Dear investors, good afternoon. Welcome to our annual results announcement for 2017. Before we begin, allow me to introduce to you our members of the management. Mr. Xu Shitan, our Vice Chairman Executive Director, Ms. Tang Fei, Executive Director, Mr. Lu Yi, Vice President and Chairman of Fujian Regional Company, Mr. Shao Liang, Assistant President and Head of Sales, Mr. Yau Kwan Shan CFO. There are several parts to our presentation today. We will talk about the overall performance and then financial highlights, business review, future outlook and conclusions. Madam Tang?
Well, Shimao's stock prices improved. Some people said or joked to me that they did not buy it yesterday. Performance of 2017. Well, first of all, allow me to welcome you to our presentation session and please turn to page three and page four.
After two years of adjustments of our strategies, we have enjoyed very good growth for 2017, which is quality growth. Which is mainly reflected in the sales volume and better inventory and profitability. Please turn to page five. We have strong growth of contracted sales, surpassing the contracted sales target of CNY 88 billion after the upward adjustment. Completion rate reached 114.5%. The average selling price is going up by 20% to CNY 16,623. Contracted GFA improved by 23.3% to 6.062 million sq m. You can also see improvement to our revenue, gross profit and GPM. We have realized revenue of CNY 70.43 billion, up by 18.8%. For hotels, rentals, and investment properties, CNY 3.63 billion, up 17.5%. Gross profit margin improved by 2.8 percentage point to CNY 21.43 billion, standing at 30.4%. Please turn to page seven. Substantial growth in core profit attributable to shareholders with outstanding profit margin.
In 2017, we have core profit attributable to shareholders standing at CNY 6.93 billion, up 10.9%. Excluding the net impact of disposal of Beijing Fortune Times, the improvement should be 23.4%. Core net profit margin 14%, which is an improvement of 1.2 percentage points. Operating profit CNY 17.68 billion, up by 19.3%. Profit attributable to shareholders CNY 7.84 billion, up 51.6%. Earnings per share CNY 2.324, up 54.3%. We also continue to have better dividend yield. Please turn to page eight. In order to thank our shareholders, we have decided to have dividend payout at HKD 1 per share, which is 31.6% up compared to 2016. We are talking about CNY 3.39 billion total payout and we have been included in Hang Seng High Dividend Yield Index, showing we have steady increase in dividend and good performance. Page nine, where we have stable development.
We continue to expand our land bank by securing strategic land parcels. By the end of the year, total land bank about 47.9 million sq m. Average land cost CNY 5,108 per sq m. Full-year attributable new land acquisitions CNY 67.9 billion, including Longgang and Shenzhen and also Cheung Sha Wan, Hong Kong. Further improving our land bank resources in the Greater Bay Area. We also maintain a relatively cheaper land cost and such important policy for land acquisition provides security for our long-term development. Page 10. I can tell you the steady growth in revenue of Shanghai Shimao. Contracted sales grew sharply by 45% to CNY 21.6 billion. At the same time, revenue of Shanghai Shimao rose sharply by 36% to CNY 18.67 billion. Profit attributable to Shanghai Shimao shareholders increased by 5% to CNY 2.23 billion. Now, let's turn to page 12 for financial highlights.
We have prudent financial management with outstanding financial metrics. We will talk about cash collection and also financing situation and financial policy to take you through the details. Page 13, increased cash collection. in 2017, we improved cash collection through clearing old receivables, increasing the cash payment ratio, and implementing quarterly performance rewards and penalties to ensure it has sufficient capital for steady development. In 2017, cash collection CNY 80.7 billion , up 34.5%. Cash collection ratio 80%. It provides sufficient supply of cash. Page 14, we have sufficient cash reserve. By the end of 2017, we have cash on hand CNY 33 billion , up 48.4%. We also have unutilized banking facilities, about CNY 20 billion . Approved but not yet utilized pending medium-term notes is about CNY 8 billion, providing security to long-term stable development. Page 15, we have solid debt structure.
By the end of 2017, total debt CNY 87.5 billion , up by 30.7% compared to the end of 2016. That mainly comes from overseas syndicates and also longer term debt. We increased such borrowing to support our long-term development. CNY 69.3 billion long-term borrowings accounted for about 77% of total debt. CNY 18.2 billion short-term borrowings account for 21% of total debt, which is a very healthy level. Page 16, we have stable net gearing ratio. In 2017, we obtained a lot of quality land parcels. We have very good projects. So towards the end of the year, we have net gearing ratio at 58.9%, up by 5.5 percentage points. For six consecutive years, the net gearing ratio remained below 60%, laying a solid foundation for sustainable development of the group amidst a complicated economic and changing financial environment.
We believe that after adjustment, the ratio should be 50.5%, still very healthy. Page 17, by the end of the year, total asset CNY 307.6 billion, up 17.4%. Fixed asset CNY 55.7 billion , up 3.2%. Professional valuation allows the market value of major investment properties and hotels to reach CNY 68.9 billion. Total equity CNY 96.7 billion, up by 9.7%. We continue to explore financing opportunities because of keen market competition. We have extensive financing channels to avoid risk. We have approved different debt and also issued overseas debt successfully. I will skip through the details here because you can just refer to page 18. Next page. We have very extensive financing channels and different financing options. We continue to reduce financing cost. It came down from 5.8% in 2016 to 5.3% in 2017, which shows effective control of financing cost.
We got improved credit ratings because of our very good performance. Please, page 20. In July, Standard & Poor's maintained its BB+ rating for Shimao Property and revised outlook from negative to stable. Dagong Credit adjusted issuer rating of Shimao from AA+ to AAA. Thank you very much for your long-term support. Mr. Shao is going to take us through the business review for 2017.
Good afternoon, everyone. I will take over now to talk about some business review and also outlook. Please refer to this page. Revenue breakdown. We reached CNY 70.426 billion, up 18.8%, and 95% comes from property sales. Next page. Our hotels and investment projects, total revenue CNY 3.63 billion. If you take away Beijing Fortune Times, the final figure will be 36.1%. Excluding the impact of Beijing Fortune Times and Shanghai International Plaza, income from this segment would have risen by 23.1%.
Next page, turnover amounted to CNY 1.708 billion, improvement of 16.5%. EBITDA of hotel operations, CNY 558 million, increase of 25.4%. EBITDA margin increased by 2.3 percentage points from 30.4% - 32.7%. At the same time, in March 2017, Shimao and Starwood Capital signed a comprehensive strategic partnership agreement to explore boutique hotel market in China. Currently, commercial and office premises rental income decreased by 4.2%, mainly due to Shanghai Shimao disposal of Beijing Fortune Times to the Shi Holdings. If we take that apart together with the renovation, then it should be 19.3% improvement, excluding impact from Beijing Fortune Times and Shimao International Plaza, the EBITDA should be 18.8% improvement. Next page. We have land reserve in 47 cities, 165 projects. For the end of the year, we cover GFA of 47.9 million sq m.
We have sufficient reserves of sellable resources in hot regions nationwide, valued over CNY 800 billion, to meet continuously growing demand in the future. Next. You can have a look at land acquisitions. In 2017, 51 parcels. Land cost, CNY 67.949 billion. Total planned GFA, over 10.6 billion sq m. They are mainly located in first tier and second tier cities, and also core regions. You can go through the list if you are interested. Page 31. We have 47 million sq m GFA. Under construction, more than 23 million. The cost, average attributable land cost is CNY 5,108. Sellable value, more than CNY 800 billion. In Huabei, Big Bay Area, and premium locations, we have secured very good reserve. Next, analysis of operation and cost analysis. We have very good revenue with very good risk control and cost control measures implemented. SG&A to recognized revenue ratio is 4.64%.
SG&A to contract sales ratio was 3.08%, which is leading in the market. Now, let's look at 2018 operations outlook. For 2018, contracted sales target, CNY 140 billion. Cash collection, CNY 112 billion, at 80%. So that we have sufficient land premium for future parcels to be acquired. Net operating cash flow, negative CNY 24 billion. We have very healthy level of cash at hand. Next page. Sellable resources. Excluding resources from new land acquisitions in 2018, we are talking about total of 13.73 million sq m. Assuming conservative ASP at CNY 17,000 per sq m, total value of sellable resources should be CNY 233.5 billion. If sell-through rate about 60%, as we estimate contracted sales to reach CNY 140 billion in 2018. In the beginning of 2018, we have acquired some new land parcels.
If we can sell them within the same year, then we can definitely go beyond that target. You can have a look at our new corporate structure of regional companies. We will empower, nurture, incentive, and scale chain so that we can have high-speed development. We have done a lot of reform. For regional companies, we have empowered them totally in terms of management. After adjustments, the group will be the resource provider, will be the brand, and we provide support to the regional companies. Next. We will compete on the same stage and eliminate the weakest players, who will realize quality growth. Concerning the same land parcel, there can be a competition among different regional companies. They can provide their own options and packages. For IRR, margin, and timing of positive cash flow, we can access on all three metrics. The winner can participate in the land acquisition.
Regional companies with sufficient capital may inject capital into, or lend capital to other regional companies. They could either receive 10% interest income by lending on shadow resources and bonus by capital injection. We have sophisticated subdivision of operations, and we have a number of principles of assessment. To nurture operational mindset of regional companies, we have active and highly efficient capabilities, cultivation, and fierce competition. This is the management statement of regional companies. We will promote regional companies to speed up resource checks and achieve the target and sustainable development. In terms of profit, we will focus on sales profit and booking profit. Operational results should match bonus awards. The third one is about risks. We have to focus on turnaround cycles and high efficiency of use of capital. The final one is about pacing. We have to implement strict control in various critical chains and standardization.
We will guide our different regional companies to achieve high turnover, high efficiency, high quality, and low leverage operations. Next. In terms of awarding bonuses, we want to provide more incentives for regional companies due to changes in the bonus policy. We have basic bonus, supplementary bonus, agency construction management fee, business bonus, and penalties along the entire industrial chain. Now for major hotels and commercial premises. This is a super five-star hotel to be opened later this year. It has the lowest man-made in the world and first of its kind in China. There are 19 levels, 17 below sea level, and two submerged in the water. There will be more than 300 rooms. We also have another hotel in Tung Chung with more than 1,000 rooms to be opened in 2019. Then commercial projects.
In the future, we are going to focus on a number of important projects, including the Shanghai Shimao Plaza. It will be reopened in 2018. Next. Between 2019 and 2020, we have some landmark projects. They include Shenzhen Qianhai project, Shenzhen Pingshan project, Shenzhen Longgang project, and also Fuzhou City 108 project, and Nanjing Shimao Commercial Center commercial project.
They will be commissioned in the next two to three years. Our sales future outlook. I already mentioned contracted sales exceeded CNY 100 billion, representing 114.5% of our target met. We have improvement in quality of sales, with profit margin increasing by 2 percentage points to 17%. The growth in contracted sales reflect the group's entry into high-growth phase. Next page. In 2017, overall sell-through rate of sellable resources was 6 percentage points higher than in previous years. Sell-through rates of new supply inventory increased by 1 percentage point and 3 percentage points respectively.
By the end of 2017, the proportion of inventory of more than two years of total inventory dropped by 21%. The value of the segment dropped to CNY 15.1 billion. The structure of inventory at the beginning of 2018 continued to be optimized, with the segment within 1 year accounting for 46% of total. Supply structure is more reasonable and healthy. Next, cash collection in 2017. Amid banks' tighter mortgage quota and restrictions on online contract filling in certain cities, group's cash collection rose by 35% to CNY 80.7 billion. Percentage of cash payment increased by 10 percentage points to 63%. Cash collection ratio reached 80%, ranking high among our peers. Sales target for 2018, CNY 140 billion, 39% higher than 2017. More land parcels were acquired in 2017, and the group plans to increase new supply to CNY 192.3 billion.
We are confident to beat the annual sales target of CNY 140 billion if the overall sell-through rate in 2017 of 60% can be maintained. Cash collection target, CNY 112 billion, 39% higher. We aim to achieve collection ratio of 80%, which is flattest from 2017. Cash collection target, CNY 20 billion will come from receivables, CNY 92 billion from new contracted sales. Next page. In terms of sales strategy for 2018, the overall supply will be evenly distributed. Sales from first and strong second-tier cities with good supply-demand dynamics are expected to account for about 60% of total sales. While weaker second-tier and third and fourth-tier cities around 40%. We expect sales in first and second-tier cities to rebound in 2018. Each core city is expected to contribute more than CNY 10 billion of sales, ensuring both the sales and profits targets will be met. Next page.
In terms of our product, we have 76 projects under our standard product series, which is 78% of all projects. After the launch of Shine and Classic Chinese Chic product lines in 2017, two ultra-luxury product lines, Glory and Royal, will be launched in the first half of 2018. The new product series launches boosts Shimao's brand awareness in the market, resulting in product price premiums and improved competitiveness. Next page, you can see some showcases of Shine and Classic Chinese Chic projects already launched. Sell-through rate on average was as high as 80%, demonstrating the premium qualities of our products. They are in Fuzhou, Wuhan, and other major cities. Now, let's take a look at ultra-luxury Glory and Royal series. In May and June, we will announce more results. They are mainly in Nanjing, Hangzhou, and Royal series in Nanjing and Suzhou. Finally, let's look at big brand strategy.
In 2018, we continuously increased brand popularity. The strategy is circled around different dimensions, including product competitiveness, diversified businesses, and strategic layout, so as to upgrade brand image and value, ultimately resulting in brand premium. That's the end of my presentation. Let's invite , Mr. Lu, to talk about regional company experience.
This is the first time I represent Fujian Regional Company to meet with you, so allow me to introduce myself a little bit. I've been working here for 10 years. In 2003, we entered Fujian, and we became the developer of the first luxury project. Beginning from 2008, in Fujian, we have set up a number of landmarks. Shimao Fuzhou Tower, Shimao Straits Tower, and also Shimao Lakeside Garden. In Xiamen, we have set some new records. Between 2011 and 2016, we focused on urban large property projects, and the speed and momentum was very stable.
In 2015, we established Minnan and South Fujian and North Fujian sub-areas, and we had a total number of projects, 14. In 2017, we pursued internal reform to create growth momentum. Fujian sales achieved CNY 25.1 billion that year, ranking number one in the group. We have the major three cities having CAGR growth of 134%. Page 62. We pursued internal reform to create growth momentum by relying on flexibility of land reserve. In 2017, we added 20 projects, exceeding the total of the past four years. Sellable value, CNY 65.4 billion. Total sellable value was CNY 153.2 billion. So scale is the biggest. Fuzhou, Putian, Quanzhou, Xiamen, and Zhangzhou are all well-covered. Page 64. We had an even more exciting year in 2018 in terms of brand-new incentive scheme and genuine corporate empowerment. Fujian company presented these growth targets. Contracted sales target, more than CNY 50 billion.
Net profit target, more than CNY 7 billion. Newly added sellable value target, more than CNY 110 billion. Cash flow from operations for the full-year is zero. We just rely on our own cash. Full-year project, more than 60. On top of that, in Fujian province, we want to be the best brand reputation in Fujian, and we may have further land acquisition. We want to stay at the top in Fuzhou, Xiamen, Quanzhou, and into top three in Zhangzhou, Putian, and Longyan, and explore opportunities to enter Nanping, Sanming, and Ningde. You can see the ranking, and we have the best management structure. We have a number of evenly distributed projects, and we want to be the best platform for Fujian. After proposing the big targets, what about actual execution? Page 65. Sales already exceeded CNY 10 billion.
By the end of the first quarter this year, our saleable value of new land acquisition reached CNY 20 billion. This is only for January and February, actually. We already ranked number one at CNY 6.65 billion, and we continue to expand our land reserve. In Q1, we reached CNY 210 billion. If you refer to the right-hand side at the bottom, many of these projects are acquired projects, and we have participated in more than 20 land parcel auctions. Allow me to explain why we have such rapid growth in such a short period of time. First, increase in land reserve. We have the most flexible and diligently We have been adhering to a principle of flexibility. Between 2017 and the 31st of January 2018, we have done some calculations because after that would be the Chinese New Year, and many people had to cease operations.
They had to take their holidays. Our contributions accumulated, and you can see very visible results. In the past 13 months, we have added 28 parcels. Total saleable value, CNY 72.6 billion. Percentage of saleable value from land auction, only 16.39% because risk is higher. Joint bidding, 30.58%, lowering our risk and reducing competition. M&A, because we have very strong brand presence, percentage was 53.03%, more than half. After we became the biggest, we could do some brand output in Fujian province. We have done some projects which focus on just management of property. We just charged management fees and basically no cost. After flexibility, I want to talk about principles of obtaining land parcels. Different cities are well within our understanding in Fujian. We have very strict judgment standards for land acquisition, and you can look at this pie chart.
You can see core areas, extension areas, spill over area, and top country level cities. It's actually very simple. In Fujian province, in various cities, there will be core areas, extension areas, spill over areas, and top county level cities. We have a very clear structure. How much obtained in every category is well managed. It depends on long-term judgment. We will make sure that the acquisition is well-balanced among different areas. The next batch, you can see that we have very good land reserve, but in Fuzhou, Xiamen, Zhangzhou, the biggest four areas. In terms of GFA, we take about 99%. The remaining 1% is Longyan and Putian. Because of very even land reserve, we are able to avoid risk for major cities in Fujian. You can't expect things to do well throughout the year. There are peak seasons and some cooler periods.
With this even location strategy, we can get through the cool periods with great success. We have quick turnover. I think we are the market leader in terms of quick turnover. We got five projects, and we sold the project. Our first project launch was only about 22 months after acquisition. Quick turnover, first kickoff meeting cycle in 2017. This is about kickoff meetings that will set the preparation. We can have the first kickoff meeting within one month after acquisition of land because we know Fujian market very well. We have this quick turnover target. We want to turn CNY 1 around twice every year. So in June or by June, we get the collection, and then we sell again in the second half. Land is the cheapest when everyone needs money, so we can make use of that timing to enjoy advantages.
We have high ratio of sellable value over land premium. We are talking about the capability to mobilize free capital. If the ratio is high, the same amount of money can trigger the creation of more money. This is because of the diversified way of land acquisition. In the past 13 months, we have been able to reach CNY 1.58, which is definitely leading in the market. You can see different auction, land auctions on one's own, joint bidding, M&A, construction and sales agent. The ratios are 1x- 2x, 1 x- 4x, 1 x- 12x, and infinity respectively. In 2018, we have some figures here to share with you. Hopefully, using free flow of capital, CNY 15 million or so, we can have CNY 25 billion capital spent on land acquisition and CNY 30 billion on land cost, CNY 100 billion postponed land cost.
If we can achieve this high 1x- 3.3x ratio of sellable value over land premium, we can get very good results. So CNY 100 billion can be obtained towards the end of the cycle, and we can supply CNY 40 billion. In the first half, we get CNY 50 billion of land. If someone asks you, if a sell-through rate is 80%, we can achieve CNY 40 billion. What if it does not reach 80% turnover or sell-through rate? We believe that is a conservative estimation.
Our sell-through rate, even if we lower it to just 60%, we can still achieve CNY 24 billion. For CNY 24 billion, if we do collection of 50%, we can get back CNY 12 billion in the same year. That is our overall target, and we believe it is achievable. Standardization is another key point. 85% of our projects will use our five major series.
We duplicate many projects in Fujian province, and the remaining 15%, they are innovative products, so they become landmarks and also special small towns. In Guling, we have a project and also hot spring town in Yongtai. Standardization will bring us faster speed and safety. We shortened our cycle from 150 days to 20 days in the future. There are 6 N plus 40 strategy companies. They have outstanding performance, and by the end of 2018, perhaps a lot more will appear in Fuzhou, Xiamen, Quanzhou, so that any one player being weaker will not affect the entire picture. The duplication of N city can continue to be expanded. We will expand into new land and new regions. We have to do well execution and provide quality services to our customers. We survive because we have a very good financial model.
We focus on positive cash flow, contract sales, and land bank. These are important indicators for our development. Facing the future, we have set up property research academy and extended our core business areas. At the same time, we have set up other demonstration centers, and we focus on this segment of the market to provide special small towns, long rental apartments, so on and so forth.
Finally, I would like to make use of this platform to inform you. Fujian Regional Company would like to be the top regional company in China. Contract sales target, CNY 50 billion in 2018 and between CNY 80 billion and CNY 100 billion in 2019. All-round industry leading management is the key to support the growth of Shimao Fujian to a scale of CNY 100 billion. We focus on strategic planning, product competitiveness, turnover capability, brand reputation, auxiliary service capability, so on and so forth.
Mr. Xu is going to draw a conclusion.
Investors, we meet once again. I am very delighted. Yes, you can see that our format has changed. We have regional company providing case studies and sharing with us. I am sure you see that we are going through some clear changes. We made adjustments in 2015 and 2016, and I have told you, in 2017, 2018, and 2019, we will enjoy high-speed development. In terms of internal management, we have done a lot, and our regional companies are fully empowered. You can see management of our regional companies are more deepened, and they are greatly enhanced. There are new incentive schemes. We have many leaders at the regional level who are very young. They are post 1980s. I think that is a good opportunity for them to grow up and learn a lot of new things.
For conclusions, in 2017, the real estate market has entered a period of adjustments, but both sales value and area of primary property market climbed to historical highs, reaching CNY 13.37 trillion and 1.694 billion sq m respectively. For tier three and tier four cities, prices and also volume both improved. In the past, people did not pay much attention to tier three to tier four cities, but today things are very different. Shanghai transaction volume about CNY 500 billion or so. This year, the situation is slightly different. In the past, we did not have sell-through pressure for tier three and tier four cities, but I think things will rebound in relation to transaction volume. We believe that in 2018, the entire market size may be slightly smaller, but it will be more than CNY 12 trillion.
If we don't grow better than that, it doesn't make sense because top 20 real estate companies will manage to grow over 30%, and market consolidation will continue to be further enhanced. Secondly, we achieved CNY 100.77 billion. In 2015 and 2016, we went through adjustments, and 2017 was the most difficult year because it's the first year after adjustment, and it's hard to take the first step forward. Many people wondered, can we continue this momentum? I believe so. We have value improved quite substantially, and also land premium seems to be going up 5,000, 7,000, and then 10,000. Where is this 10,000 piece of land? Is it premium location like Shenzhen, Longgang? Strategic parcel, just over 10,000 is actually very cheap in Shenzhen and Bohai Economic Rim area, many investors would ask.
In the past, there are four major cities in Bohai area, including Hong Kong, about CNY 30 billion- CNY 40 billion, and land premium has improved greatly. We purchased at about CNY 10,000, and now it's gone up to CNY 13,000. I heard some new reports that things are getting a bit complicated because of green issues, infrastructure, and some trees will have to be felled, because in Hong Kong you don't have the same type of land-related taxes. In Hong Kong, in fact, we do have plenty of reserve. In Shenzhen, we have three projects in Shanghai, and then in Longgang, more than 1.3 million sq m. In Pingshan, a big complex project. In Guangzhou, we also have a number of projects, and then in Foshan, a few projects. Covering four cities, Bohai area, GDP ranking first to fourth.
Of course, there are other tier cities in the same area, but we focus on the premium sites. The sell-through rate of CNY 230 billion is about 60%. If we maintain 65% sell-through rate, it will become CNY 140 billion. We are assuming the price is the same. In fact, it should improve to CNY 17,000 or CNY 18,000. Lu Yi also talked about acquisition and selling in the same year. The final figure will even be higher. Internally, we want to achieve 50% growth. Quarter by quarter, we want to achieve more than 60%. This month is going to show historical high for sales figure, but the average should be about 60%. If we follow other levels of sell-through rate, I believe that the second year performance will be better than the first half of the year.
Internally speaking, we should do better than a growth of CNY 140 billion. Fujian Regional Company in Q1, it was already more than CNY 10 billion, which is one-third of the group. They took 25% last year, and this year, hopefully CNY 50 billion. In fact, Fujian has their internal target at CNY 60 billion. We have plenty of opportunities for this year. Of course, we can't be too optimistic. We need to be prudent and stick to our stringent calculations and plans. Quarter by quarter, we want to show you the speed of sales, which should be better substantially compared to last year. I have done some communication. By the end of June, perhaps we can reach something more than CNY 70 billion. Perhaps you will ask a question about the second half. We will have some important cash collections.
I don't think people are focusing on the stock itself, because there are simply too many opportunities around. I don't think investors should be worried. Perhaps you can wait, and the stock price will improve. Gross profit margin, after two years of adjustment and lowering inventory, gross profit margin rose from 27.6% - 30.4%. We want to have more than 1 percentage point improvement, because land auction will bring lower margin, and we have more than half that is not within the scope of auction. For 2017, the margin is quite high, and there are geographical factors. For gross margin and net profit, gross profit will both rise in 2018. You're also concerned about acquisition. You may say last year we acquired a lot, but we paid about CNY 20 billion or so. We purchased a lot of land parcels, total value exceeding CNY 100 billion.
The acquisition level was about 3x compared to previous years, but it helps to ensure high-speed development in the next years. For example, we have this parcel in Shenzhen. It is very big. The value is about CNY 60 billion-CNY 70 billion, and a 700 m tall building is to be erected, and there will be hotel, commercial uses, and apartments. Many shopping malls have been upgraded, so on and so forth. For the Longgang project, every year it will bring in more than CNY 3 billion. For this few hundred thousand square meters project, it is what we call ultra-large project in Shenzhen. In terms of investment, it is also gone up. Number five, we maintain prudent financial policy. Net gearing ratio, because of more land acquisition, only rose by 5.5 pp at 58.9%. Some involved payment by installments, some one-off payment.
We will continue to acquire land this year. Hopefully, we can control the net gearing ratio at below 70%. Compared to many other developers, this is still rather low. We will continue to lower interest cost, but this year, perhaps we can't suppress it any further. It is like the U.S. cycle of interest hike. We can use overseas financing to reduce the cost. Number six, gross profit, core profit attributable to shareholders both grew. We proposed dividend of HKD 1 per share, up by 31.58% compared to the previous year. Hopefully, with better profitability, we will continue to pay out more. Number seven, our recurring income from hotels, commercial, and others increased by 23.1%. We want to go beyond CNY 10 billion according to our five-year plan, and we are still lagging behind. We have many big hotels. Big commercial dwellings will be commissioned.
For example, in Shanghai, the income will be CNY 300 million per year to be realized in 2018 and 2019. In Hangzhou, another beautiful hotel, and in Hong Kong, we will have new hotel in Tung Chung as well. The land premium is really low, obtained through auction. CNY 3,000 per square foot only. Other companies have to cooperate with the AA. They don't have equity. We have equity. We got very good deal. A lot of premium land, its value is not really presented on the books. There is this hotel in Bay Y Bay. On the Bund, they have this bar on the top level, you can look at the scenery in Shanghai. We spent CNY 400 million. Investment was CNY 1.5 billion-CNY 1.6 billion. It was only CNY 4,000. The land cost was only CNY 4,000, and today I think that is already beyond CNY 50,000.
On the books, the hotel is less than CNY 1 billion, but EBITDA is CNY 180 million. The return is 18%. If possible, perhaps investors can take a look at our hotel projects. They are really valuable. In a few years, the return level can be more than 20%. We have to open many hotels, and also offices will be commissioned this year. We will have this important project in Shanghai. Perhaps you can bring your kids to Hello Kitty Land. Not just an aquarium, it is a theme park. Many fun games for your kids to play. Investors, if you do have time, go there and have some fun. Finally, 2018-2019 will be years of rapid and quality growth. We have achieved substantial growth in sales, gross profit, net profit, project quality.
We are now ranking among top five, so this is really delightful. In terms of customer satisfaction, we are also ranking very high, and we believe this is sustainable. Every quarter, every year, we will share with you sales figures. Our management structure and empowerment of our regional companies. Now there are nine regional companies competing. They do very well. Many investors would ask us, what should they do? Should they follow others? I think we are at version 3.8% today. I think at the moment, we are performing much better than Gento. What about management profit? If you just do management of property, there is no cost. There is this CNY 1 billion sales. They got 3% as management fee, and that is CNY 30 million. But the cost is less than CNY 10 million, so they do not really think that accounts for cost at all.
For more than CNY 20 million, they can realize a return of 10%. Can you sell other services and other high-tech and smart options? The yield may be 10%. If you collaborate with other players, then perhaps only 1%. All of our projects, we want to charge management fees, and that already accounts for 10%. Collaborating with you, we have to charge management fees. We do not have to follow others. We can be our own boss. This is better than being an entrepreneur. Just save all the money. In terms of cost, you are saving millions of dollars. Many people care so much about cost, how to improve the profit level. In fact, this is a very important change in the market, and we allow different regional companies to go to other regions to get new opportunities. They can fight for the market space. When do you launch?
When do you get your cash collection? You can move forward to land acquisition, and you can connect all the channels. We connected nine regions already. Xiamen company, you are done selling your property, you can move to another region. Fuzhou, you are doing well, you can go to another region. So everything is now connected. Of course, at the end of the day, it depends on your cash collection capability and sales capability. Basically, I trust that for the nine regional companies in three years, a couple of them will be phased out, and then at the end, there will only be five or six left. Hopefully, every regional company in three years time, we can do CNY 7 billion next year, CNY 10 billion, and then by 2020, CNY 15 billion. We want to 30 x CNY 15 billion.
Of course, there will be direct management for some regional companies. You can do the math. We can enjoy rapid development, so we are so thankful of your support. I believe we will do better in the future, and we can create better return for our investors. Thank you. One more thing. Our chairperson needs to attend this very important event, we will have to take off. I hope we can take one or two questions first, and then he will have to leave. Yes, I have this important activity at 6:30 P.M., and I have to attend. I thank you very much for your long-term support and concern for Shimao Group. In the past two years, indeed, we have gone through great changes, and we see a very bright future ahead of us. So we want stable growth and create a long-lasting, 100 year long enterprise.
But of course, we need to have good control of risk factors. People may say third, fourth tier cities, perhaps they are really not performing that well. Are we going too fast, too aggressive? We can tell you, we are having a very stable foothold in these lower-tier cities. We want to last for more than 100 years. I will leave the questions to be presented to my colleagues here.
You may now raise your questions. Citibank, Oscar.
I want to ask about what you mentioned in relation to 2018. It was also mentioned that within five years' time, you want to construct a big platform. In the next three to five years, what is your plan in developing Shimao Group? What kind of company will it become? Top 10? Comprehensive developer? How are you going to realize such a target? Thank you. Thank you very much.
Actually, in the past two years, Shimao Group has not presented very attractive figures on our books. We have tens of billions of assets locked in our hotels and other projects. We showed that there's huge cost and interest cost. Every year, we are investing new cost. For commercial dwellings, it's the same. We have a few tens of billions of assets. We also have new plans every year. When we are doing CNY 100 billion business, I'm shouldering two big burdens, but the burdens have turned into a bright future, and they set good foundation for diversification. Now we're ready to take off. Of course, there are some new thinking, comprehensive medical elements, and also education elements. We are thinking about these, too.
All right. I'm sorry, I have to leave now. Thank you very much.
We'll take questions from the floor.
Please tell us who you are and who you represent.
UBS, Summer. I want to ask about your scale. At the moment, you are CNY 100 billion scale. There are some similar scale players in the market. For medium to long-term development, you have some strategic plans. After five years, what kind of scale do you think you can achieve? 2017 was the year of land acquisition. Just now, you have also said that in 2018, you also want to acquire more parcels. Other than the existing major regions, what are your other considerations? Other than the big regions and among first to fourth tier cities, perhaps, for third and fourth tier cities, there's some pressure. In terms of land acquisition, do you have to reach a certain margin level? I also want to ask about land acquisition. There are some standards or criteria.
For example, cash collection and IRR. What is the current target?
Growth of sales, we really want to achieve that. During our adjustment years, I remember before the reform, we were ranked number 18 with more than 50% growth. We have been moved up to number eight. I think, as I have said, the industry is highly concentrated. That can't last very long. In the next three to five years, but the pie is not bigger. Perhaps the pie is about CNY 11 trillion. When it's going well, about CNY 14 trillion . Basically, the pie's size is not that different. But we are all growing, perhaps top 10. If we are top 100 and we take 90% of the share, that is already very good. We can't take 99%. Every developer has their own competitive advantage and product advantage.
Sometimes, people will focus on technical property development. There has to be a limit in the next three to five years. We want to get better market share. I always say this proportion may not be reflecting the truth. We have three property companies plus seven, with a scale of about CNY 200 billion. We are talking about CNY 3 trillion total market size. We are taking a rather good proportion already. The equity level is about 60 or so. I think in five years' time, we will be able to reach our target. We can cover 30 cities in three years' time. You can do the math yourself. It should be 450. Every quarter you see 60, so that is 1,600. If we reach 600, it will become 1,800. That is one third of me. Mr. Lu wants to go even higher than that.
I do not know how much you want to achieve. Of course, we need to control risk at the same time. In 2017, we have grown by 50%. I can say that in 2018, we will go even higher, and that is sustainable. We have a three year plan. For fourth and fifth year, that is too far away. It may be too funny that some developers will say they want to become CNY 100 billion company, but at the moment they are only at CNY 10 billion level and they are already saturated. We have to be more realistic. The market is rather cruel. Last year, we grew by 48%. The industry average was only about 30% - 40%. We were eight points higher because one player withdrew from the market. They have decided to do something else. If we take that factor aside, indeed, about 50% growth.
That is very impressive in terms of land acquisition, third, fourth-tier cities. Compared to last year, there will be some more pressure, but it does not mean we will not bid for these land parcels because many of such parcels are right next to premium first and second-tier cities. The land premium may be very high. You also need to find the right window of opportunity. Stronger towns should pay tens of billions for these towns and small cities. You need to act swiftly and purchase something and then sell swiftly in two to three months, and then no risk. Then I can earn the profit and buy more land. In the past, in Fujian, we will ask for 1 million, 2 million sq m sites. But in Fujian, the trend is reversed. For smaller units, perhaps the prices will go up.
We need to roll the money forward twice. For third and fourth-tier cities, they are doing well, but you have to acquire at a relatively low land cost. Land acquisition, as we have said, this year compared to last year, the number will be higher. CNY 60 billion -CNY 70 billion. Longgang, more than CNY 10 billion in this year. The strategic land parcel number will be smaller.
We have sufficient capital to acquire land. It just depends on how much we can sell them for this month. Are CNY 50 billion or CNY 60 billion? If the indicator is CNY 15 billion, we complete 19.5, then we will be very happy. It depends on the sales situation and cash collection for different months. If for the whole year we have to sell CNY 200 billion, at the end, you may not be able to achieve the target because smaller developers are suffering.
They are struggling. Bigger developers, their financing cost is also increasing.
JPMorgan, Ryan. Two questions. This is the best timing for Shimao. Back in 2014, you did not have much reserve. You have CNY 77 million at the moment, and value has increased very substantially against this backdrop. At the moment, if you speed up turnaround cycles, it is the best because gross profit can be improved greatly. In the next one to two years, the property market, because of government policies, the land premium has gone up by huge margins. How do we balance gross margin and turnaround cycles? Secondly, you have spent a lot of time to talk about incentive schemes.
I would like to ask, other than providing incentive schemes at the company level, when we do market analysis or land acquisition analysis at a headquarters or regional company level, what has been done so that the capability of land acquisition can be enhanced? Yes, I understand you have incentives, but if you do not have capability to acquire, you will not acquire land at the end.
Yes. When it comes to land, it is the hardest part. Some developers, they purchase the wrong parcel, and they cannot turn things around. Today, they have the big scales, and they can survive. In terms of land acquisition, I think we cannot rely on auctions. You have to use different channels. Last year, for example, more than half of the land was acquired from strategic collaboration.
Sometimes when there are a batch or series of projects, 20 of them, 30 of them, only two to three are premium ones. We will acquire from smaller developers because their operating cost is higher, their selling price is low. Land from five years ago, 10 years ago, auction may be CNY 5,000 per sq m. We can acquire from them directly for CNY 2,000, CNY 3,000. They cannot sell at the same level at CNY 5,000. We can acquire small developers, and through joint collaboration, we can expand our business. The three year plan is quite scary. They want to achieve CNY 5 billion for sellable and CNY 20 billion by 2020. 2% of that, their bonus will be CNY 40 million. I can tell you, this is possible.
Last year, they were number one in Fujian, and I told them, "You are not Your number one position is better than some other places combined." They want to be number one in Fuzhou, Xiamen, Quanzhou. If that can be achieved, because you are number one everywhere, you have to find other number ones to collaborate with. If you do not do that, if you do not choose that option, you must be out of your mind. I think we can use different ways to make money. When your sales scale is so big, if they want to sell you something, they do not want to go lower for the selling price, you can just tell them to construct the project, and you can do the management. If you can have a short turnaround cycle, you can make twice as much.
If you have one turnaround in the past, today we can turn things around 2 x per year, then the same figure will have very different requirements. You can see that we have a lot of slow turnaround projects. You have to wait five years to six years. Other than the incentive schemes, I think it is about empowerment. You can't just give money. You have to empower them. You have to allow them to run freely. You can't hold them back. I think we have to look at the money that people can create. We have to create more than CNY 50 million and CNY 60 million. For the rest, that money, that surplus can be reallocated. With higher efficiency level, we can have less people, and we can still achieve more.
At the end, we can save more, and we can allow more bonuses to be released. If we only have financial investors, then the bonus is only CNY 200,000 per year. No one will do that anymore. We have to empower them, because they want to go for cash flow. We'll have to sell, and we have to turn things around quickly. After quick turnaround cycles, we can achieve higher IRR. In Zhengzhou, we have this land parcel where there are many limits on purchase limit and also price limits. Originally, we thought the level will be CNY 2,000, and finally, we got something less than CNY 1,000, CNY 950. Indeed, we provide a lot of incentive schemes. It's okay to achieve two turnaround cycles for the funds, because everyone will then make better return. Many general managers have become directors.
If we can achieve CNY 160 billion, we want to cut back the number of our staff. In fact, we need the people who were actually involved to tell the real story, right? Such empowerment is very surprising. You used to handle the land from your boss. Today, we don't just work to get a monthly salary. Today, your performance is linked to your bonus level. Really. Today, things are different. We have to look at profit level. In the past, we had expensive land, and we don't have very good margin. Today, in the same year, you get your bonus. Like myself, we won't acquire, even if our bosses force us. $1 can be turned into a lot more, but if you acquire the wrong piece of land, you won't make any out of CNY 1 .
We have this very experienced person in the company who wants to be playing safe all the time. Today, the system is different. He's now in his 40s, and he thinks that things are turning a bit strange. This is a very typical case study. Incentive is very important, and risk control is very important. If we have problematic construction quality, there will be penalties imposed by the government. To our gross margin, it is going to be a double-bladed sword. Today, cash flow has to be a positive figure before we can acquire land. We're talking about very high level of demand. We started working in the early week of Chinese New Year. Q1 was non-profit making for many other companies, but not for us. We have been working very hard. We've done a lot in terms of cash collection.
We have the money to reinvest and acquire new parcels. The gross margin is 30%-40% because when others are running short in terms of funding, we have sufficient cash flow. We have our own profit. We can enjoy the profit we create. I must make money every single day. I am sorry for taking up so much time. That is the end of today's presentation. Thank you for your concern for our company.