China’s leading property developer operating high-end shopping malls

We believe China Resources Land (CR Land), a high-quality and prudent property developer, should benefit from rising incomes and the urbanisation trend in China. CR Land is a Top 10 developer in China. It is classified as a “green category” company under the “three red lines” regulatory framework. Net gearing is around 30%, and funding cost is below 4%. It will continue to benefit from industry consolidation throughout cycles.

CR Land has the largest number of mid- to high-end shopping malls amongst Chinese developers, which should benefit from China’s growing consumer-led economy. Although the pandemic has affected short-term discretionary spending, we believe CR Land’s rental income could potentially double over the 2020-25 period once the situation normalises and its current pipeline of malls are fully developed.

CR Land is trading at 8x price-to-earnings (P/E) and 0.9x price-to-book (P/B) as investors worry about the China property market. There is a 4.5% dividend yield, and rental income is sufficient to cover dividends. We believe CR Land is well positioned to benefit from potential industry consolidation due to its healthy balance sheet and its high-quality portfolio of shopping malls. 

Management aims to double rental income during 2020-2025

Source: Company data, FSSA Investment Managers. as at 30 June 2023. *2022 rental income excludes rental relief of RMB2.5bn. 

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