Saturday, November 26, 2022
 
Columnist
Martin Hennecke
 
TOP SPRING
HKEx Stock Code : 03688 
 
Corporate Profile
The Group is a real estate property developer in the PRC and is principally engaged in the development and operation of urban mixed-use communities and the development and sale of medium to high-end residential properties in the Yangtze River Delta, the Pearl River Delta, Beijing-Tianjin and Chengdu-Chongqing regions in the PRC.

Business Review - For the year ended December 31, 2012

The PRC property market saw a strong recovery in both average selling price and transaction volume in the second half of 2012 following the difficult market environment in the first half of the year. In 2012, there was an increase in the transaction value and transaction volume of newly built commodity properties of approximately 10.0% and 1.8% respectively as compared with 2011.

The Group seized the market opportunities and achieved contracted sales of approximately HK$6,279.2 million in 2012, representing an increase of approximately 24.7% over 2011 and record-high for the Group. The satisfactory sales performance, which surpassed the Group's annual sales target range from HK$5.0 billion to HK$6.0 billion set at the beginning of the year, can be attributable mainly to the Group's aggressive and timely sales strategy, desirable product mix (i.e. approximately 71.9% of the contracted sales area in 2012 was represented by residential units with unit size of 144 sq.m. or below targeting first-time home buyers and first-time home upgraders), outstanding product quality and innovative product design. More importantly, despite intensifying market competition, the Group's projects have continued to succeed in gaining market recognition. For instance, The Spring Land Phase 5 was ranked the best selling residential project in Shenzhen in the third quarter of 2012. Changzhou Le Leman City was ranked the third in terms of residential sales amount in Changzhou in 2012. Hangzhou Hidden Valley was ranked the best selling terraced house project in terms of number of units sold in Hangzhou in 2012.

In 2012, the Group generated steady growth on its recurring rental income. Rental income reached approximately HK$129.2 million in 2012, an increase of approximately 23.4% as compared with 2011. With the commencement of operation of Top Spring Fashion Walk V the brand for community commercial centres of the Group, in Shenzhen in 2012, the total leasable GFA of the Group's investment properties under operation increased to approximately 170,018 sq.m. as at 31 December 2012 from approximately 147,625 sq.m. as at 31 December 2011. This together with the retail asset of Changzhou Le Leman City Phase 9 (2VB) V Fashion Walk and the shopping mall of Chengdu Fashion Mark, both were investment properties completed but yet to operate, the total leasable GFA of the Group's investment properties reached approximately 229,993 sq.m. with a fair value of approximately HK$4,230.8 million (approximately 17.0% of the Group's total assets value) as at 31 December 2012.

In view of the Group's relatively rich cash reserves and low net gearing ratio at the start of the year, the Group leveraged opportunities arising from the subdued PRC land market during the first three quarters of the year to further expand the scale and geographical reach of its land bank. Consistent with its anti-cyclical and dual product lines land bank strategy, the Group selectively acquired additional residential and urban mixed-use community projects with a combined plot ratio GFA of approximately 1,170,462 sq.m. in Nanjing, Nanchang, Tianjin and Changzhou at relatively low costs in 2012. The average cost of the newly acquired land bank was approximately RMB3,143.5 per sq.m. (equivalent to approximately HK$3,909.3 per sq.m.). Including the newly added cities of Nanchang and Nanjing, the geographical reach of the Group's land bank was further expanded to 9 cities with a total net saleable/leasable GFA of approximately 5,107,706 sq.m. as at 31 December 2012. As at 31 December 2012, the average land cost of the Group's land bank was approximately RMB2,254.2 per sq.m. (equivalent to approximately HK$2,803.4 per sq.m.).

During the year, the Group devoted significant management focus to further improving its operational efficiency with an aim to further enhancing the Group's asset return and competitiveness in the market. Significant progress was made in areas such as timely completion of key milestones, cost controls, and product standardisation. Moreover, the Group has strengthened its commercial property management team which has laid a strong foundation for the future expansion of its investment property portfolio comprising mainly of shopping malls, community commercial centres, retail shops and car park units.

Business Outlook - For the year ended December 31, 2012

We believe that numerous market control measures including purchase restriction, mortgage restriction and various taxes will continue to be used by the central and local governments to prevent the over-speculation in the PRC housing market. Nonetheless, we remain optimistic towards the long-term growth potential of the industry. In our view, the hastening pace of urbanisation, steady growth in household wealth, growing number of smaller families and persistent inflationary pressure should support the continuous growth in demand for good quality and well located residential and retail properties. Meanwhile, we are also mindful of the huge inventory pressure in some Chinese cities, mostly the third-tiered cities or below.

In 2013, the Group will further increase its saleable resources in order to sustain the growth in contracted sales. Given its land bank expansion amid the continuous improvement in operational efficiency, the Group's saleable resources are expected to grow by approximately 30% year over year to approximately HK$11.6 billion in 2013. The Group has set its 2013 annual sales target at HK$8.0 billion, representing a growth of approximately 27% over the actual contracted sales of approximately HK$6.3 billion in 2012. Despite its pursuit of high asset turn and contracted sales growth, the Group will still strike to maintain the right balance between product pricing and sales volume.

The Group will also adjust its product mix to increase the proportion of saleable resources targeted at first-time homebuyers and first-time upgraders. For instance, the newly acquired residential project in Nanjing (The Spring Land V Nanjing) and the residential portion of the newly acquired mixed-use community project in Nanchang (Nanchang Fashion Mark) are both targeted at end-user demand. Approximately 71.2% of the Group's total saleable resources in 2013 are represented by residential units with unit size of 144 sq.m. or below targeting firsttime home buyers and first-time home upgraders.

Given its business development plan, the Group will continue to expand and to adjust the geographical focus of its land bank so as to increase the exposure to cities with favorable supply-demand dynamics and strong appreciation potential, in particular the first- and secondtiered cities in the Pearl River Delta and Yangtze River Delta regions. The acquisition of the mixed-use community project in Nanchang in September 2012 will not only allow the Group to tap the significant growth potential of Nanchang (the only core city of Jiangxi province) and its vast catchment area in Central China, but will also enable the Group to significantly build up its investment property portfolio. The Group will continue to ensure a sound financial position in its future land bank acquisitions.

Finally, in order to succeed in the increasingly competitive PRC property industry, the Group will further step up its efforts in its project execution capability, sales strategy, cost controls, product design, product quality, idea innovations, property management services, human resources management, etc. in 2013.

Source: Top Spring Int'l (03688) Annual Results Announcement
Chairman WONG Chun Hong Issued Capital (shares) 1,155M
Par Value HKD 0.1 Market Capitalisation (HKD) 4,551M
 
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