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LVGEM (China) Announces 2021 Annual Results Author: CHINA LVGEM

[For Immediate Release]                                                    30 March 2021


(Stock code: 00095.HK)

LVGEM (China) Announces 2021 Annual Results


(30 March 2022, Hong Kong) LVGEM (China) Real Estate Investment Company Limited (“LVGEM (China)” or the “Company” or together with its subsidiaries, the “Group”; stock code: 00095.HK) today announced the audited consolidated results of the Company and its subsidiaries for the year ended 31 December 2021.


In 2021, the real estate industry experienced “boom” and “pains”. In the second half of the year, policy regulation was intensively introduced, and measures such as “three red lines”, “centralized land supply” and “centralized loan management” promoted two-way tightening at both of supply and demand, and constantly consolidated the long-term management system of “stability” of real estate. During the year, LVGEM China actively sized up the situation and proactively faced the macro environments, adhered to the strategic policy of “ensuring safety and promoting development”, and maintained the long-term stability and improvement for various business indicators of the Group. For the 12 months ended December 31, 2021, the total revenue of the Group was about RMB 4,378 million, and the contract sales amount generally reached the target at the beginning of the year. The gross profit is about 2,188 million yuan, and the gross profit margin is about 50%, which remains high in the industry. During the year, the profit was RMB 1,335 million, and the profit attributable to shareholders of the company was RMB 1,153 million. The profit attributable to shareholders decreased compared with the same period last year, mainly due to the decrease in the amount of recognized income and the one-time evaluation value-added of RMB 3.85 billion during the injection of Baishizhou project included in the comparison of last year. The basic earnings per share is RMB 22.61 cents, and the board of directors does not recommend paying dividends for the year ended 31 December 2021.


Three urban renewal projects in Shenzhen have gradually set sail, and major breakthroughs have been made in Baishizhou construction

The Group is far sighted, aiming at the market expansion, upgrading and growth potential in the Greater Bay Area, adheres to the focused development in the Greater Bay Area for over 30 years, relies on the planning and layout of “Focusing on Core Cities and Cities’ Core Areas”, locks in low-cost and high-value land resources through urban renewal, and actively participates in Shenzhen, Zhuhai and other urban renewal projects and commercial development projects in the core district of the Greater Bay Area. Leveraging its rich experience and resources, the Group has laid a solid foundation and grown into a unique real estate developer and regional leading enterprise among the core cities in the Greater Bay Area. During the year, the Group continued to make efforts in the field of urban renewal projects, and the three projects in Shenzhen gradually commenced with a record construction area; Zhuhai Dongqiao project (also known as “LVGEM Royal Bay”) was officially presold in September, which has become a regional popular property project with superior location and garden landscape design. The unit price per square meter is higher than that of the surrounding areas, and the sales progress is satisfactory.


Baishizhou urban renewal project, as a star project attracting much social attention, has always been known as “Grand Urban Renewal Project in Shenzhen”. During this year, the Group has been confirmed as the operating entity of Phase I of the Shenzhen Baishizhou Urban Renewal Project in April, and obtained the Planning Permit for Construction Land and construction commencement permit in July, which signifies that the Baishizhou Urban Renewal Project has successfully commenced and entered the stage of substantive development. According to the construction progress, by the end of 2021, the foundation ditch project has been basically completed, and the phase I project is expected to start large-scale pre-sale in 2023. At that time, the land value will be released, a large amount of cash flow will be generated, the scale and profits of the Group will achieve leapfrog growth, the brand value will rise rapidly, the capital market value is expected to further expand, and the development of the Group will drive into the fast lane. In addition, among the three urban renewal projects in Shenzhen, Shenzhen LVGEM Liguang project has completed the signing rate of 100%; The contract signing rate of Phase II of Shenzhen LVGEM Mangrove Bay No.1 Project is 100%, and has obtained the confirmation of the implementation subject and the construction engineering planning permit. At present, the foundation ditch support and earthwork construction are under way. It is expected to contribute cash flow and contract sales to the company in 2022.


The total construction area of the three urban renewal projects in Shenzhen is expected to reach 3.38 million square meters in 2022, hitting a record for the Group and adding an engine to long-term growth, which also means that LVGEM China has officially entered a new journey of fast development.


Sufficient saleable resources, abundant land bank and the Group’s development of “sufficient troops and food”


During the year, the Group’s real estate development and sales business progressed smoothly, with steady sales of many projects and satisfied selling rate. The selling rate of LVGEM International Garden in Huazhou was 92%; The selling of LVGEM Amazing Plaza is 100%; LVGEM Joyful Town Project’s selling rate is 97%, which is highly recognized by urban residents in the Greater Bay Area, Guangdong, Hong Kong and Macao. In the whole year, the sales of subscription contracts reached RMB 4.23 billion and the sales area of subscription contracts was 199 thousand square meters, providing solid support for the short-term performance development of the Group.


Meanwhile, the Group holds sufficient saleable resources. In the short term, the saleable resources is expected to reach RMB 12 billion in 2022. It is located in the core cities of the Greater Bay Area such as Shenzhen and Zhuhai respectively, which could provide the guarantee to achieve the sales target in 2022; In the long run, as of December 31, 2021, the Group had a land bank of about 16 million square meters, of which about 90% were located in core cities of the Greater Bay Area, such as Shenzhen, Hong Kong, Zhuhai and Dongguan. Moreover, the scale of land reserves under the controlling shareholder for further development was approximately 7.7 million square meters, including projects in Shenzhen, Zhuhai and Zhang Mu Tou, Dongguan. Ample land bank under the Group will lay a solid foundation for the robust expansion and long-term development of the Group.


Commercial properties under recovery and bring long-term capital gain to the Group


The Group continued to adhere to the “two-ponged” driven development model of “residential + commercial”. During the year, the Group held more than 25 high-quality commercial property projects with a total construction area of about 1,094,130 square meters. Among them, it is mainly represented by two commercial brands “Neo” and “Zoll”, including Shenzhen NEO Urban Commercial Complex, Hong Kong LVGEM Neo, LVGEM Zoll Chanson Shopping Mall, LVGEM 1866 Zoll Shopping Mall, etc.


With the normalization of epidemic prevention and the change of commercial operation strategy of the Group, the commercial property investment business continued to recover during the year. The occupancy rate of Neo in Shenzhen returned to nearly 94%, and the occupancy rate of Zoll remained at 94%, both higher than the industry level; Through the cross-sector operating strategy, the occupancy rate of Hong Kong Neo has increased by 20%, higher than the average level in Hong Kong. For the 12 months ended December 31, 2021, the Group’s income from commercial property investment and operation was about RMB 643 million, with a year-on-year increase of about 3.6%. It is worth mentioning that the Kai Tak section of the MTR Shatin to Central Link is expected to be opened to traffic in 2022. At that time, Kai Tak is expected to become a super transportation hub in Hong Kong’s East Kowloon Region, known as Hong Kong’s second “Central”. In this case, it is expected that the asset value will increase significantly in the future, while bringing steady rental income and long-term capital gains to the Group.


For the year ended 31 December 2021, the revenue generated by the Group’s comprehensive services was RMB 343 million, with a year-on-year increase of about 18%. During the year, the Group provided comprehensive property management services, with a total construction area of about 3.07 million square meters; In terms of hotel operation, with the effective control of the adverse influence on epidemic, the operation of Shenzhen hotels has gradually warmed up during the period, and is promoting negotiations with seven world-class luxury hotel brands to promote the stable growth of comprehensive service revenue.


The debt structure is clear and straightforward, financial security bears the brunt


Facing the macro environment of tight liquidity in the second half of 2021, the Group has always put financial security first. During the year, the Group took the initiative in debt management, optimized the financial structure, and continuously improved its financial standards by expanding domestic and foreign financing channels. In 2021, the Group completed the issuance of LVGEM Zoll Commercial Real Estate Mortgage-Backed Securities (CMBS), the first commercial asset mortgage-backed securitization project, with an issuance scale of 1.45 billion yuan; the Group broke through the freezing point of the capital market and successfully issued two commercial bills, with a total issuance scale of about HK $600 million; Meanwhile, the Group withdrew RMB 2.48 billion from new bank projects to maintain stable liquidity. As of December 31, 2021, the Group had no off-balance sheet liabilities, and there were no maturing US dollar bonds in 2022. The debt structure stood in the safe zone.


In order to further promote the real estate industry into a healthy development, the government assisted real estate enterprises to achieve “deleveraging” with the rigid index of “three red lines”. The “two red lines” of the Group’s liabilities to assets ratio and net debt ratio after excluding advance receipts during the year have reached the standard. Through the smooth implementation of Baishizhou project and active debt management, the Group is expected to successfully reached the “three red lines” standard in 2023. It is worth mentioning that the Group’s financing cost in 2021 was 6.4%, which continued to remain low. It is believed that through prudent and flexible financial policies and diversified domestic and foreign financing channels, the Group’s debt level will remain within a reasonable range for a long time to ensure the stability of the Group’s operation.


Looking ahead, Mr. Tang Shouchun, Chief Executive Officer and Executive Director of LVGEM (China), said: “The macro policy of real estate released the signs of marginal relaxation at the end of 2021. It is believed that the deregulation of the policy will run through 2022 and assist the real estate industry achieve a soft landing. As a real estate enterprise that adheres to intensive cultivation and steady development, the Group does not blindly pursue fast turnover and high growth, but adheres to the urban renewal projects with the characteristics of the Greater Bay Area, keeps focused development on every project to ensure safety and promote development which take solid steps on the road of steady operation. The Group will firmly grasp the great opportunities brought by the construction and development of Guangdong, Hong Kong and Macao Bay area, pursue flexible and prudent financial policies, devote itself to creating high-end residential life for cities, ensure the stability and long-term value return of the Group and bring long-term returns to investors. ”



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