Maintaining scale expansion and profitability

Hong Kong listed real estate developer Yuzhou Properties is favoured by the market, achieving lower debt ratios while growing to record highs.

Maintaining scale expansion and profitability

Adhering to the principle of “region-focused dedication to outperform domestic peers”, Yuzhou Properties Company Limited (Yuzhou Properties) continues its success in 2017 with a comprehensive upgrade of its core strategies and maintained focus on second-tier cities and their satellite counterparts in China.

Headquartered in Shanghai, the real estate developer (01628.HK) has made efforts to focus its regional distribution in the Yangtze River Delta region and maintain its business scale and profitability.

The group has a wealth of land reserves after newly acquiring 14 land plots, and made its first foray in Hangzhou, Suzhou and Wuhan in 2016. It now possesses a land bank of approximately 10 million sq.m., of which 70% is located in the Yangtze River Delta region.

Sales Hit New Highs

Benefitting from its solid position in the West Straits Zone and Yangtze River Delta, Yuzhou Properties achieved an outstanding operating performance of 2016 with its annual contracted sales, contracted sales gross floor area and profits hitting record highs.

Moving into 2017 and the results so far are equally promising. The group’s contracted sales in the first quarter of 2017 reached Rmb10.151 billion ($1.47 billion) –an increase of 80% year-on-year – achieving 34% of the annual sales target already.

Yuzhou Properties’ sales performance of the first quarter gained high rankings in a number of cities. Generating Rmb2.712 billion, it topped the enterprise sales of commodity housing in Xiamen, and has been in a leading position of commodity housing sales for 12 consecutive years.

In addition, it ranked in the top three of Hefei’s local housing market, with contracted sales of Rmb1.9 billion. The group also achieved healthy results in Nanjing for the first quarter, and ranked in the top 10 of the Nanjing Housing Enterprise Sales Ranking List.

In 2017, the developer won the honors of being one of the “Top 38 Chinese Real Estate Developing Enterprises”, the 38th for “Comprehensive Strength” and third in the “Top 10 Chinese Real Estate Developing Potential”.

High Profitability, High Dividend, Low Finance Costs

Yuzhou Properties has maintained an above-industry-average gross profit margin and shareholder returns didn’t dip below 30% of its core profit since it listed in 2009. It is a company well supported and trusted by investors and shareholders.

A number of well-known security companies maintained “Outperform” or “Buy” ratings and raised their target prices for Yuzhou Properties, while Standard & Poor’s and Moody’s raised their outlook to “positive” respectively, affirming Yuzhou Properties’ sales performance and development prospects.

The positive feedback comes as the company has strived to maintain a healthy debt level during its expansion phase.  Having kept a close eye on numerous finance channels, Yuzhou Properties’ overall finance cost has dipped from 7% at the end of 2015 to 6.08% at the end of 2016. This was achieved through a series of corporate finance measures which further replenished the company’s cash flow in support of business development, extended the average maturing term of its debt portfolio and optimised its debt structure.

Contracted Sales in 2020 to Hit Rmb100bln

Based on current performance, Yuzhou Properties believes it can achieve contracted sales of Rmb100 billion in 2020. To do this, it has formed a strategic national layout of four core regions, namely, Yangtze River Delta, West Straits Region, Bohai Rim and Central Region.

In 2016, more than half of its revenue contribution came from Yangtze River Delta, and it is expected to grow to 60% within three years. In addition to Yangtze River Delta and West Straits Region, Yuzhou Properties will also further expand in the Bohai Rim and actively expand to Guangdong Province as well as potential cities in Central China, with M&A or bidding and auction at around Rmb15 billion.

Yuzhou Properties is now a constituent stock of the “Hang Seng Composite MidCap & SmallCap Index”, as well as one of the qualified stocks of the Shenzhen-Hong Kong Stock Connect. This demonstrates the capital markets’ recognition and affirmation for the developer’s performance and great growth potential.

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