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Gemdale Properties and Investment Curved to Increase Business Achievements

2013-11-26 Source:  Size:TTT
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[Abstract] On Apr. 8, Gemdale Properties and Investment Corporation Limited (“Gemdale Properties and Investment”) announced a series of related transactions, mainly concerning the agreement on use of trademark, entrustment agreement on project operation and agreement on property management service. In the meantime, it announced that it would increase its total capital stock from 10 billion to 20 billion shares.

  On Apr. 8, Gemdale Properties and Investment Corporation Limited (“Gemdale Properties and Investment”, stock code: 0535.HK) announced a series of related transactions, mainly concerning the agreement on use of trademark, entrustment agreement on project operation and agreement on property management service. In the meantime, it announced that it would increase its total capital stock from 10 billion to 20 billion shares.

  Analyzers held that entrusting the listed company with operating and managing the shareholders’ property and increasing capital stock are all obviously to inject profits to the listed company. In the intermission when Gemdale Corporation (stock code: 600383.SH) can not inject assets within two years, these actions can partially help Gemdale Properties and Investment strengthen its earning power so as to lay a solid foundation for its future financing. 

  Profit Injection

  The announcement shows that from Apr. 8, Gemdale Corporation agreed to grant non-exclusive right to use registered trademarks of “金地”, “金地集团” and “Gemdale” in China to Gemdale Properties and Investment and its affiliated companies. 

  “This is for the purpose of accelerating the increase in value by brand effect”, said by a fellow trader. In fact, it’s also the same reason why Frasers Property was renamed as Gemdale Properties and Investment. This is a continuous action. 

  In Sep. 2012, Gemdale Corporation announced to purchase 56.05% of stock right of Frasers Property with 1,654 million HKD. In Nov. 2012, Gemdale Corporation finished complete offer and acquisition of Frasers Property and held 76.29% of its stock right.

  On this Mar. 7, Gemdale Properties and Investment announced that Frasers Property (China) Limited was renamed as Gemdale Properties and Investment Corporation Limited, which would come into force from Mar. 12, 2013.

  In the meantime, Gemdale Properties and Investment also announced that Gemdale Corporation entrusted it with the operation of three commercial property projects, namely, Shopping Center of Xi’an Gemdale Lake City with total floor area of 90,000m2 approximately; Hyatt Regency Hotel of Xi’an Gemdale Lake City with total floor area of 60,000m2; and Beijing Gemdale Plaza with total floor area of 150,000m2 approximately.  

    Gemdale Corporation will pay Gemdale Properties and Investment 1,066,700 Yuan/month for the two projects in Xi’an and 1,600,000 Yuan/month for the project in Beijing. By the end of this year, Gemdale Properties and Investment can earn profits of 8,600,000 Yuan from the two projects in Xi’an and 12,800,000 Yuan from the project in Beijing, totaling 21,400,000 Yuan. 

  Gemdale Properties and Investment held that it owns the required human resources and professionals to operate all the commercial properties of Gemdale Corporation, and judged that property operation service can bring considerable profits to itself, because it can set up its own team to further provide similar services to the third party and expand its business scope. 

    Moreover, Gemdale Corporation also entrusted Gemdale Properties and Investment with the property management of Phase I and Phase II of Vision Shenzhen Business Park (VSBP). By the end of this year, no more than 8,020,000 Yuan of property management fee will be paid.
  
  With property management fee of commercial property increasing year by year, Gemdale Properties and Investment will have a source of ever-growing income in future.
  
  On the same day, Gemdale Properties and Investment announced that it would increase its total capital stock to 20 billion shares.
  
  “Entrusting the listed company with operating and managing the shareholders’ property and increasing capital stock are all obviously to inject profits to the listed company”, Chairman of Synergy Capital and Capital Executive Office, Dennis Huang said.

  He expressed that it’s less than two years since Gemdale Corporation acquired Gemdale Properties and Investment and Stock Exchange of Hong Kong stipulates that injection of a large amount of assets is not allowed within two years. “Mildly injecting profits can achieve the purpose of supporting its business achievements; and increasing shares can also achieve the purpose of financing”. 
  
  Current Situation of Gemdale Properties and Investment

    Gemdale Properties and Investment currently owns a limited reserve of assets. Its main assets and incomes include a land for residence in Songjiang Shanghai (building), with FAR area of 745,000m2, holding 54.85% of equity; rented property of completed office building in Shenzhen High-tech Park (building) is 143,000m2, with income of annual rent of 120 million Yuan, holding 100% of equity; partial commercial and office rental properties in Beijing Sohu Plaza, with total area of 15,000m2 and annual rent of 30 million Yuan, holding 60% of equity.
  
  Analyzers held that it’s obviously difficult to support its future growth of business achievements only by the assets of these commercial properties. Gemdale Corporation can not inject a large amount of assets to it within two years. In addition to increasing shares and entrusting with operation of big shareholder’s assets, it’s more practical for Gemdale Properties and Investment to depend on itself to increase business achievements in the two years.

  On Mar. 26, the Company acquired a land parcel for residence in Hunnan New District of Shenyang at the price of 858 million Yuan by means of bid invitation, auction and quotation, which further proved the fact that the current assets of Gemdale Properties and Investment are difficult to support its business achievements as a listed company.
 
    “If Gemdale Properties and Investment only acquired commercial projects instead of residential projects, perhaps it can not earn profits immediately to support its business achievements as a listed company”, Dennis Huang said.

  “The early stage of commercial property needs a huge amount of capital, which will be a big trial to the capital chain of Gemdale Properties and Investment”, said by an analyzer from a certain securities company. He pointed out that “short, adaptable and fast” residential projects will supplement and balance its capital. 

  Dennis Huang also pointed out that Gemdale Properties and Investment has to present a luxuriant statement of business achievements to their investors each year so as to facilitate its financing; “otherwise financing will be very difficult”.

  In the opinion of Dennis Huang, Gemdale Corporation expected Gemdale Properties and Investment to be its overseas financing platform. In fact, developers recently have been much limited in bank loan under the influence of real estate macro control policies, such as the Five National Regulations on Real Estate.

  Actually, Gemdale Corporation rapidly launched this overseas financing platform only five months after announcing the acquisition of Gemdale Properties and Investment. On Jan. 29, Gemdale Properties and Investment announced to issue 900 million shares (accounting for about 11.59 of the capital stock after increase) at the price of 0.78 HKD per share and financed a net amount of 700 million HKD.

  Xu Jiajun introduced that this financing would increase the capital of Gemdale Properties and Investment and lay a foundation for its project acquisition, scale expansion and business achievements growth.

    However, Gemdale Properties and Investment also paid great attention to the shell of commercial property. At the beginning of this year, Gemdale Corporation appointed Director Xu Jiajun to CEO of Gemdale Properties and Investment, which demonstrated that Gemdale Corporation attached great importance to Gemdale Properties and Investment and also the future of commercial property.    

  In 2010, Gemdale Corporation established the development strategy that “Develop to be a composite real estate developer with residential business as the core and commercial and financial businesses as two wings”. Acquiring Frasers Property is just laying a foundation for its commercial property strategy.

KeyWord:Related Transactions, Gemdale Properties and Investment
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