New | Soho China core profit drops 60p to 1.78b yuan
Soho China's transition from developer to landlord is weighing on its earnings, with the company yesterday reporting a 60 per cent drop in core profit to 1.78 billion yuan (HK$2.24 billion) for last year.
Soho China's transition from developer to landlord is weighing on its earnings, with the company yesterday reporting a 60 per cent drop in core profit to 1.78 billion yuan (HK$2.24 billion) for last year.
Net profit, including net valuation gains on investment properties, was about 4.08 billion yuan for the 12 months to December, a decline of about 45 per cent year on year, the mainland's largest developer of prime office space said yesterday.
Turnover fell 58 per cent to 6.1 billion yuan. Its core net profit margin last year was about 29 per cent, against 30 per cent in 2013.
The company attributed the worse-than-expected earnings slump to a change in the business model from build-to-sell to build-and-hold. The consensus estimate from analysts for core profit was for a 50 per cent decline to 2.15 billion yuan.
Soho China reported rental income of about 424 million yuan last year, a rise of about 52 per cent from the previous year.
That was driven mainly by higher average occupancy rates at its Qianmen Avenue project in Beijing and Soho Century Plaza in Shanghai and the contributions from the newly completed Wangjing Soho Tower 3 in Beijing, and Soho Fuxing Plaza and Sky Soho in Shanghai.
Chairman Pan Shiyi said nearly half of the investment property portfolio on hand was completed last year and made available for leasing. The company expects the remaining projects will be completed by the end of 2018.
Soho China would by then hold about 1.8 million square metres of commercial properties, mainly office buildings in Beijing and Shanghai, he said.
Pan said the company did not make any land or project acquisitions last year but would continue to look for opportunities in the two key cities. It announced its shift to a landlord business model in 2012.
At the end of last year, the company had total cash of about 12.5 billion yuan with a net gearing ratio of only 19 per cent. Directors declared a final dividend of 13 fen per share, bringing the full-year payout to 25 fen a share.
Analysts have expressed doubts over Soho China's landlord aspirations, given that it had disposed of part of Sky Soho last year.
The core net profit was much lower than the market expectation for 2.15 billion yuan.
"We never favour the commercial [property] operator in China, simply due to the fact that rental returns are not enough to fund the capital," said Edison Bian, head of China property research at UOB Kay Hian.
