Another real estate company's interim report: Ocean Group's revenue for the first half of the year decreased by 11%, and the board of directors does not recommend the distribution of interim dividends.

The overall real estate market is sluggish, and another real estate company is facing huge losses in the first half of the year.

On Wednesday, August 30th, Far East Consortium International Limited released its interim performance announcement on the Hong Kong Stock Exchange. According to unaudited data for the first half of this year ending on June 30th, the company's contracted sales amounted to RMB 35.66 billion, a year-on-year decrease of 17%. Operating revenue also decreased by 11% to RMB 20.807 billion compared to the same period last year.

The announcement stated that due to the overall impact of the domestic real estate market, Far East Consortium recorded a gross loss of RMB 125 million in the first half of the year, with a gross loss margin of 1%. In contrast, the company achieved a gross profit of RMB 4.311 billion with a gross profit margin of 18% in the first half of last year.

Last year, Far East Consortium recorded its first loss since going public, with a full-year loss of RMB 15.65 billion. This report shows that the company's losses have intensified this year, with the shareholders' share of losses in the first half of the year amounting to RMB 18.369 billion, exceeding the full-year loss level of the previous year.

The data released on Wednesday and the loss range of RMB 17 billion to RMB 20 billion warned by Far East Consortium earlier this month are roughly consistent. The first-half loss is nearly 17 times that of a year ago, when Far East Consortium lost RMB 1.087 billion in the same period.

The report on Wednesday stated that considering factors such as the need for market confidence to recover and the improvement of the company's cash flow requiring more time, the board of directors does not recommend the distribution of interim dividends for the six months ending June 30th of this year.

In the report, Far East Consortium attributed the first-half loss mainly to the overall sluggish atmosphere of the real estate market, which led to a decrease in the company's revenue and a more significant decline in gross profit margin. Additionally, the company increased its provision for impairment of inventory of property projects.

Furthermore, the net loss from impairment of financial assets for the first half of the year was RMB 11.294 billion, far exceeding the RMB 0.5 billion in the same period last year. Far East Consortium stated that this was mainly due to the combined impact of macroeconomic market and industry downturn, difficult financing, and other factors, which led to the provision of expected credit loss allowances for trade receivables and other accounts.

Far East Consortium's report agrees with the announcement made by Country Garden Holdings on Wednesday that it also disclosed a loss of billions of yuan.

In the first half of this year, Country Garden's contracted sales amounted to approximately RMB 128.76 billion, with total revenue of approximately RMB 24.26 billion. The operating loss was RMB 45.21 billion, and the loss attributable to the company's shareholders was RMB 48.93 billion. After excluding the impact of fair value changes and net exchange gains and losses, the core net loss attributable to shareholders was approximately RMB 45.35 billion.

It is expected that the demand in core cities will rebound in the second half of the year, and the long-term outlook for the Chinese real estate market remains positive.

Far East Consortium evaluated that the overall domestic real estate market experienced a rise and fall in the first half of the year. In the first quarter, the market experienced a "small spring" with a 4% year-on-year increase in national commodity housing sales. However, after the release of pent-up demand and the real estate policies falling short of expectations, homebuyers' income and property expectations declined, and the market encountered a "late spring chill." In June, the growth in commodity housing sales turned negative compared to the same period last year. Looking ahead to the second half of the year, Dolphin Research believes that the Central Political Bureau meeting in July has released positive signals, and the policy environment continues to improve. First-tier and core second-tier cities are expected to further relax control measures and vigorously promote the transformation of urban villages, which is conducive to the return of demand in core cities.

At the same time, Dolphin Research cautiously states that due to the impact of the macro environment, residents' income expectations, and property purchase sentiment, the policy effects may be weakened, and one should not be overly optimistic about the market recovery.

In the medium to long term, Dolphin Research remains optimistic about the future of the Chinese real estate market. It is expected that the market size will reach around 10 trillion yuan, and it believes that there are structural opportunities within it. The domestic real estate industry will truly enter a new development model of "medium risk, medium profit, and medium turnover". With industry consolidation and an improving competitive environment, the prospects are promising.

Bills and debts on the verge of default

While suffering from huge losses, as one of the few real estate companies that have not publicly defaulted on debt in the past two years, Longbridge is now on the verge of defaulting on bills and bonds.

On July 18th, due to the proposed adjustment of payment negotiations with holders, Longbridge Group's "18 Longbridge 01" bond has been suspended from trading since July 18th, indicating a liquidity problem. The bondholders' meeting on August 1st approved a grace period of 30 consecutive natural days for the bond payment. If the full payment of principal and interest cannot be made by September 1st when the grace period ends, and the bondholders do not agree to an extension, it will constitute a substantial default.

On the day when the profit warning for the first half of the year was announced, August 14th, Longbridge announced that it had not paid the interest of $20.94 million generated by a bill in the first seven months of this year, resulting in a default event under the bill. Therefore, the bill has been suspended from trading on the Hong Kong Stock Exchange since 9:00 am on August 14th.

However, Longbridge stated that it has received sufficient affirmative votes to reach a special resolution agreement regarding the bill, and after the execution of the special resolution agreement, it will be exempted, and this incident will not constitute a default.