China Vanke Rises on First-Half Profit Increase: Shenzhen Mover
China Vanke Co. (3333), the biggest developer by market value traded on the nation’s exchanges, rose after first-half profit climbed 22 percent and as more property companies seek the sale of new shares.
The stock added 0.5 percent to 9.98 yuan at the close in Shenzhen, the biggest advance since Aug. 2, after jumping as much as 4.1 percent earlier. The developer’s net income increased to 4.56 billion yuan ($745 million), or 0.41 yuan a share, from 3.73 billion yuan, or 0.34 yuan, a year earlier, the company said in a Shenzhen stock exchange filing yesterday. Sales gained 35 percent to 41.4 billion yuan.
“The company has clear earnings visibility,” said Zhenyi Zhao, a Shanghai-based property analyst at Industrial Securities Co. “It had a very good sales, outperforming the peers in the first half of the year. It also invested well in the land market at good prices.”
The profit gain comes as more Chinese developers seek to resume share sales on the country’s mainland exchanges in the past week, adding to signs that the government may allow the financing to proceed.
Sundy Land Investment Co. (600077), a Shenyang-based developer, plans to raise as much as 1.5 billion yuan ($245 million) in a private placement to finance two housing projects, the company said in a statement to Shanghai Stock Exchange yesterday. China Merchants Property Development Co. (000024), the country’s third-biggest developer by market value, plans to sell shares to buy assets, according to a statement posted to Shenzhen Stock Exchange.
The gauge tracking property shares on Shanghai Composite Index (SHCOMP) rose 0.7 percent to the highest since July 17, after climbing as much as 2.4 percent earlier. It also increased the most among the five industry groups in the benchmark measure, which lost 0.7 percent.
The planned share sales reinforce expectations that regulators will ease limits on fundraising by developers, according to Haitong International Securities Group Ltd. (665)
“These companies must have received some signal that the government will gradually ease refinancing for developers, otherwise they wouldn’t announce such plans,” said Hugo Hou, a Hong Kong-based analyst at Haitong. “It will be good news for the industry, because the availability of more options will lower fundraising costs for developers.”
For Vanke, about 90 percent of its projects comprised of homes of less than 144 square meters (1,550 square feet) each in the first half, the company said. That helped boost sales even as the government stepped up a three-year campaign to cool housing prices in March, including ordering the central bank to raise down-payment requirements for second mortgages in cities with excessive cost gains.
“The developer’s strong sales in the first half helped boost the earnings,” Jack Gong, a Hong Kong-based property analyst at Orient Finance, said before the earnings announcement. “It also adopted an active land purchasing strategy, which will sustain Vanke’s future growth.”
Contracted sales in the first seven months rose 34 percent to 97.7 billion yuan, the company said in a separate statement yesterday. Chinese developers begin selling homes while they are under construction and book profits upon completion.
“Land markets in certain cities showed signs of overheating,” Vanke President Yu Liang said in an-emailed statement. “With the increase in land supply in the second half of the year, in particular in the fourth quarter, the market is expected to become more rational.”
Vanke had 37.6 billion yuan of cash at the end of June, it said, compared with 52.3 billion yuan at the end of last year.
China Overseas Land & Investment Ltd. (688), a state-controlled developer, the first among major Chinese developers to report interim earnings, said on Aug. 5 that first-half profit climbed 32 percent to HK$11 billion.
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