Chairman's Statement

Battered by the outbreak of Coronavirus Disease 2019 (“COVID-19” or “pandemic”), the global economy shrank by approximately 4.3% in 2020, the worst recession since the Great Depression of the 1930s. In 2020, the People’s Republic of China (the “PRC” or “Mainland China”) effectively coped with the fallout of the COVID-19 outbreak and the grim and complicated situations at home and abroad by adopting a string of policy measures, and became the first country to bring the pandemic under control, allow businesses to resume operations and production and turn its economy around, making it the only major economy in the world to record positive economic growth. In 2020, the aggregate gross domestic product (“GDP”) of the PRC exceeded RMB100 trillion, up by 2.3% as compared to the previous year; and its GDP per capita amounted to US$11,000, with per capita disposable income of residents increasing by 4.7% in nominal terms as compared to the previous year.
 
In 2020, the PRC government adhered to the overarching principles that “housing is for living in, not for speculation” and “property policies should be city-specific”, and reiterated that the property sector will not be used as a means of short-term stimulus for economic growth and that efforts will be made to stabilise land prices, housing prices and market expectations for promoting the stable and healthy development of the property market. Further, the government vowed to maintain the continuity, consistency and stability of property financial policies and speed up the formulation of long-term rules for governing real estate finance. The credit policy for the real estate sector in the first half of the year was neutral or slightly proactive, as the People’s Bank of China, lowered reserve requirement ratios three times, and cut loan prime rates twice. In the second half of 2020, the Ministry of Housing and Urban-Rural Development of the PRC and the People’s Bank of China set up the “three red lines” for property developers, i.e. liability-to-asset ratio (excluding receipt in advance) shall not exceed 70%, net gearing ratio shall not exceed 100%, and cash to short-term debt ratio shall not be less than 1. These restrictions on borrowing are designed to curb the growth of interest-bearing debts of property developers and reduce the scale of financing through trusts, forcing real estate enterprises to deleverage and reduce liabilities. According to the statistic data for the whole year of 2020, the total investment in real estate development across Mainland China amounted to approximately RMB14.1 trillion, representing a growth of 7.0% as compared to the previous year; while the gross floor area (“GFA”) and sales revenue of commodity housing sold were approximately 1,761 million square metres (“sq. m.”) and RMB17.36 trillion, respectively, both hitting record highs. Thanks to the introduction of the “Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area” and the “Three-Year Action Plan of Guangdong Province for Building the Guangdong-Hong Kong-Macao Greater Bay Area”, the updates of housing purchase policies for high-calibre talent and the relaxation of housing purchase restrictions in certain cities, the average price of commodity housing in nine major cities of Guangdong (which is part of the Guangdong-Hong Kong-Macao Greater Bay Area (the “Greater Bay Area”)) increased by 19.80% year-on-year in 2020. In particular, the average selling price of commodity housing in each of Guangzhou and Foshan grew by more than 20%, while the average selling prices in cities like Shenzhen, Zhuhai, Zhongshan, Jiangmen and Huizhou also saw steady increases.
 

Results

During the year under review, the Group was engaged in property development and investment businesses. The Group currently holds a number of property development projects and certain investment properties in Guangdong Province and the Greater Bay Area.
 
In 2020, the Group recorded a revenue of approximately HK$4,000 million (2019: HK$1,837 million), representing an increase of approximately 117.8% from the previous year. The Group recorded a profit attributable to owners of the Company for the year under review of approximately HK$1,682 million (2019: HK$341 million), representing an increase of approximately 393.1% from the previous year. For the year under review, profit attributable to owners of the Company before taking into account the fair value gains on investment properties and related deferred tax expense was approximately HK$210 million (2019: loss of HK$91 million).
 
During the year under review, the increase in revenue was mainly attributable to the increased GFA of properties sold as compared to the previous year. For details of the Group’s property sales in 2020, please refer to the section headed “Business Review” in the Management Discussion and Analysis. Apart from the profit from property sales, the increase in profit attributable to owners of the Company for the year under review was mainly attributable to the fact that the investment properties on the Southern Land of the GDH City Project were measured and carried at fair value for the first time. The aggregated fair value gains on investment properties contributed approximately HK1,472 million (2019: HK$432 million) to the Group’s profit after tax for the year.
 
The Board recommends the payment of a final dividend of HK1.53 cents per share for the year ended 31 December 2020 (2019: Nil). If approved by the shareholders of the Company at the forthcoming annual general meeting, the said final dividend will be paid on or about 16 July 2021.
 

Business Review

The Group conducted its business as planned in 2020 and achieved satisfactory results.
 
The Group holds a 100% interest in the GDH City Project, which is a multi-functional commercial complex with jewellery as the main theme, located in Luohu District, Shenzhen City in the PRC. The project, comprising business apartments, commercial units, shopping area and office premises, is developed in two phases, and the delivery of the properties of the first phase started in June 2020 and revenue recognition was made. Meanwhile, the Group further stepped up its efforts in seeking potential commercial occupiers for the project through extensive communications and collaborative interactions with industrial and commercial resources related to the project, and continuously optimised its product portfolio to showcase the competitive edge of the project.
 
The Group holds a 100% interest in the Laurel House Project, which is located in Yuexiu District, Guangzhou City, the PRC, with a GFA of approximately 119,267 sq. m., and comprises residential units, commercial properties and car-parking spaces. As at 31 December 2020, the aggregate GFA of the residential units contracted for sale accounted for approximately 95.6% of the total GFA of all the residential units of the Laurel House Project, and the occupancy rate of the commercial property, “GD•Delin (粤海•得鄰)” , was approximately 85.4%.
 
The Group holds a 100% interest in the Chenyuan Road Project, which is located in Pengjiang District, Jiangmen City, the PRC, with a site area of approximately 59,705 sq. m. and a maximum total GFA included in the calculation of the plot ratio of approximately 164,216 sq. m. The project comprises residential units, commercial properties and car-parking spaces. The pre-sale of the properties of the first phase commenced in January 2021.
 
In 2020, the Group succeeded in the bids for the land use rights of three parcels of land located at Aviation New Town, Jinwan District of Zhuhai City, Wanhua, Chancheng District of Foshan City and Tsuihang New District of Zhongshan City, respectively, through the public Listing-for-Sale Process. Further, in October 2020, the Group entered into agreements with certain subsidiaries of Guangdong Holdings, the ultimate controlling shareholder of the Company, to acquire 51% interest in 江門粤海置地有限公司 (Jiangmen Yuehai Land Co., Ltd.) (“Jiangmen Yuehai”) which holds the land parcel of the Jiangmen Ganhua Project, and 100% interest in 惠陽粤海房產發展有限公司 (Huiyang Yuehai Property Development Co., Ltd.) (“Huiyang Yuehai”) and its wholly-owned subsidiary 惠州市粤海房地產開發有限公司 (Huizhou City Yuehai Property Development Co., Ltd.) (“Huizhou Yuehai”) which holds the land parcel of the Huizhou Dayawan Project, respectively. The two acquisitions were completed in January 2021. The acquisition and investment in the development of the above projects complement the Group’s project portfolio in the strategic development regions, which is conducive to the sustainable development of the Group and the realisation of the Group’s regional development strategy in the Greater Bay Area, and represents a major move of the Group to seize the opportunities arising from the development of the Greater Bay Area and establish a strong presence in the core region of the Greater Bay Area.
 
In June 2020, the Group entered into an entrusted management services agreement with Guangdong Holdings, the ultimate controlling shareholder of the Company, pursuant to which the Group is entrusted with certain matters of three wholly-owned subsidiaries of Guangdong Holdings which are engaged in property development and investment in the PRC. The entering into of the agreement further clarified the intention of Guangdong Holdings to develop the Group as its sole listed real estate flagship, and eventually to become a competitive and influential PRC property development and investment arm in the Greater Bay Area. It will be beneficial to the Group in understanding the businesses and various projects of the entrusted companies and enhancing the Group’s capability in the integrated management and development of real estate business, and will enable the Group to better evaluate the compatibility of its existing business with the entrusted companies’ assets and the feasibility for future integration. Besides, the entering into of the agreement has already contributed to the successful acquisitions of the Jiangmen Ganhua Project and the Huizhou Dayawan Project.

Outlook


In 2020, China’s economy suffered severe shock due to the global outbreak of the COVID-19 and the complex and grim internal and external environment. Faced downward pressure on the economy, the PRC government managed to bring the pandemic under control in a relatively short period of time, strengthened counter-cyclical measures, and became the first country to achieve economic recovery. With its long-run fundamentals remaining positive, economic growth of the PRC remained stable. The World Bank projected that the PRC’s economy will expand by 7.9% in 2021, the strong recovery momentum reflecting the release of pent-up demand and a quicker-than-expected resumption of production and exports.
 
At the Central Economic Work Conference of the PRC government held in December 2020, the position that “housing is for living in, not for speculation” was reiterated. City-specific measures and multiple policies would be implemented to promote the stable and healthy development of the property market. Going forward, it is expected that the PRC government will continue to maintain the consistency and stability of its overall policies on the real estate market. The “three red lines” requirements will apply to all enterprises in 2021, which will facilitate the healthy development of the real estate sector in China. In general, the sound fundamentals of China’s economy in the long run coupled with steady property development and investment will continue to facilitate the steady and healthy development of China’s residential and commercial property sectors.

As the development strategy in the Greater Bay Area was fully put in place, the development of the cities in the Greater Bay Area has speeded up, with significant improvements seen in connectivity of infrastructure and a raft of policies concerning finance, human resources and cooperation and innovation in scientific research being launched. In particular, 27 reform measures and a first batch of 40 authorised initiatives were unveiled for Shenzhen to implement comprehensive pilot reforms. The development dividends of the Greater Bay Area have been expanding. With increasingly mature industries, the Greater Bay Area has seen an influx of population, which resulted in a steadily growing demand in the property market. Since 2020, the land supply in the Greater Bay Area has been on the rise with a series of hot land auctions, and more new projects have commenced construction, indicating strong momentum on both supply and demand sides. As such, it is expected that the property market in the Greater Bay Area will further expand in 2021.
 
The Group’s projects such as Shenzhen GDH City, Guangzhou Laurel House, Zhuhai Jinwan Project, Jiangmen Chenyuan Road Project, Jiangmen Ganhua Project, Huizhou Dayawan Project, Foshan Laurel House and Zhongshan GDH City are all located in the central cities of the Greater Bay Area or covered by the “Core, Coastal Belt and Zone Initiative” (which fosters the optimised development of the Pearl River Delta Core Area, connects Eastern Guangdong, Western Guangdong and cities within the Pearl River Delta as a coastal economic belt like a beaded bracelet, and establishes the mountainous areas of Northern Guangdong as an ecological development zone), and will benefit from the strong development momentum of these areas.
 
Through the development, construction and management of projects such as the GDH City Project in Shenzhen and the Laurel House Project in Guangzhou, etc., the Group has strategically entered the markets of major cities in the Greater Bay Area such as Zhuhai, Jiangmen, Huizhou, Foshan and Zhongshan, developed sound cooperative relationships with the local governments, built up professional development teams and established an operating model for project development. Building on its professional capabilities, industry experience and resource advantages, the Group will leverage its status as a provincial state-owned enterprise and the resource advantages of its shareholders to seize business opportunities and innovate project development models. Moreover, the Group will continue to seek opportunities for acquiring good development projects in the Greater Bay Area, increase efforts in brand building and enhancement, and further enhance its product quality and competitive competence, with a view to growing itself into an “influential property developer in the Greater Bay Area” and paving the way for the stable development of the Company in the long run.
 
Last but not least, on behalf of the Board, I would like to acknowledge the contribution by management and staff during the previous year. Under the leadership of the Board, the Group is confident in the prospect of its business development and will actively promote the development of its property business in order to create greater returns for its shareholders as we did in the past.

XU Yeqin
Chairman

Hong Kong, 26 March 2021