Greenland Hong Kong Reports 267% Jump in Core Profit

Greenland Hong Kong Holdings, the Hong Kong-listed subsidiary of China’s sixth largest developer, reported a 267 percent rise in first-half core net profits, which exclude revaluations and some one-offs. It is the fourth major Chinese property company to report strong results this month despite government cooling measures, restrictions on overseas investments and a government campaign against high leverage.

In results for the first half of 2018 that were posted to the Hong Kong exchange on 30 August, the company reported profits attributable to shareholders that were up by 46 percent compared to the same period one year ago, and a gross profit margin of 24 percent, up from 21 percent in the first half of 2017. Total revenues were RMB 5.3 billion ($776 million), compared with RMB 4.8 billion a year earlier.

Greenland Hong Kong has a market cap of HK$7.31 billion at the time of publication, while the company’s Shanghai-listed unit has a market cap to RMB 77.51 billion.

Higher Sales Throughout the Country

Greenland’s increases in profit and revenue were driven to a great degree by selling more space. In the announcement, the developer said that total gross floor area sold and delivered during the period was 436,136 square metres (4.7 million square feet), compared with 377,562 in the same period a year earlier. It reported activity at 17 properties and a dozen carparks during the first half.

The most sales were reported at Greenland Nanning Central Plaza, where more than 120,000 square metres of property changed hands for an average of RMB 11,329 per square metre. During the half, the company also achieved sales in Haikou, Suzhou, Kunming, Zhaoqing, Shanghai, Xuzhou and Hangzhou.

Building the Bank and Doing Deals

The company reported a sizeable increase its landbank, acquiring properties in seven cities in the first half with a total gross floor area of 4.95 million square metres. As of June 30, the company’s land bank totalled 20 millions square metres, sufficient for three to four years of development.

In January, Greenland won a site in the Dongmeng Economic Development Zone, Nanning for mixed-used development and another in Yulin City, Guangxi Province. In April, it was awarded five plots in Kunming city for a consideration of RMB 3.4 billion. The following month it acquired a parcel in Suzhou.

June was an especially busy month. Greenland won two plots in Wuxi City and made its debut in mid-Zhejiang by acquiring a parcel in Yiwu. Also in June, it entered into a cooperation agreement with the government of Wuxi for the redevelopment of shanty areas covering a 221,300 square metres and for the redevelopment of 200,000 square metres of old towns.

Challenges in the Background

In other developments, Greenland acquired a 70 percent interest in Zhaoqing Hengchang Industrial Investment for RMB 1.37 billion in January and in June issued $200 million of 7.875 percent bonds due 2019. In the first half, it also established Greenland Hong Kong Health Investment Company and announced that it was forming a venture with Provectus Care, an Australian company that specialises in the care of the aged. Like many property companies in China, Greenland sees a future in the development of communities for the elderly.

Despite the good results reported in Hong Kong, the group has been facing some difficulties. Its Greenland Wuhan Center will be reduced by at least 100 metres to about 500 metres due to new local restrictions. In June, a group led by Greenland sold a California project after facing local resistance to its plans for a $2 billion megadevelopment. Greenland has in general been pulling back following Beijing’s crackdown on overseas property investments. It is reported to be selling a massive residential tower and related hotel project in Los Angeles. In the UK, it halted work on the 67-storey Spire London.

Other Developers Doing Well

Competitors are also achieving excellent results. On Tuesday, Evergrande Holdings reported that first half core profits were up 101.5 percent and that revenues rose 59.8 percent. Last week, Country Garden reported first-half core profits up 80 percent and China Vanke reported a 25 percent rise in net profits in the same period.