Turning to manufacturing and service, Vanke expects management dividend

&From early prediction of “Silver Age” to shouting “to live”, Vanke, as the “Internet star” of the real estate industry, can always bring a variety of topics and disturb the nerves of practitioners. On March 31, Vanke held the 2020 annual performance presentation meeting online, and the term “management dividend era” runs through all the time. Yu Liang, chairman of the board of directors of Vanke, said at the performance meeting that the real estate industry can no longer rely on land dividends and financial dividends to make money. In the future, the competition will be more comprehensive and fierce. There is only one way out: learn from the manufacturing industry and earn money for processing, manufacturing and services through labor.

Land and financial dividends receded

In this year’s annual report season of real estate enterprises, the market focuses on three themes: financing “three red lines”, “loan concentration management” and “double concentration” of land supply. How to do, how to do, become the major real estate enterprises to respond to the theme.

In Yu Liang’s view, since the second half of last year, from the “three red lines” of financing, to the “loan concentration management”, and then to the “double concentration” of land supply, we can trace back to a common source – “housing without speculation”. China’s economic development has changed from high-speed growth to high-quality development stage, and the real estate industry also needs to change from scale speed to quality benefit direction. The introduction of the above policy also marks that the real estate industry has clearly entered the era of management dividend.

Yu Liang said that the era of management dividend is the return of housing to residential property and real estate to industrial property, which has become a clear and clear trend. Returning to the industrial attribute means that the return level of the industry will gradually approach to the average level of the society; it means that the real estate industry will shift from development oriented to both development and operation, with development more and more like consumer durables and operation like service industry. Enterprises can no longer rely on hoarding raw materials, land appreciation to make money, can no longer rely on leverage to make money.

“The competition in the real estate industry will be more comprehensive and fierce in the future. There is only one way out. Learn from the manufacturing industry and earn money for processing, manufacturing and services through labor.”

All return to “green” in the first quarter

According to financial report data, in 2020, Vanke achieved operating revenue of 419.11 billion yuan, net profit attributable to shareholders of listed companies of 41.52 billion yuan, with a year-on-year growth of 13.9% and 6.8% respectively; contract sales of development and operation business reached 704.15 billion yuan, with a year-on-year growth of 11.6%.

But on the other hand, in 2020, the gross profit rate of Vanke’s real estate business and related business was 22.6%, down 4.6 percentage points compared with the same period of last year. Compared with the middle of last year, the gross profit rate continued to decline, lower than the industry average. The fully diluted roe is 18.5%, 2.2 percentage points lower than that in 2019.

In this regard, Vanke explained that the decline of gross profit rate is mainly due to the structural reasons of settlement products, and some high premium products from 2016 to 2017 will be settled at a high point in the first half of 2019. At the same time, Vanke said that the proportion of land price in sales will continue to rise, and it is expected that Vanke’s short-term profit margin will still show a downward trend, while in the long run, it is believed that the profit margin will remain at the average level of the industry.

From the “three red lines” indicators, as of the end of 2020, Vanke’s net debt ratio is 18.1%; the cash to debt ratio is 1.8 times; and the asset liability ratio excluding advance accounts at the end of the period is 70.4%. According to the “three red lines” indicators, Vanke’s current asset liability ratio after excluding advance payment slightly exceeds the standard, which belongs to the “yellow file” real estate enterprise.

“Vanke is confident that it will return to green in the first quarter of this year due to the small amount of excess.” According to Han Huihua, executive vice president and financial director of Vanke, in 2020, Vanke held monetary cash of 195.2 billion yuan, which is 2.4 times of interest bearing liabilities due within one year; the net debt ratio is only 18.1%, which has remained below 40% for 20 consecutive years.

In recent years, Vanke has been questioned by the market that it is too conservative, affecting the profitability of enterprises. In view of whether the net debt ratio of 18% will be too conservative, Yu Liang said that Vanke does not pursue a low debt ratio. The 40% line Vanke held for quite a long time in the past, but it is not too low. Sometimes there is a decline because Vanke is waiting for an opportunity. This year’s centralized land supply problem requires enterprises to have great flexibility in capital. If there is no great flexibility, there will be great pressure in the face of centralized land supply. So the net debt ratio of 18% is just waiting for the opportunity of market change. “The group does not necessarily intend to maintain a low net debt ratio, just maintain a reasonable net debt ratio.”

Pan Hao, senior analyst of Shell Research Institute, said that the concentration of the real estate industry has accelerated, and the policy environment and industry development trend are good for the leading real estate enterprises. For Vanke, which has been “good without weakness” for many years, it is particularly important to develop its strengths to win at a time when the competition rules of the industry have changed profoundly.

“Stocking” all things

Since the strategic positioning of “urban and rural construction and life service provider” was put forward, Vanke has actively developed a new track in addition to the main business of real estate. But at present, Vanke’s diversified transformation needs to be promoted for a long time.

In 2020, in Vanke’s revenue, the revenue from real estate development and related asset management business is 400.45 billion yuan, accounting for 95.5%; the revenue from property services is 15.43 billion yuan, accounting for 3.7%. In addition to the income growth brought by property services, Vanke still needs to rely on its real estate industry in a short period of time.

In October last year, “Vanke Property Development Co., Ltd.” was officially renamed as “all things cloud Space Technology Service Co., Ltd.” (hereinafter referred to as “all things cloud”) and transformed into a space technology service provider, with the layout of “community space service”, “business enterprise space service”, “urban space service” and other business sectors. In 2020, all things cloud will achieve an operating revenue of 18.204 billion yuan, a year-on-year increase of 27.36%; at the end of the year, the accumulated area under management is 560 million square meters, half of which comes from projects other than Vanke.

At the press conference, Yu Liang pointed out that “the commonness of all things clouds and shells is to define their own industries. Shell has defined its industry, and cloud is also defining its own industry. As parents, we can’t limit the development of our children with scores. The focus now is on the basis of business development and healthy development. At present, there are not many indicators.

Everything cloud chooses “Stocking”, and Vanke continues to make efforts for the main business of real estate.

After the baptism of the epidemic, the channel problem of new house sales market has become the focus, and building platform thinking has also become the consensus of major real estate enterprises. Among the top real estate enterprises, Evergrande has launched the online and offline Omni channel trading platform — fangchebao, and Vanke has also launched the real estate sales platform “easy house”.

According to Zhu Xu, the Secretary of Vanke, disclosed at the meeting that the total number of users of Vanke’s “E-House” app has exceeded 10 million since it was launched. Through the digitalization of business process, it has provided customers with VR digital sand table, VR parking space, online watching and online house selection, with a total Gmv (turnover) of 268 billion yuan.

It’s still difficult to take a stake in Taihe

As the press conference drew to a close, the issue of taking a stake in Taihe was mentioned again. It has lasted for eight months, and so far there is no clear explanation.

According to the “framework agreement on share transfer” signed by Vanke and Taihe in July last year, Taihe investment, the controlling shareholder of Taihe Group, plans to transfer 19.9% of its shares to Hainan Wanyi, a subsidiary of Vanke. The total transfer price is RMB 2.426 billion, and the payment method is cash. The transfer price is RMB 4.9 per share.

However, there are many preconditions in the framework agreement of share transfer: it is necessary for Taihe to formulate a debt restructuring plan and reach an agreement with the creditors. The debt restructuring plan can support Taihe’s normal operation and sustainable operation, and the above functions of the debt restructuring plan can be unanimously recognized by Taihe investment and Hainan Wanyi.

According to the agreement, if the above conditions are not met before September 30, 2020 and Vanke is not exempted, Vanke has the right to unilaterally terminate this agreement. However, on September 29, 2020, Taihe said that part of the terms of the agreement signed by the group and Vanke had not been fully satisfied, but Vanke had no intention to unilaterally terminate the agreement.

At the press conference, Zhu Jiusheng, President and CEO of Vanke, responded that he would help Taihe, but “he would not make trouble for himself”. There are strict preconditions for him to become a shareholder in Taihe. Only when he has reached a comprehensive debt restructuring plan can he reach the conditions for becoming a shareholder. At present, the progress is still quite difficult to become a shareholder in Taihe. Only when the comprehensive debt restructuring plan is reached, Vanke will become a shareholder, and the key to solve the problem is still in the hands of Taihe itself and creditors.

In March this year, the asset management company that Vanke cooperated with Taihe was officially launched. In this regard, Zhu Jiusheng also said that the company is an operating company in the process of brewing, rather than a receiving company. It is mainly entrusted by all parties to work, such as starting and selling projects, and does not undertake the management of creditor’s rights and debts of the project itself. On the whole, it will take a long time for Taihe to solve its problems. However, it is not ruled out that some projects with better resources will be solved first to give priority to solving some problems, but the specific scheme is still in the process of negotiation.

Yan Yuejin, a real estate analyst, said that it can be seen from the content of the response that Vanke still intends to take a stake in Taihe, but is worried about being dragged down by unstable factors, ambiguous attitude and cautious cooperation. The establishment of asset management companies by both sides also shows that the development of the matter is still in progress and has not been “ossified” and stagnated.

Beijing Business Daily reporter Lu Yang and Wang Yinhao

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