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Guangzhou R&F issues profit warning

Business | Gary Poon Feb 18, 2019
Guangzhou R&F Properties (2777) expects to record a 60 percent decrease in its consolidated profit for the year to December 31, 2018. Such a decrease would be attributable mainly to the fact the group enjoyed a substantial purchase gain in connection with its acquisition of hotel assets in 2017, chairman Li Sze-lim explained. And there were "fewer exceptional transactions of similar nature in 2018," he added. If the group had not acquired the hotels in 2017, Li added, Guangzhou R&F Properties would have also recorded an increase in its consolidated profit for 2018. The developer had acquired 70 hotels and one office building owned by Dalian Wanda Commercial Properties in 2017, which contributed to the one-off gain of 13.1 billion yuan (HK$15.1 billion). "Based on the total consideration of approximately 18.1 billion yuan for 70 hotels and one office block, the simple average of the price paid per hotel was approximately 255 million yuan per hotel, which, compared to the group's existing cost of 430 million yuan per hotel, is significantly lower in value," the developer said in the 2017 annual report. The developer had 88 hotels under operation with a total gross floor area 3.89 million square meters with 26,732 hotel rooms as of June 30, 2018. The hotels are handled by management groups such as Marriott International, InterContinental Hotels Group and Hilton Worldwide Holdings. Guangzhou R&F Properties also said that it has become the largest deluxe hotel owner globally with a total of 117 hotels, with approximately 29 hotels under development or under planning. For the six months to June 30, 2018, Guangzhou R&F Properties' total revenue increased by 67 percent to 34 billion yuan and net profit increased by 64 percent to 4.08 billion yuan over the corresponding period last year. Meanwhile, China Yangtze Power International (Hongkong) decide to subscribe to 9.41 billion shares - approximately 5 percent of issued shares - of Beijing Enterprises Water Group (0371) for a total of HK$2.02 billion or HK$4.15 per share. The group decided to use HK$1.52 billion for the investment in traditional water schemes including build-operate-transfer and transfer-operate-transfer projects and approximately HK$500 million for the construction of water environment renovation projects.


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