On 22 March, China Real Estate Association and China Real Estate Appraisal jointly sponsored a conference on 2017 Appraisal Results for Best 500 of China Real Estate Developers (2017中國房地產開發企業500強測評成果) in Beijing. As per the report delivered at the conference, in 2016, in terms of gross sales value and gross sales area, top 10 real estate developers accounted for approximately 35% and 38% of the top 500 real estate developers, respectively. As compared to the first appraisal results recorded in 2009, it is reported that only 41 out of the top 100 developers for 2009 have managed to remain amongst the top 100 under this appraisal over nine years of development. Nearly 60% of the top 100 developers were new market players.

In an industry with growing concentration, real estate developers with sales of over RMB100 billion continue expansion to squeeze the market space. Against such backdrop, KWG Property has its own countermeasures in place, under which, the Company always wish to maintain a comparatively high gross profit margin and profit margin, while achieving stable growth amid its expansion. As emphasized by Mr. Kong Jianmin, Chairman of KWG Property, “Certainly, the management of the Company wishes to continue its business scale, which is definitely our objective, but the gross profit margin must fluctuate as little as possible”.  

As disclosed in the annual results for 2016, in terms of core profit of mainland real estate developers, top ten developers are KWG Property, China Overseas Land & Investment, Logan Property, Yuzhou Properties, China Resources Land, Longfor Properties, Gemdale Properties, LVGEM (China) Real Estate Investment, Shimao Property and CIFI Holdings. As for core profit margin, KWG Property, which focuses on middle-end and high-end property products, reported 37.7%, while China Overseas Land & Investment and Logan Property reported 19.0% and 15.1%, respectively, thus claiming top three enterprises amongst the developers.

At the conference on 2017 Appraisal Results for Best 500 of China Real Estate Developers, KWG Property was selected into 2017 Best 50 of China Real Estate Developers and 2017 Best 10 of Development of China Real Estate Developers due to its outstanding comprehensive development. On 22 March, at the ceremony of 2017 Ranking of China’s 100 Best Real Estate Enterprises, which was sponsored and held by Guandian Real Estate, KWG Property was selected into the 2017 Ranking of China’s 100 Best Real Estate Enterprises and the 2017 Top 30 Real Estate Listed Companies (Property G30) due to its steady growth in its performance, robust financial resources, and visionary development strategies.

Q1 Pre-Sales Value Amounted to RMB 7,744 Million with a Year-to-Year Increase of 26.1% in Pre-Sales Value in March

On 22 March, KWG Property Holding Limited (herein after referred to as “KWG Property”) announced its annual results for 2016. As of 31 December 2016, the Group’s revenue amounted to approximately RMB 8.87 billion, representing an increase of 6.3% as compared to the same period in 2015. Profit attributable to owners of the Company was RMB 3.46 billion, representing a year-to-year increase of 1.4%, while the core profit amounted to approximately RMB 2.92 billion, representing a year-to-year increase of 12.6%. It is reported that the Group’s attributable pre-sales value (after) amounted to approximately RMB 22.3 billion in 2016, beating the annual pre-sales target of RMB 22.0 billion.

According to a report published by Daiwa Securities, KWG Property’s annual results for 2016 were in line with the market expectation with a high gross profit margin, which is expected to remain at the level of 33% to 35% from 2017 to 2019. The securities house anticipated that the sales during this year will outperform that last year. The Group set RMB 28.0 billion as the attributable target (after) for its annual sales during 2017, representing an annual increase of 26%. In addition, it is believed that marketable resources will amount to RMB 46.0 billion, nearly 50% of which derives from 15 new projects.According to a study published by Credit Suisse, KWG Property’s core profit increased by 12.6% in 2016 with a dividend of RMB 0.51 (including a special dividend of RMB 0.11). The yield rate amounted to 10.2%, being the highest percent amongst industry peers. As commented by Credit Suisse, despite a slower growth of 10.3% in contracted sales of the Company than industry peers, its gross profit of 34.6% remained high, thus continuing to strike a balance amongst sales growth, profitability, and cash flow. The said securities house maintained the rating of “outperform” for KWG Property with a target price adjusted upward from HK$ 5.5 to HK$ 7.

Looking into 2017, KWG Property will proceed with its quality growth trajectory.

On 20 April, KWG Property was pleased to announce that the Group’s gross pre-sales value in March 2017 amounted to RMB 3,753 million, representing a year-on-year increase of 26.1%, while the gross pre-sales GFA amounted to 225,000 square meters (amongst which, KWG Property’s attributable pre-sales value amounted to RMB 2,871 million with attributable pre-sales GFA of 190,000 square meters). It is reported that KWG Property’s gross pre-sales value from January to February 2017 amounted to RMB 2,181 million and RMB 1,810 million, respectively, while the Group’s attributable pre-sales value amounted to RMB 1,629 million and RMB 1,582 million, respectively.

According to the combined extrapolation of the pre-sales value of KWG Property from January to March 2017, for the first quarter, KWG Property’s accumulative gross pre-sales value amounted to approximately RMB 7,744 million (amongst which, the attributable pre-sales value amounted to approximately RMB 6,082 million), representing a year-on-year increase of 23%. In terms of attributable gross pre-sales value, the Company completed 27.7% of its annual target for RMB 28.0 billion. From January to March, KWG Property’s attributable pre-sale GFA amounted to 129,000 square meters, 118,000 square meters, and 190,000 square meters, respectively, adding up to a total of 437,000 square meters of attributable pre-sale GFA for the first quarter.

Visionary positioning: Key to Profitability

Visionary and strategic positioning and highly efficient acquisition of land bank both represent the key to the profitability of an enterprise. KWG Property represents the most typical example of focusing on the business presence in the tier-one and tier-two cities, as well as enjoying easy access to high sales prices, spillover effects, and comparatively high profitability.

Pre-sales contribution of KWG Property for 2016 is based on geographic locations. Sales in tier-one cities (including Guangzhou, Beijing and Shanghai) amounted to RMB 11.27 billion (accounting for 51%), while sales in tier-two cities amounted to RMB 11.04 billion (accounting for 49%). For cities as mentioned above, in particular tier-one cities such as Guangzhou, Shanghai, and Beijing, the profit margin in general is high, mainly attributable to significant demands for properties due to population and economic development.

As for land acquisition, KWG Property also focuses on tier-one and tier-two cities. In 2016, KWG Property acquired additional 12 parcels of land in 2016, which concentrate on fast-growing tier-one and tier two cities, such as Guangzhou, Foshan, Shanghai, and Hangzhou. Excluding the land bank in Hong Kong, the average land price is RMB 4,460 per square meters, which is conducive to maintaining a high gross profit margin. By the end of 2016, the attributable land bank amounted to 11.3 million square meters, thus satisfying the development needs in the next four years to five years.

According to a study published by South China Financial, the Company launched 57 projects in 2017 for sales, 15 of which are brand new projects launched within the year and concentrate on Beijing, Guangzhou, Shanghai and Hangzhou. As part of the strategic positioning, active engagement in sales targets and concentration on tier-one and tier-two cities will enable the Company to maintain a high gross profit margin and growth in revenue and profit.

As commented by South China Financial, sales of commercial properties will be the highlight in 2017, as office buildings located in Beijing, Shanghai, Guangzhou and Chengdu may be likely to be sold as a whole. It is reported that the land bank for such office buildings was acquired during 2010 and 2014 at a low land price. The gross profit margin is expected to beat the overall gross profit margin of 34.6% recorded in 2016, generating considerable revenue and profit for KWG Property, as well as maintaining a balanced overall gross profit margin in 2017.