Major developer builds Yangtze Delta footprint

| Tereza Cai 26 Nov 2018

Zhongliang Holdings, regarded as a top mainland property company with multi-billion-dollar sales, is seeking to trade publicly in Hong Kong.

It aims to raise capital for repaying the majority of existing interest-bearing borrowings, the development of existing property projects, and for general working capital purposes.

All of the above borrowings are working capital loans, comprising five bank loans at fixed interest rates ranging from 6.41 percent per annum to 9 percent per annum. The maturity dates range from November 28 next year to July 3, 2021, according to its filing.

Zhongliang has three business lines - property sales, from which almost all of its revenue was derived; management consulting services, and property management services.

It has begun to develop and operate commercial properties and has been generating rental income from leasing investment properties from the second half of 2018.

Zhongliang, has developed 316 property projects as of August 31 this year, covering 110 cities in 22 provinces. The land bank amounts to 35 million square meters, in terms of gross floor area.

Among that, 86.39 percent of the land bank is developed by its subsidiaries with 231 property projects. And 65.73 percent of the area is under development and 32.6 percent is held for future development. The remainder of 508,337 sqm is completed properties available for sale but as yet unsold, for lease, or for investment. Only 10 out of 231 projects are investment properties.

Of the 231 projects, 123 are located in the Yangtze River Delta Economic Region, 79 of which are in Zhejiang province.

The other 13.61 percent of the land bank is for projects developed by joint ventures and associates.

Zhongliang's ranking in the top 100 real estate developers in China by the PRC Real Estate Top 10 Research Team, in terms of comprehensive development capability, has improved from 59th in 2014 to 29th in 2018.

Meanwhile, based on contracted sales in the first half of 2018, it ranked 25th among all real estate developers in China, also the highest among all unlisted developers in China, according to the China Index Academy Report.

The company's compounded annual growth rate of revenue from 2015 to 2017 is 194.3 percent. It recorded a net loss of 180.8 million yuan (HK$204.06 million) and 269.8 million yuan in 2015 and 2016, respectively, mainly because of accelerated development and marketing and geographical expansion, which incurred significant expenses.

The net increase in cash and cash equivalents plunged from 3.47 billion yuan in mid 2017 to 285 million yuan in mid 2018. Then net gearing ratio was 44.6 percent as of June 30, 2018, while that for the end of last year was 147 percent.

Zhongliang has won bids for 11 new sites with a total area of 500,000 sqm, since September 1, this year, in 11 cities, including four cities it newly-entered into. Total land premiums for these new sites add up to 4.6 billion yuan.

On August 1, 2017, there was an accident at one of its construction sites, where five workers died and one was injured.

Zhongliang says its business is heavily dependant on and may be adversely affected by the performance of mainland property markets.

Zhongliang also says that it may not have adequate financing to fund projects, and that it has substantial indebtedness, which may increase in future. This may materially and adversely affect its financial condition and results of operations.

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