China Vanke 2012 Profit Rises 30% on Sales of Smaller Homes

China Vanke Co., the nation’s biggest developer by market value traded on mainland exchanges, said full-year profit rose 30 percent as it sold more small and medium-sized homes that are less affected by government curbs.

Net income climbed to 12.55 billion yuan ($2 billion) in the 12 months to Dec. 31 from 9.62 billion yuan a year earlier, the Shenzhen, China-based company said in a statement today. That compares with the 11.95 billion yuan average profit estimate of 16 analysts surveyed by Bloomberg. Revenue rose 43 percent to 96.9 billion yuan, it said.

About 90 percent of Vanke’s projects were homes of less than 144 square meters (1,550 square feet) in 2012, the company said. That helped it boost sales even as the government maintained property curbs, including tighter lending and restrictions on the number of homes people can own.

“Vanke’s good sales last year definitely helped boost the earnings as it tapped into the first-home buyers, a segment less affected by the government’s curbs,” said Zhao Zhenyi, a Shanghai-based property analyst at Industrial Securities Co., before the earnings announcement.

The shares rose 4.6 percent to 11.32 yuan at the close of trading in Shenzhen, before the earnings were announced. They have gained 12 percent this year. The Shanghai Stock Exchange Property Index, which tracks 24 developers, advanced 2.8 percent today.

Mass Market

In almost three years since the government began efforts to rein in property prices, it has raised down-payment and mortgage requirements, imposed a property tax for the first time in Shanghai and Chongqing, and enacted home-purchase restrictions in about 40 cities, while attempting to preserve real demand from homeowners.

The Chinese government told local authorities to “decisively” curb real estate speculation last week. Cities that have had “excessively fast” price gains should “promptly” impose home-purchase restrictions if they’ve not done so already, according to a statement on Feb. 20 after a State Council meeting headed by Premier Wen Jiabao, who will step down during a leadership change next month.

“It is very likely for the government to intensify property curbs and keep for a long time,” said Vanke President Yu Liang at a press conference in Hong Kong today. “Vanke will focus on building normal residential properties to target the mass market in response to the restrictions.”

Looking Overseas

Vanke won’t rule out the possibility of investing in other places besides San Francisco and it is “watching and studying” other “interesting” markets, Yu said.

The homebuilder signed a deal with New York-based Tishman Speyer Properties LP this month for a residential property venture in San Francisco, marking its first foray into the U.S. real estate market. The companies are planning two residential towers in the city that will cost $620 million, Rob Speyer, Tishman’s president and co-chief executive officer said in an interview last week.

Vanke last month announced plans to shift trading of its foreign-currency shares to Hong Kong to widen access to global investors.

“We look forward to be listed in Hong Kong, but we are still awaiting for approvals,” Yu said, declining to give a timetable.

Full-year contracted sales rose 16 percent to 141.2 billion yuan, an industry record, the company said today. Chinese developers begin selling homes while they are under construction and book profits upon completion.

Vanke had 52.3 billion yuan of cash at the end of December, it said. By the end of last year, Vanke had land reserves with buildable area of 39.5 million square meters, it said.

The company, the first among China’s biggest homebuilders to report full-year earnings, will pay a final dividend of 0.18 yuan.

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