Developer sees profit, revenue surge, but commercial rental margin falls

Hong Kong-based China Resources Land (CRL) - the property arm of the mainland's China Resources Group - saw both profit and revenue climb in 2015.

Profit margin, however, headed down amid abundant supply of retail space. But the company said it remains confident in the retail sector, with close to 20 shopping malls due to come on stream in the next few years.

CRL, which was listed in the SAR in 1996, said on Monday its 2015 revenue grew by 15.3 percent year-on-year to HK$103.39 billion, while core profit attributable to the owners reached HK$14.21 billion - up 19.2 percent from a year ago.

It proposed a final dividend of 48.7 Hong Kong cents per share, with an interim dividend of 8.7 Hong Kong cents per share.

The company's share price shed 2.4 percent on Monday to HK$20.3 apiece. By comparison, Hong Kong's benchmark Hang Seng Index rose 0.06 percent, or 12.52 points, to close at 20,684.15, whereas the properties sub-index edged down 0.06 percent to 29,061.49.

CRL's revenue from residential development reached HK$93.54 billion, up 14.4 percent, while rental income from investment properties - offices, shopping malls and hotels - climbed 21.4 percent to HK$6.65 billion.

But gross profit margin generated from rentals of offices and shopping centers was down 4.6 percentage points (pct) to 66.9 percent. CRL said the decline is due to affluent supply. The average occupancy rate of the group's shopping malls dropped by 2.3 pct on year in 2015 to 92.1 percent, while that of offices slipped 1.7 pct to 88.9 percent.

CRL Vice-Chairman Tang Yong, however, expressed confidence in the retail market, saying the company's commercial property projects will be delivered on time, with two new malls to be completed this year, five in 2017 and 11 more in 2018 and beyond.

He's also positive about the residential market. "We believe the (mainland) governments' policies will continue to benefit the property market and help it stay stable or edge up in 2016."

"No one wants a bubble, but the authorities, especially at the local government level, don't want homes prices to decline as well," he said. "Although homes prices have risen a lot recently in top-tier cities like Shanghai and Shenzhen, the market is still healthy and demand is still high due to limited supply."

CRL has set its residential homes sales target for 2016 at 96 billion yuan ($14.8 billion), compared with 85.15 billion last year. "We will keep our profit margin above 30 percent", he added.

James Yu Jian, CRL's chief financial officer, said the company will issue more debts denominated in renminbi due to growing exchange risks. At the end of 2015, the company's share of yuan debts increased to 53 percent compared with 38 percent in late 2014.

Yu also said CRL has applied for a 20-billion-yuan quota for panda bonds - renminbi bonds issued by overseas companies in the domestic market - the first mainland developer to do so. "We expect the quota to be approved in the first half of this year and we will issue 5 billion yuan panda bonds initially," he said.

emmadai@chinadailyhk.com

(HK Edition 03/22/2016 page9)