New acquisition of Wang Shimao: sales target of 210 billion, advancing into the TOP10

Phoenix Real Estate Author: Wang Yajing

Returning to the top ten sales and 10% net profit margin of M&A projects is the latest goal and minimum requirement within Shimao Real Estate.

Xu Shitan, who has successfully created Net red works such as Shimao Riverside Garden and Shimao Shenkeng Hotel, has a pride in his heart. In his first year as president of Shimao Real Estate, he set the company's sales target at 210 billion yuan and entered the TOP10 ranks.

In order to achieve overtaking in curves, Xu Shitan decided to go to the road of mergers and acquisitions. At the 2018 performance meeting, Xu Shitan said that more than 70% of Shimao Real Estate's soil reserves in 2019 will come from mergers and acquisitions.

This is not an empty phrase. According to the data, since March 2019, Shimao Real Estate has invested 20 billion yuan and successively taken over more than 20 projects from many real estate enterprises such as Taihe Group, Wantong Real Estate, Mingfa Group, yuetai shares and so on.

According to Xu Shitan, "Shimao still has some acquisition and cooperation projects, but it has not yet been made public."

Public data show that in the first quarter of this year, Shimao Real Estate completed nearly 100 billion yuan of value reserves, of which nearly 85% was obtained through mergers and acquisitions.

On the way to chasing scale, Xu Shitan is showing his desire.

"The net profit margin of cooperative projects should reach more than 10%"

On June 24, a land battle was staged in Shenzhen's soil auction market. This is the largest supply of residential land in the Shenzhen land market in the past 20 years, attracting more than 80 housing enterprises.

In this "epic land auction" with more than 300 lifts, the total transaction price nearly reached the maximum limit price of 22.4 billion. Compared with Zhonghai, Longguang, Guangzhou Yuexiu and other winning real estate companies, Shimao, which has recently been in the limelight, is "low-key" like a supporting role.

According to Xu Shitan, now is a good time to acquire mergers and acquisitions. "The land for public bidding and auctioning is a bit expensive, and I don't understand it, so I'm a little surprised."

If you put aside the bidding, auction and listing market, Shimao may be the most "radical" enterprise in the real estate industry mergers and acquisitions this year. According to the data, since March 2019, Shimao Hao has invested 20 billion yuan and successively taken over more than 20 projects from many housing enterprises such as Taihe Group, Wantong Real Estate, Mingfa Group, yuetai shares and so on.

In response to the cooperation, Shimao relevant personnel told Phoenix Real Estate that in view of the tight domestic liquidity in the fourth quarter of 2018 and the first quarter of 2019, there are many good cooperation opportunities. "Some cooperation projects have been brewing since before the Spring Festival, and the land price is relatively advantageous."

Zhang Hongwei, chief analyst of Tongce Research Institute, also revealed, "I heard that some of the projects acquired by Shimao, including a project of Taihe, were negotiated before the end of last year, but the signing of the contract was completed this year, and the final announcement was made." ”

According to incomplete statistics, Shimao Real Estate completed nearly 100 billion yuan of value reserves in the first quarter of this year, of which nearly 85% was obtained through mergers and acquisitions. Shimao said that as of now, the value of the goods obtained by the company through project cooperation has exceeded 100 billion yuan (before equity).

According to Shimao, the company plans to spend nearly 40 percent of its sales or nearly 50 percent of its collection on land investment this year. According to the sales of 210 billion yuan, the amount of land purchased by Shimao this year will reach 84 billion yuan.

In Zhang Hongwei's view, expanding soil reserves through mergers and acquisitions is a wise choice. He said that the price of land in the open market is high now, and the return on investment is not profitable. This year, if you develop and sell land through bidding, auctioning, and listing, it will certainly not make money. In addition, some enterprises are now relatively tight in terms of capital, and the sale of some assets is still cost-effective for the acquirer, and there is still a little profit. "In fact, some large enterprises are looking for this way (mergers and acquisitions) layout, but recently Shimao may be more obvious."

The above-mentioned person revealed that "when the company chooses the cooperation project, it will mainly focus on the quality of the project, profit margin and sales cycle, and the net profit margin needs to reach 10% or more." ”

"For Shimao, similar acquisitions also reflect the orientation of its curve expansion." Financial commentator Yan Yuejin said that since Shimao entered the 100 billion level in 2017, such companies will continue to seek new impetus in the expansion of such performance scale, and the company has also made it clear that 2019 is its merger and acquisition year, so the merger and acquisition action will be more active.

In fact, this year's housing market is still tough. According to media reports, some housing enterprises have attracted the attention of regulators due to the aggressiveness of land acquisition, and the central bank and the Securities Regulatory Commission will tighten the public market financing of some housing enterprises, including bonds and ABS products.

The report pointed out that Xuhui, China Railway Construction, Gemdale and other real estate companies, although these companies denied receiving any written notices, but the financing market in May "cooled down" the trend is very obvious. According to the monitoring data of Tongce Research Institute, in May 2019, 40 typical listed real estate enterprises completed financing equivalent to a total of 36.799 billion yuan, down 52.07% year-on-year. Among them, corporate bonds fell the most, raising a total of 9.585 billion yuan, down 79.74% from 47.313 billion yuan last month.

Back to the top 10

Under pressure, Shimao's unprecedented mergers and acquisitions are behind the desire for scale.

Xu Shitan set a target for the company in 2019: sales target to 210 billion yuan, and to enter the TOP10 ranks. So, how far is Shimao from the preset goal?

On June 5, Shimao Real Estate disclosed unaudited operating data. According to the data, in the five months ended May 31, 2019, Shimao's cumulative contracted sales totaled approximately RMB71.96 billion, with a total contracted sales area of 4,027,200 square meters, an increase of 39% and 25% respectively over the same period last year.

But from the ranking point of view, the distance between Shimao and the TOP10 is still not small. Whether it is calculated according to the amount of equity or the amount of trading in the first five months of this year, Shimao Real Estate ranks 15th in the list, and the difference with the amount of housing enterprises ranked 10 is more than 10 billion.

However, in the 2018 sales ranking, Shimao ranked 11th with 176.12 billion yuan, a difference of 24.55 billion yuan from the previous Longhu and less than 5 billion yuan from the latter China Merchants Shekou.

For the expectations for 2019, the above-mentioned insider said, "The company's goal of 210 billion yuan is a conservative estimate based on a 60% dematerialization rate, and the actual demobilization rate of Shimao in 2018 is 65%, and it is expected to improve in 2019." ”

In contrast, the target of the former Longhu in 2019 is tentatively set to grow by 10%, according to which it is about 220 billion yuan.

In the real estate industry, the amount of land reserves often determines the size of housing enterprises in the future. Where to lay out, the cost of obtaining land, will affect how far a housing enterprise can go.

According to this, as of December 31, 2018, Longhu's land reserve totaled 66.36 million square meters, the equity area was 45.59 million square meters, and the average cost of the land reserve was 5218 yuan / square meter, and the location obtained by the project not only focused on first- and second-tier cities, but also moderately laid out around the urban agglomeration within the metropolitan area.

In the Guangdong-Hong Kong-Macao Greater Bay Area, which is regarded as a "place where soldiers must compete", Longhu has laid out 6 cities including Guangzhou, Zhuhai and Hong Kong, with a total land reserve of about 2.5218 million square meters. According to the average cost, the value of Longhu's soil storage in the Guangdong-Hong Kong-Macao Greater Bay Area is only 13.159 billion.

In the same period, Shimao's pre-equity land reserve was about 55.38 million square meters, the equity soil reserve area exceeded 37 million square meters, the total value of goods exceeded 900 billion yuan, and the average floor price was 5386 yuan / square meter. In the Guangdong-Hong Kong-Macao Greater Bay Area, the company's current land reserve value is 200 billion yuan.

However, Shimao's land investment in 2017 was mainly concentrated in first- and second-tier cities, with third- and fourth-tier cities accounting for only 12% of the investment amount, but in 2018, the proportion of investment in third- and fourth-tier cities rose to about 50%.

From this point of view, Shimao and Longhu have their own advantages and disadvantages. In the face of the concentration of "strength players", it is obviously not easy for Shimao to occupy a place.

For Shimao, the future has a long way to go. If Xu Shitan's sales target of 210 billion yuan is achieved in 2020, the name of Shimao will appear again in the top ten real estate sales, according to the last time it appeared in this list, Shimao has been away for 5 years.