Editor's note: In 2020, China's real estate is choking the throat of fate in the waves.
Entering a new 2021, how can China's real estate find a balance between scale and strict supervision? Companies that want to make a difference and make a difference need enough courage and wisdom to deal with it.
We are convinced that "real estate to the sun" is still the main proposition of this year. In view of this, viewpoint real estate new media planning annual blockbuster report "fine red line", review and summarize the benchmark real estate enterprises in the past year under the "anti-epidemic" and "red line", from the strategy, model, small to financing, personnel and other aspects of the adjustment and change, and look for the future "sustainable strength" in the new year.
Looking back at the development of the real estate industry in the long river of history, some years are definitely going to be a lot of color.
From the first soil auction in Shenzhen in 1987, the housing reform in 1988, and then to the four trillion yuan in recent years, destocking, shed reform, every major policy was introduced, and the economic environment turned, which made the real estate industry undergo earth-shaking changes.
Real estate enterprises in it, every time they experience, there are always some enterprises to seize the opportunity of the times and achieve leapfrog development in scale.
2020 is a more special year for real estate. In this year, we must face the big economic environment affected by the epidemic and the big policy requirements of the "three red lines". A variety of measures such as ensuring cash flow, reducing debt, and speeding up turnover have become keywords often mentioned in real estate.
The so-called "three red lines" are to divide housing enterprises into four grades of red, orange, yellow and green by excluding the asset-liability ratio, net debt ratio and cash short-term debt ratio after excluding pre-received accounts, and different grades correspond to the growth rate of different interest-bearing liabilities, which are divided into 0%, 5%, 10% and 15%.
For most housing enterprises that have leveraged rapid development through high leverage, this is tantamount to putting on a tight curse. However, for China Merchants Shekou, it has long been adapted.
This in turn gave China Merchants Shekou a chance to go further in scale as long as it followed the established pace.
One step away
In 2020, China Merchants Shekou is only one step away from the top ten.
According to the 2020 China Real Estate Sales TOP100 list released by the Opinion Index, China Merchants Shekou ranked 11th in terms of full-caliber sales amount in 2020, and there was only a gap of less than 10 billion yuan from the 10th place.
Since the completion of the restructuring and listing in 2015, CHINA MERCHANTS SHEKOU has been steadily advancing in the sales ranking, from ranking 14th in 2015, rising 2 places to 12th in 2018, and then rising to 11th in 2020.
Source: Opinion Index
In 2020, China Merchants Shekou completed sales of 278.01 billion yuan in the whole year, compared with the annual performance of 220.5 billion yuan completed in 2019, the sales scale increased by 57.5 billion yuan, an increase of 26.1% year-on-year.
Source: Corporate Announcements, Opinion Index
Looking back at the sales scale growth path after the restructuring and listing of China Merchants Shekou, since 2016, it has maintained a net growth of about 50 billion to 60 billion yuan per year.
According to the data, from 2015 to 2019, China Merchants Shekou achieved annual sales of 57.6 billion yuan, 73.9 billion yuan, 112.8 billion yuan, 170.6 billion yuan and 220.5 billion yuan, respectively, and the market share also rose from 0.7% in 2015 to 1.4% in 2019.
The stable play makes China Merchants Shekou one of the few housing enterprises whose sales still maintain more than 20% growth in 2020. However, like other housing enterprises, China Merchants Shekou also needs to face the influence from the "black swan".
In February, when the sales office was closed due to the epidemic, the monthly sales amount of China Merchants Shekou was only 2.531 billion yuan, down nearly 70% year-on-year. Like most other housing enterprises, when the offline sales office was closed, China Merchants Shekou also launched an online purchase procedure "Merchant Good House".
At the same time, under the steady and orderly promotion of the resumption of work and production in March, the offline sales office of China Merchants Shekou is also the first batch of "on-line". Among them, in Shenzhen, the China Merchants Prince Bay Seal N3 project is the first centralized opening project after the Spring Festival in Shenzhen.
Online house purchase + offline resumption of work, so that the sales growth rate of China Merchants Shekou quickly returned to positive, achieving sales of 21.684 billion yuan in March, an increase of 21.79% year-on-year. For the whole year, only February saw a year-on-year decline, and the remaining months saw a year-on-year increase of between 10% and 60%.
The rapid growth of sales is not unrelated to the strengthening of the layout of China Merchants Shekou in East China, Jiangnan, Southwest China and other places in recent years and the continuous increase in land acquisition.
According to the semi-annual report data, the signed areas of East China, Jiangnan and Southwest China were 1.466 million square meters, 1.0373 million square meters and 693,100 square meters, accounting for 29.7%, 21% and 14%, respectively, and the contribution performance of the three regions exceeded 60%. South China and the base camp Shenzhen ranked fourth and fifth, accounting for 11.3% and 8.1% respectively.
Source: Corporate Announcements, Opinion Index Statistics
(Note: In 2018, China Merchants Shekou underwent regional structure adjustments, from the five major regions of North China, East China, Central China, South China and Shenzhen to nine major regions, and the Jiangnan area was spun off from the original East China region)
In fact, east China has always been the main region of performance contribution of China Merchants Shekou. In the early years, Shenzhen was also the main contribution area of performance. However, land resources in the shenzhen open market are scarce, and China Merchants Shekou's own huge land resources in Shenzhen also need to be converted in time, so in recent years, the sales contribution of Shenzhen has gradually declined, and the performance growth point of China Merchants Shekou has also shifted to East China, Jiangnan and other places.
In 2020, China Merchants Shekou launched "One City, One Template". Liu Ning, secretary of the board of directors of the company, said in an interview that this is one of the biggest progress in internal management this year and next year, and it is strictly measured in combination with objective factors such as price limits to ensure that there is no deviation between project scientific research and market entry.
Different regions have been given different tasks, according to the information of China Merchants Shekou investors, in the expression of East China, Jiangnan and Central China, it is respectively sales and asset management business, improving the balance of investment equity fast and slow turnover value, scale traffic oriented. In short, these regions will be the main contributor to future growth in scale.
According to the incomplete statistics of viewpoint real estate new media, from 2015 to 2020, There are 20 cities with new land reserve area of more than one million square meters, namely Kunming, Wuhan, Suzhou, Nanjing, Chengdu, Shenzhen, Nantong, Hangzhou, Shanghai, Tianjin, Guangzhou, Zhengzhou, Hefei, Xi'an, Foshan, Dongguan, Dalian, Xiamen, Xuzhou and Ningbo. Among them, more than 3 million square meters are Kunming, Wuhan, Suzhou and Nanjing, and more than 2 million square meters are Chengdu, Shenzhen, Nantong, Hangzhou and Shanghai.
On the other hand, China Merchants Shekou as a whole maintained a high land investment intensity. From 2017 to the first 11 months of 2020, the number of new expansion projects in that year was 55, 80, 79 and 84 respectively, with a new land reserve area of 7.97 million square meters, 13.57 million square meters, 14.23 million square meters and 13.923 million square meters, and the amount of land price expenditure was 88.2 billion yuan, 95.4 billion yuan, 97.6 billion yuan and 133.13 billion yuan.
The proportion of investment amount in sales reached 78.19%, 55.92%, 44.26% and 53.7% respectively, and the ratio of the new land reserve capacity floor area to the contracted sales area of the current period reached 139.82%, 164.02%, 121.68% and 130.05% respectively. The intensity of land investment maintains inertia, which can not only ensure the sustainability of the volume of goods, but also ensure that there is a certain amount of flexibility in the margin.
In the land layout, China Merchants Shekou has more choices in limited cities. At the performance meeting at the beginning of 2020, Jiang Tiefeng, managing director, said that the company will no longer take the initiative to actively expand new cities, but will try to deepen the current city, and hopes to improve the equity ratio of the cities entered and increase the number of trading projects.
It can also be seen from the new urban land reserve that China Merchants Shekou will use more resources in core cities such as Shanghai, Suzhou, Hangzhou, Nanjing, Ningbo and other core cities in East China and Jiangnan and the surrounding Jiaxing, Shaoxing, Nantong, etc., and several core cities in Central China and Southwest such as Wuhan, Chengdu, Zhengzhou, Xi'an and Chongqing, and on this basis, it will appropriately sink into urban areas that are not too involved.
Moderately increase the layout of fast turnover projects, stable urban proportions, continuous land investment intensity and other factors, to ensure that China Merchants Shekou in 2020 peer sales growth rate generally slowed down significantly, can still have a growth rate of more than 20%.
Speed up turnaround
The impact of the epidemic on the real estate industry is actually not as big as imagined.
According to data from the National Bureau of Statistics, from January to November, the sales area of commercial housing in the country 150834 million square meters, an increase of 1.3% year-on-year, and the growth rate was 1.3 percentage points higher than that of January to October. Among them, the sales area of residential buildings increased by 1.9%, the sales area of office buildings fell by 12.8%, and the sales area of commercial business buildings fell by 11.1%. Sales of commercial housing 148969 billion yuan, an increase of 7.2% year-on-year, and the growth rate increased by 1.4 percentage points. Among them, residential sales increased by 9.5%, office sales fell by 10.7%, and commercial business sales fell by 13.7%.
According to the "2020 China Real Estate Sales TOP100" list released by the Opinion Index, the total sales amount of the TOP100 housing enterprises from January to December was 13.18 trillion yuan, an increase of 11.6% year-on-year; the total sales in December were 1.67 trillion yuan, an increase of 18.3% year-on-year.
Housing enterprises have long been breathless at the front-line sales end, and another "three red lines" policy that presses on the real estate industry seems to be "unbearable weight".
The "three red lines" divide housing enterprises into four grades of red, orange, yellow and green by excluding the asset-liability ratio, net debt ratio and cash short-term debt ratio after excluding pre-received accounts, and different grades correspond to the growth rate of different interest-bearing liabilities, which are divided into 0%, 5%, 10% and 15%.
That is to say, the development model of high leverage scale will no longer exist in the future, and even if it has long been consciously used to reduce the dependence on the financing end by accelerating the turnover and increasing the return of normal operating cash such as increasing the payment rate, the more difficult it is to turn around. The introduction of the "three red lines" is equivalent to making this slowly slowing convoy suddenly tighten the rope and can only brake urgently.
For China Merchants Shekou, this "rope" is always hanging around the neck, and in comparison, the pressure of the "three red lines" is not so heavy. The reason why it is one of the few green-file enterprises is also related to the SASAC's hard regulations on the leverage level of central enterprises and state-owned enterprises.
The data shows that from 2015 to 2019, China Merchants Shekou maintained its asset-liability ratio, net debt ratio or cash short-term debt ratio after excluding pre-received accounts, and it was still far from the standard line.
Data source: company announcements, opinion index statistics
The latest data show that in the third quarter of 2020, the asset-liability ratio, net debt ratio and cash short-term debt ratio after excluding pre-received accounts were 46.25%, 36.83% and 1.02 respectively.
In other words, for most housing enterprises to reduce the leverage level by reducing financing, accelerating turnover, spin-off assets and other measures, so as to exchange for the growth space of interest-bearing liabilities, China Merchants Shekou with its consistent low leverage level, do not need to worry too much about this.
However, Liu Ning said in an interview that China Merchants Shekou is in the green file, and there is still room for 15% growth in interest-bearing liabilities. However, the real impact of the policy is the sale and acquisition of land, which requires the use of its own funds, and the sale and collection of funds constrain the scale of land acquisition in the future.
The implication is that even if it is not directly constrained like other housing enterprises, it still has an invisible impact. How to improve its own asset turnover efficiency and capital utilization efficiency is a problem that China Merchants Shekou needs to face.
According to incomplete statistics, in the whole year of 2020, China Merchants Shekou has accumulated 16 projects listed and transferred, especially after the introduction of the "three red lines" policy, the equity and debt rights of 12 projects have been intensively listed/transferred, including many transactions with related parties such as China Merchants Pension and China Merchants Securities.
On September 14, China Merchants Shekou announced that it would invest 527 million yuan in the whole property of renhe Yang, a related party, including 5 office buildings and 1 hotel, with a total land use right and superstructure of 260 households of about 30,800 square meters and 268 underground parking spaces.
In terms of China Merchants Securities, on November 27, 299 million yuan took over the 24.5% equity of China Merchants Shekou Transferred Wuxi Project Company, and on December 23, it took over 24% of the shares of Hangzhou Xiaoshan Project transferred by China Merchants Shekou for no more than 500 million yuan.
During the year, China Merchants Shekou also joined hands with China Merchants Securities twice to jointly establish a joint venture company to develop its projects. In May, the two sides jointly participated in the development and construction of the E9R3 and E9R4 plots in Ludong District, Beijing Economic and Technological Development Zone, and in December, signed a cooperation framework agreement on the two-compartment plot of Leifeng Avenue in Wangyue Street, Yuelu District, Changsha City.
In addition to the transfer of shares, China Merchants Shekou officially issued and established the "Shenwan Hongyuan - China Merchants Shekou - Tiger Minghua Asset-Backed Special Plan" on the Shenzhen Stock Exchange on December 2, with an issue size of 4.15 billion yuan, a product term of 3+2 years, and the basic properties are Tiger Apartment and Minghua Center.
Tiger Apartment and Minghua Center are the projects of China Merchants Shekou in Nanshan Shekou, Shenzhen. According to the statement, this is a reference to the overseas mature market REITs model, put forward the off-balance sheet incubation promotion of the combination of industry and finance model, through the transformation of the project and the improvement of operation to achieve asset appreciation, the future may become a large number of holding properties in China Merchants Shekou incubation and upgrading path.
Throughout 2020, China Merchants Shekou defines it as the "asset management year" of the Group, planning to sort out the internal asset inventory first, then classify the revitalization and promotion, classify the policies, and exit with different asset management and securitization plans.
According to the latest news, China Merchants Shekou has declared the Shenzhen Shekou Wanggu Park infrastructure public offering REITs, in the first batch of domestic declaration park infrastructure public offering REITs army, China Merchants Shekou declared the project as the only "central enterprises + industrial reform" concept.
The assets included in the single REITs include four of the highest quality assets in Shekou Network Valley: Wanwei Building, Wanlian Building, Wanrong Building and Wanhai Building. The total construction area of office buildings on these four industrial lands reached 200,000 square meters, of which the industrial housing area was about 150,000 square meters, all of which were leased by China Merchants Shekou.
A series of equity transfers, project capital increases, asset securitization and other measures are actually aimed at achieving the purpose of three directions: reducing asset pressure and sharing risks; inefficient asset transfer, improving their own efficiency; precipitating asset withdrawal, and realizing the return of funds.
In addition to the above-mentioned withdrawal of precipitated assets and cash repatriation through REITs, a typical case in reducing asset pressure is that on November 25, 49% of the equity of Wuhan Zhaorui Real Estate Co., Ltd. was transferred, that is, the land plot in Qiaokou District of Wuhan City, which was bid for 5.887 billion yuan by China Merchants Shekou.
Although the reserve price of the project transfer is only 311,640 yuan, the receiver needs to transfer the 1.442 billion yuan of shareholder loans to the designated account of China Merchants Shekou and pay the corresponding interest on the loan, and then lend another 1.442 billion yuan to the target enterprise to pay the remaining land transfer fee of the land plot.
In fact, in recent years, China Merchants Shekou has also been reducing its dependence on financing and relying more on the return of operating funds. The data shows that the net operating cash flow of China Merchants Shekou has changed from a net outflow in 2016 and 2017 to a net inflow in 2018 and 2019, and it will continue to maintain this trend in 2020, achieving a net inflow of 10.245 billion yuan in the third quarter.
In contrast, the net flow generated by financing activities, in the half year and the third quarter of 2020, China Merchants Shekou achieved negative net cash flow from financing activities, negative 5.649 billion yuan and negative 8.098 billion yuan respectively, that is, China Merchants Shekou actively reduced its dependence on financing cash flow.
Increase revenue and profit increase
The real problem that China Merchants Shekou has to face is not the epidemic or the shackles brought about by the three red lines, but how to transform from a resource-based enterprise to a resource + ability enterprise.
China Merchants Shekou, which relies on the resources of China Merchants Group, can obtain land through various methods such as government-enterprise cooperation, state-owned enterprise cooperation, mergers and acquisitions. Moreover, the cost of financing has historically been lower than that of its peers.
The data shows that from 2015 to 2019, the comprehensive capital cost of China Merchants Shekou was 4.93%, 4.5%, 4.8%, 4.85%, 4.92%; in the first half of 2020, the comprehensive capital cost was 4.78%, and the weighted financing cost of the top 50 enterprises in the sales ranking was between 6% and 6.5% on average.
On the other hand, China Merchants Shekou also has some potential advantages. From the listing of the 001979 stock code in 2015, the completion of the major unprecedented asset restructuring of Shekou Industrial Zone + China Merchants Real Estate, and then to the completion of Qianhai land preparation and injection into listed companies, CIMC and Shenzhen International have successively completed land preparation with reference to the plan of China Merchants Shekou. In other words, many cases are "one step ahead".
In 2020, this special case should be the unfinished equity acquisition of Nanyou Group.
On June 8, 2020, China Merchants Shekou signed an agreement with Shenzhen Investment Holdings to purchase 24% of the equity of Nanyou Group held by Shenzhen Investment Holdings by issuing shares, convertible corporate bonds and paying cash, of which the consideration paid by issuing shares, convertible corporate bonds and cash accounted for 2.5%, 47.5% and 50% of the consideration of the transaction respectively.
At the same time, China Merchants Shekou intends to raise supporting funds from the non-public issuance of shares by strategic investors (Ping An Asset Management, Ping An Life) to pay the cash consideration in this transaction.
It is worth noting that in the case, China Merchants Shekou did not spend any cash assets, only issued shares and convertible corporate bonds, and the cash consideration was raised from Ping An. Even if the plan was changed on September 11, the matching fund raising arrangement was directly cancelled and only the issuance of shares and convertible corporate bonds was adopted.
The whole plan is equivalent to equity financing, although this restructuring was eventually withdrawn by China Merchants Shekou on its own initiative, but it is enough to see its advantages in the capital market.
So, what are the key problems faced by this central enterprise in the "golden mountain" and rooted in Shekou?
According to the data, China Merchants Shekou achieved revenue of 49.222 billion yuan, 63.574 billion yuan, 75.938 billion yuan, 88.278 billion yuan and 97.672 billion yuan from 2015 to 2019, an increase of 8.21%, 29.16%, 19.45%, 16.25% and 10.64% respectively.
In terms of profitability, from 2015 to 2019, the net profit attributable to the mother of China Merchants Shekou reached 4.850 billion yuan, 9.581 billion yuan, 12.656 billion yuan, 15.240 billion yuan and 16.033 billion yuan respectively, an increase of 51.36%, 97.54%, 32.08%, 20.42% and 5.20% respectively.
In the first three quarters of 2020, China Merchants Shekou achieved revenue of 50.118 billion yuan, an increase of 96.21% year-on-year; net profit attributable to the mother was 2.192 billion yuan, a year-on-year decrease of 56.96%. Revenue diverges from the growth of attributable net profit data, and it is a large divergence.
The problem of increasing revenue and not increasing profits has emerged, and China Merchants Shekou explained that due to the impact of the carry-over structure of real estate projects, the gross profit margin of community business decreased year-on-year; due to the new crown epidemic, measures such as rent reduction and exemption were adopted for leased properties; and the net income after tax generated by the company's transfer of subsidiary equity in the same period last year was 2.226 billion yuan.
Since the beginning of 2019, in the first three quarters, the net profit attributable to the mother of China Merchants Shekou has decreased year-on-year, and the explanation of the decline in profits in recent years caused by the transfer of subsidiaries in the same period last year can often be seen.
At the 2019 annual performance meeting held in April, in response to the problem of profit planning, Xu Yongjun, chairman of China Merchants Shekou, said that in 2020, the company began to do a new five-year plan, and the company has a three-year plan every year, which is rolling, and it is more realistic every year, but because of the disclosure restrictions of listed companies, the specific data is not easy to disclose.
He further said that in the future, the real estate industry should maintain the original growth rate, especially the growth rate of profits, which is a great challenge. Coupled with the impact of the epidemic, it can only be said that the foundation is very good and the challenges are great, and China Merchants Shekou has a good idea.
In terms of actual data, China Merchants Shekou East China and Jiangnan contributed to the top sales scale and revenue, but the gross profit margin was the lowest, in the middle of 2020, the gross profit margin (excluding business tax and surcharges) was 13.87% and 13.54%, respectively, a decrease of 16.66 percentage points and 9.01 percentage points compared with the same period last year.
Liu Ning pointed out that the company's gross profit margin has declined in 2019, behind which the entire real estate industry is declining, and it is expected that the trend will continue in 2020, mainly affected by factors such as land costs and limit prices. From 2016 to 2019 and the first half of 2020, the community development and operation business recorded gross profit margins of 32.27%, 38.43%, 39.28%, 33.55% and 23.52% respectively.
With scale, you also have to be profitable. For China Merchants Shekou, the epidemic situation and the three red lines may not be the focus, and how to find profitability is the core of future development.
Thin red line | Between reason and madness, there is only a thin red line.