Longfor sets 200 billion yuan sales target as core profit rises by a quarter

Longfor Properties, China’s eighth largest developer by sales, set its 2018 sales target at 200 billion yuan after posting a 25.9 per cent increase in core net profit last year. 

The Beijing-based developer saw core net profit, which excludes valuation gains and foreign exchange losses, jump to 9.77 billion yuan in 2017, on the back of a 77.1 per cent jump in contracted sales to 156.08 billion yuan from 88.14 billion yuan a year earlier. 

“We currently have saleable properties worth about 300 billion yuan,” said Shao Mingxiao, executive director and CEO, during a briefing on the company’s annual results on Friday. “We are hoping to maintain our place in the top 10.” 

Shao said that in the first two months of this year the company has achieved contracted sales of 29 billion yuan and expects to see that figure climb to 44 billion yuan by the end of the first quarter. 

Net profit jumped 37.7 per cent to 12.6 billion yuan in 2017, from 9.15 billion yuan a year earlier while total revenue grew 31.5 per cent to 72.08 billion yuan. 

“We expect the firm to maintain 15 per cent to 20 per cent annual growth in the next three years and the contribution from the firm’s investment properties to continue to increase,” said Kris Li at Shanghai-based SWS Research. 

While keeping residential property as its core business, the developer has also sought to expand its footprint in commercial property and residential property leasing, in a move designed to hedge against market cooling measures. 

Longfor to ramp up emphasis on residential and commercial property leasing

Longfor on Thursday sold 3 billion yuan of bonds to fund its long-term rental residence business, tapping the benefits of a sector currently favoured by official policy. Minister of Housing Wang Menghui said at the recent parliamentary gathering in Beijing that the government would “vigorously develop the leasing market … and promote the development of public rental housing.”

The proceeds will be used for the construction of long-term rental apartment projects in cities such as Shanghai and Chengdu. 

Longfor had more than 15,000 rooms across 17 cities for long-term leasing as of the end of 2017, and it plans to open 50,000 more units this year. 

“It just breaks even for now,” said Shao. “We hope to see the net profit margin go as high as 12 per cent to 15 per cent in two to three years by raising the letting rate.” 

Longfor and KWG Properties Holdings together bought a parcel of land in Kai Tak, the site of Hong Kong’s former airport, in May 2017 for HK$7.3 billion. 

Shao said the company has no further plans to buy land in Hong Kong and will focus on the nine cities in Guangdong as part of its development plan for Greater Bay Area. 

The company declared a dividend of 0.47 yuan per share, and a special dividend of 0.08 yuan per share to mark its 25th anniversary, bringing the total dividend for 2017 to 0.76 yuan per share. The total dividend in 2016 was 0.47 yuan per share. 

Shares in Longfor dropped 2.95 per cent to close at HK$23 on Friday as the broader Hang Seng Index fell 1,140.8 points, or 3.7 per cent. 

The company also proposed to change its name to “Longfor Group Holdings” from “Longfor Properties” in another filing on Friday.