It is with great pleasure that I present to you Ying Li International Real Estate Limited's ("Ying Li") and together with its subsidiaries, the ("Group") annual report for the financial year ended 31 December 2012 ("FY 2012"). Besides sharing with you the Group's financial performance, I will also like to take the opportunity to highlight the status of our project development as well as our views on the outlook of the Group and Chongqing's real estate industry.
In 2012, in view of the unstable global economy, the China Central Government implemented a series of macroeconomic policies aimed at achieving long term sustainable growth for China's economy. The Central Government continued to tighten its rein on the residential property market further by introducing various measures, which posed severe challenges to the residential property developers.
Despite the unfavorable macroeconomic environment, the Group has persevered and delivered another set of good results, achieving revenue of RMB585 million and a 36% year-on-year increase in net profit after tax to reach RMB378 million in FY2012. With our sharp focus on operational excellence, coupled with strong teamwork among employees, Ying Li has successfully executed its business plan. The market responded well to the presales of Ying Li International Plaza's residential units, leasing of Ying Li International Financial Centre (IFC) office units and Ying Li International Plaza's retail mall space. This commendable performance reflects Ying Li's capability and resiliency in the face of the uncertain economic climate.
Our commitment to business excellence and delivering quality projects has won us widespread recognition both from the government and industry groups. In 2012, the Group was bestowed with the following awards and accolades:
- "2011 - 2012 Chongqing Real Estate Developer Trustworthy Credit Brand Enterprise" by Chongqing Real Estate Development Association,
- "2011 Best Member Company" by the Real Estate Branch of the Chongqing General Chamber of Commerce,
- "2011 China Ecology Contribution Award" by China Green Foundation,
- "2011 - 2012 Trustworthy Enterprise" by Chongqing Municipal Yuzhong District Federation of Industry and Commerce, and
- "2012 Chongqing Charity Contribution Award" by Chongqing Municipal Charity Federation.
On the personal front, I was awarded the title of "Chongqing's Outstanding Private Entrepreneur" by the Chinese Communist Party Chongqing Municipal Party Committee and Chongqing Municipal People's Government. In addition, I was elected as the Vice President of the Chongqing Chamber of Commerce.
At the same time, the Group continues to adhere to its commitment in maintaining high standards of corporate governance, integrity, accountability and transparency. In the latest Governance and Transparency Index ("GTI") compiled by National University of Singapore and The Business Times, the Group improved by 9 positions compared to 2011 and was ranked 25th among 674 SGX-listed companies covered in the 2012 Index.
Besides the recognition from our customers, business groups and government authorities, the Group is grateful to the banking and investment community as they have extended their unwavering support and demonstrated confidence in the Group's strong fundamentals and robust growth potential.
The Group will continue to capitalize on our competitive advantage in developing premium integrated commercial projects within Chongqing's central business districts as well as the "Ying Li" brand in the China real estate industry. We believe that by continuously enhancing the quality of our products and services and responding swiftly to changes in the market place, the Group will be well-positioned to achieve sustainable growth and profitability.
Property Sector Outlook for China and Chongqing
China's 2012 full year GDP grew by 7.8% to RMB51.9 trillion while Fixed Asset Investments increased by 20.6% year-on-year to RMB36.4 trillion. Several other China economic indicators continued to show growth. Industrial Added Value on national scale recorded a year-onyear increase of 10%; Investments in the real estate sector increased by 16.2% to RMB7.1 trillion; Retail Consumption grew 14.3% to RMB20.7 trillion and Foreign Trade increased by 6.2% to RMB3.8 trillion. Per Capita Disposable Income of urban households grew 12.6% to reach RMB24,565 while Per Capita Net Income of rural households was up 13.5% to RMB7,917. While domestic and global economic conditions posed challenges to China's growth, the Chinese government continued to focus on technological advancements as part of its main effort to quicken the transformation of its economic growth model and strengthening macroeconomic policies to achieve stable economic and social development.
Chongqing, the largest municipality directly under the Central Government and the economic centre of the upstream Yangtze River, has achieved high economic growth in 2012. Faced with challenging external economic conditions, the Chongqing government introduced several policies that successfully achieved stable economic growth and social development. The strong GDP growth of 13.6% in 2012 placed Chongqing as the fastest growing city in western China and second fastest growing city in China. Per capita GDP for Chongqing was RMB39,083 in 2012, higher than the national average of RMB38,449, representing a step forward towards achieving the target of creating a prosperous society for Chongqing residents. Chongqing's Fixed Asset Investments and Real Estate sector investments both grew strongly in 2012. Chongqing Fixed Asset Investments grew by 22.9% to RMB938 billion, 2.3 percentage points higher than national average. Real Estate sector investments in Chongqing grew 24.5% to RMB250.8 billion, 8.3 percentage points higher than the national average. Despite challenging market conditions, Chongqing's foreign trade rose 82.2% to RMB53.2 billion, 76 percentage points higher than national average. Foreign Direct Investments (FDI) also crossed USD10 billion for 2 consecutive years, achieving an FDI of USD10.5 billion in 2012. Chongqing was also the fastest urbanizing city in China, achieving an urbanization rate of 56.9%, 1.96 percentage points higher than previous year. With its strong fundamentals, supportive policies such as the Liangjiang New Area, Cuntan Bonded Port and preferential tax rates, Chongqing has attracted investments from 225 of the Fortune Global 500 companies, the highest among all the cities in western China. Given the strong fundamentals and rapid economic growth, Chongqing is now considered the leading and most attractive investment destination in western China.
From the property market perspective, the global and domestic developments have placed more emphasis on achieving steady growth in 2012. The Central Government has on many occasions, stressed the need for continuing curbs on escalating residential property prices and has followed through their efforts from 2011 to cool the residential property market. The efforts by policy makers have reduced speculative activities in the property market and slowed down the price increases for both primary and secondary property transactions. However, on the back of emerging recovery in the global economy, property prices started to increase gradually in the second half of 2012. Similarly, the Chongqing property market has also shown stable growth in the past year. Commodity (i.e. private) residential property prices in Chongqing rose by 12.4% from RMB6,027 psm in 2011 to RMB6,775 psm in 2012.
In order to further stabilize the market and curb speculative activities, the Central Government recently announced two new policies to increase the initial deposit requirement for second home purchases and to impose a 20% capital gains tax on residential property transactions. The impact of these new policies on the Company is deemed to be low as the residential component makes up a small portion of our projects. We believe that our focus on developing commercial projects in the prime CBD locations enables us to leverage on the strong Chongqing economic growth and increasing demand from global corporations.
2013 is a critical year of implementing the 12th Fiveyear plan of the Chinese Central Government. The government's work plan continues to place emphasis on stable growth, active financial policies, stable foreign exchange rates and keeping a steady pace while enhancing the quality of urbanization. The Chongqing Government and new Party Secretary, Mr. Sun Zhengcai, have stated that further support would be provided for the development of private enterprises with more pro-business policies such as lowering costs of doing businesses and reducing red tape.
The continued strong economic growth, government support and rapid pace of urbanization will create more opportunities for Chongqing enterprises and real estate developers. With the positive property development outlook and Ying Li's strong competitive advantages, we believe we can build on our track record and foundation to develop and grow our business further in the coming years.
Project Development Progress
The Group has approximately 1 million square meters of planned GFA to be developed over the next 3-4 years. Ongoing pipeline projects are progressing smoothly.
Ying Li International Plaza is advancing steadily according to schedule with the topping up of Towers 3, 4 and 5. During the year, the Group launched the pre-sales of the Ying Li International Plaza residential units with strong take up rates. The Group will capitalize on the strong market support further by launching the SOHO and Grade A office units in phases over this year. In addition, the Group has made good progress in attracting tenants for the Ying Li International Plaza's retail mall. To-date, the Group has successfully secured the likes of Korean Lotte Group, who will open its first establishment and flagship supermarket in Chongqing, Poly Cinema Group and many other international and domestic brands.
Ying Li International Financial Centre, the highest specification landmark office building located in the heart of Yuzhong Jiefangbei CBD, has continued to attract major international and domestic financial institutions, as well as leading global enterprises into its premises. Together with the fully operational retail mall, Ying Li IFC is expected to provide the Group with a steady stream of rental income.
As the Chongqing Municipal Government continues its plan to further develop the "Wall Street" of Western China in Yuzhong Jiefangbei CBD, the ongoing development of Ying Li Chongqing Financial Street Project is proceeding smoothly. By securing the best land plot along the highly anticipated Chongqing Financial Street, Ying Li plans to develop an iconic landmark high-end integrated project that consists of international premium Grade A offices and a retail mall.
In addition, the Group is currently in the planning stage for the development of Lu Zu project, a prime land parcel in the luxury hotel and commercial zone of Jiefangbei. Lastly, the Group has witnessed the value of its San Ya Wan land plot appreciating significantly after being re-zoned into Liangjiang New Area. The Liangjiang New Area is China's third state level economic development zone after the Shanghai Pudong New Area and Tianjin Binhai New Area. Upon finalizing the details with the government, San Ya Wan is poised to be developed into an integrated project comprising premium residential units and retail mall and become a core development in the Liangjiang New Area.
The Group will continue to actively seek new opportunities to expand its land bank in Chongqing's core CBD and other key districts so as to sustain our growth over the long term.
The Group will explore the establishment of a listed real estate investment trust (REIT) for our premium office and retail mall assets. This will allow the Group to realize the value of its office and retail mall assets and enhance our funding capability for new development opportunities.
Riding on the growth of an improving China and Chongqing economy, we expect the Group to perform well in 2013. Going forward, the Group will continue to maintain prudent financial management and strong corporate governance while improving on innovation, product quality and customer services. In addition, the Group will enhance its development strategies, operational efficiency, professional standards as well as human resource management. Believing that people are the most important assets to the organization's long-term development, the Group continues to place emphasis on attracting talent of all levels. We welcome Mr. Ko Kheng Hwa who joined the Company in March 2013 as its Group Chief Executive Officer. Tapping on Mr. Ko's successful career, extensive experience as well as strong leadership skills, I am confident Mr. Ko will guide the Group to greater heights.
On behalf of the Board, I would like to express our sincere appreciation to our shareholders, customers, partners and staff for their trust and unwavering support of the Group. We will continue to dedicate our professional capabilities and team energies to create greater value for our shareholders.