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On 23 May 2019, the “2019China Real Estate Listed Companies Conference and 17th China Real EstateInvestment and Financing Conference” organised by the Enterprise ResearchInstitute of Development Research Center of the State Council, the Institute ofReal Estate Studies of Tsinghua University and the China Index Academy wereheld in Beijing.
Based on itsresearching experience over the years, the research team further improved theresearch methods and indicator systems, conducted a comprehensive and objectiveevaluation, searched for outstanding listed real estate companies with high growthpotential and investment value, and explored the economic growth models of listedreal estate companies under different market conditions to provide investorswith a scientific and comprehensive basis for investment.
In this study, leveragingits forward-looking development strategy, comprehensive operational strength, soundfinancial performance as well as diversified operations, KWG Group Holdings (HK.1813)continued to be the “2019 China Mainland TOP10 Real Estate Company Listed inHong Kong by Comprehensive Strength” and ranked 9th, and was honoured with the“2019 Real Estate Company Worth Focusing by Capital Market”.
KWG Group Holdings was named the “2019 China Mainland TOP10 Real EstateCompany Listed in Hong Kong by Comprehensive Strength”
KWG Group Holdings was named the “2019 Real Estate Company WorthFocusing by Capital Market”
High Growthin Performance, Core Indicators Boding Well
In 2018, capitalising onits premium land reserve in the Greater Bay Area and the Yangtze River Delta,sufficient and high-quality saleable units as well as good market reputation,KWG Group Holdings achieved good results and performed very well.
The data shows that in2018, KWG Group Holdings achieved pre-sales of RMB65,502 million, representing ayear-on-year increase of 72.2% and exceeding the annual sales target of RMB65billion; an area of approximately 3.97 million sq.m. was pre-sold, with anaverage selling price of approximately RMB16,500 per sq.m. In terms of pre-salesamount, 30% and 45% of the 80 projects currently on sale came from the GreaterBay Area and the Yangtze-River-Delta region, respectively.
Apart from growth inscale, KWG Group Holdings was able to sustain a higher-than-average profitmargin to make progress in both scale and profitability thanks to the goodreputation of its quality products with high premium, stringent projectscreening based on profit margin benchmarks during the stage of landacquisition and standardised cost control regimes during the stage ofconstruction. In 2018, proportionate consolidated revenue of KWG Group Holdingsamounted to approximately RMB22,594 million, a year-on-year increase of 9.2%; profitattributable to owners of the company was RMB4,035 million, a year-on-yearincrease of 11.5%; proportionate consolidated core net profit amounted toRMB3,812 million, a year-on-year increase of 8.2%; proportionate consolidated coregross margin and proportionate consolidated net margin stood at 35.5% and 18.4%respectively, sustaining a relatively high level of profitability.
Focusing onTwo Core Areas and Continuously Optimising Land Reserve Structure
Adhering to the strategy of “Founded in Guangzhou and Radiating outacross the Country”, KWG Group Holdings expanded its nationwide presence at afaster pace, fully covering the Greater Bay Area, the Yangtze-River-Delta citycluster, the Bohai Rim region and the key economic circles in central andwestern China with a strong focus on tier-one and tier-two cities.
In 2018, KWG Group Holdingsacquired premium land parcels through tenders, auctions and listings in thepublic market while actively participating in mergers and acquisitions toobtain land at favourable costs. As of the end of 2018, KWG Group Holdings acquired38 projects and increased attributable GFA by approximately 4.14 million sq.m. atan average cost of RMB5,400 per sq.m. It successfully acquired projects withvast potential in Beijing, Shenzhen and Huizhou. The area obtained throughacquisitions and joint development accounted for approximately 80% of the newlyadded area.Mergers and acquisitions have become itsprimary means of obtaining new land reserve. Meanwhile, KWG Group Holdings proactivelyexplored redevelopment and renewal opportunities, aiming to acquire premiumland resources in tier-one and top tier-two cities at lower costs.
With the purchase ofthe above new land parcels, as of the end of 2018, KWG Group Holdings had atotal of 136 projects in 36 cities including Guangzhou, Beijing, Shanghai andHong Kong, and had total attributable GFA of approximately 16.58 million sq.m.in reserve, which could meet the development needs in the next three to fouryears and laid a solid foundation for its high-quality and rapid development inthe future.
MaintainingSound Financial Position and Exploring Diversified Financing Channels
Consistent with its prudentapproach, KWG Group Holdings took advantage of its own capital and credibilityto actively explore diversified financing channels, continuously optimise itsdebt structure and reduce finance costs.
In 2018, KWG Group Holdings was successfully granted shelf offering of RMB10billion worth of supply chain ABS and RMB10 billion worth of CMBS, opening up anew financing channel for the company. As of the end of 2018, the carryingamount of KWG Group Holdings’ cash and bank balances was approximately RMB56,677million, reflecting sufficient funds and good liquidity; weighted averagefinance cost remained low at 6.4%; net gearing ratio remained healthy and lowat 66.4%, down 1.5 ppts year-on-year; in terms of debt structure, 22% wasshort-term debts and 51% would become mature in more than three years. The pressureof debt repayment is small in the short run, reflecting a healthy maturityprofile and strong risk resistance capacity.
DiversifiedOperations Paying Off with Growth in Scale and Profit
Established in 1995, KWG Group Holdings has been deeply involved in propertydevelopment and sales for 24 years by engaging in various business segmentssuch as industry-city, education, hotel, long-term rental apartment, culturaltourism and comprehensive healthcare, with products covering mid-to-high-endresidential units, villas, serviced apartments, office buildings, hotels,shopping malls and others.
In 2018, KWG Group Holdings completed strategic upgrade by changing itsname. In addition to consolidating the real estate business, its diversifiedoperations also ushered in a harvest and maturity period.According to the financial report, theshopping malls, hotels, long-term rental apartments and office buildings of KWGGroup Holdings performed well in 2018, leading to an increase in proportionate operatingincome of 29% year-on-year to RMB1,629 million.
Regarding shopping malls,M • Cube and U Fun, the two major shopping mall brands of KWG Group Holdings, blossomedinto Suzhou U Fun, Chengdu U Fun, Beijing M • Cube and Guangzhou The Summit UFun in 2018. The newly opened shopping malls not only recorded an occupancyrate of over 90%, but also brought a brand new shopping experience to core tier-oneand tier-two cities with the help of unique architectural design, precisecustomer positioning and their brand portfolios. As of the end of 2018, KWGGroup Holdings had six shopping malls in operation.
As for hotels, following the opening of Courtyard by Marriott SuzhouMudu and The Mulian Urban Resort Hotels Suzhou, the number of hotels inoperation under KWG Group Holdings increased to nine in 2018. Among them, fourare managed by international brands, including W Hotel Guangzhou, ConradGuangzhou (joint development), Four Points by Sheraton Guangzhou, Dongpu and Courtyardby Marriott Suzhou Mudu; five are self-operated, spanning core cities such as Guangzhou,Hangzhou, Suzhou and Chengdu.
With regard to long-term rental apartments,KWG Group Holdings introduced three long-term rental apartment brands, namely Primcasa,Riscasa and Novuscasa, in Guangzhou, Foshan, Beijing, Shanghai, Nanjing andSuzhou on a trial basis, which adopted a combination of light and heavy assetmodels to serve high-end business people, white-collar employees and noviceworkers, respectively.
In addition, KWG Group Holdings had a number of office buildings inoperation in the core areas of tier-one and top tier-two cities such asGuangzhou, Shanghai, Chengdu and Nanning, the rental income of which wouldprovide stable cash inflow for the group.
In 2018, KWG Group Holdingswas heading towards high-quality development with a strong increase in sales,sufficient and premium land reserve, sound financial performance and fruitfulnessof diversified operations, which will also provide important support and buildup momentum for achieving excellent progress under the new developmentblueprint in 2019. Going forward, KWG Group Holdings will have new ideas andpractical deployment for the teams, products, types of operations andmanagement, paving the way for a higher level of increase in scale.
