FY2013 Annual Results
April 1, 2014
Disclaimers on final page •Results and Business Overview
•Asset Injection--Nongke
•Business Development and long-term strategy
•Market Outlook
2 2013 Financial results summary (1) Revenue up 18% yoy, GP Margin 36.8%; Net profit attributable to shareholders up 27%
2013 2012 % HK$m HK$m Change Restated Revenue 9,779 8,313 18% Gross profit 3,602 2,996 20% Increase in fair value of investment property 624 470 33% Share of profits of Jointly-controlled entity 219 48 352% Share of profits of associates 832 831 -- Gain on bargaining purchase 638 189 238% Provision of Coastal Green Land (96) 0 Net profit attributable to shareholders 2,738 2,156 27%
Basic earnings per share for the year (HK cents) 58.97 59.23 -0.4% Final dividend per share (HK cents) 12.00 11.00 9% Dividend for the year per share (HK cents) 19.00 18.00 5.6%
3 2013 Financial results summary (2)
31-Dec-13 31-Dec-12 Balance Sheet HK$m HK$m
Net assets (after non-controlling interests) 25,338 17,548 Total assets 76,892 54,392 Total liabilities 49,312 34,882 Cash and deposits (include pledged deposits & restricted cash ) 7,478 7,306 Bank loans and other borrowings 24,289 22,210 Amount due to ultimate holding company 5,119 65 Book value per share (HKD) 4.71 4.71
Net gearing ratio ( included only bank loans and other borrowings) 66.3% 84.9% Net gearing ratio ( included all interest bearing debts) 87.3% 86.4%
4 Property sales net Revenue in 2013 of HK$7bn, up 17%; Property sales gross margin 40.9%; SZ project accounted to 55% Total un-booked presales proceeds in 2013 year-end: HK$6bn
Net revenue Project City GFA (sqm) ASP (RMB) (RMB m) Wanlin Lake Huizhou 15,724 8,950 141 Noah Forrest Changsha 2,865 5,410 15 Ruicheng Changsha 16,267 5,259 86 Garden Hill Huizhou 23,095 4,826 111 Splendid City Jiangyan 28,884 4,256 123 European View Dongguan 21,607 5,968 129 Terra Building Shenzhen 37,052 43,720 1,620 Seaview Garden Shenzhen 966 43,893 42 Nanhu Rose Bay Wuhan 53,188 8,747 465 YiHu Rose Garden Chengdu 16,509 5,217 86 Purple Kylin Shenzhen 7,616 15,059 115 Royal Garden Shenzhen 22,089 9,476 209 Noble Times Shenzhen 82,732 10,778 892 Royal Spring Dongguan 631 6,710 4 Shumyip City Foshan 93,791 6,308 592 Yundonghai Garden Foshan 11,473.03 10,507 121 Saina Bay Heyuan 15,991.08 9,111 146 Qingshuihe Auto Park Phase 1.1 Shenzhen 4,408 20,006 88 Qingshuihe Auto Park Phase 1.2 Shenzhen 4,615 25,025 115 Shumyip Huafu Maanshan 79,061.21 6,610 523 Total 538,565 10,440 5,623
Note: Net revenue of RMB 5,623m is equivalent to HK$ 7,040 m Excluding our portions in associates. 5
Contracted sales achieved RMB9bn, up 47% YoY in 2013 Sell-through rate of 46% (by GFA)
Accumulated GSA Accumulated Project City Type Asp (sqm) turnover (RMB m)
Service Upper Hills Serviced Apartment Shenzhen 20,755 1,304 62,852 apartment Shumyip Huafu Phase 1 Changzhou Re 4,874 47 9,683
Shumyip Huafu Phase 1.1 Maanshan Re 26,547 185 6,986
Noble Times Shenzhen Re,com 50,877 675 13,271
Royal Spring Car Park Dongguan car park 426 4 8,398
Jiangyue Bay Guangzhou re 68,954 1,082 15,685
Saina Bay Heyuan Re 17,855 193 10,835
Shumyip city Foshan Re,com 76,395 531 6,949
Shumyip Royal Garden Shenzhen Re,com 35,746 321 8,991
Yundonghai South Area Foshan Re 20,730 222 10,692
Purple Kylin Shenzhen Re 7,037 132 18,796
Garden Hill Huizhou Re 12,020 107 8,903
Splendid City Taizhou Re,com 44,750 211 4,713
European Garden Dongguan Re,com 53,213 361 6,778
Noah remaining Changsha 256 1 3,941
Ruicheng Changsha Re 69,907 348 4,983
Wanlin Lake Huizhou Re,com 72,823 494 6,781
Liantang property Shenzhen Re 13,920 230 16,526
Qingshuihe Auto park Shenzhen Mix 11,349 280 24,653
Yihu Rose Garden Chengdu Re,com 16,613 69 4,166
Terra Building Shenzhen Indu 46,548 1,671 35,903
Nanhu Rose Bay Wuhan Re 57,874 540 9,339 Total 729,469 9,010 12,351
* Excluding our portions in associates. 6 We acquired 5 projects in SZ since 2013 with GFA of 1.5m sqm --UpperHills
In Jan 2013, we acquired 100% stakes of UpperHills project (Kezhigu) from Shumyip Holdings, our parent company for consideration of RMB 4.15bn, and issue 1.4bn shares to Shumyip Holdings at HK$3.667 per share.
The project sits next to CBD of Futian district, SZ, with GFA of 788,910 sqm. It is complex project, with high-end luxury apartment, Grade A office tower, LOFT office, shopping mall and a Mandarin Oriental hotel.
Our cost for acquisition equivalent to RMB12,000 per sqm.
The serviced apartment recorded RMB 2.5bn of subscription amount, of which RMB 1.3bn was contracted in 2013.
7 We acquired 5 projects in SZ since 2013 with GFA of 1.5m sqm --Shenzhen Metro property development project
We acquired 50% stakes of a Metro property development project in SZ for RMB 1.208 billion. Land cost is around RMB 8,900/sqm;
The project sits right next to the Tanglang station of No.5 Metro line in Nanshan District, Shenzhen, near to Shenzhen University Town.
The project has land area of 43,584 sqm and GFA of 261,510 sqm.
It is planned to develop a complex project with residential and serviced apartment, office, commercial space and hotel.
The project is scheduled to be commenced by the end 2013 and launching presale for the residential part in 2015.
8 We acquired 5 projects in SZ since 2013 with GFA of 1.5m sqm --Progress on redevelopment projects
Guanlan project It is located in Baoan district, SZ with planned GFA of 125,000 sqm;
We completed all resettlement issue and obtained qualification of developing entity.
The project is scheduled to be commenced very soon and to launch presale for the residential part in 2015.
Chegongmiao redevelopment project
It is located in Chegongmiao, Futian district, SZ with planned GFA of 420,000 sqm, of which Phase one ( self-owned part) has a planned GFA of 100,000 sqm;
We obtained approval for special planning and qualification of developing entity for phase 1.
9
Assets disposal
Reduce exposure in Sanshui, Foshan.
We signed an agreement with local authority of Sanshui, in regard to the unpaid and undelivered land site of the Yundonghai project.
The related land site with land area of 585k sqm will not be delivered to us, and our obligation on paying the corresponding land premium of RMB 700m is also terminated
This action will NOT impose any penalty cost, nor gains (/losses), but it will significantly reduce our future CAPEX on the project.
We sold the transportation business to parent company.
10 2.1m sqm GFA newly commenced in 2013 Up 122% yoy
Total GFA Project Location Type GSA (sqm) (sqm) 1 Shumyip Huafu Phase 1.2 (Maanshan) Maanshan Re 85,000 65,000 2 Shumyip Huafu (Changzhou) Changzhou Re 129,063 98,846 3 Jiangyue Bay(Jinshazhou) Phase 2 Guangzhou Re 155,266 122,005 4 Jiangyue Bay(Jinshazhou) Government housing Guangzhou Re 6,392 0 5 Splendid city Phase 2.2 Taizhou Re 100,807 96,325 6 Shumyip city phase 1.1 Foshan Re 165,671 113,509 7 Shumyip city phase 1.2 Foshan Re 115,383 73,071 8 Wainlin lake Phase 8.3 Huizhou Re 124,227 61,488 9 Wainlin lake Phase 8.4 Huizhou Re 62,951 62,095 10 Ruicheng Phase 2.1 Changsha Re 130,651 92,072 11 UpperHills South Shenzhen Mix 650,190 244,000 12 Tanglang Metro Property Development Project* Shenzhen Mix 261,510 182,000 13 Sungang Project Phase 1 Shenzhen Mix 120,000 60,000 Total 2,107,111 1,270,411
11 Completed projects in 2013
Project City Type Planned GFA saleable area
1 Shumyip Huafu Phase 1.1 Maanshan Re 226,905 171,115
2 Noble Times Phase 2 Shenzhen Re 132,490 109,481
3 Shumyip City Phase 2 Foshan Re 200,224 128,889
4 Saina Bay Phase 1.E Heyuan Re 25,751 18,188
5 Wanlin Lake Phase 8.1 Huizhou Re 79,182 52,517
6 Ruicheng Phase 1.2a Changsha Re 130,322 97,746
7 Qingshuihe Auto park Phase 1 Shenzhen Mix 41,900 15,050
8 Nanhu Rose Bay Phase 3 villas （66-69#） Wuhan Re 5,857 5,082
9 Nanhu Rose Bay Phase 3. IV （39-41#） Wuhan Re 51,161 45,763
10 Yihu Rose Garden Phase 1.1 4# Chengdu Mix 13,833 6,410
11 Yihu Rose Garden Phase 1.2 12# Chengdu Mix 28,966 27,244
Total 936,591 677,485
12 Financial position
We signed 5-years loan facility of HK3.48bn in Oct 2013, with favorite interest rate below 3%;
Average borrowing costs in 2013: 6%, long-term debts accounted to 50%;
Amount due to ultimate holding company of HK$5,119 million, mainly due to the shareholders loans arising from Kezhigu;
HK$7.47bn cash on hand (include pledged deposits and restricted cash) as at 31 Dec, 2013;
Net gearing ratio(include only bank loans and other borrowings) down to 66.3% as at 31 Dec, 2013; Net gearing ratio (include all interest bearing liabilities) of 87.3% as at 31 Dec, 2013.
13 •Results and Business Overview
•Asset Injection--Nongke
•Business Development and long-term strategy
•Market Outlook
14 New Asset Injection
We signed a conditional agreement with Shumyip Holdings, the parent company to acquire 100% of Nongke holdings for RMB5.623bn on 27th Jan 2014.
The consideration will be paid partly in cash and partly in new shares issuance to parent company. RMB2.8115bn will be paid in cash. The rest of RMB2.8115bn (equivalent to HK$3.614bn) to be paid in issuing new shares to Shumyip Holding.
1.1bn shares to be issued to Shumyip Holdings at HK$3.286 , with21.7% premium to the closing price on the signing date.
By completion of this deal, Shumyip Holdings will hold 67.28% of the enlarged Shenzhen Investment.
The whole transaction is subject to approval by independent shareholders.
15 Injection target—100% stake of Nongke
Nongke is an indirect subsidiary wholly owned by Shum Yip Holdings. Nongke owns valuable lands and property assets in Shenzhen downtown, and property business became its largest segment.
Total GFA attributable to Nongke: around 384,775 sqm mainly including undeveloped project, investment properties and self-used properties at announcement date.
Creditor’s right: the net amounts due from parent to Nongke are around RMB1.2bn, and Shum Yip Holdings has to repay by completion of the transaction.
16 Key Assets: Mingren project
Located in the heart of Honey Lake area of Futian District, which is one of the most expensive luxury residential community in Shenzhen. The ASP for second-hand home market is at around RMB50,000-80,000 per sqm.
The project has land area of 39,158 sqm and GFA of 259,332 sqm. It is planned a complex project with residential and serviced apartments of 141,185 sqm, office of 80,547 sqm, hotel of 7,200 sqm, commercial spaces of 20,000 sqm and other facilities.
There is an outstanding land premium of RMB3.305bn in this project.
The project is scheduled to be commenced in 2014 and to launch presale of office in 2015, to launch presale of residential and service apartment during 2016-2017.
17 Key Assets: Mingren project
18 Key Assets: Mingren project
Map and planing picture
19 Key Assets: Investment property
Nongke has around 90k sqm of investment properties and self-used properties in Honey lake area.
Key projects includes Project GFA Type
Technology Building 57,825 Office Tower
Oasis Tower 8,756 Office Tower
Xiangli Oasis Club 2,212 Com Xiangzhu Garden 7,627 Re Longxi Garden 6,822 Re Others Mainly Re
20 Other things in the deal
Four agricultural land plots and Huahui Market in Nongke are excluded from the transaction. These assets are governmental transferred assets. Therefore, these assets are unable to be valued.
However, Nongke is expected to be compensated with an industrial landsite in Longgang as replacement land from the Government. Once the land issues to be settled in future, Shenzhen Investment shall have the priority right, but not obligations to acquire that replacement land.
21 Shenzhen Investment’s land bank by region (post deal) Shenzhen proportion by area account for 18%
City Total GFA Attr. GFA % Shenzhen 2,121,432 1,844,251 18% Huizhou 1,757,884 1,623,936 15% Foshan 1,140,931 1,140,931 10% Dongguan 54,131 54,131 0% Heyuan 938,750 938,750 8% Guangzhou 350,338 350,338 3% Wuhan 1,010,252 530,382 9% Changsha 540,515 540,515 5% Maanshan 1,175,571 1,175,571 10% Chaohu 100,000 100,000 1% Taizhou 1,372,206 1,372,206 12% Changzhou 162,263 162,263 1% Chengdu 913,955 599,291 8% 215,952 215,952 2% Total 11,854,179 10,648,517 100% Excluding our portions at associates 22 •Results and Business Overview
•Asset Injection—Nongke
•Business Development and long-term strategy
•Market Outlook
23
2014 Sales target : RMB 10.5 billion 17% growth in value YoY
Total saleable area of 1.88m sqm, with saleable value of RMB 25bn, up 7% YoY, with average sell through target of 42%;
Saleable value of our key projects: UpperHills: RMB10bn, Jiangyue Bay: RMB1.8bn, Terra Building: RMB1bn.
Contracted sales from Jan-Feb was about RMB583m.
More launching will focus on Q2-3.
24
Sales of UpperHills
We launched serviced apartment in Oct 2013, and received hot response.
With the exclusive location, landscape and product quality, UpperHills is a very top project in Shenzhen. We launch the project in batches and in years, to better reflect its value.
We launched 200 units in total since Oct last year, among which 190 units were subscribed with amount of RMB 2.9bn and ASP of RMB63,000/sqm. This is in line with our expection.
More units will be launched, and sales will go up. We are confident about the sales and the probability of the project.
25 Distribution of Saleable Area
26 Distribution of Contracted Sales target
27 New commence of around 2m sqm in 2014
sqm
Total development scale including project under construction around 5m sqm for whole year.
Projects acquired in 2013 are under construction process: Guanlan project, Phase one of Chenggongmiao redevelopment; Shenzhen Metro development project, Mingren project. 28
Target sales to jump up in 2015
Expected saleable value to increase to RMB 30bn-35bn in 2015, and 55- 60% launching projects are in Shenzhen and with relatively high ASP;
Projects acquired in 2013 are under development process in 2014;
2015 new projects is likely to include: LOFT and office of UpperHills, Metro development project, Guanlan Rose garden, Mingren Phase 1.
29 Land bank strategy Maintain steady size, improve structure SZ focus, dispose underperforming assets
Royal Garden Xinhong Mission Project Hills Noble Times
Longgang Baoan
Nanshan Luohu Yantian
Qingshuihe Tang Lang Futian Huangbeiling Shungang Project Kezhigu project OCT Ming Ren Shahe Project CBD Shangbu Industry Project Chegongmiao Luohu Port Park Terra Building
Potential project in Shenzhen
Shenzhen Investment Project The Shenzhen Investment redevelopment project
30 Key projects 1: UpperHills
Located in Futian district, very close to Futian CBD;
GFA of 788,910sqm;
Complex project, Serviced apartment: 170,720 sqm Office: 332,760 sqm; LOFT: 100,000 sqm; Commercial: 167,000 sqm Hotel: 50,000 sqm.
Service apartment was launched in 2013 with ASP of RMB 63,000;
To launch LOFT in 2015, and office in 2016
Whole project to be completed in 2017. 31
Key projects 2: Mingren Project
Located in honey lake, Futian district; one of most expensive living community;
Saleable GFA 259K sqm;
Complex project;
Construction to be commenced in 2014 and to launch presale of office in 2015.
32 Key projects 3: Terra Building
Located in Chegongmiao, Futian district
Saleable GFA 100K sqm;
ASP: RMB36,000;
Completed.
33 Key projects 4: Metro development project
Located in Nanshan district, next to Tanglang Metro station;
GFA of 261,510 sqm;
Complex project, Re and serviced apartment: 132,000 sqm Office: 50,000 sqm, Commercial: 48,000 sqm Hotel: 30,000 sqm.
Commenced by end 2013; target to launch presale in 2015.
34 Key projects 5: Chegongmiao redevelopment project
Located in Chegongmiao, Futian district, interchange with 4 metro line;
Total GFA of 420,000 sqm; GFA of Phase 1 of 100,000 sqm;
Industrial office and underground commercial
Phase 1 to be commenced by end 2014; target to launch presale in 2016.
35 Key projects 6: Guanlan Rose Garden
Located in Guanlan district;
Total GFA of 125,000 sqm;
Residential project;
To be commenced soon;
Target to launch presale in 2015.
36 Key projects 7: Qingshuihe Auto Park
Located in Luohu district;
Industrial office + commercial, positioning at niche market (Auto Park), with total GFA of 163,000 sqm
Phase 1:GFA of 30,000sqm, saleable area of 15,000sqm;
Phase 2: GFA of 81,000sqm, saleable area of 40,000sqm;
Phase 1 was launched in 2013 with ASP of RMB 25,000;
Phase 2 to be launched in Q3 2014. 37
Outlook of Shenzhen Investment in the next 3 years To enter into high growth tract
To own 4m sqm (GFA) of land bank in downtown Shenzhen, accounting for around 30% of our land bank by size, and more than 60% by land bank value.
Strive to fetch RMB 20bn of contracted sales in 2015, and sustainable growth in 2016-2017, most from Shenzhen.
GFA for investment properties to increase 500,000 sqm, and rental income to fetch around RMB 2bn in 2017-2018.
Long-term net gearing around 75%, stable dividend policy.
38 •Results and Business Overview
•Asset Injection--Nongke
•Business Development and long-term strategy
•Market Outlook
39 Market outlook
Reform is the key word of 2014. Macro economy tends to stable within the acceptable range. Structural adjustment may bring short-term challenge, but reform will make the market more dynamic.
Property measures are likely to be more market-oriented. Government will much focus on providing government housing.
Tier1 cities still face sustainable demand and limited supply, we are bullish in long-term. We expect lower volume and stable price in 2014, given to the booming last year.
Tier 3-4 cities still struggle with over supply and low sale through rate issue, which takes time to rebalance supply and demand.
Liquidity is likely to be tight.
In 2013, Shenzhen ‘s volume reached 4.4m sqm, up 19.5% yoy. ASP increased.
Long term bullish on Shenzhen market : Limited land supply, immigrant city, young population, better economy structure, strong in internet/high tech/financial sector, Qianhai. 40
Disclaimers
This presentation is prepared in good faith, based on audited financial data, publicly available information, and management’s outlook as of today. Macroeconomic parameters could change unexpectedly. The Company’s operating environment and thus strategies could change as a result and without notice.
This presentation does not constitute any offer or invitation to make an offer for sale, purchase or otherwise subscribe of the shares in the Company. Stock price can goes down as well as up and historical performance is no guarantee for the futures.
This presentation does not constitute any advice or recommendation to invest in the Company and is not intended to form the basis of any investment decision.
The presentation includes certain statements and estimates of the Company based on various assumptions that may or may not prove to be correct and involve various risks and uncertainties. Accordingly, there can be no assurance that such statements or estimates will be realized.
41