Thanks to Property Transformation and Consumption Upgrade, Carnival Group International Recorded YOY Growth of 218.98% for Net Profit in 2017

China Securities Journal (Reporter Ren Mingjie) In recent years, a wave of diversification is sweeping through the property industry. Large-scale property enterprises not only tap into the commodity market but also extend their investment to sports, tourism, finance, movie, education and healthcare sectors and make continued breakthroughs in new areas. Talking about diversification, according to the 2017 financial results of Carnival Group International (00996.HK), the Group recorded gross profit of approximately HK$1.024 billion, up approximately 80.38% year on year; profit attributable to owners of the Group amounted to approximately HK$395 million, up approximately 218.98%; consolidated net profit amounted to approximately HK$526 million and net profit for the year ended 31 December 2016 amounted to HK$49.60 million, up 959.48% year on year.

Tourism Complex Becomes A New Trend

In 2017, the sales scale of the three property enterprises, namely Country Garden, Wanda and Evergrande, all exceeded RMB500 billion, while the sales scale of another three property enterprises also went beyond RMB300 billion. Besides, there were 11 property enterprises achieving a hundred billion sales successfully. However, in the past three years, the property development era with a pure focus on generating revenue from land development and residential property development has already passed, and the direction of property transformation has seen a shift from extensive development in the past to delicacy operation. In this wave of change, more and more property enterprises start to seize opportunities and emerge from the crowd.
While the property industry is in rapid development, another wave of transformation and upgrade is also expected. As of the end of 2017, the average GDP of Chinese people reached US$9,481. Consumers are not content with basic consumption any more but seek for consumption and service experiences that are more diversified, customized, high-end and sophisticated. Therefore, consumption upgrade is imminent. To adapt to this trend, the tourism industry has accelerated the supply-side structural reform and changed simple sight-seeing to in-depth travel experience, ticket economy to industrial economy and closed tourism circle to open “tourism+”. Against this backdrop, the tourism complex economy integrated with “tourism + property” has become a new trend.
The tourism complex, a derivative of property transformation and consumption, also receives strong supports from the policy. In 22 March, the General Office of the State Council issued the Guiding Opinions on Facilitating the Development of All-for-one Tourism, stating that the government will promote the integrated development of tourism and urbanization as well as industrialization and trade industry, construct beautiful villages that are suitable for living, tourism towns, stylish counties and urban green roads and slow traffic system, and support the construction of tourism complex, themed functional areas and central recreation and leisure areas.
Members from the sector pointed out that in this circumstance, it was not by chance that Carnival Group International recorded remarkable growth in its 2017 results. The development model of Carnival Group International is about integrating its leisure business with the one-stop tourism leisure consumption platform. With this model, the Company established a flagship project, Qingdao Rio Carnival, which is a large complex integrated with indoor and outdoor themed park, outlets, five-star luxury hotel, exhibition centre and Rio Carnival coastal community. According to the information published by Carnival Group International, the “Storm the Golden Week” event held in celebration of the National Day last year attracted 500,000 customers, with 20% increase in daily traffic year on year and 32% rise in daily performance year on year.

Enhance Efforts in Project Development

In recent years, Carnival Group International has further accelerated the progress of the development of high-end residential projects.
Taking Rio Carnival as an example, as part of the operation model, the Company developed and sold the high-end riverside residential properties in close proximity to Qingdao Rio Carnival themed park, shopping malls and hotel. Such residential properties occupy a total site area of approximately 126,000 square meter and a total construction area of 350,000 square meter. Meanwhile, in 2017, Carnival Group International acquired 100% equity interest of a company owning a plot of land in Qingdao, China, and planned to develop and sell high-end riverside residential properties. In the end of 2016, the Group acquired a property in Hong Kong with a site area of approximately 50,000 square feet. Given high property price and strong demand in Hong Kong, it is expected that the property will appreciate in the future.
It is worth noting that the Company stated in the 2017 annual report that focus would be placed on investment in overseas property. In September 2017, Carnival Group International utilized RMB245 million for construction of a high-end residential project at a prime location in Vancouver Downtown, Canada. The project is located in downtown, occupying a site area of approximately 41,573 square feet. The land on which it situates is hard to find in Vancouver and enjoys convenient transportation, therefore it has tremendous development potential. This move signifies Carnival Group International’s first step in entering the overseas market.
While speeding up the development of its flagship project “Rio Carnival” and actively “going global” to explore the overseas property market, the Company fine-tuned and set procedures for every part including land acquisition, development and sales in 2017. Hence, all the parts have high replicability and operability. This is a critical approach for it to expand its development from specific regions to the whole country and even overseas.
Members from the sector indicated that for enterprises which are able to secure success under this complicated economic environment and competition, they need to possess solid strength as well as the ability to accurately identify the development of the industry, insightfully seize opportunities and predict the next trend of development. Carnival Group International demonstrated its vigor as it chose Huangdao and constructed it into Rio Carnival when one-stop tourism complex project had yet to emerge. It further showed its confidence as it devoted serious efforts in advancing the development of projects and focused on overseas property. Therefore, it is reasonable to believe that in the new wave of property transformation and consumption upgrade, Carnival Group International will be able to seize another opportunity to realize fruitful results in performance and growth.