September 1, Sino-Ocean Land Holdings Ltd. (3377.HK), a Hong Kong-listed developer with residential and commercial property operations in mainland China, aims to achieve RMB 50 billion-RMB 60 billion in annual sales by diversifying its product portfolio in the next 5 years.
The developer also aims to have 16%-20% of its future revenues come from non-residential property projects, a source from the company told the 21st Century Business Herald.
The source said Sino-Ocean Land would focus on acquiring land plots at low prices in third and fourth-tier mainland China cities over the next few years.
The company had 24 million square meters of land in 18 cities as of June 30, including 2.5 million square meters purchased in the first 6 months of this year.
“Sales from first and second-tier cities currently account for 80% of our total, and the remaining 20% come from third and fourth-tier ones, but we hope to change the proportion to 1/3 for each category,” the source said.
In the 6 months ended June 30, Sino-Ocean Land booked sales revenue of RMB 7.9 billion, up 66% year-on-year. Net profit surged 94% y-o-y to RMB 2.34 billion.
The developer’s contracted sales in H1 hit RMB 12.35 billion, or 40% of its full-year target of RMB 30 billion.
Sino-Ocean Land said it remained confident in accomplishing that target, and would beef up efforts to launch new projects in the second half.
The developer plans to launch 30 residential property projects by the end of the year.
Sino-Ocean Land currently develops a range of property projects including residential and affordable housing units, urban villas and HOPSCA (hotels, offices, parks, shopping malls, convention centers and apartments).
It expects to dive into new segments like retirement homes in the coming years.
“A more diversified line of products would help developers to better guard against risks in the market, especially in times of tough property regulation,” said Yang Hongxu, research head at Shanghai-based E-House’s property research institute.
“[But] I seriously doubt the feasibility of retirement home or tourism property projects at this point, where the problem of profitability remains uncertain,” analyst Chang Zhi from Century 21 China Real Estate said.
“Our investments in commercial [and other] property have been strategically planned, and will not affect the company’s overall operations. In the long term, we expect to rely on them [commercial property and other segments] to boost our ability to exploit new business opportunities and maintain sustainable profitability,” chairman Li Ming said in a statement on Sino-Ocean Land’s official website.
Share Structure
Established in 1993 and based in Beijing, Sino-Ocean Land is one of the 10 largest listed property firms in Hong Kong.
State-owned COSCO International Holdings Ltd. (0517.HK), originally an investor in real estate and a shipping services provider, used to own a 16.85% stake in Sino-Ocean Land, but ditched its stake last December to comply with an order from the State-owned Assets Supervision and Administration Commission (SASAC) that was aimed at reducing the involvement of non-property state-owned enterprises in real estate.
Few SOEs have complied with the order to date.
On Dec. 16, COSCO International announced it would sell its 16.85% stake in Sino-Ocean Land at HK$5.6 apiece.
Hong Kong-based financial group Nan Fung Group took over a 11.87% stake from COSCO International, boosting its holding in Sino-Ocean Land to 21.89%. It is the second-largest shareholder after China Life Insurance Co. Ltd. (2628.HK), which owns a 24.07% stake in the developer.
The remaining 4.98% stake previously held by COSCO International was sold to an unknown buyer, as the Hong Kong Stock Exchange allows shareholders with a stake of 5% or less to remain anonymous
Industry insiders believe a foreign private equity fund -- possibly under HSBC Holdings Plc. -- has bought the 4.98% stake.