Developers brace for slowdown as curbs bite

Business | Stella Zhai 23 Aug 2019

Several mainland developers reported a rise in interim net profit but they generally believe the trend cannot be sustained in the second half amid the cooling measures.

Country Garden (2007) reported a 23.4 percent year-on-year increase in its core net profit excluding impacts from fair value changes and one-time items, at 15.98 billion yuan (HK$17.68 billion) for the first half.

Revenue surged by 53.2 percent from the year-before period to 202.01 billion yuan, driven by the delivery of property units.

President and executive director Mo Bin expects 55 percent of the contracted sales in the second half will be in tier-3 and tier-4 cities, amounting to around 260 billion yuan. The company declared an interim dividend of 22.87 fen, and earnings per share were 0.73 yuan.

The core net profit of China Overseas (0688) also grew by 9.5 percent to HK$20.99 billion during the first six months, with earnings per share of HK$2.28. There is an interim dividend of 45 HK cents.

Revenue increased to HK$93.38 billion with contracted property sales up 28.7 year-on-year.

However, downward pressure on China's economy has increased, said the company, and it expects the country's domestic economic policies to undergo more frequent fine-tuning in the second half.

Sunac China (1918) meanwhile said it recorded an underlying net profit for the first half-year of 12.66 billion yuan (HK$14.03 billion), surging 1.28 times from a year ago driven by a 64.9 percent increase in sales revenue.

Chairman Sun Hongbin worries that the regulations will impact the land market, and that there will not be a rush to buy property. He added that the regulations will have more impact on tier-three and tier-four cities than the tier-one and tier-two cities.

Elsewhere, state-backed Poly Property (0119) said its interim net profit surged by 5.02 times from a year ago to 3.84 billion yuan, with the delivery and recognition of Kai Tak Vibe Centro project, and basic earnings per share were 1.02 yuan.

Guangzhou R&F Properties' (2777) interim net profit grew by 2.6 percent year-on-year to 4.03 billion yuan, with earnings per share of 1.25 yuan. It declared a 42 fen per share dividend.

Chairman Li Silian said all China developers will face challenges from a tightening financing policy, and R&F will adopt a cautious approach in the acquisition of land plots in the short-term.

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