China Overseas cautious on sales goal

China Overseas Land & Investment, the biggest mainland developer listed in Hong Kong by market value, yesterday announced a conservative sales target this year in anticipation of tight liquidity.

The firm is aiming for contract sales of HK$140 billion, compared with last year's HK$138.5 billion, out of HK$220 billion worth of saleable property.

"It's a goal we have to reach no matter what the state of the market. So this may come across as a conservative target," chairman Hao Jianmin said.

"Liquidity in the financial market will tend to be tight amid market reforms and deleveraging," the company said. "The group is prudently optimistic about the property market."

China Overseas Land is in a race against rivals such as China Vanke and Greenland Group for the title of the mainland's largest developer by sales this year, aided by a possible asset injection from parent China State Construction Engineering Corp. The asset transfer is expected within three years.

Unlike some of its rivals that seek bolt-on opportunities in banking and e-commerce, China Overseas Land plans to stick to its core business. "We won't do what we are not familiar with," Hao said.

The company's net profit rose 23 per cent to HK$23 billion last year, while turnover increased 27.7 per cent to HK$82.5 billion.

However, its gross profit margin fell to 35 per cent from 38.3 per cent in 2012, while net gearing climbed to 28.4 per cent from 20.5 per cent.

Hao shrugged of worries about the profitability of the company and the industry in general but agreed that challenging market conditions would speed up consolidation.

Hoi Wa-fong, the chief executive of mainland developer Powerlong Real Estate, yesterday said: "It'll be quite normal if 20 per cent of property firms die this year.

"Domestic banks are scaling back mortgage lending. But there is evidence all resources are flowing to big and listed companies."

Hoi also said the company was targeting contract sales of 12 billion yuan (HK$15.1 billion) this year, from 9.4 billion yuan last year.

Powerlong's gross profit margin shrank to 28 per cent last year from 40 per cent in 2012. Its core earnings rose 3.5 per cent to 1 billion yuan and revenue grew 23.6 per cent to 7.3 billion yuan.

Beijing North Star, another Hong Kong-listed mainland developer, reported a 4 per cent drop in revenue to 5.5 billion yuan last year. Profit attributable to shareholders plunged 17.6 per cent to 800 million yuan because of a "significant decrease in the gain on changes in fair value of investment properties".

Property shares underperformed the broad market yesterday, with the Hang Seng sub-index closing 1.26 per cent lower. The Hang Seng Index fell 0.67 per cent.