Hong Kong company reporting season

Country Garden posts higher profit on sales growth

PUBLISHED : Tuesday, 22 August, 2017, 10:53pm
UPDATED : Tuesday, 22 August, 2017, 11:01pm

Country Garden, China’s third-largest property firm by contracted sales in 2016, posted a 39.2 per cent jump in first half net profit to 7.5 billion yuan (US$1.1 billion) year on year, boosted by strong demand and low house inventory in the mainland.

The earnings beat the consensus estimate of analysts polled by Bloomberg by 23 per cent.

Its contracted sales also soared 131 per cent to 288.9 billion yuan in the first half. Country Garden raised its sales target for this year from 400 billion yuan to 500 billion yuan, a 62 per cent surge from last year’s actual sales number 308 billion yuan.

In addition, the company said the number of mainland Chinese investors among buyers of the US$100 billion Forest City in Malaysia were “negligible”, as Beijing tightens its capital outflow controls.

“China’s regulations on overseas investment and capital outflow didn’t affect our business. All our projects have been approved by the government and followed the country’s regulations,” said Mo Bin, president and executive director at Country Garden.

Shares of the company closed 1.7 per cent higher on Tuesday at HK$9.72, having risen 124 per cent since the beginning of this year.

Morgan Stanley retains “equal-weight” on Country Garden.

“We think the key to the share price is the sustainability of lower tier cities, where we see the lower tier cities sales recovery is not sustainable,” a Morgan Stanley research note said on Tuesday.

Another Chinese developer Guangzhou R&F Properties has posted a 22 per cent rise in half year core profit on Tuesday, helped by strong sales in third and fourth tier cities.

Net profit of R&F, which has become the world’s biggest owner of five-star hotels after buying 77 Wanda hotels in July, stood at 2.40 billion yuan, 7.9 per cent up from a year ago. Revenue dropped 8.8 per cent to 20.41 billion yuan.

Shares of the company rose 9.7 per cent to close at HK$16.28 on Tuesday, and have climbed nearly 74 per cent this year.

R&F chairman Li Sze-lim, said the 19.9 billion yuan purchase of Wanda hotels was “cheap”, adding that the acquisition will help the company improve its debt ratio as the price has a big discount to its net asset value of 33 billion yuan.

Li also said he hoped to lift the 77 hotels’ “profits attributable to the owner” by 50 per cent in the next three years.

Adrian Chan, assistant to chairman, confirmed to the Post that R&F Properties and CC Land Holdings have jointly bought the 10-acre plot of land in London’s Nine Elms district, replacing Wanda, the previous bidder.