Sino Ocean : Contracted Sales Reached Record High Gross Profit Margin Rebounded Perceptibly

(Hong Kong, 18 August 2016) Sino-Ocean Group Holding Limited ('Sino-Ocean Group' or the 'Company', stock code: 3377), one of the leading property developers with presence in the key economic regions in the PRC, is pleased to announce the interim results of the Company and its subsidiaries (collectively known as the 'Group') for the period ended 30 June 2016 (the 'Period').

During the Period, the Group's contracted sales reached its record high, which significantly increased by 49% to RMB20.6 billion, attaining revenue of RMB9,331 million, gross profit of RMB2,254 million, profit attributable to owners of the Company of RMB 1,448 million and basic earnings per share of RMB17.8 cents. During the Period, the Group proactively adjusted its sales tactics to enhance overall project value. Profit margin recovered gradually as gross profit margin increased by 4% points YoY to 24%. The Board of Directors recommended paying an interim dividend of HK$7.9 cents per share.

Contracted sales reached record high and sales quality elevated

During the first half of 2016, given the Central Government's monetary easing and continued relaxation of the property market policies, the real estate market continued to look up, sales of commodity housing in major cities kept reaching new heights and de-stocking also showed noticeable results. However, as policies and timing adopted by local authorities differed even more, the real estate market diverged further. While supply in T-1 cities and core T-2 cities fell short of demand, the pressure of de-stocking in other T-2, T-3 and T-4 cities remained severe. Looking ahead to the second half of the year, the Group expects the monetary and credit environment to be steady while property price and transaction volume to become stable. Yet, as the government remains intent on supply side reform and de-stocking, market differentiation will be even more apparent.

During the Period, the Group's effective sales strategy and continually enhanced execution competence pushed contracted sales significantly by 49% to approximately RMB20.6 billion, a record high for the same period. Sales proceeds increased by 35% to approximately RMB20.5 billion. Meanwhile, locked-in contracted sales rose significantly to ensure visible earning in the future. As at 30 June 2016, the Group's locked-in contracted sales amounted to approximately RMB43.2 billion, to be booked in the second half of the year and coming years.

The Group's sales target for 2016 is RMB45 billion, with total saleable resources of RMB77.5 billion, of which new resources were RMB47 billion. The Group plans to launch new resources of RMB35 billion in the second half of the year, including 'Ocean Epoch, Phase II, Beijing', 'Ocean Express, Phase II, Shenzhen' and 'Ocean Metropolis, Shenzhen'.

Completed location planning optimization by acquiring quality land bank in first and second-tier cities at low cost

In recent years, the Group continued its effort in optimizing land bank distribution by concentrating in T-1 and core T-2 cities and has basically exited from T-3 and T-4 cities. As at 30 June 2016, the Group's total land bank was approximately 20.3 million sqm, at an average cost of approximately RMB3,500 per sqm. By value, 99% of the Group's land bank is located in T-1 and T-2 cities, of which 57% in T-1 cities.

In the first half of 2016, despite the buoyant land market, the Group was resolute in its investment criteria. We continued to acquire projects through M&As and remodeling of mature buildings and acquired quality land bank at low cost. As at the end of July 2016, the Group acquired 9 projects in 6 cities and added a total land bank of approximately 1.7million sqm, where 7 projects are located in T-1 cities including Beijing, Shanghai, Guangzhou and Shenzhen. It will be developed into offices, commercial complexes, residential housing and apartments.

Mr. Li Ming, Chief Executive Officer of Sino-Ocean Group, said, 'The Group has a clear vision of its strategic development. We have now quality land bank and optimized location planning. In an on-going fiercely competitive land market, the Group will remain firm in its investment criteria and seize opportunities for mergers and acquisitions. Furthermore, as the cooperation model with real estate finance becomes mature, the Group targets to lock more resources through equity partnership. Being profit-oriented we will also acquire and remodel mature buildings to procure land resources at low cost for the Group's sustainable growth.'

Revenue from investment properties grew steadily and delivered returns

In recent years, the Group's investment property business has become more and more mature. During the Period, rental income from investment properties increased by 17% to approximately RMB810 million. We entered the office market in Shanghai for the first time by acquiring a well-established office block 'East Ocean Center, Shanghai'. During the Period, the Group's total leasable area reached 818,000 sqm.

The Group's investment properties are mainly located in core areas of T-1 cities such as Beijing, Shanghai and Chengdu and core T-2 cities. Total leasable area of the Group's operating grade-A offices exceeds 300,000 sqm, including the three projects in Beijing, namely 'Ocean Plaza', 'Ocean Office Park' and 'Ocean International Center Block A', which are contributing steady income for the Group. In particular, the rental of 'Ocean Plaza, Beijing' increased by 30% upon renewal of tenancy. High quality commercial properties are also generating lucrative returns. 'Sino-Ocean Taikoo Li Chengdu' has been growing from strength to strength since its trial run in Oct 2014, with both retail sales and daily customer traffic soaring 115% and 87% YoY respectively. Meanwhile, the Group's self-owned brand retail properties developed satisfactorily. 'Ocean We-life Plaza', 'Ocean We-life' and 'Ocean Landscape Eastern Area E02' located in Beijing all enjoyed more or less 100% occupancy while both retail sales volume and daily customer traffic continued to rise.

In addition to the operating projects, the Group acquired well-established offices 'East Ocean Center, Shanghai' and 'Ke En Project, Shanghai' in April and July respectively. Two office projects, 'Lize Business District Project, Beijing', 'INDIGO, Phase II, Beijing' and two commercial complexes, 'Grand Canal Place, Hangzhou' and 'Sino-Ocean Shin Kong, Beijing' will be completed between 2017 and 2019, providing a sound foundation for sustained cash flow and profitability in the future. The Group will continue to focus on opportunities for investment properties in core cities to build quality resources.

Re-branding complete and diversified business intensified

During the Period, the Group's fourth phase of strategic development was well underway. The Group officially changed its name to 'Sino-Ocean Group' and launched a series of re-branding activities, to showcase the Group's holistic business approach.

The Group's customer service business grew rapidly. 'Ocean HomePlus', a wholly-owned subsidiary of the Group, was listed on 9 May 2016 and became the largest company in the property industry listed on the OTC Board. 'Ocean HomePlus' currently manages up to 100 projects with a GFA of approximately 30 million sqm. The Group is actively expanding community service products centered around properties and seeking ways to provide value-added service to property owners through the O2O platform. The Group is also keen to venture into innovative businesses such as healthcare and co-work space.

As our operational competence in senior living advanced and demand for high quality senior care increased, the Group's senior living business is showing results. The Group's 'Senior Living L'Amore' projects, 'Yizhuang', 'Shuangqiao' and 'Qingta' are in operation, with 'Yizhuang' enjoying full occupancy. Also, the planning of 'Shunyi project, Beijing' and 'Xiji project, Beijing', the Group's two one-stop comprehensive care (CLRC) projects, has been progressing smoothly. During the Period, the Group made entry into Shanghai for the first time by securing a senior living project in Jiading District which is expected to commence operation in 2017 after remodeling and renovation.

The Group has been strengthening real estate finance strategic investment and overseas investment. Since becoming a cornerstone shareholder of China Huarong (2799.HK) in October 2015, the Group and China Huarong executed their first cooperation project in July 2016, 'Ke En Project, Shanghai'. Both companies will continue to share resources and promote cooperation in real estate. In addition, the Group subscribed to shares of China Logistics (1589.HK) in July 2016 and became one of their major shareholders. The two parties will seek collaboration opportunities for mutual benefits through combining the Group's expertise in the property industry and the competitive advantages of China Logistics in logistic facilities. The Group also made overseas investments through its subsidiary Gemini Investments (174.HK). The US real estate investment platform of Gemini Investments manages an AUM of approximately USD2 billion, with business expanding over 20 states in the US and investment projects in the US and Australia.

Mr. Li Ming said, 'Using the residential property development as the base, the Group intensified its diversified business by injecting added efforts and resources into investment properties, value-added customer services and real estate finance. The re-branding during the Period propelled the Group's strategic development to a new level for added competitiveness. Looking ahead, without compromising on quality, we will accelerate the well-planned and sustainable growth in new businesses. We will also focus on customers' needs and provide people-oriented products. By introducing the US WELL Building Standard, we will create a healthy and comfortable living environment for our customers by bringing people, architecture and the environment into harmony.'

Perceptible improvement in debt structure reduced finance cost

In the first half of 2016, the Group continued to seize the opportunities in the bond market and issued another tranche of corporate bonds totaling RMB4 billion, with 3+2 years maturity and coupon rate of only 3.5%. To reduce USD debt, the Group also redeemed USD400 million of PSS in May 2016 as planned. As a result of the low rate bond issue and debt re-structure, the Group's finance cost was reduced substantially to approximately 5.54%, 95 basis points lower than 1H15.

During the Period, the Group made conscious efforts to keep the size of interest-bearing debt under control, reducing it from RMB51.9 billion at the end of 2015 to RMB43 billion, of which due within a year was reduced to 15%, a perceptible improvement on debt structure. The net gearing ratio was 7 basis points lower than in 2015 to 52%, remaining at a relatively low level among peers. Meanwhile, the Group's cash resources stood at approximately RMB18.5 billion, with approved but unutilized credit facilities of approximately RMB104.7 billion.

Mr. Li Ming said, 'By optimizing the debt structure continuously, the Group reduced the finance cost effectively. By means of debt swap to avoid foreign exchange losses our resistance to market risks is stronger. The Group will continue to exercise stringent capital control, maintain a strong financial position and provide a solid foundation for business transformation and development of new businesses.'

Continual stronger support in all aspects and closer collaboration with two major shareholders

During the Period, the Group's shareholding structure remained stable. The two major shareholders, China Life and Anbang, gave considerable support both in terms of capital and operation. Anbang actively subscribed to the domestic corporate bonds issued by the Group during the Period. In terms of project cooperation, China Life and Sino-Ocean jointly develop CBD Z-13 project in Beijing. Above-ground construction commenced in 1H, topping-off is expected in late 2016. Moreover, China Life commissioned Sino-Ocean to build their self-use offices, accumulated construction area has exceeded 500,000 sqm.

Looking ahead in the second half of 2016, the Group will collaborate with China Life in developing new office projects, exploring further co-operation in property management business and setting up an IP investment fund to invest in quality investment properties domestically. The Group will also have in-depth discussions with Anbang to seek various strategic partnership opportunities.

Mr. Li Ming said, 'The Group will continuously strengthen collaborations with China Life and Anbang in operation, capital and business to take advantage of each party's competitive edge for better efficiency and mutual benefits.'