Business operations
Chairman

BUSINESS REVIEW

In the first half of 2010, both property prices and transaction volumes in major cities within the PRC have been adjusted due to the measures launched by the Government to curtail speculation in the property industry. Although Guangzhou remains the Group's core focus, we have also actively expanded its business scope to second and third-tier cities in the past few years. These efforts have laid a solid foundation for the Group's development. This development, combined with our timely decision to adjust our operational strategy has enabled the Group to report a marked improvement in results for the review period when compared with the same period last year.

For the six months ended 30 June 2010, the Group recorded a turnover of HK$563.9 million, up by 44% against HK$390.8 million in the corresponding period last year. Profit attributable to shareholders was HK$59.5 million (2009: HK$43.1 million). Basic earnings per share were HK20.10 cents (2009: HK14.57 cents).

For the period under review, the primary and secondary property real estate agency service businesses of the Group registered a turnover of HK$330.3 million and HK$187.1 million respectively, accounting for 59% and 33% of the Group's total turnover. The remaining 8% or HK$46.5 million was derived from the property management business and other services. Geographically, Guangzhou contributed about 51% of the total turnover and about 49% came from outside Guangzhou.

Primary Property Real Estate Agency and Consultancy Services

For the six months ended 30 June 2010, the Group handled approximately 28,200 primary property transactions involving a total gross floor area of about 30.8 million square feet at a total transaction value of about HK$28.9 billion, an increase of approximately 43% against HK$20.2 billion in the corresponding period last year. During the period, the Group was the exclusive agent for 380 projects and 320 of them contributed turnover to the Group against 280 projects for the same period last year. By geographical location, Guangzhou accounted for about 40% of the total turnover from primary property real estate agency service business while the percentage from outside Guangzhou increased from 41% in the same period last year to 60%.

The Group's proactive yet steady expansion strategy has begun to bear fruit, as can be seen in its strengthened focus in potential second and third- tier cities such as Foshan, Tianjin, Changsha and Hefei in which the Group has achieved excellent results. Key projects launched during the period, including Foshan Vanke Ranchosantafe, Tianjin Poly Upper River, Changsha Citic New Town and Hefei Evergrande Palace all recorded strong sales and have driven the turnover derived from outside Guangzhou to continuously rise.

Through the Group's established brand complemented by its highly professional services, we have not only secured more exclusive agency contracts, but have also successfully offered more comprehensive initial project consultancy services to property developers. This package of services covers all aspects of project planning including professional advice on location, market positioning, marketing strategies and sales activities. Since the PRC Government has launched a series of measures to regulate the property market, investors have become more conservative. The general public, has placed greater value on the professional advice and marketing strategies provided by the property agencies. As a result, the Group has more actively participated in the initial project planning of developers and worked closely with major property developers during the period.

During the period under review, the Group has launched a number of property projects for various major property developers, achieving satisfactory results. The projects launched included China Overseas Banyan Bay, Vanke Glorious Life and Gemdale GZ Lakes. The Group has more than 20 offices serving more than 30 markets including Guangzhou, Dongguan, Foshan, Zhongshan, Tianjin, Shanghai, Anhui, Hubei, Hunan, Shandong and Guizhou Provinces.

Secondary Property Real Estate Agency Service

In early 2010, property prices in mainland China continued to rise as the revival of the country's economy gathered momentum. However, the introduction of austerity measures in the second quarter had begun to affect property price of many first-tier cities such as Beijing and Shanghai. As a result, the property owners in secondary property market have adopted a wait-and-see attitude and are unwilling to sell their properties at a lower price. This situation further affected the overall transaction volume of secondary properties.

During the period under review, although the overall transaction volume of the secondary property real estate agency market recorded a year-on-year decrease, the overall revenue remained stable due to the rising property prices. In first half 2010, the Group managed approximately 19,500 secondary property transactions (2009: 18,000 transactions) with a total commission income of about HK$187.1 million, a 16% increase compared to the same period last year. The Group has adjusted its expansion strategy in line with the market condition, steadily increasing the number of secondary property real estate agency branches. During the period under review, the Group has opened a total of 30 branches in Shanghai and Guangzhou. Currently, the Group has about 315 branches in operation. Of the total, about 235 branches are in Guangzhou, about 55 branches in Shanghai and the remaining branches in Dongguan and Foshan.

The Group believes that the transaction volume of its secondary property real estate agency service will rebound after the market stabilises in the second half year. Therefore, it intends to adopt a prudent expansion strategy by first increasing the number of its professionals and subsequently expanding its branch network when appropriate.

Property Management Service

The Group provided property management services during the period under review to about 80 residential and commercial projects and shopping arcades in Guangzhou, Shanghai, Tianjin and Wuhan involving more than 100,000 units with a total gross floor area covering 96 million square feet. The property management services generated a stable income for the Group, which would also support the Group's business development in the future.

PROSPECTS

Looking into the second half year, the measures to rein in the property market launched by the Central Government will likely continue to stablise the market and developers will bring their new projects to market gradually. Thus, the Group's business expansion will remain stable guided by a desire to safeguard its advantages in the primary property real estate agency market while cautiously deploy long-term development plan in the secondary property real estate agency sector.

For its primary property real estate agency service business, the Group intends to secure more exclusive agency contracts to ensure a stable income in the year ahead by leveraging its good reputation, rich industry experience and extensive expertise and its close partnership with major developers. The Group is working with a number of developers on different types of projects, highlighted by some renowned companies including Vanke, Poly, Star River, Kingold, Gemdale, Citic, Evergrande, China Overseas, Sun Hung Kai Properties, New World China Land and China Central Properties, to satisfy the demand of a variety of customer segments. It will also strive to enhance its sales networks in second and third-tier cities to expand the geographical coverage and market share.

Regarding the secondary property real estate agency service business, the Group plans to expand the number of branches steadily while closely monitoring market conditions. Guangzhou and Shanghai would continue to be the main focus of our efforts. Prior to the market uptrend, the Group will enlist more experienced sales professionals to bolster the Group's overall competitiveness. It will continue to expand its business coverage and open new branches to further capture the secondary property market.

Moving forward, the Group remains confident in the long-term development prospects of the PRC property market and in achieving the objective set earlier this year. With its firm business foundation, the Group is continuously striving to provide our clients with professional and superior property real estate agency and consulting services through a prudent and pragmatic business approach. At the same time, we plan to actively expand the Group's real estaterelated value-added services business. We strongly believe with our brand, professionalism in service and strategic business and geographical coverage, the Group can optimise the upcoming opportunities in the market and bring satisfactory returns to our shareholders.