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China Overseas Land and Investment Ltd. Announces 2017 Annual Results Author:China Overseas Land and Investment Ltd.

FY2017 profit attributable to shareholders amounted to HK$40.77 billion, net profit margin 24.6%

82.78 million sq m land bank as at end of 2017, 2018 sales target HK$290 billion

 

 (Hong Kong, 26 March 2018) China Overseas Land and Investment Ltd. (“COLI” or the “Group”, stock code: 0688.HK) announced its 2017 annual results today.

In 2017, each of its major operation indicators achieved stable growth and reached new historic high. In light of the property price stagnation and sales volume decrease in first-tier and second-tier cities in mainland China, the Group achieved a stable growth in sizable sales. The Group’s total contracted property sales for the year amounted to HK$232.07 billion, 10.2% increase compared to same period last year. The corresponding area sold was 14.46 million sq m, 10.9% increase compared to same period last year. The Group effectively responded to the impact of policy regulation, including purchase and signing restrictions as well as credit tightening, with its sales collection rate exceeding 90% and collection amount reaching HK$227.8 billion.

Profitability remained at industry leading level. In 2017, the Group’s turnover amounted to HK$166.04 billion; operating profit and profit attributable to shareholders amounted to HK$62.87 billion and HK$40.77 billion respectively, with net profit margin reaching 24.6%, and remained at industry leading level. The Group proposed a final dividend of HK45 cents per share. Together with the interim dividend, total cash dividends for the year were HK80 cents per share. At the end of 2017, the Group’s shareholders’ funds were up 19.5% to HK$265.69 billion compared to the same period last year, representing a significant increase, whereas net assets maintained at an industry leading level.

Financially stable with sufficient cash. Adhering to the healthy and prudent financial strategy, the Group maintained its lowest gearing among the real estate peers with annual sales exceeding HK$100 billion. As at the end of 2017, net borrowing ratio and net gearing ratio of the Group were 27.9% and 57.6% respectively, while cash in hand was HK$104.05 billion. Yearly weighted average financing costs decreased from 4.76% on 2016 to 4.27% in 2017, which remained as one of the industry lowest in terms of financing costs. The Group believes that with accelerating deleveraging and credit tightening, its strengths of having healthy financial management and control, sufficient cash and low cost financing will continue to enhance its competitiveness.

Steady and appropriately aggressive investment strategy, pushing land bank GFA to new high. In 2017, the Group acquired 76 parcels of land in 31 cities in mainland China and Hong Kong, adding a total GFA of 17.41 million sq m and attributable GFA of 14.63 million sq m, reserving sufficient land resources for its faster growth in 2018. As at the end of 2017, the GFA of the Group Series of Companies’ land bank reached 82.78 million sq m, which will effectively meet the needs of its continuous growth in the next three years.

Achieved significant breakthrough in investing and developing major projects by leveraging on its integrated competitive strengths in investment, construction and operation.  Jointly with China Construction Third Engineering Bureau, China Construction Engineering Design and China Construction Investment Fund under China Construction Group, their parent company, the Group won the “Xiong An first tender of”, invested in the construction of the Xiong An Citizens Service Centre project, and will be responsible for the overall operation. In November 2017, the Group won the tender for a 299-acre of parcel of land at the Qin Emperor Temple in Tianfu New District in Chengdu. The land transfer agreement of which stipulates that the highest point of the building will be 677 metres and is expected to become the tallest building in China and the second tallest in the world.

“Beixinan Project” is the largest shantytown renovation project that the Group invests and constructs in Shijingshan District, Beijing. The project sits along West Chang’an Street in Beijing and is progressing smoothly, with a total GFA of 3.2 million sq m. The Paramount Jade project, an invest and build project by the Group, is one of the largest urban integrated eco-residential projects in Northern China, with a total GFA of approximately 10.20 million sq m. In 2017, the Paramount Jade project achieved sales volume of RMB 11.25 billion with an area of 1.03 million sq m sold, the top in terms of annual sales area and the second in terms of sales amount among the real estate industry nationwide for a standalone project.

Group-owned commercial assets continued to expand in size. As of the end of 2017, the Group Series of Companies operated 3.66 million sq m of commercial properties cumulatively, of which, 38 were China Overseas Grade A office space, one of the largest single-title office developers in mainland China, 12 integrated shopping malls such as Unipark (環宇城), Unipark Shopping Mall (環宇薈) and Mid-Town, and 11 star-rated hotels. In 2020, it is expected that the Group’s revenue from commercial properties will exceed HK$5 billion, and will achieve its annual revenue target of over HK$10 billion by 2023.

Orderly propelling innovative businesses, with a number of new businesses ready to launch. The Group established innovative business focusing on long-term leased apartment, culture, education, elderly care and logistics. In 2017, Shenzhen Contemporary Art Centre and Urban Planning Exhibition Hall, constructed and operated by the Group, was put into operation. The Group also operates and manages three K12 schools in Dongguan and Foshan, China Overseas Logistics Technology Park in Tianjin Binhai New Area, and constructed kindergartens, extracurricular schools, health living centres and other projects in the regions including Jinan, Qingdao, Foshan and Chongqing, and is expected to put into operation in 2018. The long-term leased apartment layout covers many regions and will gradually come into service.

Maintained highest industry creditrating. In 2017, the Group’s investment rankings were affirmed by Moody’s, Standard & Poor’s and Fitch at Baa1/Stable, BBB+/Stable and A-/Stable respectively and remained its highest industry credit-rating, which reflected the capital market’s recognition of the Group in terms of its leading position and financial stability in China’s property market.

It is the Group’s view that China’s property market will present four salient features in 2018:

(1) On industry: The property industry is facing profound reform. The government had established the overall direction of “Properties to live in but not for speculation”. The progress of refocusing from “Focused on sales” to “Equal focus on rental and sales”, in a major supply-side reform of land and housing, and the process of implementing long-term property policies, including property taxes, has recently been greatly expedited, which will deeply impact the property market, fundamentally influencing the development and business prospects of the property market, and driving the property industry to a new cycle and remoulding of its market structure.

(2) On policy: the real estate control policy will not be relaxed, domestic financial deleveraging will accelerate and loan credit will further tighten.

(3) On markets, market in different regions will become increasingly differentiated, alongside greater market concentration, together suggesting that only the strongest players in China’s property market will survive.

(4) On customers, upgrading of residential housing will become a major share of the market.

In response to the profound reform that the China real estate market is undergoing, the Group has established three industrial clusters, namely “Residential Development”, “Urban Services”, “Design Services”, which are backed by the principal business of housing development.

With regards to the market, Mr. Yan Jianguo, Chairman and Chief Executive Officer of COLI, expressed that “COLI strives to become an Exceptional Global Property Development Corporation. As one of the real estate industry leaders in China, in facing accelerating industry integration, we have confidence to further expand our market share. Aiming at serving mainstream customer groups in major cities all the times, the Group is confident to grasp the needs of residential housing upgrade, continues to provide good products and services, to realize good effectiveness, to secure better and faster development.”

Looking forward into 2018, the Group will put focus on real estate development, speed up the turnover and scale development, achieve faster growth and the balanced growth in scale and profits. Meanwhile, the Group will seize the opportunities of the profound changes in real estate industry in China, increase resources investment, and escalate the construction scale of commercial properties including office buildings, hotels, shopping malls, long-term leased apartment and operation standard. It will expand new businesses layout such as education, pension and logistics to boost the proportion of stable income brought by real estate development and operation. Some of the projects will be put into operation in 2018 and the years that follow. It will foster new growth points and secure better and faster development.

Mr. Yan Jianguo said, “In 2017, the Group’s sizable sales and profits reached historic high and through expanding diversified lands resources, our land reserves also recorded new high, laying a solid foundation for achieving faster growth in 2018 and sustainable development in the future. Considering the market condition and more saleable resources of the Group, the Group Series of Companies raise the full year contracted sales target by 25% to HK$290 billion in 2018.

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