Earnings Call: H1 2019

Aug 20, 2019

Good afternoon, ladies and gentlemen. Welcome to China Resources Land Limited interim results announcement for 2019. Today with us, Executive Director and the chairman of our board, Mr. Tang Yong. Executive Director and President, Mr. Li Xin Executive Director and, Vice Chairman for Board, Mr. John Dawait, Executive Director and Senior Vice President, Mr. Shintoto. Executive Director and Senior Vice President, Mr. Wobbinchi. Now shall we invite Mr. Tang Young Chairman Board to deliver a speech, Mr. Tang, please? Difference from the investment. Good afternoon. 1st of all, welcome to our interim sales announcement of Autonomous Land Limited. Every year at this time in the middle of August, I believe that this is a busiest decision for you as well. So on behalf of the company and the management team, I'd like to extend our sincere gratitude for your support. While I prepared for this speech, Actually, I talked with Annie that, in August this year, saw we talked about the situation in the first half, the Hong Kong situation as well as the future plan. So, actually, we give it a title to the sport, to the sport. So I call it that the deepwater always run-in slightly, and, this is a potential for the future. I'll just until certain days, we can also realize certainty. So perhaps this is also of our core value of China Resources Land Limited. Looking at our interim results, you can see that we have been operating steadily and healthily. 1st of all, in terms of our performance, the business revenue realized a steady growth by reaching the, 4 to 5.8 percent of RMB 1,000,000,000 RMB as well as overall revenue up by 4.7%. In which the investment property realized a year lease revenue of $5,700,000,000, up by 30%. Also in the first half, our development business realized, the, total settlement, but we believe that there will be a comfort positive growth. And in the, by the end of a half of this year, there was a 11.2% of our growth in terms of our development business. The rental increase also was also reflected by our investment properties, which realized a JPY 44.7000000000 in total revenue, up by 30%. And, if you can see there was also a 39% of our growth in our investment development business. Was a 37% of our growth in the retailing business. The settled gross margin also back to the normal reaching at a high level in the industry, which was 38%. In development business, realized that 36% from gross margin, up by dropped slightly than in 2018, back to the right normal. Investment properties realized that 37.6% for gross margin the shopping malls were put into operations consecutively, and the management division sales increased. There was a 37.2% of growth in the retailing business. As for the net profit attributable to their shareholders, also increased steadily, accounting for 12.7 percent, RMB12.7 billion under the core net profit to the, shareholders also increased. So this morning, we had the Board meeting, and I think that the dividend payout was, there was, yeah, 13.7 percent increase of our dividend payout, which was, 0.144 Hong Kong dollar or 0.1 to 9 RMB increased by 10.8%. So the DPS increase, as well as the contribution to the shareholders also increased their delay so that we can really, we can realize a steady growth in terms of further returns to their shareholders. And the dividend payout ratio was at 30, 37.5%. So we have full confidence for reaching our goal at the end of the year. In the first half of this year, their total agreement also increased by 26%. We have confidence that we can finish all the contracts as I said for the whole year. And as for the terms of our financials, our debt level has been very low in the industry and which was 40 3.6% increased slightly than 2018, but, dropped slightly than the mid of last year. And our financing capability has been stable. And overall financing cost was, 4.45 8 percent, decreased by 2 percentage, basic points than 2018. A good company must be bought into your time, and instead of the short term growth. So we have a long term commitment to our shareholders. Focusing with the unstudities, for political and geographical situation, we are good at finding opportunities so that we can realize a certainty out of uncertainties We stick to the commitment that were made to the shareholders. After for prudential management, we can realize high quality and a steady growth. Now I would like to invite Mr. Shintang Dong, our Executive Director, to share with you our highlights as you may hear from him out of the presentation. Mr. Chen, please. Thank you. Dear friends from the investment. Good afternoon. So coming next, I would like to share with you our midterm performance for 2018. 2019 will be 6% First of all, the company profile business overview, financial overview, the business performance overview ex business, as well as, Pentec. Since you have already known very well about the company and, you also know very well about our business, So I would escape the first part. Now I would like to start from, the second part of the company. In the first half of this year, we realized overall revenue of a 45.8% increased by 4.7% in which investment property realized a 4.7% of a rental increase, up by 30%. Recently, the, rental has been increasing steadily. And the fair value for investment properties also went up steadily. And, our net profit attributable to shareholders was some RMB12.7 billion, up by 43.8% and the earnings per share was RMB1.84. And the board suggested about RMB0.1 to 9 than per share of a dividend, up by 17.3%. Or if it is in Hong Kong dollar, it is 0.144 dollars, up by 10.8%. In terms of sales, in the first half, we realized contract amount of RMB 118,800,000,000. And we have consolidated our position of our top 10 realizing over 50% of our total target, the investment property scale also realized steady growth by the end of last year, we are operating 80s, 53 shopping malls, 37 are held household and 'eighteen are leasing. Financing cost, absolutely, the leverage levels are maintained at the low level, And, at the end of the, period, reporting period, the weighted average finance cost was a 4.45% dropped by 2 basic points then the end of last year. Net interest bearing debt increased by 7 by 9.7%, reaching 43.6% at the end of last year. In the second half, it is estimated that the debt level at the end of the year will drop. The, Slide 9 is a year breakdown of our P and L. You can see that even though the settlement cycle was, influenced by different factors, and there was a slight increase. So far, however, benefit benefited from the strong growth of lease rental income as well as the joint operations. Putting aside the valuation factor, there was a 11.3 percent to RMB 8,100,000,000 for the net profit attributable to the shareholders. We think that the yen, the balance sheet management is very important to maintain steady financial healthiness. So within the reporting period, we enhance our cash management and improve capital utilization rate. By the end of June, there was a 4 point there was a 10.4% of our grace of interest environment debt. To RMB146 1,000,000,000. And the cash the cash balance decreased by 11% than the end of last year. And the leverage level also increased slightly than the end of last year, but still maintained at the very level at the end of last year and the mid last year, the total interest bearing debt and the net interest bearing debt dropped by 2.7 and 3.6 percentage points. In the first half, our equity financing cost has been stable. And, the maturity periods also distributed evenly. So because of the influence of 4.5 and a 10 year newly issued USD debts. The average debt maturity is extended to 4 0.7 years. R and B exchange fluctuation increased. Therefore, the company has been actively managing the foreign exchange exposure under the RMB net debt to extra exposure for the reduced to 19%. Now let's look at the different business segments. In the first half, we realized RMB36.6 billion in our development property because of the high basic figure in the first half last year, as well as the distribution of the second half of such properties, In the first half, our settled revenue basically maintained at the same level. In Tier One Cities, the settlement amount reduced to 28% back to the right normal. For a long time, we focus on the high energy level of our cities. This strategy remains unchanged in the top ten cities in the first half are the Tier 1 Cities, Tier 3 Cities, and the core Tier 3 Cities. In terms of development cost, we enhanced our cost control and basically the single side cost of finance cost was maintained at the same level. In terms of our contracts, in the first half, there was a 26% or 11.6% of our growth, reaching JPY 118,800,000,000 and JPY 81,500,000,000. We have confidence that we can realize the target. Of RMB242,000,000,000 of total concepts of contracts. The top 5 cities covered all the 40 one cities increasing the unit amount, increasing to 15%, reaching 190,000 yen per square meter, reaching the high level in the recent years. Generally speaking, 80% of the countries happened in Tier One City and Tier 1 Tier 2 Cities. Investment property is one of the core competitiveness. Recently, this core competitiveness has been gradually reflected and enhanced in the first half, our total rental revenue increased by 30.4%, reaching RMB5.7 billion in which shopping malls realized 75% of our total rental revenue, investment property also realized a steady increase in terms of fair value. And the book value was evaluated over 140 1,000,000,000 in which shopping malls contributed 75% of our total capital valuation value in the reporting period, the, property evaluation capitalization rate, basically, meant and the same level, basically, they are driven by the market environment, as I said, the, growth of revenue income. In terms of our shopping malls, by the end of June, we are self warehousing 35% of our shopping malls in which 22 of the mix cities and, 30 cities of the mix And the total number of members also increased to 8,450,000,000 people or 25%. And the traffic also increased dramatically. The total revenue out of a retail business was rmb29.3 billion, up by 37%. The rental income as well as gross margin both increased to nearly 40%. Gross margin was maintained at a stable and high level. In the first half, the total retailing bank per unit increased by 18%. The growth mainly was from the stated growth of our business as well as better management efficiency, we can see that the first leasing cycle, in those shopping malls increased strongly, including the the main city in Shenzhen and Shanghai mix city. And in Zhengzhou and Wuxi, the performance in the past was not satisfied enough, but recently, the performance are much better. And what is more important is that even though the competition in the market is fierce, However, the shopping malls all increased a very good growth, including the ones in Shenyang, Chongqing and the Xinjiang Lake City. In terms of financials and returns, based on our experience in the past, we made in comparison between the shopping malls by the operating years. Before 2014, there was a 5, the mixed cities that makes under the average operating years, was 8.8 years. So these are mature ones. And through improvement improvement of the operations efficiency, the, lease, the rental return rate also increased by 2.5 percentage points, reaching 36%. Between 2014 to 2018, 2019, the first half of twenty nineteen, we gradually opened 11 other mixed cities and mixed and the average operating years was 2.6 years. And these are the young ones. However, the rental income realized a 30% 70% as well as the retailing amount also increased about 70% with the rental return rate of by 2.3 percentage points, reaching 12.4%. This 28 shopping malls contributed RMB16.8 billion and or 57 percent, which was much higher. Than the whole year of 2018. The contribution capability also dramatically increased. This slide shows our plan, for the upcoming years of our self run shopping malls from the second half this year to 2021, there will be 7 to underlying new properties by the end of 2018, there will be 53 shopping malls altogether. After 2021, there'll be 30 new shopping malls that will be opened gradually. Along with the size of a business, particularly those shopping malls increased, our advantage of the 2 wheel drive strategy will be able to show itself better. In terms of land bank, by the end of June this year, our we are holding 57.7000000 Square Meters, including 43.65000000 Square Meters for evacuated reserves, particularly in the Changzhou River Delta, there are Grade Bay Area as well as the Beijing Tianjin Harvey area, which account for 15% non 7% out of our 76 percent of equity reserves. We have been very strategic and cautious about land reserves. And in the reporting period, we invested land reserves from 9.7000000 Square Meters or the equity area of 9.6000000 Square Meters By the end of last year, the land reserve increased very slightly in which Tier 1 Cities and Tier 2 Cities account for 82% of our total land reserves, and 55% of our land reserves are for shopping malls. So, you know, our business growth model of our DP plus IP plus X and based on our long term strategy and employment, as well as the escalated development model, we have, reserved great energy for our transformation and growth. Ex business include the municipal update innovation, property management, agency services, civil construction operations, long term, long term rental apartment, the senior caring properties and so forth. So different business sectors are at a different development stages. Now I would like to share with you more details about the X business. 1st of all, the municipal innovation business, renovation business, We started early in this sector and have accumulated great experience. Based on our own outstanding capability of the complex development, we have, build up the, old landmark projects such as the Shenzhen, the, city, So with a triple 1 operations model, we according to our initial estimation, So 87% of the land reserves in Shenzhen are in the BigQuery Bay Area, including the 55% of land reserves in Shenzhen, Guangzhou, currently, we are implementing a follow-up 18 projects, which account for about 24,000,000 square meters in the total floor areas. And it is admitted that from 2022, there'll be contribution out of the, agreements. In terms of property management, the customer satisfaction has been increasing steadily. Based on our good quality, as well as a good word-of-mouth, we have one regulation in the market. The first half, we expanded our business channels. And in the period, we increased our total management area from 10,000,000 square meters. 2 thirds of them are from externals, from outside. And it is estimated that by 2020, their total managed and managed and land reserve will reach 200,000,000 square meters Meanwhile, we also participated in the high-tech area, particularly in Buildium Plus Smart Communities and by adopting cloud computing artificial intelligence big data, I will take a connection so that we can connect people things and measurement so that we can build up a strong connection between different parties. In many years, the company has been focusing on the agency services, civil construction operations in Shenzhen area, It is also one of the channels first to acquire diversified projects. The purpose is to make use of our capability and advantages of construction operations to improve the, overall, the value and overall competitiveness so that we can build ourselves into the 1st reach municipal operating operators. So so far, we are holding 100 projects for such services. And, this represents 57,000,000 1,000,000,000 RMB for total contract amount and, which will contribute to 1,500,000,000 RMB in our revenue. This project covers these projects cover parks, schools, rows, hospitals, and so forth. Near future, we can duplicate the examples to other areas. The long term rental apartments has been supported greatly by the national government national policies by sticking to the, steady growth principle, we are actively exploring their long term profit making model. And We make use of the, the SOE background and acquire the low cost long term leasing land. And so far, for those, the properties, beyond 3 year, 3 months of leasing. And, the total leasing rate is over 90%. It is estimated that there will be 2 digits of revenue. And, by the end of this year, we will be able to manage the apartments of 40 over 40,000, of them. In terms of a senior carrying, property and projects, we we are facing with the, glow the biggest senior carrier market in the world and we actively build up the business model. So by the end of this year, we will be able to lock about 8000 beds for the senior career purposes. In terms of our sports and culture area, we are also a leader in the industry. We have already, we have already formed mature culture and, sports facilities as well as other business model and a perfect bit profit making model, we have already made it a unique and effective channel to supplement our land reserves. We have already got deployments in Shenzhen, Shanghai, Hangzhou, and Shenzhen 1 stream has been Sanjay Wang has been a stadium has been a very successful case, and it has led a good foundation for our continuous growth in the future. The industrial fund has the purpose of, realizing the SCR's land management capability and, value export so that we can capture the opportunity in the secondary market. In October last year, together with the China Life as well as the Shiva's holdings, we set up the first industrial fund of, RMB15 billion with a focus in the hotels in Shanghai office buildings as well as commercial properties. In the future, the fund will be an important platform for us to deliver services and as well as the capital operations. To realize the full lease of capital values. Along with the better life, we see also great demands for coordinated demand consumptions. Theaters has been the very important ones. And, last year, we set up our own theater brand for the mix cinema, And in the first half, our total box revenue was over RMB88 1,000,000. By the end of this year, we will be running mounting theaters with 155 screens in the upcoming 5 years, we're dedicated to be a high end theater operator in terms of the scale, the quality as well as the profit making capability. So that is about our X business. The 6th part for the presentation is Pentax. So it is for your reference. And I will not elaborate about those figures. So with that, I would like to conclude my report. Thank you very much.