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Public company info - Midea Real Estate Holding Limited , 03990.HK
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Midea Real Estate Holding Limited, 03990.HK - Company Profile
Chairman HAO Hengle
Share Issued (share) 1,231,000,000
Par Currency Hong Kong Dollar
Par Value 1.0
Industry Property Development
Corporate Profile Business Summary: The Group consists of three principal business segments: (1) property development and sales; (2) property management services; and (3) investment and operation of commercial properties. Performance for the year: During the year, the Group’s revenue was RMB41,138.57 million and the gross profit was RMB13,007.48 million, representing a year-onyear increase of 37% and 32%, respectively; the core net profit* for the year was RMB4,177.77 million, representing a year-on-year increase of 27%. Business Review (I)Review of the Real Estate Industry Resilient development of real estate industry under precise and thorough policy control. Operating under the motto of “housing is not for speculation”, regulation and control of the real estate industry had been precise and thorough in 2019, with the implementation of policies varying by city, district and situation. Against the backdrop of a complex environment at home and abroad, the real estate industry showed remarkable resilience and maintained a steady growth momentum, with the national sales of commercial housing exceeding RMB15 trillion. With the tightening of real estate financing, financing costs had increased. The financing environment initially improved then subsequently deteriorated throughout the year, and hence financing became increasingly difficult. Restrictions were placed on traditional financing channels such as overseas debt issuances, trusts, and developer loans thereby increasing the financing costs for real estate enterprises. Shift in logic for development amidst intensified differentiation in the industry and market. Differentiation intensified in the industry and real estate market owing to precise and thorough regulation of the industry. Customers had consciously become aware of product offerings, the livability of real estate had regained importance, and hence there had been a profound shift in logic for development in the industry ushering in an era where customer-oriented products will pay dividends. (II)Sales Performance Sales grew steadily. During the year, the contracted sales of the Group and its joint ventures and associates reached approximately RMB101.23 billion, representing a year-on-year increase of 28.1%, with a contracted sales area of approximately 10.023 million square metres, representing a year-on-year increase of 26.8%. Having benefited from the tier upgrade of certain cities where we operate, the Group’s average selling price increased by 1.1% year-on-year to RMB10,100 per square metre. Sales grew strongly in national strategic city clusters. As the integration of the Yangtze River Delta becomes a national strategy and the benefits of the Guangdong-Hong Kong-Macao Greater Bay Area materialise, the Group had started to reap dividends from its forward-looking business planning. During the year, the Group achieved approximately RMB36.3 billion in contracted sales in the Yangtze River Delta, representing a year-on-year increase of approximately 43.8%, and achieved approximately RMB18.7 billion in contracted sales in the Pearl River Delta, representing a year-on-year increase of approximately 9.5%. The contracted sales in the Yangtze River Delta and the Pearl River Delta accounted for more than 50% of the Group’s total sales. Results from regional expansion through penetration were showing. During the year, expansion cities had increasingly contributed to the regional results; sales of companies located in the Shanghai-Jiangsu region had exceeded RMB20.0 billion while at the same time, sales in Northern China, Central China and the Pearl River Delta had all exceeded RMB10.0 billion, respectively. Results from the contribution of higher-tiered cities had increased. Owing to the strategy of tier upgrades of certain cities, during the year, the proportion of contribution of results from higher-tiered cities had increased, with tier-one/strong tiertwo cities accounting for 22.8%, and tier-two cities accounting for 42.7%. (III) Business Layout During the year, the Group had continued to expand towards the central cities and key tier-one and tier-two cities, and implement the strategies of regional expansion through penetration and city upgrades. As at 31 December 2019, the total gross floor area (“GFA”) of the Group’s land reserves* reached 52.63 million square metres, comprising 278 property development projects, covering 59 cities in 18 provincial-level administrative divisions across China, 61 of which were participated through joint ventures and associates. The “two secondary business lines” (兩翼) had continued to develop and empower focus to be on the principal business of real estate development. We had achieved breakthroughs in intelligent industrialisation: our self-developed integrated system for smart living was fully launched; the functions of the first phase of the artificial intelligence (“AI”) community and home hub were developed; a solid foundation for the development and market expansion of multiple smart scenarios was laid by the integration of a system platform integrating equipment, data and business layers; and the building industrialisation strategy was implemented: the Green Prefabricated Building Industrial Parks in Xuzhou and Handan were put into production and trial operation respectively; Guangdong Ruizhu Youka Technology Co., Ltd. (廣東睿住優卡科技有限公司), in which the Company holds interests, launched the first production line for assembled prefabricated sanitary ware in China. (III)Financial Performance During the year, the Group continued to capitalise on its low-cost financing advantage, expand financing channels, pro-actively lower leverage, and improve financial management efficiency, all to provide sufficient capital support for the Group’s stable development. Strengthening financing competitiveness by reducing financing costs bucking the trend. Midea Real Estate Group Limited, a major subsidiary of the Company, had a company credit rating of AAA with stable rating outlook. During the year, the weighted average effective interest rate of the Group’s total borrowings further decreased to 5.87%, of which the weighted average effective interest rate of new borrowings was 5.76%, further consolidating the advantages of low-cost financing. In addition, the Group continued to expand its financing channels to provide sufficient funds for the Group’s development. Strengthening our “capital generation” ability (造血能力) to pro-actively lower leverage. During the year, the Group continuously worked to improve its capital management capabilities by speeding up sales and payment collections to strengthen its “capital generation” ability, achieving a decline in net gearing ratio for three consecutive years. As at 31 December 2019, the net gearing ratio was 89.0%, representing a decline of approximately 8 percentage points as compared to the end of 2018. Further optimising our debt structure. During the year, the Group continuously optimised its debt structure by using new long-term borrowings to repay its existing short-term borrowings, thereby enhancing its security boundary. As at 31 December 2019, the Group’s proportion of bank loans and bonds increased from 62% to 85%, and the proportion of interest-bearing liabilities due within one year decreased from 34% to 17%, respectively, as compared to the beginning of the year. Ample financial resources. As at the end of the year, the Group had total cash and bank deposits of RMB26,935.62 million, and unused credit facilities from banks of RMB83,240 million. Enhanced capital operation capability. As its overall strength continued to increase, the Group gained more publicity and recognition in the capital market. During the year, the Company was included in the constituent of Hang Seng Composite LargeCap & MidCap Index and Hang Seng Stock Connect Greater Bay Area Composite Index. It completed share placements to improve the liquidity of its shares in the stock market, and was recognised by a variety of institutions and renowned banks, which raised their target prices of our shares. (V) Operation Measures In the new environment where “the real estate industry is the manufacturing industry”, the traditional extensive development model is no longer applicable. Having inherited Midea’s manufacturing DNA, the Group adopts and adheres to the refined management model of the manufacturing industry to achieve steady and high-quality growth. Operating Quality “SIFOB” integration enhanced development efficiency: Guided by refined management, the integration of “StrategyInvestment-Financing-Operation-Business” unifies the entire business process chain from strategy, investment and financing to operation positioning and indicator assessment to comprehensive evaluation of projects, identification of business risks, and improvements in the scientific decision-making of investments and management, thereby achieving comprehensive improvements in development efficiency and operating quality. Digitisation supports multi-business operations to achieve synergy and inter-connection. Based on the characteristics of the real estate industry, we had applied the refined thinking model of the manufacturing industry to achieve integration and inter-connection in the value chain of the main business flow with the data flow, building up capabilities in the coordinated management and control of business and finance, the efficient management and coordination of large supply chains and costs, and customer-oriented services. Product Quality Resolutely promoting safe production management system for projects, and maintaining a solid and safe line of defence. To improve the Group’s safety management and control structure, The group had established a veto system for safety incidents and implemented a “main contracting management model” to achieve the unified management and control of safety and quality, so as to build a solid foundation for production safety. The group had promoted new construction systems and used new technologies, materials and processes to reduce common issues in engineering quality and improve customer satisfaction. Strengthening the core competitiveness of “Smart Health” products by focusing on customers. The group had fully upgraded our product strategy and product system to promote product innovations, having “5M* Smart Health Community” as the foundation and the four main product series as the pillars. The group had conducted in-depth customer demand surveys in order to promptly adjust our product strategies and at the same time build up strength in our product lines. Organisational Quality Streamlining our headquarters, strengthening our front line, and implementing a three-tiered authorisation structure. Our headquarters was further streamlined and specialised, where the model of detailed management was replaced with dynamic monitoring and results-based evaluation, thereby achieving aspects of professional, mechanism and process delegation to the regional companies. At the same time, by continuously improving decision-making and assessment mechanisms, The group were able to maintain control and risk management functions over the regional companies. Transforming the organisation to empower development. In switching to the model of manufacturing thinking, promptly upgrading the organisational structure, redesigning the organisation and processes to align with strategic transformation and upgrades, creating a long-term oriented symbiotic organisational structure, as well as adapting to strategic transformations and changes in the external environment, this will achieve the integrated development of quality, efficiency, structure and size. Prospects: Market Outlook Affected by the outbreak of the novel coronavirus (“COVID-19”), China’s economy and the real estate industry will face greater uncertainty and a gloomy growth outlook in 2020. However, The group believe that COVID-19 will not have any long-term impact on them, and there will be no fundamental change in the trend of maintaining stability in development. As urban areas expand, the demands for purchasing and improving residences continue to be huge. The trend of transition from rapid growth to quality development of the real estate sector, the foundation of China’s economy, will become more evident. The group predict that the overall regional development and interconnection between regions and cities through the coordinated development of city clusters will become an inevitable trend in regional development, but differentiation of cities at different levels will continue, and the real estate market of core cities is expected to grow steadily. Competition for talent will continue to intensify everywhere, and more tier-two and stronger tier-three cities are expected to implement such talent policies. Therefore, cities with sound industrial infrastructure and net inflow of population will further demonstrate stronger development potential. Development Strategy and Outlook China’s real estate industry is undergoing profound changes: its traditional development model, the traditional governance model of real estate enterprises, as well as customer mix and changes in lifestyles are undergoing rapid transformation. The year 2020 is a year of strategic consolidation of the Group. The group will consider customers to be our focus, pursuing quality growth as our target, and products and services as the basis for competition. Through digital systems, The group will be able to implement refined management, create room for further growth and add new dimensions to our competitiveness. The Group will study market changes thoroughly, set its investment pace reasonably, expand low-cost land bank through diversified means and continue to enhance its investment blueprint with a focus on investing in and expanding to provincial capitals, tier-two cities, and stronger tier-three cities. For cities that are in line with its deep penetration strategy and possess room for development, the Group will continue to gain further penetration. For cities that have an edge for deep penetration, the Group will strive to attain a leading position in the market, higher brand premium and profit commitments. The group will focus on lean management and strive to build operational, product, service and marketing capabilities. By riding the industry trends in green and healthy residences and keeping in mind users’ pain points, The group will carry out forward-looking technology research, develop and upgrade products, maintain the core competitiveness of our products in 5M smart and healthy communities, and create new product advantages and development opportunities. The group will also strengthen the establishment of our own channels, expand customer base and marketing through multiple channels, scientifically arrange prompt product supply and aggressively achieving profits to make up for the impact of COVID-19 on sales performance in the first quarter of 2020. Through upgrading to total customer relationship with a focus on customers in terms of professionalism, perspective and process in a holistic manner, The group will promote the industry’s first integrated property service and customer service model, attach importance to community operations and building customer relationship, and achieve the objective of continuously offering value to customer. The group will continue to improve capital operation capabilities, broaden financing channels, strengthen cooperation with banks in credit extension at the head-office level, and increase the proportion of low-cost, long-term financing such as bank loans and direct financing. The group will also enhance our debt structure and maintain financing costs with industry competitiveness on an ongoing basis. The group will adhere to the strategy of having one principal and two secondary business lines and continue to promote the introduction of industries under the latter. The strategy of carrying out independent research and development together with ecological construction will be adopted for intelligent industrialisation and building industrialisation to expand the AI capabilities of smart systems of residences in the community, upgrade integrated smart systems, promote the full implementation of Artificial Intelligence of Things (AIoT) and complete coverage of scenarios in smart dwellings, and build a more completed smart hardware and software ecosystem. The group have established an industry and product research institute to expedite technology research and development in and layout of the ecosystem of prefabricated interior decoration through the introduction of technologies and materials from Japanese research institutes.

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