Investors, ladies and gentlemen, good afternoon. Welcome to Shimao Property Holdings Limited's 2016 interim results announcement. Before we begin, let me introduce to you members of the management. Chairman and Executive Director, Mr. Xu Rongmao. Deputy Chairman and Executive Director, Mr. Hui Sai Tan. Executive Director, Ms. Tang Fei. Executive Director, Mr. Liao Lujiang. General Manager of Sales, Mr. Shao Liang . CFO, Mr. Chu Junchan. This presentation will be divided into a few parts. 1st, results highlights, then financial highlights, business review, future outlook, and conclusions. Ms. Tang, please.
Thank you for coming to our 2016 interim results announcement. First of all, on behalf of the company, I would like to report to you our company's 2016 interim results highlights, and then I will go through the financial data. Page four, please. In first half 2016, our turnover was CNY 30.02 billion , up 2.8% year-on-year. In November 2015, we sold our cinema business to Wanda Cinemas. Revenue from hotels, rentals, and other revenue increased by 9.6% to CNY 1.43 billion . We started active destocking since 2015. GP margin declined from 28.5% in 2015 to 28.2% in first half 2016.
Gross profit was CNY 8.47 billion , down 5.5% year-on-year. However, overall inventory structure has been greatly optimized, with inventory risk significantly reduced. The group strictly links actual cost with performance ratio through overall budget management and dynamic tracking. Cost efficiency has improved significantly. Total SG&A cost in first half 2016 was CNY 2.03 billion , down 8.5% year-on-year. Excluding fees for hotel operations, SG&A costs accounted for 4.8% of contracted sales in first half this year. Last year, it's 5.3%.
Profit attributable to shareholders was CNY 3.03 billion , down 14.9% year-on-year, which was mainly due to a CNY 400 million increase in exchange loss in first half 2016, a decrease in one-off reversal in LAT, and an increase in profit attributable to minority shareholders. Excluding major after-tax non-cash items and non-controlling shareholder interests of CNY 160 million , plus after-tax profit attributable to shareholders of CNY 630 million from disposal of Beijing Fortune Times, core profit attributable to shareholders amounted to about CNY 3.5 billion , 0.4% higher than CNY 3.49 billion in the first half 2015. Core net profit margin attributable to shareholders declined slightly from 13.1% - 12.9%. The group strengthened foreign exchange risk management. Foreign currency borrowings ratio significantly dropped to 33% from 48% last year, effectively mitigating foreign exchange risk by decreasing foreign exchange risk exposure.
The board proposed payment of interim dividend of HKD 0. 26 and payment of special dividend of HKD 0.06 from profit brought by the sale of Beijing Fortune Times. Total dividend per share will be HKD 0. 32 , commanding a payout approximately HKD 1.11 billion . Contracted sales was CNY 34.46 billion in first half this year. ASP was at CNY 14,192 per square meter from CNY 12,011 per square meter in first half last year.
Contracted sales area was 2.43 million square meters. As at June 30, 2016, the group's attributable land bank was 31.85 million square meters, with average land cost of CNY 3,016 per square meters. Quality land resources and relatively low land cost lay a sustainable foundation for the group to develop in key markets in China in coming few years. Turnover of Shanghai Shimao amounted to CNY 6.37 billion .
Profit attributable to shareholders was CNY 1.39 billion , up 49.7% year-on-year. After the issuance of CNY 1.5 billion of non-public A-shares at the end of 2015, Shanghai Shimao announced on March 15, 2016 its plan to issue additional non-public A-shares to raise about CNY 4.3 billion in cash and share capital. Shanghai Shimao has just addressed the first round of feedback from CSRC. in May 2016, Shanghai Shimao sold 100% equity interest in Beijing Fortune Times to Leshi Holdings at about CNY 2.97 billion in cash, realizing an after-tax profit attributable to shareholders of CNY 630 million . This is a successful case of a listed company realizing capital gain through incubation of commercial properties. Page six. As at June 30, 2016, the group had abundant capital.
Its total disposable capital was approximately CNY 14.1 billion , including cash on hand of CNY 20.1 billion and unutilized banking facilities of CNY 20 billion . [Non-English content]. The group upholds prudent financial policy, keeps the scale of financing under control, and consistently optimizes its capital structure. As of June 30, 2016, total balance of bank loans and other borrowings were CNY 66.9 billion , down by 4% from CNY 69.8 billion at the end of 2015.
Including long-term borrowings of CNY 54.7 billion and short-term borrowings of CNY 12.2 billion, representing 82% and 18% of the total borrowings respectively. As of June 30th, 2016, cash ratio, that is cash and bank deposits to short-term borrowings ratio, increased from 156% as at December 31st, 2015 to 164%, reflecting strong ability in repaying short-term borrowings. Net gearing ratio was 55.7%, down 2.4% from the end of 2015, meeting management's goal.
Net gearing ratio has been maintained below 60% for more than four consecutive years. It laid a solid foundation for the group's future development and enhanced the group's ability to respond to complicated economic conditions and changes in the financial market. The group boosted cash collection through such initiatives as continuous clearing of inventories and receivables, increasing cash collection ratio of receivables, controlling cash collection of overdue receivables to make sure it has sufficient capital for steady development. Cash collection in first half this year was about CNY 29.39 billion, with cash collection ratio at 85.3%, so we're up 4.9% year-on-year. With the opening up of China's capital markets, the group actively expanded domestic RMB financing channels, including issuance of private corporate bonds, RMB bonds with low interest rate, and short-term debentures. Taking advantage of the current low interest rate, the group refinanced some existing high-interest loans.
Coupling with other measures of interest reduction, the group's weighted average cost of financing went down to 6.5% in first half 2016 from 6.9% in 2015. The group actively repaid foreign currency loans by RMB cross-border payments and gradually reduced the proportion of foreign currency loans. Newly added RMB cross-border quota was CNY 16.9 billion in first half 2016. RMB cross-border payment, CNY 13.5 billion was arranged, mainly to repay foreign currency borrowings equal to about CNY 12.2 billion. As at June 30th, usable RMB cross-border quota was CNY 11.3 billion . The group was well-recognized by international rating agencies for its sound operational and financial performance. In April 2016, Fitch upgraded its long-term credit and debt rating from BB+ to BBB-. Moody's Ba2 rating and Standard and Poor's BB+ rating were maintained.
Also, three major domestic credit rating agencies, CCXI Credit Rating and Dagong Credit, maintained the group's AAA rating in June 2016. Market valuation of major investment properties and hotels was CNY 61.1 billion . In 2015, it is CNY 61.7 billion. It is down because some Beijing Fortune Times assets were disposed of. The VAT reform is fully implemented in May 2016.
The group made it through the transition successfully by taking early initiatives, such as studying the policies, establishing relevant systems, upgrading systems in advance. As the group has a high proportion of developed projects of diverse types and modes of operation, VAT reform is expected to have a positive impact on its overall performance. Page seven. Here is the financial summary. In first half 2016, revenue was CNY 30.016 billion. In 2015, it is CNY 29.193 billion, up 2.8%. GP margin or gross profit, CNY 8.467 billion. In 2015, it is CNY 8.962 billion, down 5.5%. GP margin 28.2%.
In 2015, it is 30.7%, we are down 2.5%. Operating profit in 2015, it is CNY 7.88 billion. It rose 4.7% to CNY 8.251 billion in 2016. Profit attributable to shareholders in 2015 was CNY 3.559 billion. It came down by 14.9% to CNY 3.028 billion this year. Core profit attributable to shareholders was CNY 3.502 billion. In 2015, it is CNY 3.487 billion . We are up 0.4%. Core net profit margin 12.9%. In 2015, it is 15.2%, we are down 2.3%.
Earnings per share, CNY 0.876. In 2015, it is CNY 1.028, we are down 14.8%. In the first half of 2016, the board proposed a dividend of HKD 0.32 per share and HKD 0.06 special dividend. In 2015, it is HKD 0.30 per share. Page eight, balance sheet summary. As of June 30th, 2016, total assets was CNY 253.23 billion . In December 2015, it is CNY 244 billion, up 3.7%. Fixed assets, CNY 49.867 billion .
At the end of 2015, it is CNY 49.519 billion , we are up 0.7%. Total equity, we are up 12.6% from end of 2015, reaching CNY 84.148 billion. Cash and cash equivalents at the end of 2015 is CNY 26.41 billion. It came down by 24% to CNY 20.064 billion. Total borrowings at the end of 2015 is CNY 69.821 billion. It came down by 4.1% to CNY 66.946 billion. Net gearing ratio was 55.7%.
At the end of 2015, it is 58.1%, we are down 2.4%. Adjusted net gearing ratio, 47.6%, we are down 1.4% from end of last year. I will not go through the detailed historical financial performance. Let us turn to page 10. In the face of RMB depreciation risk, we tightened the foreign exchange exposure. We took the initiative to manage it. As of June 30th, 2016, the balance of borrowings was 33% from 48% of last year.
Towards the end of this year, it will be lower than 32%. We expanded the domestic financing channels and arranged cross-border RMB payments. For 2016, we plan to repay CNY 13.2 billion . In the first half, we already repaid CNY 12.2 billion. In July, we repaid around CNY 1.5 billion of foreign currency borrowings. As of now, repayment was completed ahead of schedule. We reduced foreign exchange loss by CNY 400 million . In the first half of 2016, we signed a $150 million for forward exchange option contract, so as to hedge against RMB depreciation risk in the next two to three years. It will increase the hedging ratio if the price level is reasonable. We will balance interest cost and exchange rate risk, and we will adjust and tighten foreign exchange exposure as necessary. Page 11.
Through continuous financial innovation, we want to lower financing costs to within 6% towards the end of this year. 1st, we issue panda bond. In 2016, January, Shimao Group issued the first tranche of private bonds of CNY 4 billion . Interest rate was the lowest during that period. It is among the first companies to issue private bonds on the Shanghai Stock Exchange. We started preparation of issuing public panda bonds in China. Its application for issuance was submitted to the Shanghai Stock Exchange. We used new borrowings to early repay existing borrowings and negotiated for a lower contracted interest rate. This is to adjust the cost of old borrowings. Based on changes in the market interest rate, we exercised strict control over the group's finance cost in line with changes in market interest rate. Selected optimal option after comparing various options.
Number three, we completed the hotel property issuance. In 2016, first half, we issued some low-interest RMB bonds and short-term debentures at low-interest rates between 3% and 3.38%. The group is constantly diversifying its financing channels, including mortgage-backed securitization and other upstream and downstream financing channels. Number six, in the first half of 2016, we were able to lower interest costs. The weighted average of finance costs decreased to 6.5% from 6.9% in FY 2015. This was the lowest level in Shimao in recent years and consistent with the management's goal of reducing finance cost. We are confident to lower it to within 6%. Page 12. In May this year, there was the VAT reform being implemented. We completed VAT reform related transition and implementation. We started in 2014 to prepare ahead for the VAT reform by embarking on system reforms, setting up relevant workflows and internal training.
Old projects account for 82% of the group's total projects. Simple tax computation is an option, which may help reduce the group's tax burden and enhance its profit. As the group runs diverse businesses, VAT reform helps eliminate duplicated taxation, which is positive for results. Leveraging on good relationships with upstream and downstream business associates, the group is building an integrated value chain, which will allow it to fully enjoy tax dividend from the VAT reform. Page 13, our financial summary. I won't go through the details. The interim results highlights and financial review presentation is just presented, so I hope that you will continue to have confidence in our company. Now, we will present to you our overall operations and business review. Thank you.
Thank you, Ms. Tang. Let's do a review of our first half operations and business. In the first half of the year, you are aware of the market. The market is quiet in some cities. For some product categories, for example, in tier two cities, the residential land market was active. At the same time, in tier three, four cities and commercial properties and office, the growth was very slow. In some areas, there is decline.
In face of this kind of uncertainty in the market, we continue to have stable development and growth to maintain improvement in our results. We have optimized our sales rhythm and structure. We reduced inventory as presented by Ms. Tang. We did destocking and optimized our inventory structure. That affected our gross profit and our destocking and our optimization of structure was very effective. We controlled costs. That accounted for 4.8%, and in fact, in many cities and projects, we adjusted our price.
We strived for more premium. If you look at our revenue, total is CNY 30 billion, slightly up from last year. Sales of properties, CNY 28.5 billion. They are in 42 cities in China, mainly Nanjing, Beijing, Jinan, Wuhan, Shanghai. Their contribution is bigger. Next page. Hotel operation and investment properties. You can see revenue from hotel was up 7%, rental income up 12%.
Other revenue is slightly down because last year we sold our cinema business, and last year there was a difference of CNY 160 million. If we exclude this impact, then there should be a growth of 9.6% year-on-year on income from hotel operation, rental, and others. Page 17, investment properties, hotel operation. So 14 hotels. Altogether 5,128 rooms. In the first half 2016, revenue was CNY 667 million, up 7% from last year. EBITDA was CNY 190 million. In first half 2015, it is CNY 176 million, up 8%.
There are a number of mini hotels and also self-operated hotels. Page 18, investment properties, commercial and office premises. 11 premises altogether. For first half 2016, turnover was CNY 415 million, up 12% comparing with 2015. Mainly from rental income growth from our shopping malls. That is a brief result review of first half 2016. Well, given the market circumstances, we continued our operating strategies. Page 20 shows our land reserve. We are in 41 cities with 116 projects. Total land reserve, 31.85 million square meter as of June 30th this year. This distribution is more or less the same as the original distribution. Next page 21. A detailed analysis of our land reserve. Newly acquired land, eight pieces, eight sites. They are in tier one and good tier two cities, Beijing, Nanjing, Wuhan, and Fuzhou. Along the periphery of Fuzhou. Total land cost.
Our total area, 1.1 million, and land cost, slightly more than 10,000. Land cost, CNY 8,178 million. Our land reserve. 31.85 million square meter is the total, and 25.2 million square meter was attributable GFA. We are concentrated in Northern China, around Beijing and its periphery. We have a lot more land there, and then Fujian while Central China. These are areas where our land reserve is concentrated. Our strategy is, first of all, we have completed some investment property. Completed and unsold inventory held as investment property, 3.37 million square meter. Properties under construction, 12.95 million square meter. Future developments, 18.9 million square meter. They haven't been developed yet. Average land cost, CNY 3,016.5 per square meter, slightly up from last year. If you look at the bar chart below, you can see our increase in ASP. Our ASP rises quite fast, 14,000.
As a percentage of land cost to ASP, it came down slightly to 22%. Next page. Sellable resources for second half of this year. This page is quite clear. In second half of this year, total resources. It is quite big for these two categories. For basic small units, all these added up almost 80%. That is the main part of our product. In first half 2016, contracted ASP was CNY 14,192 per square meter. This is because the price increase in tier one, two cities, and also we have bigger bargaining power. For the whole year 2016, saleable resources amount to 9.3 million square meter GFA. Conservative estimate of ASP is CNY 13,000 per square meter. Total value of the saleable resource will be CNY 120.9 billion. We only need to do a sell-through rate of 55.04% to reach the target.
However, we offer higher targets to various districts, so we are very confident to reach this target. We hope that you will have a better understanding of our strategy now with all the information. Next, a simple summary and conclusion. For the second half 2016, how are we going to maintain our operation results? Four areas. 1st, profitability as priority. When the market is getting better, profitability is a priority. We will increase price. We will increase premium pricing of products. At the same time, we will continue to do destocking. This is a trend in the market. We will optimize our inventory. While this may affect our gross profit, we think that this is the right direction. We will insist on destocking so that for 2017, we can be prepared to become light asset. Then optimize production. 1st, structural.
Structure of cities, and then also the timing structure. We manage construction processes and development guided by the philosophy of optimizing operations, determining output levels based on sales, and controlling expenditures well within revenue flows. Then cash is king. We want to maintain good cash flow. At the beginning of this year, we already said that we want to achieve positive operating cash flow.
For the whole year, if land cost is within plan, then we are quite confident to maintain positive operating cash flow for the whole year. Then, I think this is our strategy for the second half. Now the market is still rather volatile, and we adhere to this stable strategy. After the past period of adjustment, in 2017 - 2018, we are still very confident. We hope that our results will be recognized by our shareholders. This is my report on operations. Concerning marketing, Mr. Shao will take you through this part. Thank you.
Now let me present to you our review and outlook for marketing. 1st, supply. Supply in first half 2016 was basically flat when compared with first half 2015. Property control of supply launch schedule to ensure higher profits will be achieved. We will capitalize on the growth in the market. Right now, supply of products remain flat. Contracted sales rose by about 9%. Cash collection increased by 16%. Overall cash collection ratio, owing to higher quality sales, increased to 85%, ensuring adequate cash flow. If you look at our business review, we have completed 52% in sales in the first half. Cash collection reached 50% of the planned target for the entire year. Both exceeded the target, and the cash flow facilitated land acquisitions.
[Non-English content]. Sell-through rate of new supply and inventory to sales ratio grew notably in the first half. We achieved first half 2016 target under controlled pace of new supply with a 12% increase on sell-through rate of new supply as compared with first half last year. We focused on inventory clearance during first half this year, and inventory to sales ratio increased by 19% as compared with first half last year.
[Non-English content]. Cash collection ratio increased by 5% as compared with last year, which accelerated cash inflow to ensure a healthy cash flow. Cash collection ratio target in 2016 was 88%. In first half last year, it is 80%, so we are up 5% this year. Cash collection ratio from new sales increased to 59% from 46%. Clearance of receivables + 63% from 53%, so we are more efficient in cash recovery or cash collection.
For the first half of the year, prices for a number of projects showed notable growth with year-on-year increase of 29% - 67%, with an average of 18% for our group's portfolio. Magnitude of increase in ASP led the industry and ranked among top 10. We continue to implement four strategies to achieve annual target. We will control our new supply in regions that meet market's demands to increase profitability. We will accelerate cash collection, supply control, and we will raise efficiency and do inventory clearance. Total saleable resources in second half this year amount to CNY 86.4 billion. There's an increase by 6% in first and second-tier cities. That's proportion of inventory. In the second half, saleable resources reach CNY 86.4 billion. Basically, we are very confident to upgrade or enhance our ASP and also profit from sales.
For destocking, there are four means to maintain our implementation of inventory clearance. Inventory of one to two years, saleable resources within one year, new supply, they will be managed by different ways so as to achieve inventory clearance of CNY 14 billion. Sell-through rates of total resources should reach 55%. For new supply, it should exceed 60%. Last part will be customer-oriented, and we will put in place a system to address customers' mindsets. We will optimize living space, enhance living experience, and improve land properties. We will ensure our core selling points in order to improve the competitiveness and premium pricing ability of our products. That's all about marketing. Now, Mr. Xu will deliver the conclusions.
Good afternoon, investors. It's quite late already, and we are the last property enterprise announcing results, so you may feel bored. In my conclusions part, I will go faster. I will share with you some news. 1st, the property market was red hot and turnover rose 40%. Very often, this spread from tier one to many tier two cities. Tier three cities are now doing well, and price also went up in tier three cities. Our sales was CNY 34 billion. ASP went up to over CNY 14,000. Is this related to the disposal of assets? Well, a very small percentage. At the end of June, we did not collect all cash, but up till now, almost 100% of the payments were settled. It's very good. Secondly, for our sales target, some developers have revised upward their sales target. Our sales target remain unchanged, so some investors may wonder why.
Actually, it has gone up a lot because we are confident that we'll exceed target. Besides, we had already closed 10 projects. We wanted to sell CNY 10 billion, and still we exceeded target. Some investors may ask, why? In fact, a lot of sales was very passive. Well, the King of Land in the periphery. There is a Zhoupu project in Shanghai. Land cost was CNY 18,000. Bought it at the CNY 50,000, and next year, we can do CNY 60,000, CNY 70,000. Our gross profit was CNY 5 billion. Even though we are passive, there is still CNY 2 odd billion. Few days ago, I went to Xiamen and there are six sites that are being auctioned. The total consideration was CNY 14 odd billion. The land price is really alarming. In Xiang'an, there was a project last year. It sold at CNY 18,000.
Gross profit was CNY 2 billion-CNY 3 billion. At the periphery, the auction price was CNY 38,000. Now we are selling at CNY 30,000 odd . I think the trend is really alarming, from CNY 18,000 odd -CNY 30,000 odd . At the end of next year, it will be at CNY 50,000 odd . In the rural area of Xiamen, later I took a look. We used to be in top three of land reserve in Xiamen. We have a lot of land there, and I haven't thought that we could be among the top three. After the auction there, we closed our projects. There is inventory of one odd billion. We have to sell like CNY 40,000 odd . At even better locations, we have CNY 10 odd billion of inventory. We can earn another two more billion.
We have raised price a lot, and we closed sale of some projects. Price is going up very rapidly. In Chengdu, there is a rural project selling at CNY 6,000 odd, but the land cost along the periphery also reached CNY 6,000 odd . In nine areas in western China, CNY 10 billion of sales will be moved towards next year. This is beyond my imagination. We will be able to exceed the target. If we had not closed sales, we would be exceeding target by a large margin. You may be concerned about gross profit. In the first half of this year, it's 28.2%, slightly lower for the whole year, 27%-28% this year. I think our gross profit margin will be at its lowest this year.
In 2015, we did destocking, and we made some sales, so it was realized or booked in the first half this year. We had raised price a number of times, and in 2017, our gross profit margin would exceed 30%. Profit will go up a lot in 2017. Concerning destocking and cash collection, we did a lot of work. Cash collection rose from 80% - 85% for destocking. It reduced our GP margin, but for our future health, I think it will be very good. Gearing, 55.7%, it is coming down, and there is room for further decrease. In these two months, there's CNY 3 billion to lower our borrowings. We issued shares. Whether or not we are able to complete it at the end of the year, CSRC did not quite agree to the additional issue.
They don't want to see too much volatility in A-share price. If we are able to raise CNY 4 billion of cash and CNY 4 billion of equity, then we will be able to lower our gearing ratio. That means that at CNY 10 odd times of PE in A-share market, we are doing placement. Our A-share control will be smaller than CNY 5 billion. I think this is still very good. In the future, we will continue to inject assets to enhance our profitability, and it can also increase cash and lower gearing ratio. Increase equity, this is very good. Financially, our interest costs will come down to below 6% within this year. This is a big move for foreign exchange. Last year, we lost a lot in FX, so from 48% down to 33%.
At the end of the year, it will be at 32% because there is not much borrowing that we can repay. We have repaid most. In January next year, we will repay $800 million, so we'll be at 20% odd , which is very low. But I think that is very healthy. We bought a lot of land in China. There are many kinds of land. Many investors said that our results these years were very boring, not energetic enough. In 2017, 2018, we will make you feel energetic because 2017 will be a year of big growth. From now, even if we do not buy land, there will be a growth of 10% odd , but it is not possible for us not to buy land.
In the first half of this year, we bought very little land because the price is high, but then in the second half, land will be more expensive. What should we do? We are now thinking. Of course, it is not impossible. It's just that we may not be bidding for land. A few years ago, we were strong at getting land, acquiring land. In July, August, in the periphery of Beijing and Hangzhou, in Xiamen, we acquired almost CNY 10 billion worth of land, which is rather cheap. We will acquire some secondhand projects. We will actively liaise with the government on building core center, healthy senior housing, and so on. Together with Nanjing government and Fuzhou government and Pan-Beijing, Shenzhen, we signed a strategic agreement already. Shenzhen has never signed a strategic agreement with privately run enterprises.
That can give us over CNY 100 billion of resources. Land cost is rather low. I can't tell whether we can really get it, but we don't want investors to misunderstand that Shimao has not much good to sell. Now, we have a lot of good things to sell. For example, in Beijing and Pan-Beijing, we have over CNY 30 billion of high profit product. In Beijing, over CNY 20 billion. Nanjing, over CNY 30 billion. Very high profit. Fuzhou, Xiamen, let's not talk about tier three, four cities. High GP margin, over CNY 30 billion. Wuhan, Hefei, over CNY 30 billion. Shanghai, Suzhou, over CNY 30 billion. I still haven't included Shenzhen, Hangzhou, Tianjin, and Shandong, and so on. Price increase exceeded our expectation. Altogether, over CNY 200 billion of high profit products. Very high profit.
This year, if we can replenish CNY 100 billion of land, if we can replenish more land, then I think our land structure and profitability growth can be secured. CNY 200 odd billion, of course, it won't be sold out in one year, maybe in three to four years, but the new resources that we'll replenish are very good. This year, land costs will be bigger than last year. Last year, we only acquired CNY 20 billion of land. This year, it will be bigger. Last year, we bought land, and they all rose a lot in price. Our division of labor with the share company, they concentrate on commercial. There is residential that we manage for them, but now the effect is quite good. For many projects, profit grew quite a lot. They do diversified investment. I think the rights issue is very important.
In the future, there will be some commercial properties that may be sold for hotel and investment properties. In 2018, 2019, there will be some good hotels and good commercial properties that will be open, so rental income will grow significantly. Let me do some advertising. If you have the opportunity to go to Xiamen, please If you stay, please try Conrad Xiamen, which is the tallest. I have tried it, and the scenery is excellent. This type of hotel is very good. There are some in Shanghai, Hangzhou, and Hong Kong. We will start our hotels. There are offices and shopping malls with increase in rental income. In Shanghai, our rental income will grow from CNY 100 million- CNY 300 million. There will be a big adjustment. These are some positive trends for the future. I have been reflecting on our operation.
In 2015 and 2016, it was a year of adjustment for us. In 2013 and 2014, we grew very rapidly. Every year, sales grew 50%-60%, and then our delivery rose from 10,000 - 50,000, 60,000 units. I discussed with investors about that. In 2015 and 2016, especially in 2015, our quality declined. Our product quality declined because we went to too many cities, and the refinement of our management is not good enough. In 2015 and 2016, we made adjustments to our energy, our region, and our performance appraisal and project quality.
Now, construction quality has been enhanced significantly. Customer satisfaction is now in the middle high end in the industry. We're still not happy. In 2017 and 2018, we will restore quality growth, not only growth in sales. There will be big growth in profit, customer satisfaction, and construction quality. All these will be enhanced. In 2017, it is a year that we look forward to. In 2016 will be a still boring year, but there are four more months to go only. Please have patience. Thank you.
Thank you, Jason. It's now time for Q and A. Please feel free to ask questions. Before you speak, please state your name and the organization you represent.
Hello, Raymond Cheung from CIMB. I'm from CIMB. Jason, you said this year you will buy CNY 20 billion more of land. In the first half, you spent CNY 8 billion, and then there is still at least CNY 12 billion more to go that you will replenish land in the coming few months. For replenishing land, are you going to do it through a cooperation or you will go to the public market to buy land? If you buy land from the public market, the price is quite high.
In the second half of the year, where will you buy land from? That's my first question. Concerning dividend, the chairman is here. In the first half, you paid HKD 0.32. If you deduct six fund, then around 30%. Actually, your finance is quite good. Gearing is only 60%, net gearing is 60%. Will the chairman consider increasing the dividend payout? Will it reach 40%? My last question is concerning the whole market. Now, land price has gone up a lot. Concerning the overall property market, like property prices, this year and next year, what will it be like? Will you see a turning point? Thank you.
Let me take the first and third question, and then he will take the dividend question. For the land market, perhaps I did not make myself clear. Last year, we bought CNY 20 billion. This year, if there are the right opportunities, the figure will be much bigger. This year, it won't be CNY 20 billion, it will be much bigger. In the first half, it's only CNY 10 billion. In July and August, through cooperation, we increased some, which was not accounted for in the first half.
What will be the final number? As Raymond said, to a large extent, it depends on our strategic cooperation with the government. We don't want a lot of them will come from auctions. We will help the government to build a city center, sub-center, or we will do tourism-related or commercial, elderly-related projects. This type of land acquisition is very difficult. In Shenzhen, in Fuzhou, Nanjing, Pan-Beijing, we discussed with local governments. Many projects are over CNY 10 billion.
If these projects can be finalized, then it will be like CNY 30 billion or CNY 40 billion. These projects are difficult. It's easy to use a check to bid for land. This year, we don't know whether we will acquire land to CNY 30 billion, CNY 40 billion. If everything goes smoothly, it will be at CNY 40 billion. We are not worried. By issuing new shares, our gearing ratio will be controllable. It won't go up further. We are discussing with the government, and payment will not be made in one-off payment. We need to do cooperation. In July and August in Hangzhou, Xiamen, we acquired some sites through cooperation. Yes, we bid for the sites, but at the later stage, we did it by cooperation.
About the market, this year the market is very hot in terms of turnover and also in tier one, tier two cities. This heat spread to tier three cities. This year the market was good, but next year there are risks. In tier one and good tier two cities, price will not come down because there is the population benefits. Many developers, people, and money are in those areas. Money and people, these are the two determinants of growth in property market. When there are people and money, it will be difficult for the market to fall. It will not be as crazy as in the past years because price has risen to a level that is beyond people's affordability. Perhaps we have not taken into consideration other income of people, but price has gone up to a very high level.
Local governments are doing adjustment by means of supply of land. In Dongying, there is less land. In Nanjing, it depends on whether you are lucky to be able to get land. We tried our luck, and in some areas, in terms of mortgage, there are some restrictions. In recent period, there are rumors of some purchase restriction in tier two cities. So far, no announcement has been made yet. In Nanjing, for example, there was that rumor, but it was not realized yet. I think the broad policies are okay. I think the monetary and financing support is quite good. Overall speaking, we are optimistic about the good cities. We hope the price can stabilize. If the price goes up so much, it's difficult to buy land. Land price is already very crazy. There is risk.
Well, we have closed sale for 10 projects, but next year, we will sell them again. We won't stop sales for three to five years. I think in good cities, it's difficult to see a decline, but we don't want them to rise as much as this year. If they continue to grow, that won't be sustainable. This is our worry, but we are still positive about good cities. There may not be only 10-odd good cities. The periphery of Beijing is good, like Ring Seven and Kunshan around Shanghai, they are also good.
Property price has gone up a lot. We will look into the periphery of Beijing, Shenzhen, Guangzhou, and Shanghai.
About dividend, 10 years since our listing, we have been adhering to our promise to shareholders. Dividend payouts will not be less than 30%. In the past 10 years, we have been doing that. In order to pay back to shareholders, we have to ask our colleagues to work harder to expand revenue and increase profit. Then 30% of an increased profit will be bigger. Up to now, we have no plan to change it.
Good afternoon. I'm Ryan from JPMorgan. I have a few questions. 1st, about your project launch plan. In tier one , tier two cities, you are quite optimistic, and you still closed sales in some projects. Some developers want to sell at this time because they don't know when this boom will last. If they sell in 2013, then they may have to offer discounts in 2014. That's an example.
Comparing with 2014 or 2011, why is it that this time the market has been so good for 12, 15 months, there is still no downside pressure in Hangzhou, Nanjing, Xiamen? There has been such movement. That's my first question. Secondly, looking at Ring Seven, Beijing, looking at your layout, some may be worried because if we go back to 2011, 2014, plan in these tier three cities does not give very good return. Now, if you look at the government's population layout, is there a change? If you look at the top 15, 20 cities and also Ring Seven in Beijing, I think this is going to be very favorable.
My last question is for [Ringo] about financials. Looking at the financial statement, there are two items. Current assets, there is a disposable asset, CNY 1.5 billion to CNY 1.7 billion. In the past, there wasn't this item. For this CNY 1.57 billion, what type of asset is it? In core earnings, investment loss of CNY 150 million was deducted. Is that related? There is a CNY 600 million perpetuals. Which project is this related to? In the second half of the year, do you have plans to repay it? Thank you.
Let me talk about project launch plan. Traditionally speaking, in July and August, our project launch is usually smaller. In July, it's a CNY 5-odd billion. In August, it will be more or less the same, around CNY 5 billion. But then we will launch more in September, October, and November, about CNY 6 billion of sales. If we reach that number, we already exceed targets. Just now, you asked a very good question. Why do we keep so much stock? Why don't we sell it?
If we sell it next year, will there be the risk of a lower price? In fact, the government had imposed many restrictions. There is price restriction. If there is not price restriction, then definitely I will sell the product today. So I am forced to stop sales. In Xiamen, land cost is CNY 38,000, we are selling at CNY 31,000. The government this year will not let us sell at a high price. Next year, perhaps it will be at CNY 40,000 odd , then I will sell. In Shanghai, land cost was CNY 50,000. I can only be allowed to sell CNY 40,000. That is not acceptable. Now, next year, the units will be sold as completed units. Then we can adjust price to CNY 60,000, possibly. Others may be able to sell at CNY 70,000. So I have to tackle the price restriction.
In Shanghai, Nanjing, Xiamen, and Hefei, Suzhou, price increased a lot, and there is price restriction. My land was cheap, but it was bought much earlier. So they will not let you increase price by 100% within a year. Otherwise, the ASP will go up. If ASP goes up a lot within a year, the local government will be very scared. So it is not true that we do not want to sell, it is because of the price restriction.
After communication, if we are given the approval, like CNY 40,000 odd , then tomorrow I can start sales. But it takes time for communication. So I think we have to wait for a year to increase price. But we are not that worried, because these are very good cities, and many developers were eager to go in. There are a lot of people and money, so risk is not worrying.
There are a lot of adjustments in control that are on state level. There are other adjustments on city level which are milder usually, because the government still needs to sell land. So if they put in place very harsh measures, that is not conducive to their land sale. Secondly, I just talked about the Pan-Beijing size and other arrangements. Beijing and the peripheral, we have a product of CNY 30 billion, CNY 20 billion in Beijing, Pan-Beijing, CNY 10 billion. Very little, only. Some enterprises have a plan of a few hundred billion in Pan-Beijing. They are among top 10. We hope to increase it. But we will be rational. In the future, in sixth ring, property price will be at CNY 50,000, CNY 60,000. For seventh ring, CNY 10,000 - CNY 15,000 should be rational. It is only 20%-3 0% off. Or actually, 70% to 80% discount.
In some place, land cost is at CNY 7,000, CNY 8,000. We are talking about CNY 2,000, CNY 3,000 land cost, and we will have a lot of profit, even if there is price restriction. If it is CNY 5,000, CNY 6,000 or CNY 7,000, risk will be high. In seventh ring, people are being attacked for buying land, so it is difficult to acquire land there. We will expand the periphery of big cities. But for tier three, four cities, there are no industries, no people, we will not go there. In the past two years, we digested our inventory and saw some problematic sites. So 2017, 2018 will see big growth. CNY 600 million perpetual debt or bond, and CNY 1.57 billion wealth management products. Ms. Tang can supplement on the details.
Disposable assets. All right, let me comment on perpetuals. Now, in the mainland financial market, it is being opened. For public perpetual debt, in the second half of the year, they may accept public debt for property enterprise. We will use CNY 600 million to explore, because we understand that other players are issuing perpetuals. In accounting, investors' recognition is not that high. For our perpetuals, 1st, the interest rate will have to come down quite a lot because it is public equity. Banks and securities houses support will be bigger. Talking about recognition of this kind of equity, we have reached consensus with accountant. 1st, this amount won't be big, and interest rate is low, so usually it will be more conservative. We will not be talking about CNY 10 billion. It is very small amount, and interest rate is very low.
I am Eugene from UBS. I have a few questions. 1st, for associated companies, there is a loss of CNY 200 million -CNY 300 million. The same happened last year. What are the reasons? For these loss-making JV projects, are you going to take care of them, for example, by selling the shareholding? My second question is, for your perpetuals, what is the actual cost in the future? If you still want to do a little bit more, what is your target about cost of this financing? Jason just said that in the past, there were too many cities. In the first half, there are 42 cities with making different contribution. Can you let us know in the future, how are you going to reduce the number, and in which area will you concentrate your resources?
About perpetual, first, interest rate will be 4%-5%. Overall volume will be very small. We won't issue CNY 10 billion to lower debt, because our debt is not high. It is a way of exploration. A few hundred million, or maybe slightly bigger in the future, interest rate will be very low. You made a good point just now. First, about cities. 40 odd cities, too many. We are in the ending stage in some cities, so after the adjustment, we will focus on 10 odd cities, like 15 cities.
We will focus on 15 cities. In some cities, there is inventory, like car parking spaces and so on. We may not be able to lower this number at one go. It takes time. Overall speaking, we hope to put core resources in core cities. Just now, I said that after the adjustment in the past two years, in 2017 and 2018, there will be much improvement on various dimensions. In terms of new products, we have done lots of studies. In the past, there are a lot of units for self-occupiers, and now there are many units for upgraders, and also the furnished units.
There are many units selling at CNY 100,000 odd. In 2017 in Shanghai, there will be units selling at CNY 200,000 odd. In Hong Kong, there will be units selling at HKD 500,000 odd in 2018. For the high-quality demand, it will come back. We will not go for an absolute number, where even if we do not buy land, there will be growth. It is not possible for us not to buy land. We are not competing on price. There are some from the public market, but that will not be the majority in terms of acquisition of land. You talked about JVs.
Their loss is in, for example, Yuanjiagang , the Asia-Olympic City. In the past, there were five shareholders. Now there are four only, and we acquired Fuli's shares. This was announced in Fuli's retail announcement presentation. Because the shareholding was not even, together with two shareholders, we have 26.67%, and then the other strategic investor has 25%. Now we are managing the project. The good news is that in the past, the selling price was CNY 12,000. The financial interest rate is very high. It is CNY 20 billion. King of Land is now at CNY 31.3 billion. Now, the land price is already CNY 18,000. This year, we will be selling at least CNY 18,000. There will be positive profit of about 10%. Next year, definitely CNY 20,000 above. There is still product of CNY 70 billion in the Asia-Olympic City.
If we can sell at over CNY 20,000, then 15% profit margin. Some shareholders want to sell at CNY 30,000, so it has become a treasure. In the past, it is not good. Tianjin Jinan, four property developers worked together. In the past, it did poorly. Now, we have half of the operation or management right. Profit margin is already 15%. After-tax profit margin, 15%. In the future, it will go up to 20%. These are the two biggest loss-making projects, but they have turned into treasure already. It is good. We now have the management rights. In the future, we hope that there are only two shareholders or three shareholders. In the future, in most cases of cooperation, we are the one with management right. If there are too many parties involved, it will be problematic.
I am from Morgan Stanley. I am Yi Shun Ho. I have three questions. 1st, it is now in August, so you may be thinking about saleable resources for next year and product launch. What will be the growth in contracted sales for next year? Second question, this year in May, you sold a building. You sold Beijing Fortune Times to Leshi. In the future, will there be a sale of mature commercial properties, and how are you going to select the buyer? What are the criteria of sales? Just now, you said you signed an agreement with Shenzhen government, which includes elderly and healthcare projects. What is the scale of capital involved? Thank you.
About sales for next year, I said just now that we have not included Future land acquisition, the growth will be 10%. There are still four more months for us to buy land, so it will be more than 10%. We may be buying more than CNY 20 billion. Will it reach CNY 30 billion, CNY 40 billion? We do not know. Because we will not go to public market that much. We will do negotiation, and in some cases, it will take one to two years, not only in Shenzhen but also Nanjing, Fuzhou, Pan Beijing. We are talking with the government on a number of sites. Some may take one year or two years.
If all these go smoothly, then the growth will be very, very high. So, at least 10% growth. How much exactly? It depends on the coming months. Concerning the transaction with Leshi, our profit is more than CNY 1 billion. We have shareholding of 58%, so CNY 600 odd million. There are still many mature commercial projects. Are we willing to sell? At what price? We have not considered yet. The Shimao Tower in Beijing, our cost is only CNY 1 billion. Some are offering, like, CNY 3 billion, CNY 4 billion.
Our board is not willing to sell it. There are still many good commercial properties. I think the board is willing to sell the shares, because the shares are of our subsidiary company. This reorganization is selling shares because half of the capital is raised from the market. We are optimistic about Tianhai. It is selling now at CNY 10,000. Our rental income can be above CNY 300 million. I think if we sell it, we can get CNY 6 billion next year, even more. For sales in 2017-2018, booked sales after 2018 will be very good. There are many of these projects. Of course, we cannot sell all of them. It is good to sell the shares of the subsidiary. Of course, if there are offers of very high price, then we may sell the projects. This is about sale of core and non-core assets.
About land, there is still a lot of uncertainty because, as such as now, healthcare, elderly, and also subcenter of city, we have put up a lot of proposals. We have to report things to the government. There are many indicators. The government has to communicate with us as to how to get a more reasonable land cost and so on. The process is very long. There is uncertainty. Now, it is equal to relocation of projects. It takes a few years, but after that, the profit margin is very high. Last year, we had a project in Shanghai. There are still many parts not demolished yet. Today, everything is completed, but then the whole thing waited for one year, and we can sell, like, CNY 2 billion or CNY 200,000.
Now, I think at least the land price will go to CNY 160,000, CNY 170,000, but we paid only CNY 50,000 - CNY 60,000. Gross profit is super high, but then the duration is very long, two to three years. Everything included, like relocation and approval. In some strategic areas of cities, the government will have to do reprovisioning. In some cases, reprovisioning was done already, but there is uncertainty. This year we can get it, but I do not know whether it will be 1, 2, 4, 5, 6 sites. In some sites, the value is already over CNY 10 billion.
I am from Macquarie. I am Wilson. I have a few questions. There is a special dividend. For this special dividend, how did you calculate it? Is it based on Leshi's deal? You have done some buyback. How did you justify the buyback ratio and the special dividend? For the second half of the year, are you going to sell investment properties? Third question. Perpetual. For the perpetual, is there a step-up interest rate? After the third year, will interest rate go up? For Shanghai Shimao, at the beginning of the year, set up an insurance company with its funds. To Shimao, what is the intention for the mid to long term? The size for your unbooked revenue, how much is it, and what is the GP margin? Thank you.
1st, about dividend. Special dividend, it is based on CNY 600 odd million core profit, almost 30% of it. I suggest now that there is value added of CNY 1 billion to this asset. We only own 58%, so only CNY 600 odd million . 30% of this, or slightly lower than 30%, CNY 200 odd million. CNY 0. 60 times CNY 3 odd billion shares, CNY 200 odd million, so almost 30%. It is not related to our buyback because it is too low for the buyback. Based on today's share price, it is very low. In the future, if share price will be more or less the same for a long time, then this year it is highly possible that we will continue to buy back shares.
About the perpetual, first of all, the interest rate is very low for us to consider, like four to five points, and there is not a mention that it will go up after a few years and so on. The amount will not be big. So for the perpetual, it is not our main channel of financing. For the unbooked revenue, as such as now, next year, our GP margin will be above 30%. So for the unbooked revenue, most of it is 30% in GP margin, above 30%.
For the absolute amount, we can go back to calculate. This year, total booked figure does not differ that much from last year, because in the past few years, there is not much growth in sales. Next year, there will be growth, but not a lot. Next year, the booked sales will see a growth of a few percent, but next year, gross profit margin will go up a lot, at least 30%, and there is some increase in the booked revenue. So, we would look forward to the results. There is a delay in booking. In 2017, if sales grows a lot, then in 2018, there will be two times increase. So, the booked revenue will increase, and we are optimistic about the GP margin, too.
Next year, whether or not there will be good growth depends on the market and our land acquisition, because recently, the land market was crazy. If we compete on that, we will not have profits. Insurance company. That is a diversified investment of the A-share company, and we ask professionals to manage it, and our shareholding is not big. We cooperate with Leshi, and in some other cases, with other companies. It is an investment. In the future, our major focus is on operation of commercial properties. Investment is just of secondary importance.
Thank you.
I am from Merrill Lynch, I am William. I have a few questions. Number one, can you share with us your cash flow in the first half of the year? Secondly, for the whole year cash flow projection, can you give us some idea? Concerning your USD borrowings, the one maturing in 2020, will you buy it back this year or next year? If so, in what way? Thank you.
Two questions. Cash flow this year. Cash flow at this moment is very healthy because our cash collection rose from 80% - 85% for the whole year. We will be even higher than this level. In the first half, we did not buy too much land. For the whole year, we will prepare a chart. So for interim results, we did not make this table because the figure is not very accurate. Leshi, at the end of June, paid us very little, but in July and August they paid, they settled the whole payment. So there is a big gap in the numbers. For the whole year, it is not even. In the first half, we bought CNY 10 billion.
In the second half, maybe CNY 20 billion- CNY 30 billion. It depends on the strategies. Overall speaking, apart from many possible strategic land acquisition, for our cash flow, we hope to turn it into a positive number or close to a positive number. It depends on land acquisition. Another uncertainty is the A-share issue. We have to see whether it can be completed within this year. If so, then there will be cash of CNY 4 odd billion. Then our cash flow will be very good. Now it is quite tight because CSRC is still deliberating. The second thing is about our USD loan. For foreign currency or foreign exchange risk, it has been reduced a lot because we repaid a lot of syndicated loans. Some banking people may not be happy, so there is not much room for us to do further repayment.
Basically, we have three USD high interest rate loans. The first one will mature in January next year, so it is $800 million. We will use internal resources, especially RMB. It will be cross-border. There is 10 billion cross-border money, so we can repay that $800 million. After that, our foreign currency will account for only 20% odd of the borrowings. It is quite healthy. Then in 2018, in January, every year we issue bonds in January, so we will repay every year in January. Of course, we will have to see whether RMB continues to depreciate. If it does not depreciate, of course, the syndicated loans is cheap at 3%-4%. Now, we still hope that we will concentrate mainly on RMB f or foreign currencies, we are afraid of foreign exchange loss.
This is the end of today's presentation. Thank you very much for your interest in Shimao Group.