Wanda Chairman Wang Jianlin (Photo/VCG)

Jan.22 (NBD) -- Chinese property developer Wanda Group reported about 227.4 billion yuan (35.47 billion U.S. dollars) in revenue for last year, while net profit remained flat compared with 2016, according to a statement posted on the company’s website on Saturday. Total assets declined 11.5 percent to 700 billion yuan (109.18 billion U.S. dollars).

Wanda Chairman Wang Jianlin pledged at the 2017 annual meeting that the company will reduce its corporate debts through all available means, including the sale of non-core assets and minority stakes of the businesses it controls.  

Lower corporate debt to "absolute safe" level

It is said that Wanda has transferred most of its assets overseas. Wang called the statement total nonsense. The fact is that the company's offshore assets only take up 7 percent of its total in 2017.

Wanda has invested a string of overseas projects in the past years. But the company has decided to clear its offshore debts in hope to secure the healthy development of its core business, Wang explained.

Selling assets doesn't necessarily mean the company is not doing well. Trade entails buys and sales. Those who questioned Wanda's move to sell assets don't get the philosophy behind, Wang noted. The essence lies in whether the buying and selling makes profits.

2018 marks the 30th anniversary of Wanda, which is a crucial year for the company. Wang noted that cooperates all over the world are reducing leverages and debts. It's a general trend to follow. The company also plans to lower corporate debt to a "absolute safe" level in two to three years, he added. 

It's noteworthy that Wang proposed to set up a business management group, a real estate group and a network technology firm. The real estate group is designed to deal with the real estate business owned by the business management group and Wanda Plazas. It may also develop residential homes.

For Chinese property developers, the amount of debts goes in line with sales, Wang noted. If the company's real estate group continues down the same path, it would be no point reducing debts. The real estate group is profit-driven, not scale-driven.

Yan Yuejin, a researcher from E-house China Holding, said days of mass expansion for real estate developers has gone. In the future, they should focus on quality development and operational infrastructure building.

Services contributing 63.4 percent to total revenue

NBD noticed that "reform" has been frequently mentioned in Wang's annual work reporting speeches ever since Wanda announced its forth turnaround strategy in 2015.

Dalian Wanda Commercial Properties Co., Ltd. put forward "asset-light business model" in 2016, but the implementation of such a model started in the second half of 2017.

In the year, Wanda sold 77 hotels to Guangzhou R&F Properties and 13 tourism projects to Sunac for a total of 63.8 billion yuan (9.95 billion U.S. dollars). The deal set Wanda on the path of "light assets". Upon the completion of the deals, Wanda saw its total assets for 2017 reduce by 11.5 percent. The transaction alone helped the property conglomerate reduce 44 billion yuan (6.86 billion U.S. dollars) in debts and bring back 67 billion yuan (10.45 billion U.S. dollars) in cash.

Wang confessed that each large-scale tourism project needs to go on with a loan for 7 to 8 years and takes over 10 years to make profits. Wanda has more than ten tourism projects. Though it can take back most of its cash through selling the property management business, Wanda will still be under heavy pressure with increasing debts each year. To ensure the healthy development of its core business, Wanda plans to open 50 Wanda Plazas each year. Going with an asset-light model must be a good choice, Wang added.

Wanda has successfully reduced debts through selling assets and get away from long investment return cycle of cultural and tourism projects.

Wang noted that it has turned itself into a service-oriented company successfully. In 2017, 63.4 percent of its income came from services, of which 18 percent came from rental services. At the same time, the cultural business is another backbone industry.

Email： tanyuhan@nbd.com.cn