Wheelock: fine-tuning property prices

Affected by the changes in the new accounting standards, Wheelock’s (201020) core earnings fell 6.5% year-on-year, but interim dividends rose 5.3%. According to the analysis, Wheelock’s unrecorded amount of more than 30 billion yuan will lock the future income of the group and increase the resilience of the interest rate hike cycle.

Recently, a number of banks have raised the lock-up ceiling for mortgages. Chairman and managing director Wu Zongquan said that in the second half of the year, the property market will face factors such as interest rate hikes and trade wars, or increase operating pressures; trade wars are not short-term solutions, and 1 is not excluded. Trade disputes will continue until 2 years later. However, based on the economic data of China, Hong Kong and the United States, it is believed that property prices will only be fine-tuned and will not rise or fall sharply. Therefore, the Group will maintain a sales strategy such as rotation.

Core earnings fell 6.5%

Wu Zongquan said that under the uncertainty of the external environment, the attitude of land investment in the second half of the year will be more cautious and more selective. “The number of items will be included first.” In the future, land will be considered together with residential and commercial land. Regarding the impact of the vacant tax, he will pay attention to it, but it will still have to wait until the government announces the details before discussing it.

According to the new accounting standards, the income from the sale of properties in Hong Kong must be confirmed at the time of completion of the transfer, resulting in the sales of Wheelock’s confirmed accounts for the first half of the year only 2 billion yuan. The sales of MONTEREY are expected to be credited to the second half of the year. Group Chief Financial Officer Xu Yaoxiang said that the impact of accounting standards on the Group’s accounting is only one-off, and will return to normal levels next year.

Nomura Securities said that the performance of Wheelock’s performance is expected, the core profit decline is only due to the postponement of the crediting time, not the cash flow is weakened, it is expected that the annual dividend will increase by 8%.

In the first half of the year, Wheelock’s residential sales increased 37% year-on-year to 23.4 billion yuan, the strongest first-half sales in the past. There were 2,021 units sold or pre-sold, which was 53% higher than last year’s record.

As of the end of June, sales that had been pre-sold but not yet confirmed accounted for a record $30.2 billion, an increase of 243% year-on-year, and will be recorded in six to 24 months. Wu Zongquan pointed out that the land reserve is about 6.6 million square feet, enough to cope with the next four to five years of development.

The analysis believes that Hong Kong’s property market will face multiple risks in the coming months, so it is more attractive for investors to pre-sell large developers with reserved sales.

Earlier, Wheelock announced that it plans to privatize Singapore-listed Wheelock Properties at a price of S$2.1 per share, meaning that the required capital is about S$600 million. Xu Yaoxiang said that technically, the price can be raised, but this has not been considered. Wu Zongquan said that there were no other restructuring plans in the department.