The market value of A-share real estate companies with a market value of 100 billion yuan has been zeroed, and shareholders have called on the management to boost the stock price, and Vanke has linked the executive bonus to the stock price

Source of this article: Times Finance Author: Chen Zexuan

"Now there is only one hand of Vanke A left", from a heavy position in real estate stocks to basically getting rid of it, in the past six years, Li Wenting has experienced the peaks and troughs of the real estate industry in the stock market.

In January 2018, Li Wenting bought Vanke A and Poly Development (then known as "Poly Real Estate") at a price of 32 yuan per share and 15.9 yuan per share respectively. At that time, the number of mainland real estate companies with sales scale of 100 billion yuan increased, and the stock prices of real estate stocks in Hong Kong and A continued to rise for more than a year, and the stock prices of many real estate companies hit the highest record. Li Wenting is very optimistic about the real estate industry, "I think there are dividends and good performance."

After the high, the prices of the two stocks quickly retreated, and in the following three and a half years, Li Wenting missed one of the few opportunities to "escape". In October 2021, he made up his mind to "cut meat" and stop loss, and cleared Poly Development at a price of about 13 yuan per share. Since then, he has sold part of Vanke A at a loss, one of which was traded at a price of about 22 yuan per share, which is also the highest price of Vanke A in the past two years.

In March this year, Li Wenting sold Vanke A twice at 9.40 yuan/share and 9.42 yuan/share, leaving only one hand of stock rights as "watching the show".

Since the end of March, the stock prices of domestic properties in Hong Kong and A have fallen collectively again. After many days of decline, the market value of Vanke A and Poly Development fell below 100 billion yuan on April 3 and April 9 respectively. So far, the A-share market value of 100 billion real estate companies has reached zero for the first time since July 2014, while there are only two real estate companies with a market value of 100 billion yuan in Hong Kong stocks.

"Real estate stocks have really come to an end", Li Wenting was full of emotion.

Source: Picture Worm Creative

A-share real estate companies with a market value of 100 billion yuan are zero

"From the perspective of the supply and demand of real estate and the capital chain of real estate companies, real estate stocks would have fallen sharply," said Huang Lichong, president of Huisheng International Capital.

The real estate policy environment continues to be loose, and the first-tier cities, which are the market vane, have also partially adjusted their purchase restrictions this year. Among them, Guangzhou lifted the citywide restrictions on the purchase of units over 120 square meters at the end of January, and Beijing lifted the restriction of "no house purchase within three years of divorce" in March, but this failed to stop the continuous decline in the stock prices of mainland real estate companies.

Huang Lichong believes that the reason why the stock price of real estate companies has not fallen to the current extent is because the real estate policy has brought a certain buffer effect on the downward trend of the market.

According to Wind Financial Terminal, there are a total of 127 mainland real estate companies whose main business includes residential development in Hong Kong and A. As of April 16, the only real estate companies with a market value of more than 100 billion yuan were China Resources Land and China Overseas Land & Investment, both of which are mainland real estate companies listed on the Hong Kong stock market.

The peak market value of A-share real estate companies occurred in 2016 and 2019. At the end of 2016, there were 4 A-share real estate companies with a market value of 100 billion yuan, namely Vanke A, Poly Development, China Merchants Shekou, and Greenland Holdings. Although Greenland Holdings' market value fell below 100 billion yuan in 2017, many real estate companies ushered in a peak in market value in 2019. At the end of 2019, the total market value of the three A-share real estate companies with a market value of 100 billion yuan, Vanke A, Poly Development, and China Merchants Shekou, reached 714.069 billion yuan.

At the end of the year, there were as many as 6 real estate companies with a market value of 100 billion yuan (note: not included in Vanke), with a total market value of 1.59 trillion Hong Kong dollars, both reaching the highest in history. The six real estate companies with a market value of 100 billion yuan are China Overseas Land & Investment, China Evergrande, China Resources Land, Country Garden, Longfor Group, and Sunac China.

In 2019, the 9 real estate companies with a market value of 100 billion yuan in Hong Kong and A basically formed a pattern of equal distribution between central enterprises and private enterprises, but now only two major central enterprises are active in the 100 billion market value club. In the past three years, the real estate industry has continued to adjust, and compared with private enterprises, the operating performance of central state-owned enterprises is more stable, and the stock price and market value trend are relatively stable.

The central enterprises with a market value of 100 billion yuan in Hong Kong have achieved contrarian growth. In 2023, CR Land achieved a consolidated turnover of RMB251.14 billion, a year-on-year increase of 21.3%, and a profit attributable to shareholders of RMB31.37 billion, a year-on-year increase of 11.7%. During the same period, COLI's revenue was 202.52 billion yuan, a year-on-year increase of 12.3%, and the profit attributable to shareholders was 25.61 billion yuan, a year-on-year increase of 10.1%.

Shareholders demand market value management from management

However, due to the real estate environment, the share prices and market capitalization of CR Land and COLI have also continued to decline.

On April 16, the closing price of China Resources Land was HK$23.10 per share, corresponding to a market value of HK$164.725 billion, and the closing price of China Overseas Land was HK$11.44 per share, corresponding to a market value of HK$125.209 billion. On the last trading day of 2023, the closing price of China Resources Land was HK$28 per share, corresponding to a market value of HK$199.666 billion, and the closing price of China Overseas Land & Investment was HK$13.76 per share, corresponding to a market value of HK$150.602 billion.

It is also in this context that the share price of Poly Development, an A-share real estate company that has rushed to the first place in the industry in terms of sales amount, has fallen from 9.90 yuan/share at the end of 2023 to 8.00 yuan/share on April 16, and its market value has also fallen from 118.507 billion yuan to 95.704 billion yuan.

In addition, the stock price of central state-owned enterprises is also lower than the net assets per share. On April 16, the net assets per share of China Resources Land, China Overseas Land and Poly Development were 40.99 yuan, 37.61 yuan and 16.31 yuan respectively.

Huang Lichong believes that the current stock price and market value of real estate companies do not overfall, "it reflects that the real estate industry is still prone to financial difficulties, as long as the risk premium is still there, it is normal for the stock price of real estate companies to appear in such a situation."

The current stock price and market value trend of real estate companies have caused dissatisfaction among shareholders, and many shareholders have "shouted" to the management through the investor communication platform provided by the exchange, asking the company to manage the stock price and market value.

In fact, some real estate companies have already started to carry out relevant plans. Among them, Poly Development released the actual controller's shareholding increase plan and the company's repurchase plan in December 2023, both of which reached the lower limit of the increase in holdings and repurchase amount in March.

According to the statistics of Times Finance, since 2021, real estate companies such as Ronshine China, China Jinmao, OCT A, Blu-ray Development, Meihao Real Estate, Shunfa Hengye, Songdu Shares, Vantone Development, Heung Kong Holdings, and Zhonghua Enterprises have issued repurchase plans. Judging from the results, the huge repurchase has had little effect, and the stock prices of many real estate companies are still falling.

Vanke, on the other hand, innovatively linked the annual bonus of the management to the stock price performance. On October 27, 2023, Vanke disclosed the "Announcement on the Resolution of the Third Meeting of the 20th Session of the Board of Directors", which showed that the board of directors deliberated and approved the company's 2023-2025 bonus plan, and proposed that "the 2023-2025 cash remuneration plan of the chairman of the board of directors and the president will continue to be linked to the annual net profit, and the annual stock price change will be added as the adjustment coefficient, and the annual average of the daily compound closing price of the company's A shares will be used as a comparison index to strengthen the orientation of shareholders' interests".

Seeing Vanke's plan, the shareholders of China Merchants Shekou couldn't sit still, and suggested to the secretary of the board of directors that the company's management should appropriately increase their holdings of shares during the decline in stock prices, "which can not only maintain the company's image, but also bind the company's interests and executives more closely, and at the same time, this price will generally not lose money in the future."

Shareholders of Gree Real Estate demand that Gree Real Estate, as a local state-owned enterprise, should consider following in the footsteps of central enterprises and including market value management in the assessment of the heads of state-owned enterprises. In January this year, Xie Xiaobing, head of the Property Rights Administration Bureau of the State-owned Assets Supervision and Administration Commission of the State Council, revealed that the State-owned Assets Supervision and Administration Commission will further study the inclusion of market value management in the performance appraisal of the heads of central enterprises, and guide the heads of central enterprises to pay more attention to and pay more attention to the market performance of the listed companies they control, and timely convey confidence and stabilize expectations through the use of market-oriented means such as increasing holdings and repurchases, and increase cash dividends to better return investors.

Despite the efforts of some real estate companies, under the general trend of the industry, real estate stocks are still falling and falling, and they have not regained their former glory.

(Li Wenting is a pseudonym)