Property sales continue to rise despite curb

Untroubled by government cooling measures, developer's key debt measure falls to 58pc from 96pc, as first-half profit climbs 10.4pc

PUBLISHED : Tuesday, 27 August, 2013, 12:00am
UPDATED : Tuesday, 27 August, 2013, 4:07am

Leading mainland developer Evergrande Real Estate Group announced first-half revenue of 41.95 billion yuan (HK$53.16 billion) yesterday, topping the 40.63 billion yuan reported by China Vanke last month.

Evergrande's net profit grew 10.4 per cent year on year to 6.24 billion yuan, beating Vanke's 4.56 billion yuan and second only to China Overseas Land & Investment's 11.03 billion yuan.

A 13.3 per cent increase in revenue helped to bring down Evergrande's net debt ratio to 58.4 per cent, from 96.1 per cent at the end of June last year and 84.2 per cent at the end of last year.

Despite the central government's measures to cool the market, Evergrande had 44.61 billion yuan in total contracted sales in the first half, up 27.3 per cent year on year. Sales from second- and third-tier cities contributed the majority, with first-tier cities accounting for just 0.9 per cent.

Gross profit margin declined by 1.3 percentage points to 28.6 per cent.

"We at Evergrande do not believe in high profit margin," chief executive Xia Haijun said. "We want housing to be affordable and real estate to be more like the manufacturing industry."

The group's net profit margin on its core businesses grew slightly to 11.1 per cent, with Xia saying 15 per cent would be ideal.

It has a total land reserve of 145 million square metres in 140 cities, mostly second and third-tier ones.

Xia said that with more cash on hand - 42 billion yuan as of June 30 - the company planned to increase its presence in first-tier markets, following its acquisition of a plot of land in Beijing last month.

Chairman Hui Ka-yan said he expected monetary policy and real estate control measures would remain stable in the second half of the year, with advancements in urbanisation benefiting the industry.

Greentown China, a smaller developer focusing on mid to high-end properties in the Yangtze River Delta, reported interim turnover of 10.21 billion yuan, down 19 per cent, although net profit rose 8.7 per cent to 1.8 billion yuan.

Net profit margin was 24 per cent.

Last year, Greentown experienced what its chief executive Shou Bainian described as "a roller-coaster ride" in cash flow, with net debt ratio once as high as 93.5 per cent. This year, the group raised about US$1.1 million through the issuing of three bonds, with a weighted average cost of 6.917 per cent. As a result, net debt ratio fell substantially to 49.5 per cent, a level that Shou hopes to maintain.

Shou said the company was looking to diversify its products according to market demand, experimenting with pension and tourism-themed projects in Wuzhen, Zhejiang province.

ABC International, the international subsidiary of Agricultural Bank of China, said in a report that "keeping a loose property policy is essential" to sustaining the mainland's economic growth and it expected no further tightening measures for the rest of this year.

It forecast a further rise in sales in the second half as sentiment picked up.