Principally engaged in real estate development and project management, specialised construction, property investment and securities investment.
Business Review - For the year ended December 31, 2012
REAL ESTATE DEVELOPMENT
Our real estate development business segment is premised on the powerful ¡§Minmetals Land¡¨ label which we are glad to be increasingly well received and recognised in China. The Company was ranked 58th on ¡§the List of Top 100 Real Estate Enterprises of China 2012". As of 31 December 2012, the Group's portfolio of real estate development is centred on the economically active regions in China, particularly in the Pearl River Delta area, Yangtze River area and the Greater Beijing area. There is a total of ten projects distributed in seven cities in the PRC under vary stages of developments. The table below summarises the position of the Group''s real estate development projects as at 31 December 2012.
1. Laguna Bay
Laguna Bay is a fairly mature residential project located in Nanjing, Jiangsu Province developed in three phases providing villas and apartment units measuring a total of approximately 310,000 square metres of gross floor area. In 2012, this project has recorded total contracted sales of RMB279.9 million. Realised sales prices in general are slightly lower than forecasted as steeper discounts had been typically attached to the clearance sales of remaining units.
The control measures applying to the Nanjing region remain unaltered during the year, but there are signs emerging that sales volume and realised prices are picking up, especially in the fourth quarter of the year as major real estate developers had already achieved or even exceeded respective annual sales targets, leaving little incentive for providing price discounts to buyers. The expectation of the arrival economic stimulus has also encouraged potential buyers in general, coupled with a slowdown in new supply. All development works of this project have basically completed. It is planned to complete the development works of a commercial complex and ancillary facilities such as school. It is noteworthy this project has successfully established a high benchmark in Nanjing and the Group has gained considerable market recognition in the region.
2. Riveria Royale
Riveria Royale is the Group's second residential project in Nanjing, which is situated on a 71,000 square meter site. It comprises villas, apartment and LOFT units aiming at the higher-end market. In 2012, the sales programme for the LOFT units commenced and the average sales price of RMB21,857 per square metre was higher than forecast. Total contracted sales of the project amounted to RMB935.6 million during the year. At the same time the apartment units that were presold were delivered to buyers as scheduled. In the year ahead, another phase of the marketing programme of the remaining unsold units has been planned and the delivery of the sold units is also progressing as scheduled.
3. Sello Royale
The success of both the Laguna Bay and Riveria Royale projects has laid a solid foundation for Sello Royale, which is the third residential project of the Group in Nanjing. This site measuring approximately 179,000 square metres is planned for villa development which had commenced construction in April 2012, and the first marketing campaign was launched in October 2012. Year to date the contracted sales amount was approximately RMB400 million, as a result of better than expected of both market responses and realised prices. Further development and marketing of this project is expected in 2013, and the outlook for this project is optimistic.
4. LOHAS International Community
This wholly-owned large scale residential project is located in Changsha, Hunan Province. With a site area of approximately 643,000 square metres, the development is being built in five phases with a wide range of supporting facilities including clubhouse, shops, car parking spaces, schools, and kindergarten providing a total gross floor area of approximately 1,060,000 square metres. In 2012, the real estate sector in Changsha is characterized by relatively large volume of new supply and unsold units. The resultant effect is a dampening factor on prices and a generally slower sales flow as buyers have become more selective. Longer term, more details of the mass transit railway project of Changsha is expected to be unveiled in 2013, which should have a positive effect on the buyers' sentiment. In 2013, the phase V, the last phase of the project, will commence construction works, marking that this project is reaching the maturity and finalisation stage. The marketing status of the project is set out in the table below.
5. Scotland Town
Scotland Town project is adjacent to LOHAS International Community in Changsha, and is wholly owned by the Group after it was acquired from China Minmetals in 2010. The site area of this project is approximately 333,000 square metres. It is developed over two phases comprised of villas and apartments units. In 2012, the construction of second stage of phase II of the project was completed, and the third stage will soon complete. The Group is confident about the outlook for its two Changsha projects which are well located geographically and well regarded within the market by potential home buyers.
6. Minmetals International
Located in Tianjin, Minmetals International is the Group's first commercial cum residential project. It has a site area of approximately 21,000 square metres and is developed into office cum residential twin tower with a total gross floor area of approximately 183,000 square metres including approximately 22,700 square metres of commercial retail area and car parks at the basement. Total contracted sales in 2012 reached approximately RMB164.3 million and the average price achieved of RMB13,421 per square metre. The Tianjin Binhai area has been befitted by a series of favourable government initiatives but the real estate sector there had nevertheless been restrained by an abundant new supply.
7. Platinum Bay
This wholly-owned project is located in Yingkou City, Liaoning Province with a site area of approximately 396,000 square metres and total gross floor area of approximately 504,000 square metres upon completion. Construction works of stages I and II of the project had commenced in 2012. Presently, various factors such as labour shortage had caused procrastination in the schedule. The Group has made modification and downsized the scale of current stage to cope with the market changes. The pre-sale launched in 2012 had registered total contracted sales of RMB127.7 million.
8. Hallstatt See
This project is located in Huizhou, Guangdong Province with a site area of 984,000 square metres. Construction of the first phase is progressing as scheduled and approval for the commencement of construction of the second phase has been forthcoming in December 2012. Pre-sale marketing of the project was first launched in April 2012 and the total contracted sales reached RMB413.8 million as at 31 December 2012. The road construction works surrounding Hallstatt See had experienced delays which had an impact on Hallstatt See's marketing programme. The Group, however, is confident that these adverse factors can be overcome and the project is expected to achieve better results in the years ahead given its location and the Group's brand name recognition in the region. 2013 will see the launch of a powerful marketing campaign of this project.
9. Fortune Garden
The project is located in the prestigious Haidian District, Beijing with a site area of approximately 139,000 square metres. It is developed into a high-end residential project providing total gross floor area of approximately 416,000 square metres. In 2012, this project recorded total contracted sales of approximately RMB1,640.6 million for a total gross saleable floor area of 40,095 square metres. Marketing programme for this project will be reinforced in 2013 following a larger amount of smaller units and more apartment types to be put on sale.
10. Beijing Celebration City
The Beijing Celebration City project was re-started in 2012, and a total of 130,000 square metres of land had been acquired in May 2012. The project is currently under planning and research stage.
The Group is engaged in the business of specialised construction mainly encompassing the services of design, production and installation of curtain walls system via two wholly-owned subsidiary companies, namely Minmetals Condo (Shanghai) Construction Co., Ltd. (¡§Condo Shanghai¡¨) for the PRC market and Minmetals Condo (Hong Kong) Engineering Company Limited (¡§Condo HK¡¨) for the Hong Kong market. Revenue derived from this operating segment showed an increase of 41.5% in 2012, and the operating results of this operating segment, net of intra-group transactions, showed an operating loss of HK$4.4 million in 2012, as compared to HK$76.6 million in 2011.
Condo Shanghai had made good progress in enhancing its professional competence in 2012. The trend of urbanisation and more activities in commercial property developments which are not subject to the restrictive controls had provided ample opportunities for Condo Shanghai amidst ongoing tightening measures being imposed on China''s real estate industry during the year. The development of collaborative partnership with government and state owned enterprises and the focus on higher value contracts are the drivers for the company''s performance. Condo Shanghai's revenue rose 20.7% to HK$752.0 million (including HK$34.1 million generated from inter-company transactions (2011: HK$113.8 million)) whilst profit growth was effectively flat. Looking ahead, the PRC market shall continue to provide a steady supply of new construction works, but cost control, shortage of skilled labour and fierce competition will need to be managed on an ongoing basis.
Condo HK achieved a commendable increase in revenue in the year under review, premised upon a buoyant property market in Hong Kong and the steady release of infrastructure projects by the government. Revenue and profit in 2012 recorded, respectively, increased 44.7% and 120.2% compared to last year, to approximately HK$120.2 million and HK$0.2 million. The challenges arising from cost driven pressure and intense competition persisted. The technical prowess of Condo HK was further enhanced upon the establishment of a specialised design workshop across the border in Shenzhen to cater for designing works of Condo HK. Profit outlook for Condo HK is favourable as it has established a sound professional reputation giving it more opportunities to be involved in sizable projects. The real estate market in Hong Kong is expected to remain active and buoyant in the foreseeable future providing a steady stream of project works. In addition, the two Condo companies are working closely together in sharing industry information and making client referral and project reference for each other generating substantial synergistic benefits.
The Group''s investment property portfolio in Hong Kong comprises two commercial office buildings, namely China Minmetals Tower in Tsimshatsui and ONFEM Tower in Central, plus four residential units, all of which are located in Hong Kong. In 2012, revenue from this operating segment showed a modest increase of 7.6%, rising from HK$52.8 million in 2011 to HK$56.8 million (excluding HK$1.6 million generated from inter-company transactions (2011: HK$1.0 million)) in 2012. Such performance is the result of the mixed contribution from the two commercial buildings during the year despite a generally strong Hong Kong property market in 2012. China Minmetals Tower, situated in Tsimshatsui, had experienced a reduction in total rental income as lower occupancy rate had outstripped the effect of higher average rental income. There are a number of buildings surrounding China Minmetals Tower presently under development and the associated noise and environmental issues have an adverse impact on attracting new tenants. ONFEM Tower in Central, on the other hand, had benefited from the favourable rental revision and a de-facto full occupancy. Cost pressures remained real in Hong Kong because of cost push pressures and focus of this operating segment is to seek further refinement in property management expertise and to continue to upgrade the portfolio to attain higher investment values. Such endeavours had received market recognition in 2012 with the China Minmetals Tower and ONFEM Tower being awarded ¡§Outstanding Managed Property¡¨ and ¡§Outstanding Commercial Property Management¡¨ respectively.
Business Outlook - For the year ended December 31, 2012
We continue to make further improvements internally, both in the areas of project development, design, execution and management capabilities; financial and capital market analysis and planning; sales and marketing ability. We believe it will help to maintain and augment our competitive edge in the real estate landscape in China. Our aim is to match the customer demand for their satisfaction; and through our strong market labeling and stringent cost controls to provide above average returns to all stakeholders. Looking ahead, with the strong support of the controlling shareholder, the Group is confident and cautiously optimistic in achieving further and continued business growth going forward.
Source: Minmetals Land (00230) Annual Results Announcement
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