In an interview, Cen Zhaoxiong, chairman of the board of directors, executive director and chief executive officer of Times China Holdings (1233.HK), used to prepare small notes to remind himself what to say and what not to say. However, when "Times Real Estate" was renamed "Times China" on March 1, 2018, his ambition and passion made him speak a little more.
"Times China will be committed to growing into a 100 billion-level enterprise in the short term. This will be the first battle after Time China has changed its name." When he said this, he rarely smiled. It felt like I was 29 years old. I went back to the Jianlibao Building on Dongfeng Road, Guangzhou, where I started my business. I shouted "Stay back and wait, or jump out and give it a try", and then jump forward.
Since the eyes are full of vast seas and sky, a small note can't contain the overflowing ambition.
Cen Zhaoxiong also came up with the grand vision of "urban development service provider" and "Fortune 500", planning to squeeze the industrial chain of project development, property services, urban renovation, long-term rental apartments, home furnishings, etc. into the houses of the era in China. in.
Now that three years have passed, the first battle of "breaking hundreds of billions" is still being fought, the "urban development service provider" is not taking shape, and the big dream of "the world's top 500" seems to be far away-the outside world has been turned upside down. Everything in China is just beginning, and the limited room for growth cannot support Cen Zhaoxiong's three great aspirations.
What is more helpless than limited revenue and net profit growth is the rising debt and cost pressures, which are tarnishing the era of China, and considerable investment value has become empty talk. Perhaps another headache for Cen Zhaoxiong should not be how to realize the ideal of the year, but how to get rid of the current embarrassment. After all, in the current real estate circle, survival is a very realistic problem.
Three ambitions
In the eyes of many people, Cen Zhaoxiong's three ambitions are indeed not groundless.
To quote his point of view, to become a Fortune 500 company, Times China must have three hard powers: world-leading corporate governance, profit model, value creation ability, business leadership in the industry, and the ability to develop globally. "From'Times Real Estate' to'Times China', it is not just a simple two-character change." Cen Zhaoxiong said.
According to Cen Zhaoxiong's strategic design of Times China, property development and urban renewal constitute a framework for dual development. On the one hand, speed up the turnover of property development and provide sufficient liquidity for development; on the other hand, reserve old reform projects and "use time for profit" to expand imagination. Right now, the two major sectors account for more than 98% of total revenue.
In the property development process, Cen Zhaoxiong showed amazing courage and courage, and he was magnificent when he spent money: first in September 2018, he set a new record in Guangzhou's unit price at a floor price of 55,400 yuan per square meter; When striving for stable development, it spent 12.967 billion yuan in radical acquisition of land that year; after that, it continued to set a record of burning money in 2019.
According to statistics, except for the land in Chenghai District, Shantou City, Guangdong Province, the premium rate of land acquisition in China in 2019 was over 33%; this year it spent 24.7 billion yuan, an increase of 90.48% year-on-year. There are not many similar cases in the entire real estate circle, but Times China has already done it.
"We don't think it's expensive." At least Cen Zhaoxiong's intentions were still unfinished.
As for the purchase and storage of old reform projects, it is smooth: In 2017, Times China has signed 68 renewal projects with Guangzhou, Foshan, Shenzhen, Dongguan and other cities, with a total of about 6 million square meters of land resources, all projects are concentrated In the golden area of the Guangdong-Hong Kong-Macao Greater Bay Area.
By 2018, Times China will account for revenue from the urban renewal sector for the first time, contributing a total of 2.776 billion yuan, accounting for 8.1% of revenue that year.
"The 70 (projects) are all ours and can't run away." According to Cen Zhaoxiong's estimation, these projects will eventually contribute nearly 20 million square meters of land reserves, with a total value of more than 500 billion yuan. In the real estate industry, there are not many companies of the same size.
Not only has the property development completed the return of blood, but also has the long-term potential of urban renewal, China's data in the "walking on two legs" era is really good. Summarizing the company’s financial report information from 2015 to 2018, Times China’s contract sales have grown by leaps and bounds, and the compound annual growth rate has remained stable at 45.9%. Hold” rating.
The company is making money quickly and its business is leading the industry. It is only a few development projects overseas to reach its dream of reaching the world's top 500. Looking up, the threshold of the Fortune 500 is not so high.
When Cen Zhaoxiong put forward the big plan, the data on the "threshold" of Times China and the Fortune Global 500 were not much different, that is, "stepping on the accelerator." Already a top 500 competitor in the world, are you worried that your performance will not exceed 100 billion?
Perhaps the most difficult thing is how to decorate the role of "urban development service providers", nothing more.
China in a "disheartened" era
On September 9, 2019, Times China announced that it had completed the spin-off of its subsidiary property company Times Neighborhood (9928.HK) and listed it on the Stock Exchange.
Counting the leasing business, which accounts for 1.42% of its performance, finds a fourth role in the universe of "urban development service providers". At least in form, Cen Zhaoxiong is one step closer to his dream.
But when it comes to overall development, everything is not so smooth.
Times China put forward the idea of breaking 100 billion yuan in 2018, but the year-end contracted sales were only 60.6 billion yuan; 2019 was another drastic development. When the general ledger was calculated at the end of the year, the contracted sales of 78.4 billion yuan did not meet the target.
"The goal of 100 billion yuan is not a very important goal. We believe that it will not be achieved this year, and it will be achieved next year." In 2020, seeing the impact of the epidemic and the overweight of market control policies, Cen Zhaoxiong simply lost the plan to quickly achieve the "100 billion sales scale".
In the real estate industry, many people have said such "disappointing" words: lamenting the fierce competition, Gemdale Group (600383.SH) Chairman Ling Ke put down his posture and agreed that Gemdale pursues business scale growth, but not only scale; Yuzhou Group ( 1628.HK) Chairman Lin Longan also asked to retire and decided that the company would no longer pursue volume in the next 2-3 years.
However, at the beginning of December 2020, Yuzhou Group announced that it had reached the goal of 100 billion yuan; as for Gemdale, it has reached a scale of 100 billion yuan in 2017- only after reaching the goal, "don't care" is really worthwhile; Cen Zhaoxiong also said "don't care" "It just sounds a little sour.
Can it even become the world's top 500 if it can't even achieve a sales scale of 100 billion? According to data released by Crane, there are 34 real estate companies that exceeded 100 billion yuan in 2019, but only 5 companies are on the list. With this development, how can Cen Chiu-hsiung's ideals be fulfilled?
In fact, it is the trend of the times in China that makes him feel more dangerous than the goal cannot be achieved.
In order to achieve large-scale development, Times China has continuously increased the amount of land acquisition and the level of premiums, which quickly pushed up the overall debt pressure. According to media statistics, in 2019 alone, there were 12 bond issuances. The purpose of each financing was to borrow the new to repay the old to fill the funding gap caused by project growth.
Since it is financing, the cost of capital cannot be avoided. Financial report data shows that starting from 2018, Times China has ushered in a "double growth" of short-term debt and total debt, and the net debt ratio has increased from 55.1% in 2016 to 71% in mid-2020.
In the face of pressure, Cen Zhaoxiong's statement has always denied its existence.
Over the years, the Guangdong-Hong Kong-Macao Greater Bay Area has always been the "base" of Times China. Financial report data shows that 91% of its land reserves are concentrated in Guangdong, and Chengdu, Hangzhou, Wuhan, and Changsha account for only 9% of the total. With so much land in the country, this place "wholes the wool" and will never exceed Lei Chi Half a step.
Such a posture can help Cen Zhaoxiong to keep risks and costs at a low level. As for the scale, what should we do if the ideal of the Fortune Global 500 cannot be realized? Once policy tightening occurs and regional development pressure increases, what should we do? Cen Zhaoxiong did not reply. Don't ask, the question is "enough land."
In September 2019, there was news in the circle that Times China would assign sales tasks to all employees. Employees either complete sales tasks and bring cash flow to Times China; or choose to leave to reduce the cost burden for Times China. In this case, the number of employees of Times China decreased to 5,955, a decrease of 37.41%.
In a later official reply, Time China denied layoffs, but admitted the fact that it was assigned sales tasks. As for the reason, don't ask, the question is "this is the rule".
On the one hand, the resources are sufficient, and on the other hand, the rules must be observed. No matter what reason Cen Zhaoxiong finds, it is a fact that whitewashes China's stall in the era. Under current conditions, when will China be able to step out of the Fortune 500? China has not yet experienced the prime of life, and China has a tendency to "get old". Counting it down, it is only three years before the three major ambitions were made.
The last light
Will Cen Zhaoxiong be content with mediocrity? of course not. After all, he still has a "ace" in his hand.
Financial report data shows that as of June 30, 2020, Times China's total land bank is about 21.8 million square meters, of which the total number of urban renewal projects exceeds 150, and the potential total construction area is about 52 million square meters. Among all the districts, although Qingyuan ranks first with 23.8%, Guangzhou, which accounts for 19.1% of the value of goods, is its stronghold.
Public data shows that from September to November 2020, Guangzhou’s sales exceeded 10,000 units for three consecutive months, and reached a peak of 11,892 units in November after the “Golden Nine and Silver Ten”. During this period, the average price of new houses in Guangzhou has risen to 30,146. Yuan/square meter-this is a piece of hot land, very valuable.
At the same time, Guangzhou is also one of the most concentrated areas in China. According to statistics from the statistics department, as early as 2000, the local urbanization rate had completed 62.5%, and the problem of urban aging had already appeared, so the competent department quickly implemented the transformation plan.
Converting these old renovation projects into land reserves, the company saves the tedious process of bidding, auction and listing and high costs, and directly enters the development stage. What a blessing! Stationed in Guangzhou, you can not only enjoy the benefits of land value-added, but also get the old reform resources to supplement. For Times China, the value is self-evident.
You should know that in 2018, Times China listed its urban renewal business as its revenue for the first time, with 2.776 billion yuan, but unfortunately, its urban renewal projects fell to 2.168 billion yuan in 2019, which was a decline of 21.91%. The total revenue fell to 5.1%; and in the first half of 2020, this part of the revenue dropped to zero. In the financial report, Times China explained the “zero income” of this sector, and the epidemic has affected the overall construction process.
"If land acquisition is a short-term strategy, then urban renewal is a mid-to-long-term operation." According to the analysts of Yihan Think Tank, old reform is never a short-term business. Confirm housing property rights, negotiate demolition compensation, complete cooperation signing, and later Project development...Every link takes time.
What is the specific time? It's a long time, but it's hard to tell how long it will be. Therefore, it is too late to count on the "rice" of the old reform to relieve the "hungry" in front of us. Input cannot be quickly exchanged for output. This has become the key reason why many real estate companies have not been involved in related fields. It is also the reason why Times China has stored a large number of old reform projects but has not been able to beautify financial reports.
What is even more frightening is that in this year of unprecedented supervision and shortage of market liquidity, people are really hungry for a long time. Who cares about food? Some food is the most important thing to survive, so competition has gradually become the main theme of the industry.
Public data shows that Guangzhou arranged for 9 old villages to sign contracts with cooperative enterprises in 2018, and this number will increase to 31 in 2019. As of December 10, 2020, 51 old villages have successfully signed contracts. There are not many old renovation projects, and more plots will enter the market in the future, but are these projects still enough? not necessarily.
According to statistics released by Kerrey, there is more than one company in China that will carve up the old reform cake in Guangzhou in 2020, including China Evergrande (3333.HK), Longfor Group (0960.HK), and Poly Development (600048.SH). Such an industry giant, in the current era, China is already under the enemy.
Among the real estate companies that are focusing on the old reforms, China is not the one with the most harvest, nor the widest plot, nor the greatest potential. When everyone is present, can Times China survive? When the supply capacity of Guangzhou, a land of heavy warehouses, is deteriorating day by day, how can China realize its original aspirations? It's too difficult.
Conclusion
Can Times China become the world's top 500? Everything is hard to say.
Judging from the 2020 list, the average sales return rate of mainland Chinese companies on the list is 5.4%, and the average return on net assets is 9.8%. At some point in history, Times China has reached or even exceeded these averages. To increase revenue and net profit, there is a real chance to be shortlisted.
The only question is, for Cen Zhaoxiong, is it still important to be shortlisted? When China needs to face unprecedented growth pressure and traditional advantage projects begin to face the challenge of industry giants, how to survive is the key. As for those false names, they are no longer important.