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Restructuring and re-positioning

Reporting lower interim profit Substantially raising growth targets Joe Zhang, COO & Executive Director 18 September 2006 Disclaimers on final page Three major risks on page 28. Restructuring and re-positioning.

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Restructuring and re-positioning

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  1. Reporting lower interim profitSubstantially raising growth targetsJoe Zhang, COO & Executive Director18 September 2006Disclaimers on final pageThree major risks on page 28

  2. Restructuring and re-positioning • Interim net fell 62% (yoy) due to lower profits or large losses at associates (Cable TV, and Mawan Power (agreed to sell)). Stock option expenses & lower re-valuation on investment property also hurt • We aim to double recurring net profit (defined as property + Road King) in 2007 and double again in 2008 from a relatively low 2006 level • Asset disposals on track: Completion by June 2007. Agreed to sell Mawan Power for an exceptional gain of $371m (to pay a special dividend) • Our niche:High-quality mass-market property in south China • Our strategy: will seek acquisitions of financially-troubled developers or developers that offer large land bank, synergies, or special expertise • Our promise: Total transparency, full accountability, and whole-hearted commitment to value creation SHENZHEN INVESTMENT

  3. Interim results: Highlight SHENZHEN INVESTMENT

  4. Net profit break-down SHENZHEN INVESTMENT

  5. What’s the problem? • Operations at associates are beyond our control, and have continued to deteriorate (Mawan Power). • Cable TV has continued to expense set-top boxes distributed (infrastructure building) • In the past two years, we deliberately delayed our property development in anticipation of higher selling prices (We still expect rising property prices) • However, we have accelerated property development, and acquisitions of land bank, to boost asset turns and ROE SHENZHEN INVESTMENT

  6. Investment property: 61% of our book valueVery low returns a major concern. To take action SHENZHEN INVESTMENT

  7. Rental incomes: toll roads • So far, all of Road King’s net profit is due to toll roads. To us, it is rental income in nature • The acquisition of Jingdong Expressway in August will further increase the significance of rental incomes in our business • We think toll roads are a good substitute for rental property given a short economic life of Chinese property (poor quality of construction, and weak maintenance) SHENZHEN INVESTMENT

  8. Substantially raising performance targets: 2006-08 • In 2006, our reported net profit will likely be much higher than in 2005 due to disposal gains from Mawan Power • However, we expect a lower recurring net profit in 2006 (defined as property + roads + Road King) • We expect recurring net profit will likely double in 2007 and double again in 2008 • Our reported net profit will likely double from 2006 to 2008 • Our previous targets: >20% CAGR of reported net profit in 2006-08 SHENZHEN INVESTMENT

  9. Operational plans: 2006-08 • Net gearing to rise from today’s 37% to about 60-70% by year-end and will stay around that level • Targeted dividend payout: best efforts to keep it above 50% (excl. special dividend) • Land bank acquisitions: 1.7m sqm (GFA) in rest of 2006, and at least 1m in each of 2007 and 2008 • One more acquisition of an operating road SHENZHEN INVESTMENT

  10. Asset disposals in progress City Govt Public 55.9% 44% SHENZHEN INVESTMENT (0604) 80% 24.3% 19% 91% 31.1% Mawan Power Property development Transport Road King Jingdong Expressway • Industrial • Color Display • PJLD, metal Cable TV Property investment (HK$2bn) Agreed to be For sale Sold SHENZHEN INVESTMENT

  11. To acquire three types of property developers • Financially-troubled • Those that offer large land reserves at competitive prices • Those that offer unique expertise SHENZHEN INVESTMENT

  12. Recent events • Acquired a 91% stake in Jingdong Expressway, • Signed agreement to sell Mawan Power’s 19% stake for an exceptional profit of HK$371m, and proposed a special dividend • Our 24.3% associate, Road King, obtained an option to acquire 55% of Sunco, one of the largest Chinese property developers • We will likely take a 35% stake in Suzhou Phoenix property project, with attributable GFA 430k sqm, when/if Road King exercises the option • Secured a syndicated bank loan of US$465m (mostly for refinancing) SHENZHEN INVESTMENT

  13. Expected land acquisitions in rest of 2006: attributable 1.7m sqm GFA • 0.23m sqm attributable in Dongguan, Guangdong (by Tian’an) • 1.5m sqm in Huizhou, Guangdong (by a subsidiary) So far in 2006: attributable 820k sqm GFA acquired • 130k sqm in Dongguan, Guangdong • 260k in sqm Longgang, Guangdong • 430k in sqm Suzhou (Sunco), Jiangsu SHENZHEN INVESTMENT

  14. Property completion schedule SHENZHEN INVESTMENT

  15. Our property development schedule (1) SHENZHEN INVESTMENT

  16. Our property development schedule (2) SHENZHEN INVESTMENT

  17. Land bank locations Where land premiums have been fully paid (except Suzhou) SHENZHEN INVESTMENT

  18. Road King’s transformational acquisition of Sunco via three options • On 5 September, together with two other entities, Road King (24.3%-owned by Shenzhen Investment) obtained three options to acquire a 55% stake in Sunco A, a 55% stake in Sunco B, and a 100% stake in Suzhou Phoenix • Road King’s interest in Sunco A and Sunco B is 49% • A 35% stake in the Suzhou Phoenix will likely be transferred to Shenzhen Investment SHENZHEN INVESTMENT

  19. 43 property projects: Overview SHENZHEN INVESTMENT

  20. (1) Worst-case scenario • Given that Road King has secured continued support of Sunco’s creditors, and Sunco is under no financial pressure, Sunco can (in the worst-case scenario) sell land of all projects in an orderly manner • Except 4 projects, Sunco A and Sunco B’s 38 other projects are under construction (some at advanced stages), but we assume they would be sold as land rights only • Our most conservative estimate of the average land price in Sunco A’s and Sunco B’s comparable regions is about Rmb1,800/sqm • For reference, Guangzhou R&F acquired 3m GFA of land reserves in some cities in 1H 2006, costing Rmb1,700/sqm • Net profit from selling the land of the 12 Sunco A projects will be Rmb2,100m (calculation: (Rmb1,800 - 800)*2.1m sqm), and that of Sunco B’s 30 projects will amount to Rmb2,816m. On average, Sunco owns 40% of the JVs • Road King will own 49% of Sunco A and Sunco B, so, its attributable net profit from selling the land will be Rmb2,409m, ie, 49%* (Rmb2,100m + 2,816m) • We further assume that land price in Suzhou Phoenix has not appreciated since January 2004: so it would be sold for no gain to Road King consortium SHENZHEN INVESTMENT

  21. Rmb585m of the gains from Sunco belongs to us • Expected that about Rmb585m, ie, 24.3% of the Rmb2,409m in net profit from selling land in the 43 projects belongs to Shenzhen Investment • Assume that the profit will be evenly split between the next two years, the net profit will amount to extra (albeit one-off) EPS of about HK$0.12 per share, assuming that our total number of shares stays at 2.5bn in next two years. • On the above assumption, expected NAV gain per share: Rmb585m / 2.5 billion shares = HK$0.23 • In this calculation, we ignored the time value, since the time span is just two years SHENZHEN INVESTMENT

  22. (2) Base-case scenario • According to Road King’s conservative internal estimate (the numbers were used in the negotiations), Sunco A, Sunco B and Phoenix City will command a total post-money NAV attributable to Road King is Rmb576m (using 12% discount). Calculation: 49%*(Rmb750m + 500m)-Rmb500m + 49%*(Rmb630m + 400m)-Rmb400 +65%*550m = 613m +505m +358m = Rmb576m • Our 24.3% portion will be Rmb140m • Our direct NAV from the 35% participation in Phoenix City will be Rmb193m • So, Our total NAV will be Rmb333m • Per share NAV gain: HK$333/2.5bn = HK$0.13 SHENZHEN INVESTMENT

  23. Reconciling the two scenarios • Our “worst-case scenario” gives Shenzhen Investment NAV of HK$0.23 per share • Our “base-case scenario” gives us NAV of HK$0.13 per share. So, selling bare land will generate more gains • This contradiction only shows that our base-case projections are too conservative. Note that these figures were prepared for negotiations and were inevitably too conservative SHENZHEN INVESTMENT

  24. A going concern • It is a growing concern and will aim to recover from its recent setback • Management overhaul under way • Tremendous synergies between Road King’s stable cash flows plus old-fashioned conservative management and Sunco’s young, dynamic and experienced team plus vast land reserves • Our valuation does not reflect Sunco’s brand equity SHENZHEN INVESTMENT

  25. Road King in our NAV: HK$0.64 a share • Assuming an efficient stock market, we (and most investors) choose to value our 24.3% stake in Road King at its market value • We hold 146m shares of Road King. At HK$11 apiece, our stake is worth HK$1,641m, leading to an NAV of HK$0.64 per share at Shenzhen Investment SHENZHEN INVESTMENT

  26. Our NAV estimate (un-audited)Refer to disclaimers on final page SHENZHEN INVESTMENT

  27. Three major risks with us • We are an SOE, and are much more rigidly regulated than those in the private sector, and therefore, we are much less efficient • Our incentives system does not work as effectively as in the private sector • Our property business can be extremely volatile and cyclical and subject to policy risks. Some of our associates are entirely beyond our control and we are in the process of selling them SHENZHEN INVESTMENT

  28. Major steps we are taking • Analyzing ways to increase rental yield, • Analyzing ways to reduce investment property holdings given their low yield • Using toll roads as a substitute for rental property • Planning a better incentives structure • Discussing ways to improve efficiency & reduce red tape SHENZHEN INVESTMENT

  29. Disclaimers • This presentation is prepared in good faith, based on audited financial data, publicly available information, and management’s outlook as of today. Macroeconomic parameters could change unexpectedly. The Company’s operating environment and thus strategies could change as a result and without notice. • This presentation does not constitute an offer or an invitation to make an offer for the sale or purchase of the share in the Company trade this or any other stock. Stocks can go down as well as up. Historical performance is no guarantee for the future. • The NAV estimates in this document are for reference only, and have nothing to do with our views of potential realizable values. • This presentation does not constitute any advice or recommendation to invest in the Company and is not intended to form the basis of any investment decision. • The presentation includes certain statements and estimates of the Company based on various assumptions that may or may not prove to be correct and involve various risks and uncertainties. Accordingly, there can be no assurance that such statements or estimates will be realized. SHENZHEN INVESTMENT

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