Monday, November 30, 2020
 
Columnist
Martin Hennecke
 
KAI SHI CHINA
HKEx Stock Code : 01281 
 
Corporate Profile
The Group is a real estate developer focusing on residential properties in Dalian Lvshunkou, the PRC. The Group's real estate developments are large-scale residential complex comprising low-rise apartments, mid-rise apartments, high-rise apartments, upscale properties such as townhouses, two-family houses, carparking spaces and garages and composite buildings mainly to facilitate the daily needs of its residents.

Business Review - For the year ended December 31, 2012

Real Estate Development Business

In early 2012, the austerity measure of the PRC government intensified the policies of the macroeconomic regulation and control changed from ..Encouraging Containing Property'' oriented to ..Cooling Property Price'' oriented. According to National Bureau of Statistics of China, the total investment in real estate development in 2012 was RMB718.0 billion, a year-on-year growth of 16.2 percent (the ..%''), dropped 11.9 percentage points over that in 2011. The land area purchased by the real estate development enterprises totaled 3.6 million square meters (..sq.m.''), a year-on-year decrease of 19.5%, and decreasing amplitude expanded 4.7 percentage points over the first eleven months. The total transaction of land topped RMB74.1 billion, decreased 16.7%, decreasing amplitude expanded 6.4 percentage points over the first eleven months. In spite of this situation, the Group actively and steadily pushed forward the sales of Kai Shi Jia Nian project and the construction of Kai Shi Xi Jun project to make a solid foundation for the development and business performance of the Group's real estate development business.

During the year of 2012 (the ..Year''), the Group's total land reserve has been kept stable. According to market prospect and concrete construction procedure, our new project, namely Kai Shi Xi Jun was reorganised to be developed for 3 phases from our original plan of 2 phases. Due to the delay in the construction of Phase I of Kai Shi Xi Jun mainly resulting from the delay in the issue of the construction permits than previously expected by the Company, the pre-sales of the residential properties of Kai Shi Xi Jun Phase I has been delayed to the end of October 2012, which was slightly behind the traditional peak season i.e. the months of September and October for sale of residential properties in the northern China due to the seasonality. Furthermore, the completion of construction progress of the residential portion of Kai Shi Xi Jun Phase I had been severely affected and delayed due to the early coming cold weather and constant heavy snow in Dalian. Accordingly, the construction of Kai Shi Xi Jun cannot be completed by the end of 2012. In addition, the North Station of Dalian, which is relatively distant from the Lvshun District, is the main station for the high-speed line between Harbin and Dalian, which was opened on 1 December 2012 and has largely shortened the traffic time between Harbin and Dalian. The relatively long distance between the North Station and the Lvshun District has to a certain extent reduced the purchase desire in properties of the Lvshun District. Taking into account the aforesaid factors, the revenue and net profit of the Group decreased accordingly for the year ended 31 December 2012. The construction of Phase II of Kai Shi Xi Jun commenced in late 2012 and the development of Phase III of Kai Shi Xi Jun will commence in the near term according to the plan. The Group has attached more importance to the project quality and was seeking for selected land plots in Dalian and second-tier and third-tier cities in China that are geographically close to Dalian with great potential of development.

For our investment properties portfolio, it comprised (i) underground carparking spaces (772 units) and garages (189 units) with a total GFA of 42,707 sq.m.; (ii) levels 2 and 3 of a composite building with a total GFA of 1,855 sq.m.; (iii) a warehouse in basement level 2 with GFA of 2,080 sq.m., all of which are located in Kai Shi Jia Nian phase I and long-term hold; and (iv) the GFA of approximately 1,639 sq.m. of the composite buildings of Kai Shi Jia Nian Phase II and the GFA of approximately 925 sq.m. of kindergarten (the ..Kindergarten'') in Kai Shi Jia Nian Phase II. For details of point (iv), please refer to the paragraph headed ..Kai Shi Jia Nian (investment properties)''.

As at 31 December 2012, the saleable GFA of Kai Shi Jia Nian and Kai Shi Xi Jun amounted to approximately 20,051 sq.m. and 21,507 sq.m. respectively.

Property project overview

Kai Shi Jia Nian Phase I (completed property)

Kai Shi Jia Nian Phase I occupies a site area of approximately 97,318 sq.m. and has an aggregate GFA of approximately 155,186 sq.m.. It mainly comprises 13 blocks of low-rise apartments, five blocks of mid-rise apartments, two blocks of high-rise apartments, a 2-storey basement comprising 772 underground carparking spaces and 189 underground garages, a canteen and warehouses, and one fourstorey composite building for office or commercial use. Construction of Phase I was composed of two parts, with Part I (which comprises mainly low-rise apartments) commenced in September 2007 and completed in October 2008; Part II (which comprises mainly mid-rise and highrise apartments) commenced in June 2007 and completed in December 2009. During the Year, the average selling price of the sold properties of Part I and Part II was approximately RMB8,658 per sq.m. and RMB7,408 per sq.m., respectively. As at 31 December 2012, the pre-sale/sold GFA was approximately 98.8% of the total GFA of Kai Shi Jia Nian Phase I.

Kai Shi Jia Nian Phase II (completed property)

Kai Shi Jia Nian Phase II occupies a site area of approximately 61,866 sq.m. and has an aggregate GFA of approximately 84,042 sq.m.. It comprises several residential parts namely (i) Lucca's Noble Villa (c d胆講) which mainly includes upscale properties such as two blocks of low-rise structures, 22 blocks of townhouses, the Kindergarten, 10 blocks of two-family house, a single-family house and a Western food restaurant; and (ii) Scenery (敢o) which mainly includes four mid-rise apartments, underground carparking spaces and garages of approximately 9,723 sq.m. and four blocks of multistory composite buildings which are intended for commercial/retail use. Construction of Kai Shi Jia Nian Phase II was completed in September 2011. For residential portion, the Group started the presales by the end of 2010; for non-residential portion, the Group first started the pre-sales in August 2011. During the Year, the average selling price of the sold properties in Kai Shi Jia Nian Phase II was approximately RMB11,328 per sq.m.. As at 31 December 2012, the pre-sale/sold GFA was approximately 65.5% of the total GFA of Kai Shi Jia Nian Phase II.

Kai Shi Jia Nian (investment properties)

In view of the current market conditions of the real estate market of the PRC and with a view to enhancing business atmosphere, improving the quality of the district and selling the relevant properties at higher prices after enhancing its value, the Group appropriately increased its investment properties portfolio including the GFA of approximately 1,639 sq.m. of the Composite Buildings and the Kindergarten by changing its original plan from for sale to for lease to independent third parties. The contract term was at least 6 years. As at 31 December 2012, the market value of Group's investment properties including approximately 1,855 sq.m.1 of Kai Shi Jia Nian Phase I and approximately 2,564 sq.m.2 of Kai Shi Jia Nian Phase II totally amounted to approximately RMB209.7 million based on an appraisal report as at 31 December 2012 prepared by Grant Sherman Appraisal Limited, our independent property valuer (the ..Appraisal Report'').

Kai Shi Xi Jun (property under development)

Kai Shi Xi Jun project occupies a total site area of approximately 155,438 sq.m. and has an aggregate GFA of approximately 159,015 sq.m.. It was planned to be developed for 3 phases. The construction of Kai Shi Xi Jun Phase I started in the first half of 2012. However, due to the delay in the construction of Phase I of Kai Shi Xi Jun mainly resulting from the delay in the issue of the construction permits than previously expected by the Company, the pre-sales of the residential properties of Kai Shi Xi Jun Phase I has been delayed to the end of October 2012, which was slightly behind the traditional peak season i.e. the months of September and October for sale of residential properties in the northern China due to the seasonality. Furthermore, the completion of construction progress of the residential properties of new project Kai Shi Xi Jun Phase I had been severely affected and delayed due to the early coming cold weather and constant heavy snow in Dalian. Accordingly the construction of Kai Shi Xi Jun cannot be completed by the end of 2012 as expected. Pursuant to the requirement under the Group's adopted accounting standards, any revenue generated from Kai Shi Xi Jun can only be recognised after its completion of construction. Therefore, the revenue of the Group generated from Kai Shi Xi Jun cannot be booked in the financial statements of the Group for this year ended 31 December 2012.

Below is the status of Kai Shi Xi Jun Phase I, Phase II and Phase III as at 31 December 2012 and the expectation of the Group in view of the construction progress of Kai Shi Xi Jun in 2013. For details, please refer to page 22.

Phase I occupied a site area of appropriate 47,042 sq.m. and has an aggregate GFA of appropriately 23,656 sq.m. It mainly included 28 blocks of two-family houses and 6 blocks of house apartments. The construction of Kai Shi Xi Jun Phase I started in the first half of 2012. The Group obtained Phase I's pre-sales permit certificate of all 34 blocks of residential properties in mid August of 2012. The completion of construction progress of the residential properties of new project Kai Shi Xi Jun had been severely affected and delayed due to the early coming cold weather and constant heavy snow in Dalian. As at 31 December 2012, completion ratio of all 34 blocks of residential properties exceeded 90% and it was expected to be delivered in the first half of 2013.

Phase II occupied a site area of appropriate 63,665 sq.m. and has an aggregate GFA of appropriately 51,098 sq.m.. It mainly included composite buildings, small scale high-rise structures, house apartments, two-family houses and townhouses. The construction of Phase II commenced in late 2012. As at 31 December 2012, the foundation construction works of 1 ancillary composite building, 1 block of townhouses and 5 blocks of two-family houses had been completed. The construction of other properties of Phase II is expected to be commenced in 2013.

Phase III occupied a site area of appropriate 44,731 sq.m. and has an aggregate GFA of appropriately 84,261 sq.m.. It mainly included high-rise structures, composite buildings and underground garages. The Company planned to commence construction of Phase III after 2013.

Earthwork Engineering Business

During the Year, Dalian Kai Shi Earthwork Engineering Co., Ltd. (jsカ}@gホよu{Τそq) (..Earthwork Engineering Company''), a subsidiary of the Group, had obtained professional certificate for Earthwork Engineering (gホよu{M~瑚処) and commenced its operation in the second half of 2012. On 11 December 2012, several agreements were entered into between Earthwork Engineering Company and Beihai Sunshine (Dalian) Corporation (_凶(js)Τそq) (..Beihai Sunshine'') in connection with the provision of the foundation, site formation and excavation and cart-away works by Earthwork Engineering to Beihai Sunshine with an aggregate contractual sum of approximately RMB12.6 million. Details of the agreements are set out in the announcement of the Company dated 11 December 2012. The principal business of Earthwork Engineering Company is foundation and site formation.

Doors and Windows Business

In 2012, Lion Tianjin added new business decoration and refurbishment in its business license based on the original business scope, which is expected to accelerate the development of relevant business in the future. To supplement the registered capital of Lion Tianjin, China Kai Shi Group Holdings Limited had injected approximately USD2.1 million into Lion Tianjin in the second half of 2012, increasing its registered capital to approximately USD2.9 million. In addition, a possible acquisition of certain land and plant by Lion Tianjin was under negotiation with the purpose of expanding its production scale. The Company will comply with the relevant requirements of the Listing Rules if and when the acquisition of the land and plant materialises.

As at 31 December 2012, the recognized revenue generated from the doors and windows business amounted to approximately RMB22.4 million.

Business Outlook - For the year ended December 31, 2012

2012 is a year of risks and opportunities. In late 2012, the PRC government attached great importance to urbanization's role in economy's healthy and sustainable development in the 18th Communist Party of China (CPC) National Congress. As experts analyzed that, urbanization policy will possibly benefit Real Estate Enterprises of the PRC to a great extent. The Group will take advantage of the deep understanding of related national policies, striving to grasp these possible opportunities to enhance our competitiveness and brand recognition in Dalian Lvshunkou. This will enable us to secure a favorable position in the ever-changing market environment, as well as our capacity and capability of sustainable growth that can generate satisfactory returns for our shareholders.

Source: Kai Shi China Hold (01281) Annual Results Announcement
Chairman Kai Chenglian Issued Capital (shares) 602M
Par Value HKD 0.01 Market Capitalisation (HKD) 1,072M
 
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