Editor's note: In 2020, China's real estate is choking the throat of fate in the waves.
Entering the new 2021, how can China's real estate find a balance between development 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.
Viewpoint Real Estate Network Fujian real estate enterprises have always been labeled as "radical" by the outside world.
However, the past development rhythm of veteran Jianfa is relatively gentle, and when Shimao, Sunshine City, Xuhui and other new talents are far ahead, Jianfa seems to be still sitting on the Diaoyutai.
In the difficult year of 2020, the pace of most housing enterprises is more cautious and stable. But on the other hand, if you don't advance, you will retreat, and anxiety is also spreading.
C&D deliberately adjusted the rhythm of the past and took a bigger step.
In order to make the real estate platform bigger, since the backdoor listing in 2016, C&D has continued to inject assets into the listing platform C&D International, intending to achieve rapid growth in scale, and C&D will extend its other hand to the open market.
This year, C&D's expansion is somewhat amazing, some people call it "a battle against the water", and some people say that this is a "bear market" in view of the advantages.
With high leverage and rapid expansion of reserves, C&D has chosen a path that few people have taken at the moment, and has also made certain sacrifices, including a reduction in profitability and a red line for debt.
However, the feasibility of this practice should be more considered to the particularity of C&D itself.
Such a high growth rate and rapid expansion, can C&D digest it well?
Growth expectations
Strong growth and the improvement of sustainable operation ability are the main reasons why C&D International has attracted the attention of capital recently.
With both the advantages of state-owned enterprises and the market-oriented mechanism, in order to obtain higher market recognition, C&D needs to enter a stage of rapid development.
Within C&D, sales scale has been repeatedly emphasized in recent years.
The review found that from 2018, the description of the real estate business in the financial report of the controlling shareholder C&D shares will appear such as "destocking" and "rushing sales"; the 2019 interim report also highlights that C&D Real Estate and Lianfa Group should focus on "rushing sales" and "guarantee targets" to capture the market cycle and promote the continued growth of sales scale.
According to the statistics of the opinion index, in 2020, the cumulative sales of C&D real estate were 117.37 billion yuan, ranking 35th; equity sales were 61.66 billion yuan, ranking 42nd, and the sales interest accounted for about 52.53%.
Data source: corporate announcements, opinion index collation
C&D, which still has a large room for growth, is in a period of rapid growth in terms of sales scale. In fact, since 2016, the sales scale of C&D International, a Hong Kong-listed platform, has also increased at a rate of almost double every year.
The sales growth rate of C&D International in 2018 and 2019 reached 145.2% and 104.8%, far faster than the overall 36.6% and 16.0% of the TOP100 in the same period.
In 2020, the growth rate was originally set at nearly 40%, but the final sales amount was about 90.77 billion yuan, an increase of 78.75% year-on-year, and the increase was rare in the industry at present. In particular, sales in the first quarter increased by 30% year-on-year, which should be the highest among all housing enterprises, highlighting its advantages under the epidemic.
The reason why C&D International can quickly do large-scale is that on the one hand, it comes from the injection of existing mature high-quality real estate projects by major shareholders, bringing solid performance; on the other hand, relying on endogenous growth, increasing land acquisition in the open market, expanding soil reserves and saleable resources.
In 2018, C&D Real Estate divided its business positioning with its holding subsidiary C&D International: C&D Real Estate will be mainly responsible for land development, commercial operations and other business sectors in the future, while C&D International will be mainly responsible for real estate development, property management and emerging investment business.
This means that the new real estate business in the future will basically be undertaken by C&D International.
Taking the first- and second-level linkage typical Xiamen Houpu "Fanghu 2019P05 Plot" as an example, the parcel was previously an old remodeled plot, and C&D Real Estate was responsible for the first-level development. In the first half of 2020 financial statements, the urban renewal industry contributed 5.439 billion yuan of revenue, accounting for 52.57% of the revenue, which was mainly affected by the progress of land transfer in the current period of the Houpu-Fanghu Old Village Renovation Project.
The project has also become the pillar of C&D's performance in 2020, and the third quarterly report disclosed that the net profit attributable to the mother at the end of the period was 2.814 billion yuan, a sharp increase of 54.18% year-on-year, mainly due to the "Xiamen 2019P05" plot in the subsidiary's land primary development business in the first quarter of 2020 to recognize revenue and carry forward profits.
It is worth noting that after the 2019P05 plot of Zongfang Lake was taken by C&D backdoor at the end of 2019, it was included in C&D International Report and became a saleable project.
In terms of soil storage layout, relying on the resources and background of the parent company, C&D International has deeply cultivated fujian, east China, central China, south China and other regional markets. However, with the acceleration of the national layout, the proportion of sales in Fujian is also decreasing year by year, and the sales contribution is concentrated in areas with high urban energy levels.
As of the end of 2019, about 32% of C&D International's 162 billion yuan of saleable value is located in the southern Fujian region (Xiamen, etc.), 27% is located in the East China region (Suzhou, Wuxi, etc.), 16% is located in the South China region (Shenzhen, Guangzhou, etc.), and the proportion of first- and second-tier cities is 5% and 71% respectively.
According to the 2020 interim report, Haixi and East China became the main players in performance growth, contributing 9.17% and 86.47% of the overall property sales revenue respectively.
It is reported that in the second half of the year, C&D International still has a saleable value of 72 billion yuan, of which the Haixi region includes Xiamen, Zhangzhou, etc., accounting for more than 30%, and the East China region accounts for 27.8%, and the projects are distributed in Shanghai, Nanjing, Suzhou and other cities.
Overall, the sales city level is basically concentrated in the first and second lines, and the product maintains high-end positioning, so that the average sales price in the past few years can also maintain an upward trend, the data in 2019 is 17300 yuan / square meter, in 2020 it rose to 19500 yuan / square meter.
However, the positive performance of the bidding, auction and listing market has also made the cost of C&D land continue to rise, coupled with the increase in sales expenses, which means that it may continue to face the situation of increasing revenue and not increasing profits.
In the first half of 2020, C&D International's total revenue was about 2.854 billion yuan, an increase of about 123.32% year-on-year; of which the property development income was about 2.377 billion yuan, an increase of about 164.11% year-on-year; but the net profit fell by 28% year-on-year.
A major reason for the decline in net profit was that marketing expenses increased to 450 million from 210 million in the same period last year. C&D explained that the increase in sales expenses was due to the increase in personnel and project expansion, and the marketing expenses were rising.
In addition, the gross profit margin of C&D International in the first half of the year also decreased from 40.62% at the end of 2019 to 21.89%, and the reason for the decline was that the gross profit margin level of individual delivery carry-over income items during the period was lower than that of the same period in 2019.
On the whole, more bidding, auctioning and land has led to a gradual decline in profit margins, but fortunately, C&D has cheap money that can be partially offset, and the main high-end products can also have a higher premium.
Some insiders have analyzed that with the continuous growth of sales scale, the market value of C&D International will have a lot of growth. However, due to the delay in settlement, the profit will be released slightly later. With the addition of settlement, the proportion of settlement / sales gradually shrinks, and the company will also enter a stable growth cycle.
Soil storage rhythm
To achieve its scale target, C&D International needs more grain and grass.
The sales target for 2020 is 71 billion, and it will sprint to 100 billion yuan in 2021, while the saleable value of C&D International at the end of 2019 is 162 billion yuan, which is probably only enough for two years to digest, and to maintain sustained high sales growth, the existing soil reserves are obviously insufficient.
How to rapidly expand soil reserves and saleable resources? C&D International mainly relies on the asset injection of the parent company and the acquisition of land in the open market.
Bidding, auctioning and listing has become the most important way to obtain land, and in 2020, when most housing enterprises strictly control land investment, C&D has become a regular customer of the national land bidding, auction and listing market.
According to the incomplete statistics of viewpoint real estate new media, in 2020, C&D (including C&D Real Estate and C&D International) won a total of 24 parcels of land through the open market in Shanghai, Jiangsu, Suzhou, Hangzhou, Fujian Xiamen, Chengdu and other places, with a total amount of land taken of 53.151 billion yuan, which has exceeded the original budget of 30-40 billion yuan.
In April, C&D spent 11.792 billion yuan in 3 days to win 4 parcels in Suzhou, Chengdu, Nanjing and Hangzhou; on 30 June, it won 3 parcels in Xiamen in a single day, with a land amount of 5.35 billion yuan; at the end of December, it spent 6.2 billion yuan to win 3 parcels in Chongqing, Jiangsu and Zhejiang in 4 days.
Most of these plots were won at a higher premium, such as the record of the floor price of Chengdu at that time with 19,800 yuan / square meter in April; in June, the 125% premium took the commercial and residential land in Nanning Qingxiu; in July, after breaking the record for the total price of residential land in Bengbu, Anhui, it refreshed the record for the highest unit price in Xinwu District of Wuxi with 14,800 yuan / square meter; in October, after 960 rounds of bidding, it won the commercial and residential land in Huai'an, Jiangsu Province, with a total price of 3.52 billion yuan and a premium rate of 55.2%.
Source: Opinion Index Collation
This year, C&D entered 13 cities including Beijing, Guiyang, Ningbo, Chongqing and Jinan. According to the official website of C&D Real Estate, the new soil reserves exceeded 160 billion yuan in that year, and the business layout was more than 50 cities; in 2019, the business layout was more than 30 cities.
It can be found that since 2018, C&D has increased the deep ploughing of traditional advantageous cities while actively expanding reserves in first- and second-tier cities. According to the data disclosed by C&D International, the amount of land acquired in 2019 was 42 billion yuan, accounting for 82.7% of the sales of the year, and the overall layout returned to strong second-tier cities.
At the same time, C&D is concentrating on areas with high urban energy levels, and about 90% of the new soil reserves in the first half of 2020 are located in first- and second-tier cities, and about 10% are located in third-tier cities in Fujian, the base camp.
The proportion of new soil reserve rights and interests is rising year by year, which means that more to bear and digest by themselves. According to the data, C&D International's new land storage rights increased from 51% in 2016 to 72% in 2019, and continued to rise to 79% in the first half of 2020.
Moreover, the new soil reserves are mostly fast turnover projects, which may be at the expense of certain profits. C&D management also admitted at the interim results meeting that the newly auctioned land in 2020 does not exclude that individual plots will not be able to obtain 8% profits.
However, with the advantages of C&D in terms of capital cost and brand premium, most projects can still have a profit guarantee of 8% to 10%.
In addition to bidding, auctioning and listing, the diversified land acquisition methods formed by C&D International also include brand cooperation, mergers and acquisitions, and major shareholder linkage. The first- and second-level linkage with shareholders and industrial land hooking may become an important potential gain for the company's soil storage in the future.
Since its backdoor listing in 2014, C&D Properties has been injecting assets similar to ant moving. After the business division, C&D Real Estate clearly withdrew from the secondary real estate development and fully supported C&D International to become bigger and stronger, and the corresponding asset transfer continued.
This is C&D International's unique resource advantage – according to statistics, from 2017 to September 2020, C&D International has obtained more than 10 asset packages from its parent company.
On September 28, 2020, C&D International acquired the equity of three companies through related party transactions with its controlling shareholder, C&D Real Estate, and acquired a total of three land parcels in Shanghai and Chengdu. The total transaction price of the three plots reached 8.214 billion yuan, while C&D International only received a transaction consideration of 4.748 billion yuan.
The most typical case of "one-two linkage" is the aforementioned 2019P05 plot of Xiamen Houpu Fanghu.
The parcel of land originally belonged to the C&D Real Estate Renovation Project, which was built as the C&D Yangyun Project only half a year after the land was transferred, and then included in the C&D International Statement. According to the 2020 interim report, the total saleable building area of the project is 232,851 square meters, and C&D International holds 80% of the interest, and the total construction area should be 186,281 square meters.
In addition to the fast turnover of soil reserves, high-profit old reforms have also begun to be valued by C&D.
At the 2020 interim results meeting, Lin Weiguo, chief executive of C&D International, revealed to investors that the urban renewal business will become the focus of the company's development. According to the official micro disclosure of C&D Real Estate, as of December 31, 2020, the total area of the contract signed is about 1.5 million square meters.
According to the announcement of C&D Real Estate, real estate development revenue and urban renewal business revenue accounted for 38.15% and 52.57% of revenue in the first half of 2020, respectively, and the gross profit margin was 13.91% and 55.31%, respectively.
Liabilities and financing
Choice, most of the time, also means giving up.
"Net debt is relatively high for a certain period of time, which is normal." C&D management appeared calm.
According to the financial report for the first half of 2020, C&D International stepped on two red lines, and the asset-liability ratio after excluding pre-collection was 79.24%, and the net debt ratio was 247.68%, an increase of 71.9 percentage points over the end of 2019, and the debt-to-equity ratio increased from about 234.70% at the end of 2019 to about 303.25%, due to the increase in shareholder loans and bank loans during the period.
The net debt ratio is particularly conspicuous, which once exceeded 300% in 2017 and fell to 242.08% and 175.74% in 2018 and 2019, still at the highest level in the industry.
According to the financial reports of previous years, from 2017 to 2019, the current liabilities of C&D International were 16.642 billion yuan, 25.497 billion yuan and 57.665 billion yuan, accounting for 57.9%, 48.9% and 60.08% of the total liabilities, respectively; the new soil storage area was 1.37 million square meters, 5.56 million square meters and 7.56 million square meters, respectively.
In the first half of 2020, current liabilities continued to rise to 69.539 billion yuan, and total liabilities reached 121.2 billion yuan, an increase of 26% over the end of 2019, and current liabilities accounted for 57.34%.
The rapid rise in soil storage area means that there is higher financial pressure. As of the first half of 2020, the net cash generated by C&D International's operating activities was -12.304 billion yuan, compared with -153 million yuan in the same period of 2019.
However, in terms of short-term compensation, C&D International actually has no pressure.
At the end of 2019, C&D International held 11.6 billion yuan in cash, an increase of 154% year-on-year, corresponding to interest-bearing liabilities of 5.763 billion yuan within one year, and the cash short-term debt ratio was nearly 2 times. In the first half of 2020, the debt repaid in one year was about 2.685 billion yuan, and the cash held was about 9.929 billion yuan, which was enough to cover short-term debt.
In fact, C&D does not need to retain too much cash, and the status of state-owned enterprises can support a certain expansion cost.
"The company itself pays less attention to the net debt ratio of C&D International, because C&D International is an important listing platform for the parent company, and the parent company provides greater financial resource support for it." Lin Weiguo also said.
As a holding subsidiary of C&D Real Estate and a member of C&D Group, C&D International can enjoy great advantages in shareholder borrowing and financing.
In 2019, C&D International accepted a total of 23.08 billion yuan in real estate loans from C&D, an increase of 43.5% year-on-year, accounting for the largest proportion of the company's long-term interest-bearing liabilities. The financing interest rate of C&D Real Estate itself is very low, and the bond ratings issued so far in 2018 are all AAA, and the average bond issuance interest rates in 2019 and the first half of 2020 are only 4.06% and 3.95%.
In the first half of 2020, C&D International's interest expense on loans to C&D Properties rose to RMB666 million. During the period, it also entered into a loan framework agreement with C&D Real Estate to seek 40 billion yuan of loan financing from C&D Real Estate at an annual interest rate of 5.5% to promote project development.
In December 2020, the announcement also disclosed that C&D Real Estate provided a loan line of 9.5 billion yuan to Xiamen Yiyue Real Estate, an international subsidiary of C&D International.
As of the end of June 2020, the total liabilities of C&D Real Estate were 185.064 billion yuan, an increase of 20.60% over the end of 2019, the asset-liability ratio was 81.06%, an increase of 3.92 percentage points over the end of 2019, and the asset-liability ratio after deducting goodwill and intangible assets was 81.18%, an increase of 3.9 percentage points over the end of 2019.
From the perspective of short-term solvency, the current ratio of C&D real estate in the first half of 2020 was 1.74, an increase of 2.34% compared with 1.70 at the end of 2019; the quick ratio was 0.47, down 14.48% from 0.54 at the end of 2019, and the liquidity performance of funds was not satisfactory.
C&D International's current ratio in recent years is also going down, from 2016 to 2018, the data was 2.60, 2.33, 2.29, respectively, and fell to 1.84 in 2019, a new low in the past 5 years; in the first half of 2020, it was 1.87.
However, compared with other housing enterprises of the same scale, C&D financing channels are more smooth. 2020 should be the most frequent year for financing in the entire C&D system, with no less than 20 bond issuance dynamics alone, including bank loans, asset securitization ABS, corporate bonds, medium-term notes, short-term financing bonds and overseas syndicated loans.
Whether it is C&D International, the controlling shareholder, or the group level, these financings will be used directly or indirectly for the expansion of the real estate business to a greater or lesser extent.
Of course, the support of major shareholders can help C&D International leverage, but it also needs to be digested more.
Compared with real estate stocks, asset-light and highly profitable property stocks are more favored by capital.
At the beginning of 2020, the management clearly proposed to spin off the property listing, but the scale and profitability of the property sector were still insufficient. The management said in the middle of the year: "The plan for the property spin-off has been considered and studied, but it is difficult to say whether it can be realized. ”
C&D Property finally chose the form of introduction to the listing, which did not require IPO financing, which also made the progress faster. It took about 92 days to land on the capital market at the end of 2020, becoming the third mainland property stock listed in this form after China Overseas Property and Country Garden services.
The scale of C&D Property is small, the prospectus discloses that the area under management is 21.65 million square meters, the contract area is 39.59 million square meters, and there are 203 projects under management, with a layout of 35 cities across the country, of which Fujian Province contributes 72% of the total revenue.
In terms of profitability, the gross profit margin in the first half of 2020 was 24.3%, lower than the industry average, and the "package dry system" should be the primary reason for the low gross profit margin. In addition, the renewal rate showed a downward trend year after year, from 95% in 2017 to 85.7% in the first half of 2020, which is different from the industry average of 98%.
At the end of 2023, more than half of C&D Properties' property contracts will expire, which is a signal to be vigilant.
However, compared with scale and profitability, marketization is the highlight of C&D Properties – data show that more than 60% of its revenue comes from independent third parties.
In addition, C&D Property was split off from C&D International, and after the split, C&D Property became an international joint venture company, and was an indirect subsidiary of Xiamen C&D Property and C&D Real Estate. In this listing, C&D International distributed the shares of C&D Property in kind to qualified C&D International shareholders on a 1-to-1 basis.
Although it is a state-owned enterprise system, C&D Property has achieved executive shareholding and has a strong endogenous driving force for future development. In fact, the same is true at the real estate level, and a high degree of marketization is the characteristic and advantage of C&D.
Thin red line | Between reason and madness, there is only a thin red line.