CR Land looks to spread risks as net rises sharply

New accounting, cost controls help achieve record $384m earnings

China Resources Land's share price soared to a record high of $5.45 yesterday after the developer announced its net profit rose sharply to $384.51 million last year.

Wang Yin, the managing director of the red-chip developer, yesterday said while the massive growth was due mainly to the new accounting system, better cost controls and rising house prices on the mainland had boosted profits.

China's housing market has boomed recently, with prices in 35 large cities rising an average of 9.7 per cent in the first half of last year.

Under the old accounting standard, CR Land posted a 156.1 per cent increase in net profit last year, double Thomson Financial's estimate of 78.56 per cent. The restated profit for 2004 was $21.36 million.

Earnings per share rose to 24.8 cents from 1.4, while turnover jumped 43.2 per cent to $2.7 billion.

The company proposed a final dividend of 3.3 cents per share.

Mr Wang said an increase in sales and better cost management had widened the company's gross margins to 24 per cent from 17 per cent in 2004. He believed the figure would rise further to 30 per cent.

Chairman Song Lin was optimistic about the property market in China, saying the company planned to spend $2 billion to $3 billion this year to buy medium-sized sites in cities such as Beijing, Shanghai and Wuhan.

Last year, the developer spent $2.56 billion to increase its land bank in China. It also sold 2,234 homes and six office buildings.

Mr Song would not rule out the possibility of buying properties from China Resources Holdings, but said 'we don't have any timetable for any asset injections from our parent company'.

CR Land in November used 3.3 billion yuan to acquire three properties from its parent - a shopping centre in Shenzhen, a 26-storey office and retail complex in Beijing and China Resources Times Square in Shanghai.

With less than 10 per cent of the firm's revenue coming from non-residential projects, Mr Song hopes to include more investment properties in its portfolio.

'If we diversify away from concentrating on residential projects, it will lower our risk ' he said. 'We hope [in a few years' time], 70 per cent of our income will be from the sale of residential developments, with the remaining 30 per cent coming from rents.'

The company forecast a double-digit rise in rental income this year based on the floor space completed for sale reaching 480,000 square metres. It estimated that the figure should grow to 800,000 square metres next year and one million square metres in 2009.

CR Land shares yesterday leapt 10.2 per cent to close at $5.40.