Taking risk control as the first goal, CIFI said that the rigid maturity bonds in the second half of the year have been cleared

Lin Zhong, Chairman of the Board of Directors of CIFI Holdings. Image source: CIFI Group

Reporter｜Wu Bo

“The year of in-depth adjustment is also a year of transformation of the old and new development models of the industry.” Lin Zhong, chairman of the board of directors of CIFI Holdings, defines 2022 for the real estate industry. In-depth adjustment means that the high growth is no longer and the scale is shrinking; transformation means that the industry will usher in new opportunities for development.

As one of the exemplary private real estate companies, the performance of CIFI Holdings Group (0884.HK hereinafter referred to as CIFI) in the first half of this year also reflects changes in the industry.

On August 30, CIFI’s financial report for the first half of 2022 showed that the company’s revenue during the period was 29.72 billion yuan, down 18.2% from the same period last year; gross profit was 6.148 billion yuan, down 18.29% from the same period last year; gross profit margin was 20.7%, The net profit was 1.9 billion yuan, down 64.5% from the same period last year; the core net profit margin was 6.1%, compared with 6.8% for the whole of last year.

Despite the overall decline in performance, CIFI has outperformed the market. According to a report released by the Crane Research Center, the overall profit margin of the real estate industry will continue to decline in 2021, and various profit margin indicators of enterprises have dropped to historically low levels.

In the financial report, CIFI stated that the company maintains the current level of profit due to the fact that the delivered property projects have achieved reasonable profits, reasonable land costs, low financing costs and product premiums.

In the first half of this year, the real estate market continued the trend of last year, the scale of the industry shrank, and the contracted sales of CIFI also faced a decline, down 53.6% year-on-year to 63.1 billion yuan, and the collection rate exceeded 100%. The sales scale of CIFI ranks 15th in the country in the sales rankings of Chinese real estate companies in the first half of 2022.

Judging from the regional contribution of CIFI’s layout, the Yangtze River Delta, Bohai Rim, Midwest and South China contributed about 34.7%, 23.8%, 30.5% and 11% of contracted sales, respectively. In terms of city energy level, contracted sales in first- and second-tier cities accounted for 86.4% of total contracted sales.

Regarding the current real estate industry situation, Lin Zhong believes that China’s real estate industry has always been a pillar industry of the national economy and a sustainable industry. It is often done and often done; the real estate industry has returned from the pace of rapid growth to a stable and healthy one Normalization, from a high-debt, high-leverage, and high-growth model to a low-debt, low-risk, and asset-light development model.

Based on this judgment, CIFI emphasizes strict adherence to the financial bottom line and investment discipline, while requiring attention to cash flow and profits. At the same time, under the development model, CIFI also pays attention to both importance and importance, and pays attention to the development of business, agency construction, long-term rental, and property.

In terms of finance, as of the first half of 2022, CIFI has total assets of 410 billion yuan, total debt of 114.141 billion yuan, net assets of 105.7 billion yuan, advance receipts of 82.9 billion yuan, cash on hand of 31.2 billion yuan, and the weighted average cost of debt is 4.9%, down from 2021.

CIFI’s “three red lines” maintained the green status, and the asset-liability ratio, net debt ratio and cash short-term debt ratio excluding advance receipts were 67.7%, 78.5% and 1.62 times respectively.

At the performance meeting for the first half of 2022, Yang Xin, CFO of CIFI Holdings, said that CIFI’s debt structure remains at a reasonable level, with short-term debt accounting for 17%. Cleared.

Under the circumstance of tightening liquidity, CIFI has achieved over RMB 4.6 billion in new direct financing in the open market, and is one of the few private real estate enterprises that has completed domestic and overseas multi-channel financing. In June this year, CIFI successfully issued 500 million corporate bonds using credit protection tools with an interest rate of 5.5%.

In terms of investment, CIFI has become more cautious. In the first half of the year, only 3.6 billion yuan was spent to buy land, and the new value of goods was 16.9 billion yuan. As of the end of the first half of the year, the total land reserve of CIFI was 49 million square meters, and the attributable land reserve was 26 million square meters. The total saleable value in the second half of this year is more than 200 billion.

CIFI’s next investment strategy will remain cautious. Lin Zhong said that in the second half of the year, CIFI will pursue light assets and low land reserves, with quality first and quantity second.

The industry has changed, and the rules of the game have changed. Lin Zhong mentioned at the performance meeting that in the period of industry change, CIFI has recognized the importance of the agency construction business, which is a very huge market.

Since the beginning of this year, the revitalization of non-performing assets such as “guaranteed and handed over buildings” has brought opportunities to agency construction. The financial report shows that in the past six months, CIFI Construction Management has entered through government agency construction, commercial agency construction, capital agency construction, enterprise customized agency construction and management consulting services, etc., and has newly expanded 29 projects with a cumulative area under management of over 7 million square meters.

CIFI has been developing diversified businesses for many years. In addition to the agency construction business that the management has paid particular attention to this year, property, commercial and long-term rental apartments have also maintained growth.

In the property sector, the revenue and profit of CIFI Yongsheng services in the first half of the year were approximately RMB 3.163 billion and RMB 437 million, a year-on-year increase of 53.6% and 35.8% respectively. By the end of the first half of the year, the total contracted GFA of CIFI Yongsheng’s services was approximately 291.4 million square meters, of which the total GFA under management was approximately 207.9 million square meters, representing a year-on-year increase of 33% and 60% respectively.

In terms of business, in the first half of the year, CIFI achieved a property income of 660 million yuan, a year-on-year increase of 69%; it has reserved more than 30 commercial complexes across the country, with a total construction area of ​​more than 2.78 million square meters, and opened 14 shopping malls with a total construction area of ​​approx. 960,000 square meters.

In terms of long-term rental apartments, as of the end of the first half of 2022, the long-term rental business of CIFI has expanded to over 82,000 rooms and operates over 30 large-scale rental communities. At the performance meeting, CIFI disclosed that the long-term rental business segment CIFI has launched the A round of financing and has made substantial progress.

“Stable and safe” is the key word of CIFI’s development in the second half of the year. Lin Zhong said that the real estate industry is gradually recovering from the bottom, and CIFI’s strategy has also changed, with the pursuit of risk first, profit second, and scale third.