Group conference call takeawaysWe hosted an investor conference call for Joy City this afternoon. Thefollowing are the key takeaways:- Management provided a conservative guidance on the rental income growthfor the year: double digit growth (less than 20%) could be achieved and thegrowth rate in 2016 could reach 20% due to the opening of the new malls aswell as the organic growth.
Chengdu Joy City and the Shanghai Joy City Ph 2 will both be opened beforeChristmas this year. The average rent for Shanghai Joy Ph 2 would be at least20% higher than that in Ph 1.
Latest occupancy rate for Chengdu Joy City and Shanghai Joy City Ph 2 areabout 85% and 90% respectively.
Besides looking for new sites in Tier-1 cities (especially in Southern China)
and core Tier-2 cities (such as Nanjing, Wuhan and Chongqing), the companyis also looking for other ways of expansion like the planned asset lightexpansion model.
Joy City is exploring the asset light model and Yantai Joy City is the example.
The company owns 51% of the mall and the other 49% is owned by aninstitutional investor, who is also a shareholder of Joy City.
Joy City could also expand through M&A as there are other developersapproaching Joy City for asset sales. Joy City intends to acquire a minorityequity interests; it is also considering not even taking any stakes but onlycharging management fees on the malls. Through such arrangements, it ispossible for Joy City to achieve its target of expanding into 20 malls earlierthan the five years as planned.
Management said the yield (EBITDA on cost) on the malls for the preliminaryperiod (within 3 years) is about 2% and it would increase to 6% during thegrowth period (3-5 years). Yield on the mature malls is about 8%. However,Xidan Joy City has been performing strongly with a c.25% yield after 8 years ofoperation.
Contracted sales target of Joy City in 2015 is RMB2.0bn and RMB1.2bn hasbeen achieved in 9M15. The residential part of Shanghai Joy City (COFCOTianyu One) was launched in Nov and about RMB1.4bn sales has beenrecorded on the launch day. The cumulative sales value of the projects as ofnow is about RMB1.7bn. The company has completed its full year sales target.
ASP of this Shanghai project is about RMB100,000 psqm with GPM over70%. The project is expected to be booked starting 2016.
Sellable resource for 2016 is about RMB14bn and the sales and managementis expecting higher contracted sales value for the company in 2016.
The company is eligible for domestic corporate bond issuance and theplatform is ready. However, there is no such financing need at the moment.