HONG KONG, Aug 31 (Reuters) - Property developer Sunac China said it will focus on its core business and stop non-property related diversification plans, following its failed investment in debt-laden Leshi Internet Information & Technology Corp Beijing.
Sunac, widely viewed as a white knight after its 15 billion yuan ($2.20 billion) investment for the crumbling LeEco group of which Leshi has been the main listed vehicle, booked a 16.6 billion yuan charge last year for the investment.
“We do our core business well so we don’t need diversification,” said Sun Hongbin, the chairman of Sunac - the country’s fifth-largest property developer by sales.
“We may look at consumption upgrade-related opportunities in the future, but for now we have stopped investing.”
The company’s cultural and tourism group as well as its property business cater to two big markets and require long-time development, he added at an earnings conference on Friday.
Sunac, which bought tourism projects from Dalian Wanda Group for $6.5 billion in 2017, set up the independent cultural and tourism group earlier this year.
The company on Thursday reported a three-fold jump in its core profit to 6.6 billion yuan for the six months ended June.
Its gearing ratio, excluding perceptual capital securities that are categorized as equity rather than debt, fell slightly to 65.8 percent at the end of June from 66.9 percent at end-December.
The company said it expects the ratio to continue to drop in the next two to three years as it becomes more careful in its public land acquisitions.
Land prices are expected to decline in the next one to two years, Sunac CEO Wang Mengde said, adding the company would focus on expanding only in first- and second-tier cities.
China is seeing a surge in failed land auctions as developers face reduced liquidity and thinning margins due to a prolonged tightening of government policy since late 2016.
“The tightening policies introduced have far exceeded expectations,” Sun said on Friday. “Governments will not loosen them in the short-term, and the policies will change consumer expectations, so we have to be careful.” ($1 = 6.8285 Chinese yuan ) (Reporting by Clare Jim; Editing by Himani Sarkar)