- Dec 03, 2014
- CNTD to sell Wuxi Project for a net profit of RMB 675 million
(Hong Kong and Singapore, 3 December 2014) - China New Town Development Company Limited – the leading planner and developer of integrated new towns in China (the “Company”, “CNTD”, the “Group”; HKSE: 1278.HK; SGX: D4N.SI, its ultimate controlling entity is China Development Bank Capital Corporation Ltd. (“CDB Capital”)), is pleased to announce that China New Town Development (Wuxi) Company Limited (“China New Town (Wuxi)”), a wholly-owned subsidiary of the Company, and Wuxi Municipal New Town Development Group Limited (“Wuxi New Town Development”), which currently indirectly holds 10% equity interest in Wuxi Project of the Group, have entered into a disposal agreement (the “Agreement”). Pursuant to the Agreement, China New Town (Wuxi) sold 90% equity interest in Wuxi Project to Wuxi New Town Development in a consideration of RMB 1.134 billion.
Wuxi has its economy being one of the vibrant among the cities in Yangtsz Delta. Wuxi Hongshan New Town, developed by CNTD, is located in Wuxi New District and is adjacent to the high-tech industrial park, with close proximity to the Wuxi city centre and Wuxi Airport. Apart from its convenient transportation, Hongshan New Town also embarrasses comprehensive auxiliary facilities. CNTD’s Wuxi Project is held through two project companies, namely Wuxi Hongshan New Town Development Co., Ltd. (“Wuxi Hongshan Development”) and Wuxi Hongshan New Town Virescence Environmental Protection Construction Co., Ltd. (“Wuxi Hongshan Virescence”). China New Town (Wuxi) and Wuxi New Town Development respectively holds 90% and 10% equity interests in each of these two project companies. Upon completion of the transaction, the Company will no longer hold any interest in Wuxi Project.
As at 30 June 2014, the net book value of the Wuxi Project is RMB459million. Pursuant to the Agreement, the consideration for the Disposal is approximately RMB1,134million with the excess over the net book value of approximately RMB675million. The disposal of Wuxi Project is expected to bring an one-time net gain, after tax of RMB675million and extra profound cash flow of more than RMB1.1billion.
Inventories have maintained on a high level, surpass of supply caused a gloomy property market in Wuxi. The prices and trading volume of both of the lands and properties have been weak. The average land price of this year even hit the long-time bottom, representing RMB 1.2 million per mu, thus uncertainties of the Group’s investment outlook. The Company was expected to invest more than RMB3billion in Wuxi Project, however, the land sales of the project has been stagnant in recent years. Wuxi Project recorded losses for several consecutive years. Continuous and substantial investment of the Group is not favorable to the Group’s optimization of the capital allocation and is not in line with the maximum interest of the shareholders. Meanwhile, Wuxi New District Government holds optimistic view on the long-term appreciation potential of Wuxi Project where the government itself is located at and highly recognizes the Group’s contributions on the early stages, such as master planning, land integration and introduction of investments, therefore the government proposed to acquire the Company’s equity interest in a consideration that is significantly higher than the fair value, thus the confirmation of the Agreement
In the views of property market in Wuxi and analysis on Wuxi Project status, the Disposal will not only unlock the cash value of the Wuxi Project after 7 years of investment, but also allow the Group to reduce market risk and optimize the Group’s resources allocation. Besides, the Disposal will accelerate the disposal of the Disposal Assets and corporate restructuring, which will in turn allow management and financial resources to be redeployed to projects with better risk-reward profile and shorter return cycles.
The spokesperson of CNTD, ‘CDB Capital being the controlling shareholder of the Company, constitutes a profound foundation of capital and resources for the Company’s development. Since CDB Capital’s subscription to the Company’s shares, CNTD has adjusted the long-term development plan with regard to the markets and the status quo of itself, and dispose of certain assets which are not in line with long-term strategies of the Group, re-allocating investments and optimizing the Group’s project portfolio. The successful disposal of Wuxi Project does not only contribute special income and cash to the Group, but also facilitate the process of the asset disposal aforesaid. It will be favorable to the optimization of human and capital resources. Looking forward, we will explore more quality projects which sustain the stable returns for shareholders.”
The to-be-disposed Wuxi Project consists of primary development business, as well as equity interests of auxiliary facilities of the new town, such as hospitals, stylish streets and hotels. According to the master disposal agreement which has been duly passed in the extraordinary shareholder meeting of the Company on 30 December 2013, those auxiliary facilities became non-core and to be disposed assets as CDB Capital became a shareholder of the Company. In a consent of SRE Investment, as a part of Wuxi Project, the relevant disposal assets under Wuxi Project is to be sold to Wuxi New Town Development in a consideration of RMB594 million, which was equivalent to the price set out in the master disposal agreement. Such consideration is directly payable to the Company. The disposal assets of Wuxi Project is the first batch of successfully disposed assets which is significant to the asset restructuring and cash return.