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

We believe this 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.

This company 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 its 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 property developers which have lower debt levels – this property developer is classified as a “green category company” under this regulatory framework. We believe this developer 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. 

Management aims to double rental income during 2020-2025

Source: Company data, FSSA Investment Managers. as at 30 June 2022.

Disclaimer: Reference to specific securities (if any) is included for the purpose of illustration only and should not be construed as a recommendation to buy or sell the same. All securities mentioned herein may or may not form part of the holdings of FSSA Investment Managers’ portfolios at a certain point in time, and the holdings may change over time.