Logan Property Holdings Company Limited, ("Logan Property" or "the Group", HKEx stock code: 3380), a leading integrated property developer in the PRC focusing on the residential property market in Shenzhen and the Pearl River Delta region, successfully grasped the market opportunities in a timely fashion and stood out in the consolidation of the industry with its remarkable sales performance in 2015.
For the year ended 31 December 2015, the Group recorded significant growth of 53.6% in contracted sales to RMB20.51 billion, with annual target completion rate at141%. Contracted saleable GFA reached 2.42million sq.m. with 33.2% increased. Revenue was RMB14.57 billion in 2015, representing a year-on-year increase of 16.6%.
Continued Growth in Profitability with 2015 Profit Rose by 12.8%
Gross Profit increased 16.4% to approximately RMB4,430 million and gross profit margin reached 30.4%. Core profit (excluding changes in fair value of investment properties, derivatives and the relevant deferred tax) up 12.1% to approximately RMB1,974 million, and core profit margin was 13.5%. Profit of the year increased 11.0% to about RMB2,688 million.
Profits attributable to shareholders rose 12.8% to RMB2,649 million. Earnings per share stood at RMB52.41 cents, equivalent to about HK62.56 cents (2014: RMB46.95 cents). The Board of Directors proposed the payment of a final dividend of HK14 cents per share, total dividend payment accounted for approximately 33% of the core profit.
Fully Grasp the Market Recovery Opportunities at Shenzhen to Boost the Sales in Achieving Substantial Growth
During the year under review, benefitting from the introduction of numerous favorable policies promulgated by the PRC government, the general sales performance of the PRC property market saw a significant recovery. Various control and adjustment policies were launched to support the sustainable development of the PRC real estate market, thus boosting the demand for upgraders.
During the year under review, Logan Property continued to focus largely on projects targeting upgraders and first-time homebuyers and catering to inelastic demand in
order to fully grasp the market opportunities.
Of the contracted sales units in 2015, approximately 94% had GFA of no more than 140 sq. m. In terms of payment method, approximately 80% of contracted sales units in 2015 were settled by mortgage down payment, cash collection rate reached 92%.
The supply and demand varied significantly from city to city during the process of profound industry restructuring. In first-tier cities and certain major second-tier cities, there was a strong recovery with rapid and significant growth in property prices and turnover. Due to the imbalance of the long-term property demand and supply structure, the property price in Shenzhen recorded the most rapid growth among all first-tier cities in the PRC.
During the year under review, the Group launched two flagship projects in Shenzhen, namely the Logan City (龍光城), in eastern Shenzhen and Acesite Mansion (玖龍璽), both greatly contributed to the growth of the annual sales. The Group obtained the Acesite Mansion through public tender at the end of October 2014. It took only a year for land resumption, land development and launching of sales. Quick turnover of the project ensured rapid cash returns.
Another key project of the Group, Logan City with a total GFA of 5 million sq. m. featuring outstanding planning and design, has attracted much attention from the users with inelastic demand in Shenzhen. Selling price was high following hot demand and achieved remarkable performance, nearly 8,000 units were sold, generating approximately RMB5 billion in sales during the year.
Focusing on Great Shenzhen Area with Abundant and Outstanding Land Reserve
Focusing on regions with established business, the Group has expanded its businesses and consolidated its market position in Great Shenzhen Area, replenished quality land parcels timely to secure sufficient saleable resources. In 2015, the Group acquired eight new projects offering a total GFA of 2.38 million sq.m. through public tendering, auction and listing, over 70% of investment was made in Shenzhen region, further enhancing the Group's project distribution in Shenzhen. As at 31 December 2015, the total GFA of the land reserve of the Group amounted toapproximately13.71 million sq. m., the average cost of land reserve was RMB2,410 per sq. m., out of which more than 60% of saleable GFA are located in Shenzhen, so as to further strengthening the development in the Pearl River Delta region. Quality land reserve will support the Group in enhancing its market leading position in existing markets amid the industry consolidation.
In respect of expanding its land resources, the Group will maintain its leading market position in existing market area while further optimizing its strategic plan by focusing Beijing-Tianjin-Hebei Economic Zone, Shanghai and nearby regions with a more developed economy and development potential and the opportunities to obtain the land nearby. In order to establish a quality land reserve and continue to boost up sales.
Actively Expanded Diversified Financial Channels; Gained Wide Recognition from Capital Market in the Development Prospects of the Group
Logan Property gained wide recognition and support from the capital market with its visionary land distribution, quick turnover of quality products and outstanding sales performance. In addition, the Group has maintained its prudent financial strategy for stabilizing its funding costs and ensure the Group's healthy growth. During the year, seizing the opportunity created by the loosening of regulations on issuing onshore corporate bonds in mainland China, the Group's wholly owned subsidiary, Shenzhen Logan Holdings Company Limited (formerly known as Shenzhen Youkaisi Investment Co., Ltd.), successfully issued two tranches of domestic corporate bonds in an aggregate amount of RMB5 billion in August 2015. The two tranches of issuance will broaden the Groups' funding channels, lower its financing costs, improve its debt structure and continue to enhance the overall financial strengths of the Group.
On 10 March 2016, the corporate long-term credit rating of the Group's wholly owned subsidiary, Shenzhen Logan Holdings Company Limited (formerly known as Shenzhen Youkaisi Investment Co., Ltd.), has been upgraded to "AA+" by United Credit Ratings with its "stable" outlook affirmed, reflecting the recognition of the Group' stable business model, strong financial position and leading sales growth by domestic and overseas investors.
In November 2015, the Group announced that it had agreed to a top-up placement of USD200 million. The placement attracted the participation of numerous investment institutions, including international sovereign wealth funds, insurance funds, long-term funds and hedge funds, as well as strategic investments of HK$775 million from RRJ Capital, an Asian-based private equity fund and HK$233 million from Value Partners, one of the Asia's largest independent asset managers. RRJ Capital and Value Partners subscribed to 5.58% and 1.67% of the placed shares respectively, reflecting the recognition of Logan Property by international investors, which laid a solid foundation for its growth in terms of business scale and sustainability.
Catalysts for a Bright Future
Looking ahead, the Group will continue to utilize various funding channels to provide capital for sustainable growth. The Group added that looking ahead to 2016, under the 'new normal' in the PRC economy, the development of urbanization is expected to move forward. The moderate supporting policies to the real estate industry and the significant growth in first-tier cities are expected to continue. The Group will duly adjust its investments and sales strategies according to the changing market situation and adhere to the operation model of 'asset-light and quick turnover' so as to strive for a higher sales growth while ensuring a reasonable profit margin.
The Group will also focus on projects catering to inelastic demand and targeting first-time homebuyers and upgraders in order to strengthen the existing advantages and competitiveness of the Group. Furthermore, the Group will strive to further refine the design and quality of products with an aim to realize product value of the Group. In addition, the Group will continue to analyze other industries and other investment projects as well as the development opportunities of other industries in order to further optimize its diversified strategies. Logan Property will grasp the market opportunities; maximize the Group's value as well as the returns for the shareholders.
In 2015, the Group was ranked the 38th-largest property developer in the PRC in terms of overall business strengths. In addition, the Group is a constituent stock in the MSCI China Small Cap Index Series and Hang Seng Composite Large Cap/Medium Cap Index. Given profits jumping on positive outlook, the stock is value for investment. The stock traded at 4.09x PE on the last trading day dated on 11 March 2016, which was still below its peers' average.
End of Press Release