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. The company is 61%-owned by China Resources Holdings and is a state-owned enterprise, but as one of the oldest of China’s red-chip companies it has a long history of operating commercially and to high standards.
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.
Meanwhile, the real estate sector is facing tighter regulations on land acquisition and selling prices given China’s “common prosperity” goals. Policy constraints on highly leveraged developers have hurt profits; however, this has provided a boost to companies like CR Land which has lower debt levels and is classified as a “green category company” under this regulatory framework. We believe CR Land is well positioned to benefit from any potential industry consolidation that follows, due to its healthy balance sheet and its high-quality portfolio of shopping malls.
Source: Company data, FSSA Investment Managers. as at 30 June 2022.
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