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Public company info - Zhenro Properties Group Limited , 06158.HK

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Zhenro Properties Group Limited, 06158.HK - Company Profile
Chairman HUANG Xianzhi
Share Issued (share) 4,123,000,000
Par Currency U.S. Dollar
Par Value 1.0E-5
Industry Property Development
Corporate Profile Business Summary: The group is a large comprehensive property developer in the PRC focusing on the development of residential properties and the development, operation and management of commercial and mixed-use properties. Performance for the year: For the years ended December 31, 2014, 2015 and 2016 and the six months ended June 30, 2016 and 2017, the group's revenue amounted to RMB3,039.6 million, RMB4,310.2 million, RMB14,603.5 million, RMB5,404.5 million and RMB8,085.2 million, respectively. During the same period, the profit and total comprehensive income for the period was RMB80.1 million, RMB418.9 million, RMB1,243.2 million, RMB559.2 million and RMB376.6 million, respectively. Business Review: Zhenro Properties Holdings, the onshore holding company of the group was established in July 2015 as Zhenro Group’s exclusive platform to carry out its property development business founded in 1998. The group has inherited from Zhenro Group extensive experience and sophisticated property development capabilities. Zhenro Group has earned the accolade of a top 100 real estate developer in China for 13 consecutive years since 2005 in terms of its comprehensive property development capability by various industry research institutes. According to the China Index Academy Report, Zhenro Group was one of the largest unlisted PRC real estate developers, and it was ranked 23rd among all real estate developers in China in terms of comprehensive property development capability and ranked 24th among all real estate developers in China whose contracted sales were in excess of RMB10 billion in terms of market share by contracted sales in 2016. According to the China Index Academy Report, in 2016, Zhenro Group accounted for approximately 0.31% of the PRC real estate market in terms of contracted sales. Headquartered in Shanghai, the group has an active presence in the Yangtze River Delta Economic Region, the Midwest China Economic Region, the Bohai Economic Rim and the Western Taiwan Straits Economic Zone. As of October 31, 2017, the group had a property portfolio of 81 property projects with an aggregate GFA attributable to the group of approximately 11.5 million sq.m., including (i) the total GFA available for sale and total leasable GFA for completed properties, (ii) total GFA for properties under development and (iii) total GFA for properties held for future development. The group's property projects were located in 17 cities in four core business regions at various stages of development, of which 64 property projects were owned and developed by the group, ten property projects were developed by the group's Joint Ventures and seven property projects were developed by the group's associated companies. The group attribute the group's success to the group's distinctive market positioning strategy, strong land sourcing capability, standardized property development procedures and dynamic realizable-market-value-based inventory management approach, all of which enable the group to replicate the group's success as the group expand throughout China and create brand recognition. In particular, the group position the group's brand as “改善大師 (home upgrade master),” with a vision of offering customer-oriented, quality residences to affluent mid- to high-end customers with home-upgrade demand. The group believe such customers have relatively high disposable income and strong purchasing power and place higher priority on quality rather than price in their property purchase decision making process. To implement the group's market positioning strategy, the group has developed four product series of residential property projects since August 2016, namely, the “優家 (Great Home)” series, the “精工 (Craftsman)” series, the “大師 (Masterpiece)” series and the “典藏 (Collection)” series, each targeting different segments of the group's customers. The group's property development process, starting from site selection to project planning and design, is also centered on the needs and preferences of the group's targeted mid- to high-end customers. The group believe the group is able to command a premium in the sales price for the group's residential properties in certain of the group's markets, as compared to properties of similar quality. For instance, according to the China Index Academy Report, by comparing with residential properties with similar characteristics in close proximity, such as project scale, property unit size, layout and use for the same year, and by comparing the average selling price per sq.m. of the properties in close proximity, the average selling price per sq.m. of Nanjing Zhenro Royal Fame and Nanjing Zhenro Splendid Land, two selective residential projects developed and sold by the group in 2016, were found to be 20.4% and 15.8% higher than that of comparative residential properties in their respective close proximity, respectively, which the group believe are primarily attributable to the group's customer-oriented approach. The group's independent property valuer, Jones Lang LaSalle Corporate Appraisal and Advisory Limited, or JLL, valued the group's properties based on the assumption that the seller sells the property interests in the market without the benefit of a deferred term contract, leaseback, joint venture, management agreement or any similar arrangement, which could serve to affect the values of the property interests. In the valuation of property interests by using comparison method, JLL has identified and analyzed various relevant sales evidences in the locality which have similar characteristics as the subject properties such as nature, use, size, layout, accessibility, environmental quality of the properties. The selected comparables are basically located in the area close to the subject properties or within the same development. Appropriate adjustments and analysis are considered to the differences in location, size and other characters between the comparable properties and the subject properties to arrive at an assumed unit rate for the subject properties. In the valuation of property interests by using income approach, JLL has taken into account the rental income of the subject properties derived from their existing leases and/or achievable in the existing market with due allowance for the reversionary income potential of the leases, which have been then capitalized to determine the market value of the subject properties at an appropriate capitalization rate. Where appropriate, reference has also been made to the comparable sales transactions as available in the relevant market. In the valuation of property interests which are construction in progress, JLL has assumed that they will be developed and completed in accordance with the latest development proposals provided to the group by the Group. In arriving at its opinion of values, JLL has adopted the comparison approach by making reference to comparable sales evidence as available in the relevant market and have also taken into account the accrued construction cost and professional fees relevant to the stage of construction as of the valuation date and the remainder of the cost and fees expected to be incurred for completing the development. JLL has relied on the accrued construction cost and professional fees information provided by the Group according to the different stages of construction of the properties as of the valuation date, and did not find any material inconsistency from those of other similar developments. The group's market position, together with the group's sizable land bank, the group's quality product offering and the group's property development and management capabilities along with strong brand recognition the group achieved, all contributed to the group's sustainable and rapid expansion and financial success in the past. The group's revenue grew at a CAGR of 119.2% from RMB3,039.6 million in 2014 to RMB14,603.5 million 2016, and the total GFA delivered grew at a CAGR of 69.1% from 437,595 sq.m. in 2014 to 1,251,117 sq.m. in 2016. The group's revenue increased by 49.6% from RMB5,404.5 million in the six months ended June 30, 2016 to RMB8,085.2 million in the same period in 2017 and the group's total GFA delivered increased by 37.5% from 536,262 sq.m. in the six months ended June 30, 2016 to 737,522 sq.m. in the same period in 2017. The Group's Business Model The group strive to develop high-quality residential properties primarily for mid- to high-end customers with home upgrade demand. The group is also engaged in the development of commercial and mixed-use properties to maintain a balanced development portfolio. In addition, the group currently hold as investment properties the commercial spaces of the group's shopping malls at the mixed-use properties the group developed. Moreover, the group provide commercial property management services to certain commercial properties the group developed through the group's commercial property management subsidiaries. Leveraging the group's comprehensive and high quality development, operation and management capabilities, the group has established a track record of bringing to market large-scale, mixed-use property projects that encompass residential, SOHO and office, retail and/or leisure use spaces. As of June 30, 2017, the group had one mega mixed-use property project, namely Nanchang Zhenro The Capital of Great Loch, with a total GFA exceeding 1.0 million sq.m. and four large-scale residential and mixed-use property projects, namely Putian Zhenro Fortune Center, Changsha Zhenro Fortune Center, Nanping Zhenro Fortune Center and Nanchang Zhenro Royal Sunrise, each with a total GFA exceeding 0.5 million sq.m. The group outsource the construction work of the group's property development projects to qualified contractors. Many of the general contractors the group has worked with hold the Premium Grade Constructor Qualification in the PRC. Due to the highly competitive and evolving nature of the real estate industry in China, the group is required to constantly monitor the changing market condition and adjust the sales prices of the group's projects as appropriate. Suppliers and Customers The group's major suppliers are construction material suppliers and construction contractors. The five largest suppliers accounted for approximately 43.0%, 55.2%, 41.0% and 46.5% of the group's total purchases for the years ended December 31, 2014, 2015 and 2016 and the six months ended June 30, 2017, respectively. The group's single largest supplier for each of the years ended December 31, 2014, 2015 and 2016 and the six months ended June 30, 2017 accounted for approximately 30.0%, 31.1%, 22.5% and 28.7% of the group's total purchases, respectively. As of June 30, 2017, the group's business relationships with these major suppliers had generally been over three years. The group's five largest customers are individual and corporate purchasers of the group's residential or commercial properties. Prospects: The group strive to become one of the largest real estate developers in the PRC. (i) to enhance leading position in existing markets and strategically expand into other selected markets; (ii) to focus on high quality and balanced future growth; (iii) to utilize diversified investment strategy and identify new growth opportunities; (iv) to further enhance the group's customer-oriented product offerings, brand equity and customer loyalty; (v) to remain dedicated to prudent financial policies and optimize the group's capital structure; and (vi) to attract, retain and motivate skilled and talented employees.

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