Recently, the 9th “Global Investment Carnival 2025” hosted by Gelonghui was held in Shenzhen. As a major event in the capital world, the event invited many executives of listed companies to have face-to-face and zero distance communication with investors.

This time, I had the pleasure of listening to the live road show for the development of Kamishito City. At the event, Mr. Liang Jiankang, the company's financial director, and Ms. Fu Lin, deputy head of the corporate communications department, shared the development of Shangshi City.

Here, the author has sorted out the main points as follows:

Shangshi City Development is one of the real estate platforms under the Shangshi Group. As the only Hong Kong share of real estate in the Shanghai state-owned enterprise system, the company is backed by the Shanghai State-owned Assets Administration Commission. The majority shareholders are Shangshi Holdings and Shangshi Group. This provides it with strong resources and background support, which not only brings a steady business environment, but also enhances confidence in the capital market.

(Source: Company Information)

Judging from the revenue structure, Shangshi City Development has shown a multi-wheel drive development strategy in terms of housing, commercial assets, and rental housing. Furthermore, the projects developed by the company not only focus on high-end residential communities, but also cover various business formats such as high-end office buildings, shopping centers, star hotels, and condominiums. This diversified business layout enables the company to maintain steady growth and profits in different market environments.

(Source: Company Information)

In recent years, the overall situation in the industry has been poor, and most housing enterprises have suffered serious losses. On the other hand, the overall performance of real city development has been relatively steady. With the implementation of a series of policies to support the industry, the company's fundamentals have shown a steady, moderate and positive trend. Financial reports show that in the first half of this year, the company achieved main business revenue of HK$2.981 billion, gross profit of HK$0.621 billion, and gross margin of 20.8%, which is at a healthy level in the industry.

(Source: Company Information)

The company's core assets are high quality, cash flow is abundant, and the financial structure is good. As of the end of June this year, bank balances and cash holdings reached HK$5.363 billion, a current ratio of 1.3 times, and a net debt ratio of only 65.1%, demonstrating its good fund management ability and strong resilience to risks.

(Source: Company Information)

Furthermore, the company has been stable in terms of dividends for a long time. According to reports, its dividend payout ratio reached 35.4% last year, showing the importance it attaches to shareholder returns.

Although the macro environment and the real estate industry cycle are putting pressure on housing enterprises, the performance of Shangshi City Development in the capital market in recent years has been relatively steady, showing the ability to cross the market cycle.

(Source: Futu Market)

Furthermore, as of the end of June this year, the company's net book assets per share were HK$2.78. Up to now, the company's dynamic PE is only 3.26 times, and the net market ratio is 0.14 times, showing a clear underestimate.

According to the author, with its state-owned enterprise background, Shangshi city development has natural advantages in terms of financing costs, land acquisition, and project execution. The company's strategic layout is also mainly focused on Shanghai and the Yangtze River Delta region, as well as core Tier 1 and 2 cities, which is in line with the country's urbanization strategy and regional development policies.

As of June 30, 2024, Shangshi City Development has 28 real estate projects in 10 key mainland cities in China, including Shanghai, Beijing, Tianjin, Xi'an, Chongqing, Wuxi, Shenyang, Yantai, Shenzhen and Wuhan. Most of these are medium- and high-end residential and commercial properties built and under construction. The planned floor area for future sales is about 3.41 million square meters, which is enough for the next 3 to 5 years of development.

(Source: Company Information)

At the same time, the company stated that it will strengthen the development of existing high-quality land reserves and concentrate resources on a quality development model. Furthermore, in the future, Shangshi City Development will also cooperate with more experienced developers and financial institutions through models such as holding, shareholding, and joint development to obtain more high-quality resources at reasonable risk and capital costs to fuel future growth.

From a policy perspective, as macroeconomic policies further strengthen economic stability in the second half of this year, real estate policies are expected to focus on “stabilizing the market” and “removing inventory.” For the development of Shangshi City, this also means more market opportunities and policy support for the future market.

At the same time, in the long run, the company focuses on the renovation of old districts, the transformation and upgrading of industrial land plots, and the development of superstructure properties. It is also in line with the direction of policy support and is expected to further open up room for future growth.

It is worth mentioning that in past real estate project practices, it can be seen that Shangshi City's development has shown strong value mining capabilities. The company focuses on asset quality and profit potential in project development, and ensures that investment projects can bring stable returns through strict project screening and risk control, which also continues to lay the foundation for the company's steady and long-term development.

Taken together, Shangshi's urban development has shown strong advantages in terms of background strength, operational soundness, and policy support. Although the real estate market is under pressure to adjust, the recovery trend of the market is already visible to the naked eye. With its state-owned enterprise background, high-quality project layout, and steady financial situation, Shangshi City Development is expected to stand out in subsequent market competition.

The following is a compilation of live investor questions and answers for your reference:

Q: How much is the company's contract sales this year? How much is the company's current foreign debt? Also, can you tell me about the company's future land reserve situation?

Liang Health: The company's 2024 contract sales were about 4 billion-5 billion yuan. The handover was about 2.2 billion yuan in the first half of this year, but in fact, we are focusing more on handover in the second half of the year. We try our best to handle more houses in the second half of the year to achieve the carry-over level scheduled at the beginning of the year.

In addition, the company has about HK$0.85 billion in foreign debt, mainly from loans from the majority shareholders of the Shanghai Real Group. Since overseas costs are currently relatively high, we are also trying to reduce overseas debt and replace it with domestic financing as much as possible.

Fu Lin: Our planned construction area for sale in the future is about 3.41 million square meters, mainly distributed in Shanghai, Xi'an and Wuhan, which is enough for the next 3-5 years of development. At the same time, we will continue to acquire land at an appropriate price in due course, through tenders or cooperation with brother companies, etc. As I mentioned earlier, we have collaborated on many contract construction projects with brother companies over the years. Relying on the comprehensive operation capabilities of our parent company Shangshi Group's diversified business layout, we have cooperated with companies such as Shanghai Pharmaceutical, Chongming Dongtan, and Shanghai Jiuyuan on various construction projects at various levels in recent years. In the future, it will also be actively promoted in fields such as old renovation, immediate needs, improved housing, and general health.

Question: Market feedback was good after the 9.26 New Deal this year. Will our company's performance improve in the second half of the year?

Fu Lin: Since September of this year, the central level has introduced a “package” of countercyclical adjustment policies to help the real estate market stop falling and stabilize. Judging from the recent performance of the real estate market and related data, the effects of the policy are beginning to show signs of recovery. Our revenue for the first half of the year was around HK$3 billion. Sales stabilized due to relevant policies. We expect to sell more buildings in the second half of the year, and our annual revenue is expected to exceed HK$12 billion.

Liang Jiankang: In addition, after the government policy was introduced at the end of September, overall market sentiment improved. It can be seen that the company made great improvements in the launch of the project in the fourth quarter. However, in terms of unit prices, the market is still very sensitive. This will also reduce the gross profit or profit level of real estate developers, and we will also control costs very strictly.

At the same time, we will also consider taking new projects at a level that does not increase the company's balance to liability ratio as much as possible, and will strictly control the balance to liability ratio.

Question: May I ask you, in addition to cooperative development with brother companies, they also have some of their own original reserves. Does the company have plans to reserve some other land? Does the company have some key layout areas?

Fu Lin: We will collect some land reserves at the right time and at the right price. You can also see that the cost of each plot of land purchased by the company was relatively low. It can be seen that our attitude in acquiring land is quite cautious.

Our investment layout is mainly focused on Shanghai and other Yangtze River Delta regions and the core first-tier and second-tier cities we have been working on for a long time. We concentrate resources on high-quality development models, continue to build high-quality benchmark projects, focus on urban renewal and transformation opportunities, increase the wealth of the city, and use state-owned enterprise brands to focus on the renovation of old districts and the development of subway superstructures to maintain balanced and high-quality development.

At the end of November, Ms. Leng Weiqing, Chairman of Shangshi Group, signed a letter of intent to support and participate in the development of the northern metropolitan area on behalf of the group and the Hong Kong SAR government. We are also looking forward to expanding the future development map to Hong Kong.