27/3/2018-1

Vanke: The unilateral surge in property prices ended. Difficulties in rising gross profit margins

Vanke Property (02202) posted a core net profit of 27.28 billion yuan (RMB) for the same period last year, an increase of 30.3% year-on-year. Although the final interest rate was raised from 9 yuan to RM9 per 10 shares, the dividend payout ratio dropped by 42%. To 36%, UBS said that the distribution was 12% lower than market expectations. Zhu Xu, Vice President and Secretary of the Board of Directors of Vanke, said that the dividend payout ratio in the last five years has been maintained at more than 30%, and the total dividend payout has grown steadily. It will give shareholders a steady increase in dividends while considering the funds required for development.

Housing companies should look at manufacturing services

Last year, Vanke’s gross profit margin for property development increased by 5.79 percentage points to 26.18%. Chairman Yu Liang revealed that the era of rapidly rising unilateral property prices in mainland China has ended, and it is not realistic to expect a substantial increase in gross profit margin. Housing companies must think of themselves as manufacturing and service industries to make money. They cannot make money solely by unilateral appreciation. The industry must make changes.

One after another, there was the demolition of the property management business of the domestic house company. Vanke’s subsidiary, the Force Group, had 172 management projects as of the end of last year, involving a total floor area of ​​more than 10 million square meters, and was the second largest property management platform in the Mainland. Zhang Xu, the company’s executive vice president and chief operating officer, mentioned that there is currently no plan for any spin-off or listing, and that he will continue to pay attention to opportunities for mergers and acquisitions in the future, and he hopes to lead the industry.

Still optimistic about the Hong Kong Building. It does not intend to sell Wan Chai.

Talking about the development in Hong Kong, Zhang Xu said that because the land in Hong Kong is too expensive, when the company bid for land, the bid was unsuccessful and it will be deliberately involved in the future. However, the company is still very optimistic about Hong Kong’s economy and property market. The serviced apartment project at Luen Fat Street in Wan Chai is a residential property because the land in Wan Chai is scarce and therefore will not be sold. It will continue to be held as rent collection. It is expected that the Tuen Mun Sabah project will be sold in the first half of the year and the Cheung Sha Wan project is expected to be launched in the second half of the year.

As to when asked whether it would cooperate further with the major shareholder Shenzhen Metro and Qianhai International, which it puts on sale, Zhu Xu said only that if there are standards that need to be disclosed, it will be disclosed.

Yu Liang pointed out that operating long-term rental apartments and revitalizing the village are not aimed at making money. If the profits are calculated before they are developed, the opportunity will not come to you. It will be possible to do it when everyone does not understand it. Successes, such as Huawei, Alibaba, and Tencent (00700), began with non-profitable businesses. However, some businesses that can make money from the beginning are untouchable. He believes that the value of business, the provision of good products, and good services will surely reflect its commercial value.

Asked about the strengthening of financial supervision in the Mainland and the impact of deleveraging on the company, the CEO wished Jiu Jiusheng that the relevant policies were introduced in a timely manner and would help the industry develop healthily in the medium to long term.