August 21, 2017 / 5:29 AM / a year ago

UPDATE 2-China Overseas raises FY sales target, aims to boost rental income

* H1 net profit hits record high

* Raises FY sales target by 10 pct from previously seen HK$210 bln

* Still sees growth in China property industry but at slower rate

* Plans to boost rental income, focus on mid-end apartments (Recasts, adds company comment)

By Clare Jim

HONG KONG, Aug 21 (Reuters) - State-owned China Overseas Land & Investment plans to boost its rental income and build bigger-sized apartments to cushion itself from growth fluctuations in the residential market often caused by shifting government policies.

The country’s seventh-largest developer by sales, like its rivals, has posted strong financial results helped by a property boom in the world’s second-largest economy.

But China is increasingly reining in the real estate market on worries rising prices will lead to a costly bubble. Major cities across the country have imposed a slew of curbs, including home and land purchase restrictions as well as price limits on sales. That is expected to impact developers’ profits next year.

“There is still room for growth for China’s residential property market but it will grow at a slower pace,” China Overseas Chairman and CEO Yan Jianguo told an earnings conference.

The company aims to raise its annual income from self-held properties such as offices as well as new businesses such as elderly homes, education and rental apartments to HK$5 billion by 2020 and HK$10 billion by 2027, Yan said. The goals compare to a total income of HK$1.4 billion in the first six months of this year, according to a company statement.

China Overseas also aims to build more mid-sized apartments that homebuyers look to upgrade to from the small-sized apartments that first-time buyers prefer. The mid-sized segment is less affected by the tightening policies and yields higher selling prices and margins, it said.

The developer also said it will invest more in Hong Kong and Macau, betting on their economic outlook.

China Overseas said on Monday its first-half core profit, which excludes revaluation gains, grew 26 percent to HK$ 16.8 billion ($2.15 billion). The homebuilder raised its full-year sales target by 10 percent to HK$231 billion.

Net profit for the six months rose 25 percent to HK$21.7 billion, its highest ever half-year profit, while revenue was up 3.5 percent to HK$87.2 billion.

Its shares closed up 2.8 percent after the earnings announcement, outperforming the boarder market which rose 0.4 percent.

Major Chinese developers have so far reported strong results for the first six months, with any impact from Beijing’s property curbs likely to reflect on their financials only next year.

Developers typically record revenue in their books 10-18 months after sales of the property are completed when they actually pocket the proceeds.

That means current results reflect a period prior to when China adopted the arduous property market restrictions. Moreover, the results also reflect the low costs of land parcels of previous years.

Yan said that the Chinese government is expected to maintain the current stringent controls and deleveraging policies in the second half, while also launching policies with long-term positive impact, covering the property market, the financial markets and taxation aspects. (Reporting by Clare Jim; Editing by Muralikumar Anantharaman)

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