Country Garden targets 400bn yuan sales for 2017 after posting 22pc core profit rise

Country Garden, China’s third largest developer, has reported better-than-expected profit growth for 2016, driven by strong house sales, especially in smaller cities.

Core profit – which excludes valuation gains and foreign exchange losses – rose 22 per cent from a year earlier to 12 billion yuan (US$1.74 billion), the company said on Wednesday. Net profit was up 24 per cent to 11.5 billion yuan.

The Guangdong-based developer has set a 2017 contract sales target of 400 billion yuan, a 30 per cent jump from 2016.

“We have a rich land bank, with 616.3 billion yuan worth of saleable units this year,” founder and chairman Yeung Kwok-keung, said at its result briefing in Hong Kong. He added the developer will spend another 150 billion yuan restocking that land bank this year.

Total revenue grew 35 per cent to 153 billion yuan, while the company’s net gearing ratio declined to 48.7 per cent.

It has also submitted an application to the China Securities Regulatory Commission for its property management unit to list on the mainland.

The company recently shut its dozens of sales offices across China for its mega Malaysian housing project Forest City, which Yeung said that was caused by the Chinese government’s tightening of capital controls since the beginning of this year. Forest City has to date recorded contracted sales of about 20 billion yuan.

Country Garden halts Malaysian housing sales amid capital flight crackdown

The company must follow the rules, otherwise, the government will “give you a spanking,” he said.

But Yeung refused to comment on what solutions might be available to those Chinese clients who have already put down payments on properties at the development, but have been unable to transfer the rest of the money overseas because of the increased tightening.

“We are selling the project to buyers from all over the world,” Yeung said.

Country Garden recorded contracted home sales of 308.8 billion yuan last year, a 120 per cent increase from 2015. That puts it in third place in terms of sales, behind China Evergrande and China Vanke.

Most of Country Garden’s sales come from China’s second- and third- tier cities.

It has also shortened the average period from land acquisition to sales launch to 6.2 months.

“To Country Garden, (China’s) urbanisation is far from over, and the company will continue to focus on the residential and related demands of urbanisation,” said Mo Bin, president and executive director, in the company’s results filing.

During the period, the developer spent 1.4 billion yuan of its profit on interest payments on perpetual bonds.

“As the company redeemed all of its 19.5 billion yuan of perpetual bonds recently and maintained robust sales growth, we expect core earnings to increase 20 per cent in 2017,”said Toni Ho, a property analyst at RHB-OSK Securities.

Country Garden decided to pay a final dividend of 10.2 fen per share, bringing its total dividend for 2016 to 17.12 fen per share, up 32 per cent from 2015.

Shares in Country Garden dropped 1.9 per cent to HK$6.6 in Hong Kong Wednesday.