hexun.com: Finance and Strategic Investment Support Performance in Semi-Annual Report and Represent Transition of Drivers Growth of Oceanwide Holdings
hexun.com Real Estate News, August 30 P.M. | Oceanwide Holdings released its semi-annual report of 2017, achieving the revenue of RMB5.34 billion and the net profit of RMB904 million in the first half of the year. It is noteworthy that, unlike the past when real estate was the biggest contributor to the revenue, finance and strategic investment became important support for the performance of Oceanwide Holdings in this report.
Tightening regulation leading to fluctuations in the real estate performance
According to the semi-annual report, the real estate business revenue amounted to RMB2.23 billion in the first half of 2017, a year-on-year decline of 76%. The increasingly severe real estate regulation significantly affected the revenue of the real estate business with focus on high-end properties.
Oceanwide Holdings' real estate projects under construction now include Beijing Oceanwide International Residential Area, Wuhan Central Business District, and Shanghai Oceanwide International Apartment. The market environments in Beijing and Wuhan in the first half of 2017 were bad for real estate sales.
Since the beginning of this year, Beijing has promulgated a series of housing regulation policies which have been tightening, thus dramatically cooling the real estate market in Beijing. According to statistics of Beijing Municipal Bureau of Statistics, in the first seven months of this year, the sales area of commercial housing in Beijing registered 4,806,000 square meters, down 40.9% year on year. The sales of housing projects for sale in Beijing, especially some high-end properties, showed a clear decline.
Wuhan, another key city which is home to Oceanwide Holdings' real estate business, implemented housing regulation policies by imposing restrictions on purchase, loans, pricing and refined decoration, throwing cold water on the local real estate market. However, if the regulation policies could turn positive later, the revenue of the real estate business is likely to rise greatly thanks to the huge amount of land reserves in Wuhan. In addition, Oceanwide Holdings' real estate projects in the United States, once being launched on the market, are expected to bring new profit growth points.
According to the semi-annual report, Oceanwide Holdings, in response to the tightening regulation and market adjustment, will optimize the internal control model, promote the development and marketing of projects in a steady and orderly manner, and improve the quality and efficiency of the real estate business. "In the next step, Oceanwide Holdings will steadily work to develop, construct and sell existing real estate projects and speed up destocking and performance release. It will continue to pay attention to and participate in investment in quality projects in order to ensure sustainable development. It will also promote the synergy between real estate and finance segments, so as to drive the transformation and upgrading of the real estate business."
Finance and strategic investment as strong support
As the real estate performance fluctuated due to the market environment, Oceanwide Holdings' financial and strategic investment business segments underpinned the company's overall performance.
According to the semi-annual report, the financial business revenue reached RMB3.11 billion in the first half of 2017, a substantial increase of about 31% year on year. The financial subsidiaries such as Minsheng Trust and Minsheng Securities supported the strong growth of revenue.
Minsheng Securities is the earliest financial enterprise incorporated by Oceanwide Holdings in the early stage of transformation. At the end of 2016, Feng Henian, an experienced professional engaged in the Chinese capital market, became Chairman of Minsheng Securities. This securities company that has been in the midstream of the industry started to exert efforts in investment banking and other services.
In the first half of the year, Minsheng Securities strengthened its active services through building a strategic customer platform and offering regional financial services, and consolidated and capitalized on the advantages of traditional services such as investment banking, for the purpose of enhancing its operating performance and serving the real economy. In this way, its investment banking business realized the net revenue of RMB331 million, a substantial increase of 44.63%, boosting the significant increase in Minsheng Securities' revenue and profits.
Minsheng Trust, a new market player incorporated into Oceanwide Holdings less than two years ago, has seized the new drivers of growth in the trust industry such as active management, investment banking and innovative business, actively expanded its wealth management business, and basically formed wealth management expansion channels covering the first- and second-tier core cities in the country.
During the reporting period, the profitability of Minsheng Trust increased substantially. Its net profit amounted to RMB516 million in the first half of 2017, an increase of 124% over the same period last year. In the industry rating organized by China Trustee Association in May this year, Minsheng Trust was selected among the China Top 20 Class A trust companies.
In addition, Asia-Pacific Property & Casualty Insurance (formerly Min An Property & Casualty Insurance), which had suffered losses for many years before being merged into Oceanwide Holdings, turned losses into gains in the second quarter. According to the semi-annual report, Oceanwide Holdings' strategic investment business focused on industries and fields such as finance, big data, real estate, smart home, mixed ownership reform of state-owned enterprise, and digital marketing. Oceanwide Holdings actively looked for investment projects and enriched project reserves. It completed the transfer of share in partnership in Yunfeng Capital and participated in the Series-B round of investment in BAIC BJEV. In addition, Oceanwide Holdings took into account factors such as the law of industrial development and the strategy of enterprise resource allocation and achieved the withdrawal of several projects at the right time, with a return on investment of RMB576 million.
It is noteworthy that Oceanwide Holdings started the full transformation in 2015, and 2017 is the last year of "laying a solid foundation in three years," thus being regarded as a crucial year for the company's transformation and development. Despite the unsatisfactory performance in real estate in the first half of 2017, finance and strategic investment gave strong support, proving foresight and necessity of Oceanwide Holdings' transformation strategy.
Multi-pronged moves in the "new period"
Overall, the high growth momentum in the domestic real estate and financial sectors has continued for many years. The directional changes in the policy and market environment this year are expected to open up a new period for the industry.
On the one hand, the policymakers put forward an array of requirements of lowering leverage, controlling liabilities and preventing risks; on the other hand, the return of financial services to the original mission of serving the real economy and the strengthening of financial regulation have also been put in a more prominent position.
Under such circumstances, how Oceanwide Holdings, which focuses on the traditional real estate industry and is committed to building a complete financial services system, continues to push forward the strategic transformation and seek breakthroughs in the industry will undoubtedly set an example of great significance.
According to the semi-annual report, Oceanwide Holdings will further reduce the asset-liability ratio and optimize the asset-liability structure as its priorities. By seizing opportunities in the multi-level capital market, Oceanwide Holdings will give full play to its advantages such as excellent asset quality and presence in multiple industries, and actively try innovative ways of financing to seek abundant and stable funding channels. In addition, Oceanwide Holdings will explore new ways of operating assets to better disperse operational risks and increase revenue, thereby providing sound support for stable operation.
In the financial business, Oceanwide Holdings proposed that the financial business will effectively return to its original mission of serving the real economy, so as to better meet the diversified financial needs of the general public and the real economy.
The above ideas have been evidenced in Oceanwide Holdings' several financial companies. Earlier this year, the 80,000 DWT "MSXT Princess" bulk carrier invested by Minsheng Trust was launched. Minsheng Trust also acquired four super-sized handymax bulk carriers. Minsheng Trust has not only become the only company in the industry engaged in the shipping business, but also opened up new ideas and models for the development of the sluggish shipping industry.
In May this year, Minsheng Securities and the Shunde District Government of Foshan (real estate) signed a memorandum of strategic cooperation to explore the establishment of the country's first industrial fund of industrial development protection zone, thereby leveraging on financial resources to upgrade the industry and advance new urbanization. Asia-Pacific Property & Casualty Insurance established a complete livelihood guarantee product system that includes Sunset Red elderly accident insurance and "Anyibao" inpatient medical insurance, in order to exert the role of commercial insurance in strongly supporting and complementarily guaranteeing personal and family protection plans.
As the financial business is effectively serving the domestic real economy, Oceanwide Holdings will also place the control of overseas investment risks at an important position. According to the semi-annual report, in the next step, Oceanwide Holdings will be cautious and rational in overseas investment based on prudent decision-making by considering the national regulatory policies, market changes, corporate strategic layout, business transformation and upgrading and other factors, and prevent and control risks to ensure normalized and orderly overseas investment.
"In the face of the tightening policy environment and increasingly fierce market competition, Oceanwide Holdings has maintained its strategic positioning and achieved a good start in the last year of 'laying a solid foundation in three years,' based on the initial results achieved in the previous phase of transformation, and on the principle of promoting the transformation and development with efficiency, quality and risk control," as stated in the semi-annual report.
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