Earnings Call: H2 2018

Mar 26, 2019

Investors and analysts. Good afternoon. Welcome to China Resources Land Limited 2018 results announcement. Please allow me to introduce the management to you. Chairman and the Executive Director, Mr. Taoyo, Executive Director and the President, Mr. Rishi. Executive Director and Vice Chairman, Mr. Chanda Wei, Executive Director and a Senior Vice President, Mr. Wobin Chi. And Executive Director and Vice Senior Vice President, Mr. Santondon. Welcome. So the first part of the results announcement, Mr. Tangou, our Chairman, will deliver a remarks, Mr. Tangou, first, please. Dear friends from investment. Good afternoon. 1st of all, welcome to our company. For 2018 results presentation. So twice the results presentations in a year, and this is also the busiest time for you. So by taking this opportunity and on behalf of the company, thank you very much for your great support in the past. So for our results, perhaps you can access the Internet for more details about our performance overall I would like to share with you some key points. First, after Mr. Shenan, our Executive Director, We are sharing with you more information about our specific performance. So we have we are confident with the long term commitment to our shareholders. Based on the good control management, we strive to deliver good returns to our shareholders. We realized a steady growth and and realized our premise. And in the year, our overall revenue increased and the gross profit as well as the revenue from the rental business also increased, our net profit was was over 20%, which is the high level in the industry. And there is a 23% of our growth in the gross margin gross profit attributable net profit attributable to the shareholders, reaching to 24.2 1,000,000,000. And this is under the consideration of foreign exchange loss last year. So up on the side, this So our net profit rose about to 28.1%. So this morning at the Board meeting, we also discussed about our managerial responsibility regarding the foreign exchange loss. I believe that in 2018, trend in 2019 onward, we will do a better job. We also changed the functional currency to RMB. This has brought some influence to our financial statement as well. In 2018. And our contract sales was over JPY 270,000,000,000. And we realized our target as such at the beginning of the year in 2018 by taking advantage of the good time window, we also increased our land reserves based on the market performance as well as our strategy in 2018, we actually implemented a strategy very well. This has also reserved enough land for our future growth in 2019, it is estimated that our contract sales will be 20,242,000,000,000, up by 10%. And the fund cost continues to grow and the net gearing reduced to 33.9%. Down by 2 percentage points. And it is suggested that EPS, the dividend payout will be RMB3.05 EPS. And, our final DPS will be Hong Kong.1. 12. And this will represent 28.4 percent, which is higher than the increase of net profit. We take the increase of a DPS excellence brought into our shareholders very seriously. This year, under considering the foreign exchange loss as well as an increase in net profit, I believe that our dividend payout will be more rewarding to our shareholders. So as for the foreign exchange loss, this is partially because of the accounting standards. As in the medium to long run, we will maintain 35% of a dividend payout ratio. In the future, there, even though there are still challenges in the market, as well as the changing macro situation, our investment property, as well as self holding properties, give us more resistance to the changes and the challenges where we are striving to maintain the steady operation, safety efficiency so that we can further promote the increase in DPS and the EPS and create more values to our shareholders. So we In the long run, we are planning to cut with new source of growth under the strategy. Of course, our transformation business involves the municipal center. If you look at our PPT, we've made some progress in this regard as well, including the property management long term rental department, commercial and industrial property cinemas and so forth. In 2018, we realized the progress in all of these areas. In order to further improve the customer's experience, we actually improves new technologies and explore the application of such technologies. In terms of the technical application in property management, we also tried successfully and we're trying to transform ourselves to digital land, digital property management so that we can bring continuous growth to our business. Now I would like to invite my colleague, Mr. Shantong, to share with you more information about our performance in 2018. GA Investors And Analysis. Good afternoon. I would like to report to you on our performance in 2018 There are 6 parts in the presentation. The company overview results, highlights, financial review, business review, our ex business, and, appendix. So since you have already been very familiar with the background and a business model in the group company. So I would like to skip this part. Let me start my presentation from part 2. In 2018, we realized the gross business revenue of 1,000,000,000, up by 18.9%. Because of there are more high margin projects within the reporting period, Therefore, there was a 23.1 percent of our gross margin increase to RMB 24,200,000,000. And equivalency, that is RMB3.5 per share. And as suggested by the board, we will pay RMB0.949 or RMB1.1.2 Hong Kong dollar as the dividend payout ratio. Our contract sales within the period is RMB210.7 billion. Our investment property also realized the faster growth by the end of last year, including the 17 light access projects, we are running 51 projects, including shopping malls. Our financing and the leverage level is also maintained at a low level in the industry with end of the reporting period. Our weighted funding cost is 4.47 percent, up by 31 basis points, net gearing down by 2% reaching 33.9%. If you look at Slide 9, this is our income results, our income statement. By the end of the year, we realized the growth in both sectors property development and development property and a, and the investment property, reaching 17 point 5% under 24.5%. Gross margin also improved with 28.4% of our growth in gross margin. The net profit as well to the shareholders increased by 33.1 percent, reaching RMB 24,200,000,000. Net core net profit increased by 11.8%, reaching 19.3%. We take the long term returns our shareholders and the DPS growth more seriously. This year, we considered the foreign exchange loss last year which is RMB1.677 billion. And we take it as the benchmark for dividend payout ratio. And we'll a 28.3% of our increase in payout ratio, which is 28.4% yearly. You look at the overall P and L, in addition to the development property and the investment property, the increase in revenue and gross margin, last year, there is a value adding there was the value adding of RMB6.9 billion which contributed about JPY 1,300,000,000 as the profit of the company. And last year, there were more projects under our operations It is estimated that in the future, while we maintain steady growth, the affiliated business part, we also contribute more profit. End of last year, our interest bearing debt increased by 25.3%, reaching rmb 132,200,000,000 total interest bearing liability is 22.3 percent, which is at the similar level at the end of 2017. Our cash equivalent increased by 32%. Net interest bearing net liability went down by 2% which 33.9 percent. We continuously enhance our assets and reliability management and maintain a steady financial Our credit level is the highest, including standard pool and and Moody's, as some give us the BBP plus credit ratio, and, Chongqing and, Chongqing Qing, which maintains the AAA credit level within the reporting period, interest bearing liability, the total sum increased and bring it along to the interest expenses, up by 27% reaching RMB6.1 billion The weighted average funding cost increased by 31 basic points reaching 4.47% and the debt structure was further optimized. Last year, Bank loans was 74%, floating interest borrowings as the 62% in the upcoming 5 years with the maturity of 5 year debts are distributed evenly and within the period, the panda debt and existing debt, the natural cycle shortened and down by 3.7 years. Recently, RMB to USD practice, which are locked in the foreign exchanges, So therefore, for the non RMB debt was some it's 34% in our total debts, putting aside the overseas ads and the cash, Then our RMB debt liability was basically at the same level for 2017, which is 23%. To the right, this is a sensibility analysis. Suppose in 2019, RMB purchased 1% against the USD, Then the foreign exchange will bring us again of RMB 310,000,000,000 and the net interest bearing liability will go down by 0 point 2%. And if RMB depreciates by 1%, the figures will be the same, but to the direct to the opposite direction. So the risks are controllable. Now let's look at the different business sectors. In 2018, we realized RMB105.1 billion in the development property, up by 17.5% in Tier One Cities, total settlement increased by 45% bringing the settlement average price higher than the previous years. Meanwhile, the gross margin of the settlement projects in Tier One Cities also as high as 54.5%, pushing the overall gross margin of development property to 42.9% mainly, the top 10 cities are those top the Tier 1 cities and the core Tier 2 cities. In terms of contract sales, last year, we realized 22.3% and the 21.7% in our total in the total statistics and the operational statistics reaching to 210.7 $1,000,000,000 $185,100,000,000, which means that we successfully hit our target. In Tier One City, the total sales growth, sales contributed 4 more percentage points reaching 90%. Investment property is one of our core competitiveness In 2018, our overall rental increased by 24.5 percent reaching RMB99.5 1,000,000,000 in which shopping malls contributed 72% of our total rental income and investment property contributed a 34% of our growth in the gross margin reaching rmb6.3 billion, which means the further enhancement in the overall profit contribution with a steady revenue we are able to strengthen our disability of our finance. And currently, our interest coverage is 1.55 times. Last year, the size of our investment property and operations efficiency went up steadily. And the fair value of our investment property increased to RMB126.9 1,000,000,000 in which shopping malls its valuation accounts for 76% office buildings 21%. Shopping More Business has basically finished the national deployment by the end of last year, the shopping malls that we're having under running totaled 34, including 24 22 at the mix and the 2012 makes the city, realizing 47,300,000,000 in the retailing, up by 32% with the total number of members of 6,780,000,000 people. We conducted the comparison for all the shopping malls. Before 2014, there were 5 the mix of city and the mixes. And by average, the operating years is 8.3 years within the reporting period. Through the improvement in the operations, the rental returns improved by 4.6 percentage points reaching 37%, which is a very high level in the industry. These seven shopping malls in 2018 realized retailing amount of rmb2.39 1,000,000 and from 2014 to 2018 we realized we opened 17, the mix and 10 mix Cities with the average operations, yes, of a 2.2 years, And there was a 70% of a retail rental increase and the rental returns up by 2.9 percentage points reaching 11.1% and the retailing amount increased by 60% every year. So these are the figures for the shopping malls, office buildings, hotels, rental income, and the rental returns. So in this table, you can see our opening plans for the upcoming 4 years of shopping malls, including the light assets, that we're holding from 2019 to 2021, working to open line 8 under 13 of them. By the end of 2021, the operating shopping malls will total 81. And after 2021, there will be another 22 shopping malls to be opened gradually. Along with the increased size of investment properties, typically, the shopping malls our advantage our competitive advantage of a dual wheel driving strategy will be further reflected. In terms of land reserve, by the end of last year, our land reserve is 50,140,000 square meters including 38.05 square meters for equity land reserves, particularly in the Pearl River Delta, the Greater Bay Area and the Beijing Tianjin Her Bay Area, which accounts for 11% 17% 11% and the 6% by the end of last year, the total floor GLA of Land Reserves is a 9.41000000 Square Meters, Equity GFA, It's a 6,750,000 square meters, accounting for 70%. In Tier One And Two Cities, the land reserves that account for 85% and the shopping malls 54%. Along with the increase in land cost, the land supply in the core areas are coming are becoming very tight. So we are diversifying the land acquisition channels including but not limited to the auctions, the municipal replacement, the SOE hybrid shareholding reform, M and A and S and SFOs. We acquired 3 new projects in last year. Meanwhile, we are also participating at in Beijing in Tianjin and Shanghai in the SOE hybrid shareholding reform in order to enhance the penetration in the local markets. In the DP plus IP plus X business model, in addition to the property in addition to the development property and divestment property, we are also trying to expand more innovation innovative business in order to reserve more energy. X business include the Millicipal Replacement Property Management, long term rental, the senior curing property, industrial fund, industrial property interterment and the cinema and the support. Now first of all, the municipal upgrading system sector. We started earlier than others and have got a lot of experience. And for example, we successfully renovated the old benchmark project in Shenzhen, which is the China Resources City. And this Triple 1 business model also won regulation by the government and the local public. Meanwhile, we're also deploying for Shenzhen, Guangzhou and Dongguan according to our estimation, their land reserve in this area will be over 85%. So far, we are we have 16 projects for follow-up and the implementation, which represent the land reserve of 222,000,000 square meters. And we estimate that in 2022, there will be contractor sales. We also build up their 1st Smart community by using AI, bigdata, IoT, cloud Computing, and so forth, order to improve the efficiency and the customer experience in the property management, within the period, we promoted the brand new property brand, which is called Yire plus. Meanwhile, we also issued 2 APPs for the business for the partner owners and employees. Last year, we are managing over 100,000,000 square meters and the revenue from property management exceeds RMB 4,100,000,000, up by 18%. By 20 22, we are we were managing and holding land with a total GFA of 200,000,000 square meters. Long term rental project is supported by government policies. Last year, we launched the long term rental brand for Yutoutiao. And by the end of the year, we're managing and reserving apartments totaled 200,000. And in terms of senior carrying property, we have the largest market And we are exploring actively in terms of our profit model seeking synergies between different departments within the group Through acquisition and self building by the end of last year, we have locked and managing 5300 beds And by the end of next year, there will be 100,000 beds. In terms of our couches, culture and disposal, property, we are the 1st among their peers. And the Shenzhen Bay the sports center is SSL case. Through this light assess model, we have to deploy it in Shenzhen, Shanghai, Hangzhou, and Shen, And the, we realized the 1,000,000 RMB 250,000,000 revenue. And industrial fund is to realize that the management capability export through leveraging the equity equity and by taking advantage of the investment opportunities in the secondary market. In October last year, We set up the 1st industrial fund together with China Life And Shuba Holding. We promised to make investment for of RMB 15,000,000,000, particularly in Shanghai, hotels in Shanghai And Office Building as well as commercial properties. Along with the increased higher level of life. People are seeking more entertainment and the cultural recreation. So cinema is one of the strategy Last year, we set up our own cinema brand, which is called the mix cinema. And the total box office was about JPY 50,000,000. Last year, we opened 9 cinemas. And by the end of last year, there will be 19 cinemas. So with that, I would like to conclude my that is about our ex business. The part 6 of the presentation is some facts and figures and appendix. With that, I would like to conclude my presentation.