Shimao Property Holdings Limited 2017 Annuals Results (Stock Code: 813) www.shimaoproperty.com 27 March 2018 Content 1 Results Highlights 2 Financial Highlights 3 Business Review 4 Future Outlook 5 Experience Sharing 6 Conclusions 7 Appendix 2 Results Highlights Enhance Internal Management to Boost Business Growth Entering the new phase with strong sales growth Quality of inventory improved; Industry-leading profitability Securing strategic land parcels; Expansion of a premium land bank 4 1 Strong Growth of Contracted Sales Surpassing the contracted sales target of RMB88 billion after the upward adjustment in Aug 17, completion rate 2016 2017 reached 114.5% Contracted y-o-y Growth of Contracted Sales Sales RMB 68.12 47.9% RMB 100.77 billion billion 2016 2017 y-o-y Growth of Contracted ASP Contracted ASP RMB 13,850/ 20.0% RMB 16,623/ sq. m sq. m 2016 2017 Contracted y-o-y Growth of Contracted GFA GFA 4,918,453 23.3% 6,062,186 sq. m sq. m 5 2 Steady Increase in Revenue, Gross Profit and GPM Gross profit margin increased significantly by 2.8p.p. y-o-y Growth of 18.8% RMB21.43 billion Revenue Revenue RMB16.35 billion 30.4% RMB 59.29 billion RMB 70.43 billion 27.6% 2016 2017 Income from hotels, rentals and investment properties rose 17.5% y-o-y. Income from Hotels, Rentals and Investment Properties RMB3.63 billion RMB3.09 billion 2016 2017 Gross profit markedly 2016 2017 increased by 31.1% y-o-y 6 3 Substantial Growth in Core Profit Attributable to Shareholders with Outstanding Profit Margin Core Profit Attributable to Shareholder Operating Profit RMB y-o-y RMB y-o-y 6.93 Growth of 17.68 Growth of billion 10.9% billion 19.3% Excluding the net impact of Profit Attributable to Shareholders the RMB634 million profit from the disposal of 23.4% RMB y-o-y Beijing Fortune Times y-o-y 7.84 Growth of in 2016 Growth billion 51.6% Core Net Profit Margin Earnings per share y-o-y y-o-y RMB Growth of Growth of 14.0% 2.324 1.2p.p. 54.3% 7 4 Included in Hang Seng High Dividend Yield Index with Steady Increase in Dividend 2016 2017 HK$1.00 HK76 cents Significant y-o-y per share per share Growth of 31.6% Including a final dividend of HK60 cents per share and an interim dividend of HK40 cents per share Included in Solid Performance Hang Seng High & Dividend Policy Dividend Yield Index 8 5 Expanding Land Bank by Securing Strategic Land Parcels Total land bank was approximately 47.90 million sq.m. Average land cost Full-year attributable was RMB5,108 new land acquisitions per sq.m. amounted to RMB67.9 billion Secured strategic premium Sufficient land parcels in land bank in Longgang, Guangdong-Hong Shenzhen and Kong-Macao Cheung Sha Wan, Greater Bay Hong Kong, etc Area 9 6 Steady Growth in Revenue of Shanghai Shimao In 2017, contracted sales of Shanghai Shimao grew sharply by 45% y-o-y to RMB21.6 billion In 2017, revenue of Shanghai Shimao rose sharply by 36% y-o-y to RMB18.67 billion In 2017, profit attributable toShanghai Shimao’s shareholders Increased by 5% y-o-y to RMB2.23 billion Note : 1.All the data above are excerpted from Shanghai Shimao’s results announcement prepared accordingly to PRC GAAP. 2.The Group holds 58.92% equity interest in Shanghai Shimao. 3.Figures of 2016 have been restated due to restructuring. 10 Financial Highlights Prudent Financial Management with Outstanding Financial Metrics Ensuring sufficient capital by strengthening cash collection Maintaining solid capital structure through prudent financial policy Stable gearing ratios; Improved credit ratings Lowering financing costs via multiple financing channels 12 1 Increased Cash Collection Cash Collection Ratio Management of Cash Collection The Group improved cash collection through 80% clearing old receivables, increasing the cash payment ratio, and implementing quarterly performance rewards and penalties, to ensure it has sufficient capital for steady development. 2017 Cash Collection RMB80.7 billion 2016 Cash Collection RMB60.0 billion 13 2 Sufficient Cash Reserve Sufficient capital lays a solid foundation for sustainable growth of the Group. Unutilised banking facilities approximately RMB20.0 billion Cash on hand RMB33.0 billion, up 48.4% y-o-y Approved but unutilised Panda Medium Term Notes (MTN) RMB8.0 billion 14 3 Solid Debt Structure RMB 18.2 billion short-term borrowings, accounted for 21% of total Balance of Borrowings RMB 87.5 30.7% billion 21% Up RMB 66.9 billion The structure of Short- and long-term borrowings has remained healthy 79% RMB 69.3 billion long-term 2016 2017 borrowings, accounted for 79% of total 15 4 Net Gearing Ratio – Stable 65% 5.5 p.p. 60% 58.6% 58.9% Net gearing ratio was 58.9%, 5.5 57.4% 58.1% p.p. higher than the end of 2016. 55.9% 55% The Group secured premium 53.4% land parcels in strategic locations in 2017. Net gearing ratio increased mainly for 50% supporting the Group’s quality development. Net gearing ratio remained 45% below 60% for six consecutive years, laying a solid foundation for sustainable development of the Group amidst a complicated 40% economic and changing financial 2012 2013 2014 2015 2016 2017 environment. Note 1: Net gearing ratio was calculated based on: Total net borrowings (Total borrowings – Total cash and cash equivalents (including restricted cash)) / Total equity (excluding perpetual capital instruments). Note 2: If total equity includes appraisal increment of totals, adjusted net gearing ratio should be 50.5%, 4.9 p.p. higher than end-2016. 16 5 Increased Scale of Assets Total Assets Fixed Assets* Total Equity RMB’ billion RMB’ billion RMB’ billion 307.6 261.9 y-o-y 96.7 Growth 17.4% 88.2 55.7 y-o-y Growth 54.0 9.7% y-o-y Growth 3.2% 2016 2017 2016 2017 2016 2017 * Fixed assets = property and equipment + land use rights + investment properties. Through professional valuation, the market value of major investment properties and hotels reached RMB68.9 billion (end-2016: RMB64.2 billion) 17 6 Extensive Financing Channels Issue of US$1 billion senior notes in 2017 Issued five-year senior notes amounting to US$600 Approval of RMB8.0 billion Panda MTN million in June 2017, becoming one of the few real estate companies On 28 April 2017, the Group become one of the first to issue USD Senior Notes in 1H2017. private real estate companies approved by the National Association of Financial Market Tap issued five-year senior notes amounting to US$400 Institutional Investors (NAFMII) to issue million in December 2017. Panda MTNs. Coupon rate: 4.75% Registered amount was RMB8 billion. Issue of US$500 million senior Multiple notes in January 2018 Issued RMB6.5 billion Shanghai Financing Channels Issued seven-year senior notes amounting International Plaza ABN to Avoid Financial to US$500 million in January 2018 before Risks market fluctuations. On 13 September 2017, the 20-year Coupon rate: 5.2% Shanghai International Plaza ABN was issued at an average interest rate of 4.8%, the lowest in the industry at that time. Issue of RMB950 million senior China’s first-ever commercial property ABN notes in March 2018 for public placement in interbank market. Issued “dim sum bonds” for the first time. The good response reflected the confidence of the capital market in the Group’s business performance and future outlook Coupon rate: 5.75% Approval of US$680 million + HK$5.89 billion Offshore Syndicated Loan Facility A four-year US$680 million + HK$5.89 billion Early Redemption of high-yield senior offshore syndicated loan facility approved. notes US$800 million and US$600 million of senior notes were redeemed early in Jan 2017 and Jan 2018 respectively. Early redemption of high yield USD senior notes to further lower average financing cost. 18 7 Reduced Financing Costs 2015 6.9% 5.8% 2016 2017 5.3% The Group is expanding multi-financing channels. Under multi-pronged measures of financing cost management, financing costs continue to be reduced year by year. 19 8 Improved Credit Ratings Shimao Property Shimao Jianshe Shanghai Shimao In July 2017, Standard & Poor’s In June 2017, Dagong Credit adjusted In May 2017, United Ratings adjusted maintained its ‘BB+’ rating for Shimao the issuer rating of Shimao Jianshe from the issuer rating of Shanghai Shimao Property, and revised “AA+” to “AAA”. from “AA+” to “AAA”. its outlook from Negative to Stable. Stable AAA AAA Negative AA+ AA+ Issuer Ratings of Shimao Property – Offshore Issuer Ratings of Shimao Property – Onshore BB+ Stable AAA Ba2 Stable AAA BBB- Stable (Investment grade) AAA 20 Business Review Revenue Breakdown Revenue Breakdown Recognized Sales by City* – RMB66.8 billion RMB’ million 80,000 1,242 Pingtan 5.0% Tianjin 5.0% 680 Quanzhou 5.4% 70,426 1,708 Jinan 5.0% 70,000 66,796 913 Fuzhou 5.7% 710 Wuhan 4.6% 59,286 1,466 60,000 56,197 Zhangjiagang 3.7% Qingdao 6.2% 50,000 Chengdu 3.7% 40,000 Hangzhou 3.2% Beijing 7.3% 30,000 Hefei 3.1% Chongqing 3.0% 20,000 Shaoxing 2.5% Xiamen 9.3% Suzhou 2.4% 10,000 Xi’an 2.1% 0 Nanjing 12.3% Yinchuan 2.1% 2017 2016 Property sales Rental income Other 14 cities 8.4% Income from hotel operation Others * Excluding attributable revenue from joint ventures & associated companies 22 Breakdown of Income from Hotel Operation and Investment Properties For the Year Ended 31 December Turnover from Hotel Operation and Investment Properties RMB’ million RMB’ million 2017 2016 Change(%) 4,000 3,630 3,500 Income from hotel operation 1,708 1,466 16.5% 3,089 3,000 34% Rental income 680 710 -4.2% 2,500 30% 19% 2,000 Others 1,242 913 36.1% 23% 1,500 1,000 Total 3,630 3,089 17.5% 47% 47% 500 Excluding income from Beijing Fortune Times and Shanghai 3,593 2,918 23.1% 0 2017 2016 Shimao International Plaza Income from Rental income Others hotel operation Rental income decreased by 4.2% y-o-y because Shanghai Shimao sold Beijing Fortune Times to Leshi Holdings in May 2016, and Shanghai Shimao International Plaza has been under renovations since 2017.