China Vanke

Vanke’s 1H profit misses estimates as shareholders’ tussle distracts operations

Wang Shi, Yu Liang to skip results press conference scheduled for Monday

PUBLISHED : Sunday, 21 August, 2016, 7:55pm
UPDATED : Sunday, 21 August, 2016, 10:59pm

China Vanke’s first-half profit missed analysts’ expectations, as a protracted tussle among shareholders for control of the country’s largest developer affected its operations, while margins were crimped by a real estate slump that carried over from 2014.

First-half net income rose 10.4 per cent to 5.35 billion yuan (HK$6.27 billion), or 0.48 yuan per share, Vanke said in a statement. That’s lower than the 5.65 billion yuan profit expected by analysts in a Bloomberg poll.

Revenue rose almost 49 per cent to 74.80 billion yuan, while gross margin shrank by 3.49 percentage points to 17.55 per cent compared with last year, Vanke said.

“The gross margin fell because the company’s earlier sales in Changsha, Hangzhou, Wuxi, Shenyang, Chongqing, Ningbo and Xi’an were affected by the market correction in 2014, “ Vanke said.

Vanke has been embroiled in an eight-month takeover tussle, when Baoneng Group, an obscure Chinese conglomerate, emerged from nowhere as the developer’s largest shareholder in December.

To deter Baoneng’s hostile takeover, Vanke chairman Wang Shi sought out a white knight, selling the company’s shares to Shenzhen’s subway operator to dilute the acquirer’s stake.

That plan was opposed by another major Vanke shareholder China Resources, owned by the government.

In the latest twist, China Evergrande Group, the country’s second largest developer, said it bought nearly 7 per cent of Vanke from the open market and looks poised to use its clout to determine the outcome for control of Vanke.

All this corporate intrigue is distracting the company from its operations, Morgan Stanley said before Vanke posted its results.

“Vanke’s management stability remains a concern for us,” Morgan Stanely’s analysts John Lam wrote, with a “equal weight” recommendation on the stock. “The recent shareholding disputes have started to affect company operations as suggested by the decline in July contracted sales.”

Vanke’s shares have surged 84 per cent in the last 12 months, following a seven-month trading halt in Shenzhen. The stock fell 3.9 per cent on Friday to 24.59 yuan. Its shares in Hong Kong advanced 21.4 per cent in the same period, falling 1 per cent Friday to HK$20.25.

The company didn’t declare an interim dividend.

Vanke’s chairman and founder Wang, and its president Yu Liang will both skip the first-half results press briefing on Monday, a Vanke spokesman told the South China Morning Post. Yu has rarely missed Vanke’s press conferences.