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End-of-day quote Shenzhen Stock Exchange  -  2022-06-28
19.63 CNY   +6.40%
06/29Vanke Chairman Says Property Market Bottomed Out in Short Term
06/29China developer Vanke says property market has bottomed
06/19Chinese Developers Rally After PBOC Holds Lending Rates Steady
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China developers speed up diversification after debt-led growth fuels crisis

04/19/2022 | 02:53am EDT
FILE PHOTO: Under-construction apartments are pictured from a building during sunset in the Shekou area of Shenzhen, Guangdong

HONG KONG (Reuters) - Chinese developers are heeding Beijing's call and accelerating a push into asset-light businesses such as property services and commercial real estate to cut their reliance on a high-debt, high-turnover model blamed for a liquidity crisis in the sector.

KWG Group Holdings, CIFI Holdings and state-backed China Resources Land were among developers that listed diversification plans along with their recent financial results.

The diversification moves come even as property companies are targeting asset sales to raise cash for repaying creditors and, according to analysts and developers, will pile cost pressure on the smaller firms.

Chinese developers have for years relied on high-leverage financing to target rapid growth through a build-to-sell quickly model, which worked well until property sales slowed and market liquidity tightened in 2021.

A string of offshore bond defaults by China Evergrande Group and others in the last few months triggered concerns about the financial market impact of a stifling debt crisis in the sector.

With the crisis casting a shadow on China's economy, the government is now prodding companies to change. Premier Li Keqiang told an annual meeting of parliament last month that the real estate sector should explore a new development model.

KWG Group said on Monday it would develop "multiple race tracks" of diversified businesses including residential, shopping malls, office buildings, hotels, and healthcare.

China Resources has also chalked out plans to deepen its role as an "urban integrated operator" in developing not only residential but also commercial and industrial real estate.

Company president Li Xin told an earnings call last month the firm will grow the diversified businesses bigger to support the "high quality development" laid out by the central government.

Smaller peer CIFI aims to increase non-property development income to up to 40% of its total, up from mid single digit now, by growing businesses including property services, contract building, and property-related technology.

Some developers, however, said the pain inflicted by diversification outweighed its contribution in bolstering revenue in the short to medium term.

The chairman of China Vanke, the country's No. 2 property developer by sales, told reporters and analysts last month its diversification move, implemented since 2014, was one of the reasons why its profit plunged 46% last year.

"The cost of exploring multi-race tracks simultaneously was much higher than expected," said Yu Liang, adding the impact on its bottomline became more obvious last year when the property development business turned bad.

A senior executive at one of the top-five developers, which has also started work on diversifying its business, told Reuters the shift to a low-debt, high-margin business model will be a "long and painful" process.

A representative at another smaller developer, which has failed to meet its offshore debt obligations, said it is not looking to diversify at this moment because its priority is negotiation with creditors.

"Recurring income businesses take a long time to break even," CGS-CIMB Securities (Hong Kong) Limited analyst Will Chu said, adding mid-to-large developers will have an advantage because they have relatively more cash on hand to spend.

"But the small-to-medium private developers, who are still spending most of their effort on how to repay debt, will fade out from the market eventually as their land-bank dries up," he said.

(Reporting by Clare Jim; Editing by Sumeet Chatterjee and Muralikumar Anantharaman)

By Clare Jim

© Reuters 2022
Stocks mentioned in the article
ChangeLast1st jan.
CHINA EVERGRANDE GROUP 8.55% 1.65 Delayed Quote.3.77%
CHINA RESOURCES LAND LIMITED 0.41% 36.35 Delayed Quote.10.52%
CHINA VANKE CO., LTD. 6.40% 19.63 End-of-day quote.-0.66%
CIFI HOLDINGS (GROUP) CO. LTD. 0.76% 3.97 Delayed Quote.-12.63%
KWG GROUP HOLDINGS LIMITED 2.04% 2.5 Delayed Quote.-51.96%
All news about CHINA VANKE CO., LTD.
06/29Vanke Chairman Says Property Market Bottomed Out in Short Term
06/29China developer Vanke says property market has bottomed
06/19Chinese Developers Rally After PBOC Holds Lending Rates Steady
06/16China's New Home Prices Fall at Softer Rate in May From April
06/09China Vanke Lists $76 Million of 3.55% Renminbi Bonds Due 2025 in Hong Kong
06/07China Vanke Records $4.61 Billion in Contract Sales for May
06/07China Vanke Co., Ltd. Announces Final Dividend for the Year Ended December 31, 2021, Pa..
06/07China Vanke Co., Ltd. Reports Sales Results for the Month and Year-To-Date Ended May 31..
06/01China’s Top 100 Property Firms Post 59% Drop in May Home Sales
05/19China Vanke Lists $9.5 Billion Bond Program on Hong Kong Bourse
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Analyst Recommendations on CHINA VANKE CO., LTD.
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Sales 2022 481 B 71 842 M 71 842 M
Net income 2022 29 783 M 4 445 M 4 445 M
Net Debt 2022 125 B 18 716 M 18 716 M
P/E ratio 2022 8,56x
Yield 2022 4,53%
Capitalization 221 B 32 925 M 32 925 M
EV / Sales 2022 0,72x
EV / Sales 2023 0,67x
Nbr of Employees 139 494
Free-Float 65,6%
Duration : Period :
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Technical analysis trends CHINA VANKE CO., LTD.
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Mean consensus BUY
Number of Analysts 22
Last Close Price 19,63 CNY
Average target price 23,43 CNY
Spread / Average Target 19,4%
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Managers and Directors
Jiu Sheng Zhu President, CEO & Executive Director
Hui Hua Han Chief Financial Officer & Executive Vice President
Liang Yu Chairman, President & Chief Executive Officer
Dong Xie Chairman-Supervisory Board
Xiao Liu Chief Operating Officer & Executive Vice President
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1st jan.Capi. (M$)
CHINA VANKE CO., LTD.-0.66%32 925
VONOVIA SE-36.93%24 873