Helenbergh’s High-quality Development Track Featuring Stable Sales and Finance

Helenbergh Creative Park

In 2020, China’s real estate industry withstood the severe test of the epidemic and commercial housing sales across the country achieved a steady growth. Statistics from Cric China show that the total sales amount of top 100 real estate enterprises in 2020 reached 13 trillion yuan, an increase of 12.4% than 2019. Among them, some real estate enterprises had an outstanding performance, recording a growth far higher than the average level. For example, in 2020 Helenbergh achieved a full-caliber sales amount of 78.39 billion yuan, up about 47% year on year, with a compound growth rate of over 40% in the past five years. In the ranking of equity sales, Helenbergh also ascended to the top 40 players in the industry.

In addition to the impact from the epidemic, the new policy of “Three Red Lines” in 2020 had raised higher requirements on the financial strength and operational efficiency of real estate enterprises. Some analyst believed that though the introduction of the policy had some limitations on the growth rate of interest-bearing liabilities of all real estate enterprises, compared with real estate enterprises rated as red and yellow, those enterprises rated as yellow and green face relatively smaller limitations on their growth rate, thus they have some comparative advantage and expect to take this opportunity to adjust their land reserve structure and further improve their scale advantage.

As can be seen, while pursuing growth in scale, Helenbergh has maintained a sound financial style. As of the end of June 2020, the company had 15.57 billion in cash, with a ration between cash and short-term debt at 1.05 and a net debt ratio at about 89.6%, which was far from going beyond the regulatory red lines and thus is a real estate enterprise with relatively healthy financial conditions. It’s reported that by taking active measures to stabilize growth and control debts, the company was expected to be rated as green with more competitive advantages throughout 202.

Thanks to this, Helenbergh acquired dozens of high-quality land in core cities of the Guangdong-Hong Kong-Macao Greater Bay Area, Yangtze River Delta and Mid-and-west of China, laying a solid foundation for its sustainable growth in the future.

Helenbergh China Holdings

Financial Soundness Highlights Strength

Recently, it has been reported that the Central Bank and the Ministry of Housing and Urban and Rural Development held another forum among key real estate enterprises, which had expanded to cover real estate enterprises that were previously not involved in the experiment of “Three Red Lines”. It was considered as a signal that the scope of the experiment would expand.

It’s reported that according to the requirements of “Three Red Lines”, those real estate enterprises whose debt ratio after deducting the advances received is higher than 70%, net debt ratio higher than 100% and ratio between cash and short-term debt is higher than 1 will be rated as red, those who have stepped on two lines or one line will be respectively rated as orange and yellow, and those who have stepped on none of the three lines will be rated as green. The interest-bearing debt growth speeds corresponding to the four levels are 0, 5%, 10% and 15% respectively.

The new financing policy of “Three Red Lines” is considered as a major milestone event that will change the development path of the real estate industry. Pan Gongsheng, vice president of the People’s Bank of China and director of the State Administration of Foreign Exchange, ever said that the purpose of the system was to promote the marketization, regulation and transparency of the financing management of real estate enterprises. At the micro level, it’s good for real estate enterprises to form stable financial policy expectations, properly arrange their business activities and financing behaviors, correct some enterprises’ blind expansion so that they can move on steadily to reach far and improve their ability to resist risks. At the macro level, it can promote the long-term stable operation of the real estate industry, prevent and resolve the financial risks of real estate and promote the sustainable, stable and healthy development of the real estate market.

According to statistics, as of the end of June 2020, most of the real estate enterprises rated as green were mostly state-owned enterprises and central enterprises, most of those rated as yellow are private enterprises with a higher financial self-discipline, including Country Garden, Vanke, Midea Property, Logan Estate and Helenbergh.

Great Wall Securities believes that under the restriction of “Three Red Lines”, those enterprises with healthier financial leverage, interest-free leverage, diversified assets and the right to speak in the industrial chain will be more competitive.

Optimizing Land Reserve Structure and Improving National Layout

According to the monitoring of Cric China, the impact of the policy of “Three Red Lines” on the investment of real estate enterprises has emerged. The high-quality resources of land market have further been concentrated in those real estate enterprises rated as green and yellow. According to the data of the institution, while those real estate enterprises rated as red and orange have significantly reduced their investment, in 2020, the investment of those real estate enterprises rated as yellow and green showed distinctive differentiation. Half of them had remained relatively active in land acquisition after the policy was released, which was on one hand due to the postponement of investment tempo in the year, and on the other because while other enterprises paused in land acquisition, they seized the opportunity to reserve land against the market. Such kind of differentiated attitudes toward investment is expected to continue. As a result, those real estate enterprises with financial advantage will seize the opportunity to adjust their land reserve structure and further promote their advantage in scale.

With healthy financial indicators, Helenbergh has managed to seize the rare investment window. In the late December of 2020, after more than 60 rounds of offers in 70 minutes on a land auction in Zhuhai, Guangdong, Helenbergh won a plot of land in Doumen district, which was just an epitome of Helenbergh in the land market of 2020: In November, it settled in Qionglai, Chengdu, in October, it debuted in Guiyang, and in the first nine months, it increased investment in the cities of Yangtze River Delta such as Zhenjiang, Wuxi, Jinhua, Suzhou, Hefei and Nanjing…

According to public information, since 2020, Helenbergh has adhered to the strategy of national deployment and focused effort in regions, furthered optimized its land reserve structure and won dozens of quality plots of land in different cities such as Guangzhou, Foshan, Huizhou, Suzhou, Hefei, Nanjing, Jinhua, Chongqing and Guiyang. As of June 20, 2020, the company’s land reserve area had reached 29.41 million ㎡, which had deeply deployed in regions like Pearl River Delta, Yangtze River Delta, Beijing-Tianjin-Hebei, Western China and Central China, of which the land reserve area in the Greater Bay Area accounted for over 30%, providing a strong support to its steady growth and development.

Under the premise of limited financial leverage, leveraging the external equity cooperation has become a common option for real estate enterprises to seek a steady growth. It’s reported that in 2020, Helenbergh actively reached strategic cooperation with benchmark enterprises of the industry or regions like Midea, Gemdale, Longfor, Zhongnan, RiseSun, Kaisa, Rsun and Dynasty Property in such areas as project development, land auction, urban renewal, industrial operation, financial investment and real estate innovation to complement advantages mutually and balance the risks.

According to China Index Academy, in the future, the features of the industry like slowing down, differentiation and a low fault tolerance will become more obvious, as a new competition pattern is taking shape. Seizing the structural opportunities in key city clusters and core cities of Tier 1 and 2 will become an important means to promote the growth of enterprises, while strictly guarding against financial risks and optimizing financial management will be the foundation for the steady development of the enterprises.

Helenbergh also agreed with this view. It believed that in 2021, in the context of accelerating the construction of a new development pattern of domestic and international double cycles, the company will continue to adhere to its stable and high-quality development strategy, constantly improve its core competitiveness, strengthen its operating capacity, enhance its quality and efficiency and solidify its foundation to usher in a brighter future.