[For Immediate Release] 30 August 2023
(Incorporated in the Cayman Islands with limited liability)
(HKSE Stock Code: 95)
LVGEM (China) Announces 2023 Interim Results
Harvest in Sight for Large Urban Renewal Project
“Two-pronged” Business of “Residential and Commercial” Enters Fast Growth
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Financial Highlights: Interim results as of 30 June 2023: Ø Achieved total revenue of approximately RMB1.34 billion, representing an increase of approximately 29% year-on-year; revenue generated from real estate development and sales of RMB780 million, representing an increase of approximately 57% year-on-year; revenue generated from commercial property investment and operation of RMB360 million, representing an increase of approximately 5% year-on-year, and revenue generated from comprehensive services remained flat as compared to the same period last year. Ø Gross profit was approximately RMB590 million, representing an increase of approximately 35% year-on-year; gross profit margin maintained at 44%; far exceeding the industry level; Ø Loss for the Period was approximately RMB580 million, which was mainly due to the one-off recognition of a commercial valuation gain from the intended change of use of Baishizhou Urban Renewal Project Phase IV to leasing and long-term investment purposes in the same period last year. |
(30 August 2023, 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) is pleased to announce the interim results for six months ended 30 June 2023 (the “Period”).
In the first half of 2023, as national production returned to normalcy with accelerated development of a new economic pattern, a general improvement can be seen in major indicators, and China’s macro economy has shown a prominent trend of restorative growth. Against the backdrop, LVGEM (China) seized the opportunity of the normalization of domestic economic production, adhered to ”two-pronged” synergistic development model of “residential and commercial”, actively promoted the urban renewal projects located in the core cities and core districts of the Guangdong-Hong Kong-Macao Greater Bay Area (the “GBA”), continuing to empowering the endogenous value of cities through intensive efforts on the urban renewal filed. During the Period, the Group achieved total revenue of approximately RMB1.34 billion, representing an increase of approximately 29% year-on-year. Gross profit was RMB590 million, representing an increase of approximately 35% year-on-year. Gross profit margin remained at a high level of 44%, far exceeding the industry average, with significant profitability. Loss for the Period was approximately RMB580 million, which was mainly due to the one-off recognition of a commercial valuation gain from the intended change of use of Baishizhou Urban Renewal Project Phase IV to leasing and long-term investment purposes in the same period last year.
Contracted sales surging against market trends and quality land reserve enriching the “pool” for urban renewal
The Group took real estate development and sales as its core business with its projects mainly located in the core areas of core cities in the GBA. For six months ended 30 June 2023, the real estate development and sales of the Group generated revenue of approximately RMB 780 million, representing an increase of approximately 57% year-on-year; the contracted sales amount based on the subscription letters for commodity housing was approximately RMB 3 billion, representing an increase of approximately 16% year-on-year .
In the first half of 2023, after a temporary boom in the first quarter, the real estate industry has experienced a lack of demand for housing, with transactions cooling down and the market remaining quiet. In the midst of the tough market environment, the Group’s two key project for sale – LVGEM Royal Bay in Zhuhai and International Garden in Huazhou won the first place in terms of sales in Zhuhai and Huazhou respectively due to their strategical location in the city’s core areas and were well-received by the market. Meanwhile, according to CRIC, the Group was ranked among the “Top 100 Real Estate Enterprises in China in terms of Sales in the First Quarter of 2023” and “Top 200 Real Estate Enterprises in China in terms of Sales in the First Half of 2023” for the first time, which proved the quality of the residential projects and their broad appeal in the market.
Over the years, the Group has been committed to the urban renewal segment in the GBA, accumulating abundant resources and experience in the urban renewal circuit in the GBA and establishing a commendable reputation. As of 30 June 2023, Group had land reserves of approximately 16 million square meters, approximately 90% of which are located in core cities and core areas in the GBA such as Shenzhen, Hong Kong, Zhuhai and Dongguan, offering high commercial value. The magnitude of the land reserves is also capable of meeting the operational and developmental needs of the Group for the next decade. Meanwhile, the Group will closely monitor the changes in the market and industry environment and acquire other urban renewal projects in a timely manner with a view to enriching its existing land reserve to empower the Group’s development in the long run.
Baishizhou Project to commence official pre-sale in September and progress continues on other projects
In the first half of 2023, the Group examined the changes in the industry and policy environment, made steady progress, focused on high-value residential and commercial development projects located in core cities and core areas in the GBA, and persistently drove its existing land reserve projects to maturity. The Baishizhou Urban Renewal Project, the Shenzhen Liguang Project, the Zhuhai Dongqiao Project (LVGEM Royal Bay in Zhuhai) and Phase II of Shenzhen Shazui Project (Phase II of Mangrove Bay No. 1) progressed with frequent good news in the Period.
The Baishizhou Urban Renewal Project is a core project of the Group and is also a star project that has attracted attention in Shenzhen and even nationwide. With a massive amount of gross floor area of 3.58 million square meters, the Baishizhou Project was accredited as the “Grand Urban Renewal Project” in Shenzhen. In the first half of 2023, the construction progress of Phase I of the Baishizhou project was satisfactory, and the fastest construction of the main structure under Phase I of the Baishizhou Project has already reached 27 storeys aboveground, and the overall construction progress was also approaching pre-sale standards. Meanwhile, the Group has begun the initial preparation for obtaining pre-sale certificates and is expected to officially launch the project for sale in early September 2023. Phase I of the Baishizhou Project primarily comprises a total of 2,746 units of residential and apartment products with the main residential units ranging from 110 to 125 square meters, targeting to meet the demand for improved homes with three- to four-bedrooms that were gradually released in market. It is worth noting that the marketing center and sample units of the Baishizhou Project have opened and received more than 5,000 groups of visitors and customers. Such huge popularity signified the high recognition of home buyers for not only the location, ancillary facilities and building designs of the Baishizhou Project, but also for the Group’s brand. Meanwhile, the Group held a global launch event for Baishizhou Project on 12 August 2023, during which over a hundred participants from the government, media and potential customers were invited to explore the design concept of Baishizhou Project’s living environment and witness the ten-year history of its urban renewal. The launch event signifies the imminent start of the Baishizhou Project. The sale of Phase I of the Baishizhou Project is an important milestone for the Group’s development, and with the significant influx of cash flow, LVGEM China will enter a new era, formally stepping into a stage of growth with both high speed and high quality.
For the Baisihou Urban Renewal Project, the signing rate of Phases I to IV of the Baishizhou Project, on an aggregated basis, exceeded 95%, reaching a major business milestone. To realise the rolling development of the project, the Group has successively begun dismantling old buildings for Phases II to IV of the project, which are expected to meet the conditions for commencing construction in full swing by 2024. This large-scale urban renewal project will spurleapfrog growth for the Group with the grand scale and considerable profitability.
For other urban renewal projects in Shenzhen, the signing rate of Phase II of Shenzhen Shazui Project (Phase II of Mangrove Bay No. 1) has reached 100%, and the construction progress has met the pre-sale standards and the project was expected to open in end of August 2023 for pre-sale. This project is located at the core area of Futian District, surrounded by a frontline sea view in Mangrove Bay, and is therefore a scarce and high-value property. The contract signing rate of the Shenzhen Liguang Project has reached 100%, and was currently in the process of confirming the construction of the main body of the project. Other urban renewal projects are driven to maturity, which will further supplement the Group’s projects for sale, enrich the Group’s saleable value, and increase the Group’s sales revenue and cash inflow, providing strong support for the healthy and sustainable development of the Group.
Steady expansion of the commercial property presence with continuous increase in rental income
In the first half of 2023, the Group adopts the “two-pronged” synergistic development model of “residential and commercial”, which provides the Group with a stable rental inflow and protection against the cycle through holding and operating commercial properties in the core cities and core areas in the GBA at the same time of the development of residential properties, thus adding power to the Group’s development.
During the Period, the Group continued to increase the number of commercial properties by operating two major commercial property brands, “NEO” and “Zoll”, holding more than 30 quality commercial property projects. If the commercial portion of the Baishizhou Project is fully self-owned, the total gross floor area will exceed 1.6 million square meters. In the first half of 2023, the momentum of China’s economic recovery remained robust, but the recovery was not as vigorous as expected, and the “residual effect” of the COVID-19 pandemic on the macro economy and the business environment are still present. According to Cushman & Wakefield, the vacancy rate of Grade A offices in Shenzhen in mid-2023 was as high as 24.5%, making the commercial property leasing market tough. Horizontally, the commercial properties of the Group are located in core locations in core cities in the Bay Area such as Shenzhen, and the overall occupancy rate of “NEO” and “Zoll” in the first half of the year was 82%, significantly outperforming the market. The Group’s revenue generated from commercial property investment and operation was approximately RMB356.1 million, representing a year-on-year increase of approximately 5%.
In incremental growth, Zoll series marked another significant, that is, Zoll Xinyi Shopping Centre staged its grand opening in the first half year, moving forward the parallel development of light and heavy assets; meanwhile, Huazhou International Garden Wanda Plaza, a joint venture with Wanda Group, will have its grand opening on 10 August 2023. The grand opening of Wanda Plaza, an important commercial project in western Guangdong, will add important regional commercial facilities to the Huazhou International Garden Project and continue to empower the brand value of the Group.
With the increasing urbanization and accelerated development of the GBA of Guangdong, Hong Kong and Macao, the high-growth potential cities and commercial complexes will empower each other, and the revenue generation ability of the Group’s core commercial properties is expected to be effectively enhanced, which will bring long-lasting benefits to the Group’s development, and significantly strengthen the Group’s core competitiveness.
Navigating through the mists of uncertainty with stable and sound finance position and various honors enhancing brand influence
In the first half of 2023, the Group has continued to optimize and expand its diversified domestic and overseas financing channels with the solid support of quality assets, proactively managed its debts by prioritizing cash flow management, and gradually resolved its short-term debts by a combination of repayment and roll over, so as to ensure the debts within a reasonable level and weather the cyclical fluctuation in the industry smoothly and steadily.
During the Period, with the determination to be “trustworthy and responsible”, the Group successfully paid off USD470 million of US$ bonds due in full, substantially increasing security for the Group. Upon completion of the payment, the Group no longer has any USD-denominated bonds. The risk of “credit default” of US$ bonds has been completely eliminated, laying a solid foundation for the opening of the Baishizhou Urban Renewal Project in the third quarter. In addition, the Group continued to adhere to its simple and clear debt structure with bank and other loans as the main source of financing. In the first half of 2023, the Group’s new bank drawings amounted to over RMB10 billion, which was invested in the development and construction of the urban renewal projects. As the Group’s main source of financing, bank loans are highly secured with corporate projects as the underlying assets, laying a solid foundation for the smooth and orderly development and construction of the Group’s various urban renewal projects.
The Group’s sound operating fundamentals and the long-term prospect of sustainable development were further recognized by the industry and market. In the first half of 2023, the Group was granted the “Top 10 Real Estate Development Enterprises in Shenzhen in terms of Comprehensive Strength” and “Benchmark Enterprise for Social Responsibility in Shenzhen’s Real Estate Development Industry 2023”, making further improvement in brand reputation.
Looking ahead, Mr. Tang Shouchun, Executive Director and Chief Executive Officer of LVGEM (China), said: “The Group will continue to uphold the philosophy of sustainable operation and the strategic layout approach of ‘Focusing on Core Cities and Cities’ Core Areas’, anchor itself in the development blueprint of the GBA, focus on regional development on an ongoing basis, and make every effort to build the Baishizhou Urban Renewal Project well. The Group will also acquire other urban renewal projects in the GBA to expand our existing land reserve. While helping the core cities of the Pearl River Delta transform into modernized cities, the Group will also achieve sustainable business development and long-term value release and develop itself into a reputed urban city value-creator in the GBA by pursuing its efforts in the segment of urban renewal in real estate industry.”
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About LVGEM (China) Real Estate Investment Co., Ltd
LVGEM (China) Real Estate Investment Company Limited (“LVGEM (China)” (stock code: 00095.HK) is property development and property investment in the PRC. As a featured and integrated real estate developer, the Group is positioned as a unique property developer and pioneer in urban renewal, which has always upheld the “dual-core strategic plan of “Focusing on Core Cities and Cities’ Core Areas”, with “Shenzhen-Hong Kong playing the pivotal role. The projects focused presence over the core areas of core cities such as Shenzhen, Hong Kong and the Pearl River Delta region, which are also the major planning cities of the Guangdong-Hong Kong-Macao Greater Bay Area.
The press release is distributed by Wonderful Sky Financial Group Limited on behalf of LVGEM (China) Real Estate Investment Company Limited.
For more information, please contact:
Wonderful Sky Finance Group Limited
Annie LU
Telephone: (852) 3977 1862
Email: lvgem@wsfg.hk
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