Developer China Vanke’s profit rises 45 per cent in third quarter

PUBLISHED : Thursday, 27 October, 2016, 9:44pm
UPDATED : Thursday, 27 October, 2016, 10:54pm

China Vanke, the developer at the centre of a battle for control among shareholders, posted a 45 per cent increase in third-quarter profit as a home-market recovery boosted sales, helping offset uncertainties over the company’s future.

In the latest quarter ended September 30, net income at the nation’s largest residential developer, climbed to 2.91 billion yuan, or 26.4 fen per share, up from 18 fen per share a year ago , the company said in a filing to the Shenzhen stock exchange after the close of trade on Thursday night.

Revenue grew 44.1 per cent from a year earlier to 42.26 billion yuan, it said.

“The outcome is generally in line with our expectation, slightly beating our forecast,” said Liu Feifan, a property analyst with Guotai Junan Securities. “The results showed the ownership struggle has a contained negative impact.”

For the first three quarters, net income grew 20.54 per cent to 8.26 billion yuan, while revenue rose 47.1 per cent to 117 billion yuan, the company said. Gross margin rose slightly to 17.92 per cent.

The company in the first nine months sold 19.9 million square metres of homes worth 262.9 billion yuan, losing its long-held position of China’s largest homebuilder to China Evergrande Group.

The company’s Shenzhen-traded share price fell 1.59 per cent to 24.77 yuan per share on Thursday, while its Hong Kong-traded share price fell 0.25 per cent.

To stave off an unwelcome bid from Baineng group, Vanke proposed a US$6.9 billion stock sale in June to Shenzhen Metro Group as part of a restructuring that would make the southern Chinese city’s train operator Vanke’s biggest shareholder. The move was opposed by major shareholders China Resources and Baoneng Group, Vanke said in an August 16 filing.

In the first nine months, Vanke acquired 99 new projects at a cost of 5,043 yuan per square metre of floor space. This is compared to 5,488 yuan per square metre a year ago, a remarkable achievement given the soaring land price this year.

However, the cautiousness in acquiring land has pushed the company’s land bank down in the third quarter, to the lowest level since 2012. Since then, the company has been aggressively buying land across China, amid a cooling in the land market.

In October, Vanke has spent a total of 11 billion yuan to acquire plots in Dalian, Tianjin, Fuzhou, Jinan and Guangzhou, in many cases at premiums of more than 100 per cent over the starting bid price. Vanke’s moves are extraordinary given most developers have scaled back investment after the Chinese government tightened the rules on buying property on September 30.