China Overseas Land Says 1H Profit Rises as Sales Expand
Aug. 5 (Bloomberg) -- China Overseas Land & Investment Ltd., the country’s biggest developer by market value listed in Hong Kong, said first-half profit climbed 32 percent as it sold more properties.
Net income rose to HK$11 billion ($1.4 billion), or HK$1.34 a share, from HK$8.38 billion, or HK$1.02 a share, a year earlier, the company said in a stock-exchange filing today. Sales increased 27 percent to HK$32.2 billion, it said.
The developer benefited from focusing on so-called first-tier cities, including Beijing and Shanghai, where demand remained strong even as the government stepped up a three-year campaign to cool home prices in March. Home prices in Guangzhou and Beijing rose at least 20 percent in July from last year, according to SouFun Holdings Ltd. (SFUN), China’s biggest real estate website.
“The numbers are largely in line,” said Jinsong Du, a Hong Kong-based property analyst at Credit Suisse Group AG. “The company will have no problem exceeding its sales target this year,” he said, adding that he doesn’t anticipate any major “negative” policy changes in the second half as the government grapples with an economic slowdown.
The Hong Kong-traded stock rose 0.4 percent to HK$23.50 as of 2:54 p.m. local time, extending this year’s gain to 1.7 percent.
The company’s contracted sales of properties reached a record high of HK$80 billion in the first half as the company “intensified its sales effort upon seeing improvement in the market sentiment,” it said in the statement. Hong Kong and Chinese developers usually start selling properties while they’re still under construction and book profit upon completion.
“First-home buying is still strong in major cities and China Overseas’ strategy of focusing on those cities fits in very well,” Alan Jin, Hong Kong-based property analyst at Mizuho Securities Asia Ltd., who rated the stock a ‘buy’, said before the announcement.
Profit excluding revaluations rose 26.7 percent from a year ago to HK$8.06 billion. The developer raised its 2013 sales target to HK$120 billion, which Du from Credit Suisse said is “relatively conservative.”
Net gearing fell to 14.9 percent at the end of June, from 20.5 percent at the end of 2012, and is “relatively low at the moment,” Chairman Kong Qingping said in the statement. Kong will resign tomorrow as executive director and chairman, replaced by Hao Jian Min, the company said in a separate statement.
“The group is hence in a position to secure more funding at suitable times,” Kong said without elaborating. “Excellent performance of the group under such a tough market environment confirms that the strategy of developing high quality residential projects in the core areas of major mainland cities is correct.”
China Overseas, which builds homes and offices in China, Hong Kong and Macau, said operating profit rose 7.8 percent to HK$13.2 billion. Operating profit from mainland China accounted for 76.5 percent of the total.
The developer acquired 11 plots in China in the first half and plans to expand its land bank in the second half, it said without giving a specific target.
The company is studying the feasibility for controlling shareholder China State Construction Engineering Corp. to inject its property development business into China Overseas, according to a separate statement to the Hong Kong stock exchange. No definitive proposal or agreement has been made, it said.
The company said it will pay an interim dividend of 18 Hong Kong cents.
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