Friday, March 29, 2024
 
Columnist
Martin Hennecke
 
GREENTOWN CHINA
HKEx Stock Code : 03900 
 
Corporate Profile
The principal activity is the development for sale of residential properties in the PRC. Main segments are property development; hotel operations; property investment; and others (including sale of construction materials, electronic engineering, design and decoration, project management, etc.).

Business Review - For the year ended December 31, 2012

Looking back into 2012, amidst market volatility and continued macro-economic control, the Company proactively adjusted its strategies and transitioned from aggressive expansion to prudent operation. Moreover, besides continuously improving our product and service quality, the Group also focused on the end users and established an agent-based sales model. In addition, the introduction of strategic investors into the Group improved capital structure, reduced gearing ratio, capitalized both parties' competitive strengths while at the same time created synergies, and further enhanced brand value and core competencies.

Financial Overview

In 2012, the Group recorded a revenue of RMB35,393 million, representing an increase of RMB13,429 million or 61.1% from RMB21,964 million recorded in 2011. The Company's net profit reached a record high in 2012 which increased from RMB4,118 million in 2011 to RMB6,053 million in 2012, representing an increase of RMB1,935 million or 47.0%. Profit attributable to owners of the Company grew from RMB2,575 million in 2011 to RMB4,851 million in 2012, representing an increase of RMB2,276 million or 88.4%. From 2009 to 2012, the year-to-year growth rates of the Company recorded in profit attributable to owners of the Company were 51.4%, 68.1% and 88.4% respectively, representing a CAGR of 68.6%. In 2012, the Company achieved basic earnings per share of RMB2.57, representing a 63.7% increase over RMB1.57 recorded in 2011.

Continuous Leadership in Residents' Overall Satisfaction

According to the “2011 China Urban Resident Satisfaction Survey” conducted by a special research group organized by China Index Research Institute and the China Real Estate Index System, which interviewed nearly one hundred companies and more than ten thousand interviewees in 12 major cities, namely Beijing, Shanghai, Guangzhou, Shenzhen, Chongqing, Tianjin, Hangzhou, Wuhan, Qingdao, Ningbo, Suzhou and Nanjing, the Group continued to rank No. 1 in “Overall satisfaction of residents in Chinese cities” and also in all six indices including project quality, planning & designing, sales services, property services, corporate image and customer loyalty. These results also indicated that the Company's development philosophy has gained huge market recognition and customer support.

Sales Model Transformation

Sales result has always been the Company's top priority. In 2012, Greentown Group vigorously promoted a sales model transformation, a shift from the traditional sales model to the agent based model, from a static model of onsite reception, introduction and experience, to a sales-model that is composed of proactively identifying customers and then providing relevant services. In addition, the Company improved its incentive system, motivated the agents to perform at their highest potentials and also enhanced performance evaluation; meanwhile, the Company established an open and transparent property information platform in order to leverage the internal and external resources and implement all staff marketing, thereby stimulating sales growth.

Introduction of Strategic Investors

On 8 June 2012, the Group announced that it entered into a subscription agreement and an investment agreement with The Wharf (Holdings) Limited (“Wharf”, stock code: 00004.HK) and its wholly-owned subsidiaries, pursuant to which the Company issued shares and perpetual subordinated convertible callable securities to Wharf's wholly-owned subsidiaries, with the total consideration of approximately HKD5.1 billion (approximately RMB4.16 billion). After the placement in August 2012, Wharf held approximately 520 million Greentown shares, representing 24.6% of the enlarged total share capital, and became Greentown's second largest shareholder. Moreover, Wharf also obtained two seats in the Board and one seat in the newly formed Investment Committee. Shortly afterwards, the Company acquired Dalian Buxiu Lane (“大連不朽巷”) land site jointly with Wharf, which fostered a closer bond between the two parties, progressing from strategic alliance to project collaboration, whereby leveraging on Greentown's excellent capabilities in product development and execution and Wharf's proven experience in financial management and financing. The synergies between both parties are starting to materialize.

On 22 June 2012, the Group entered into a framework agreement with Sunac China Holdings Limited (“Sunac”, stock code: 01918.HK) to cooperate on a 50/50 basis in eight projects, namely Shanghai Yulan Garden (” 上海玉蘭花園”), the Shanghai Bund House (“上海黃浦 灣”), Suzhou Majestic Mansion(“蘇州御園”), Suzhou Rose Garden (“蘇州玫瑰園”), Wuxi Yulan Square (“無錫玉蘭廣場”), Wuxi Jasmine Garden (”無錫茉莉花園”), Changzhou Yulan Square (“常州玉蘭廣場”) and Tianjin Azure Coast (“天津藍色海岸”), and to establish a 50/50 joint venture platform (“Sunac Greentown”). The Group also transferred 50% equity interest in Shanghai Rose Garden to Tianjin Sunac Zhidi Co., Ltd (“Sunac Zhidi”, a whollyowned subsidiary of Sunac). Through this transaction, Greentown transferred half of its equity interest in the above nine projects with a total consideration of RMB3.36 billion. Following this transaction, the Company leveraged on Sunac Greetown's competitive advantages to secure three high-quality land sites in Shanghai. Given Greentown's expertise in product development, construction design and management, and Sunac's rich experience in market positioning, cost control and sales management, this strategic cooperation will bring significant synergies to both sides.

Pre-sales in the Year

In 2012, the Group implemented a thorough reform on its sales division, which transformed the old static model of onsite reception into the proactive agent-based sales model maximizing all available resources to identify potential customers. These changes have energized the Group's sales force and created an open platform to attract talented sales staff.

For the year ended 31 December 2012, the Company and its subsidiaries, together with its jointly controlled entities and associates (collectively the “Greentown Group”) sold approximately 2.83 million sqm of properties, representing an increase of 61.7% from 2011. Total property sales amounted to approximately RMB54.6 billion (including RMB27.3 billion attributable to the Group), representing an increase of approximately 54.6% from RMB35.3 billion in 2011, and exceeding 36.5% of the original sales target of RMB40 billion for 2012. The overall average selling price was RMB19,891 per sqm.

Development scale

In 2012, in light of the market situation, Greentown Group had put its focus on product quality and customer satisfaction, and duly controlled the development pace and appropriately adjusted the product structure. In 2012, the total GFA under the new construction sites amounted to approximately 4.69 million sqm. In 2012, Greentown Group completed total GFA of approximately 4.13 million sqm. As at 31 December 2012, Greentown Group had 82 projects under construction, with a total GFA of approximately 16.57 million sqm.

Land Bank

In 2012, the Greentown Group acquired seven new land sites, with a total GFA of approximately 2.1 million sqm, of which approximately 680,000 sqm is attributable to the Group. The newly added land sites' total land premium amounted to approximately RMB12 billion. Majority of the land premium was borne by the associates, while only approximately RMB700 million was borne by the Group through its internal resources. The average land price of the sites was approximately RMB5,693 per sqm.

Business Outlook - For the year ended December 31, 2012

The government's continuing macro-control policies and the unfavorable real estate market conditions had once put pressure on the Company's operations. In view of such challenging operating environment, the Group proactively adjusted its strategies and transformed its operations through a series of measures. Thanks to the commitment and dedication of all staff members, the Group successfully weathered the difficulties and achieved satisfactory results in 2012.

Braving the challenges of macro-control policies, the Group's management team has become more seasoned and employees have become more experienced. In addition, the structure of the Group has become more competitive with better operational control and focus. The Group has also obtained a clearer vision and goal for its future development while becoming more confident to tackle market challenges in the future. In 2013, the Group will continue to focus on property sales and adhere to its principle of “quality sophistication and prudent operations”, while striving to improve its management capability, operational efficiency, quality sophistication, as well as infrastructure management. Embracing passion for property development, the Group is confident that its belief in integrity, kindness, sophistication and perfection will gain recognition from the market and the society.

Continuous Improvement in Product and Service Quality

Product quality is a cornerstone of the Company. Despite challenges in its operating environment, the Company has always put product quality as its first priority, and consistently focused on product and service quality while adhering to its commitment to “value-added project development”.

In 2012, the Company continued to rank No. 1 in respect of Chinese Urban Residents' Overall Satisfaction. The Group's understanding in urban residents' needs and pursuits in life, as well as the Group's responsible attitude to urban development, has won huge support from our customers and the society. The Group understands that our customers' understanding in and pursuit of quality living grows with China's continuous economic development and increased living standards, therefore it will put great efforts to enhance the quality of its products and services further. Customer satisfaction is a key performance indicator of our business and operation while customer aspiration is a key motivation for our high-quality product and service value. The Group will continue to focus on high-quality products and services to meet increasing demand of its customers.

Product Diversification

The Group believes that properties are artistic creations that embody architectural value. The Company has centered its product development on “implementing high-quality product strategy and creating long-standing masterpiece”. Under this strategy, the Company has developed six classical product lines including villa, multi-story apartment, high-rise apartment, urban complex, large-scale community and commercial properties, which helped Greentown win such recognition as a “specialist of high-end properties in China”.

Aiming to offer customers with quality properties and improve their urban living experience, the Group will continue its product diversification with a focus on quality and sophistication, which shall cater to market demands. The Group will also transform its business focus from residential project oriented to upcoming cities' urban complex oriented. Besides, the Group will also expand into pension themed projects and tourist-oriented projects.

Prudent Financial Control

The Group will maintain its gearing ratio at a reasonable level and optimize its debt structure by improving its debt maturity profile and reducing short-term debt, as well as enhancing its cash balances to cover short-term loans due within one year. The Group will also explore different financing channels to optimize its debt structure and reduce average financing cost, while looking for opportunities to monetize projects with longer development cycle so as to improve the Group's cash flow and optimize its land bank reserve.

Cost Control Management

The Group will strengthen its overall control on project development, in particular in respect of cost control. The Company will reduce material procurement cost via its electronic procurement center and establish a cost management and evaluation incentive system for different regions and product categories. At the same time, to ensure that development projects in the future will generate a reasonable internal rate of return, the Group will adopt professional advices and forward-looking decisions of the Investment Committee at the early stage of the project to enhance assessment on investment risk and return for new land parcels and development projects, thereby achieving maximum return through reasonable use of financial leverage and prudent management of its financial liquidity.

Asset-light Strategy

Throughout the course of its development in the past 18 years, the Company has gradually identified, strengthened and confirmed its core competencies. In recent years, the government's stringent macro-control policies have forced the Company to reflect on its future directions, aiming to explore for new footholds. The Company will give up its previous aggressive expansion strategy and shift its focus to strategies that rely on its brand power and management expertise for cooperation with other parties to unleash their commercial value. By leveraging its expertise and resource integration management capabilities in planning, design and construction, the Group will continue to develop via its independent or cooperative project development models to enhance its asset turnover rate, while establishing extensive cooperation with external parties to create new market and profit engines for the Group without incurring additional liability and capital expenditure.

Geographical Coverage

The Group will review the current geographical distribution of its projects, in particular the correlative activities and developments within its existing business regions, with an aim to strengthen its presence and competitive advantages in those regions. In terms of project development, the Group will make its decision on land acquisition based on cash flow forecast and analysis. Leveraging its brand power, the Group will moderately replenish its land bank reserve at a reasonable price through diversified channels, which shall support its development in the next five years.

Projects scheduled for completion for the year

In 2013, the Group expects to commence construction of projects with a total GFA of approximately 7.48 million sqm It is expected that 44 projects, or project phases, will be completed in 2013 with a total GFA of 5.73 million sqm.

Source: Greentown China (03900) Annual Results Announcement
Chairman Song Weiping Issued Capital (shares) 2,155M
Par Value HKD 0.1 Market Capitalisation (HKD) 33,191M
 
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