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Wanda eyes expansion as revenue surges

2015-01-19 08:55 Global Times Web Editor: Qin Dexing

Conglomerate turns services into core business activity

Chinese conglomerate Dalian Wanda Group has started its fourth transformation, expanding its focus from property development to diversified services, Wang Jianlin, founder and chairman of Dalian Wanda Group, said over the weekend.

During the company's annual meeting held on Saturday, Wang said that the latest transformation will be comprehensive and represent Wanda's future development trend, according to a statement posted on the company's website Sunday.

The transformation will make service industry a core business of Wanda in addition to property development, the statement said.

The conglomerate expects the service sector to contribute more than 65 percent of the total revenue in 2020, while property sales will only account for less than 35 percent.

To achieve the goal, Wanda will speed up development in the fields of culture, tourism, finance and e-commerce, according to the statement.

Wanda is an ambitious enterprise which is trying to expand beyond property, and its decision comes at the right time as China's real estate market no longer offers easy profits, Song Ding, director of the tourism and real estate center of Shenzhen-based China Development Institute, told the Global Times.

Wang Yongping, secretary-general of the China Commercial Real Estate Association, echoed Song, saying the good old days of China's property development have come to an end, and companies should be aware of the need to change.

In addition to reduce reliance on property development, Wanda Group has also set a goal to become an international enterprise rather than being just China-focused, and the group expects 20 percent of its revenue to come from overseas market in 2020, the statement said.

Wanda has already started overseas expansion with its business now spanning across Asia, Europe and the US and assets exceeding $62.8 billion.

Wang Jianlin also revealed the transformation plan for Hong Kong-listed Dalian Wanda Commercial Properties Co, saying it will rely less on asset ownership.

The statement elaborated that Wanda Commercial will take the responsibility of design, building, leasing as well as operation of Wanda Plaza complexes, but other investors rather than Wanda Commercial will own the assets.

Wanda Commercial will take a part of the rental from the properties it builds, the statement said, noting the new model will be less impacted by house price fluctuations.

China's commercial property market has seen increasingly intense competition in recent years while developers provide similar products, Wang Yongping said.

The total transaction revenue of the Chinese commercial property market stood at 106 billion yuan ($17.1 billion) in 2014, down 27 percent from 2013, the Xinhua News Agency reported on Thursday, citing a research report from real estate consultancy Jones Lang LaSalle.

Wanda Commercial's new business model will cut its capital requirement and maintain its brand value as it will undertake all construction and operation work, he said, noting other industry peers are also planning to reduce asset ownership.

Longfor Properties Co is also trying to apply the low-asset business model by launching a joint venture with Canada Pension Plan Investment Board to build a business property project in Suzhou, East China's Jiangsu Province, instead of completing the project on its own as in the past, Beijing-based Securities Daily reported on Tuesday.

On the same day, Wanda also released its 2014 financial results, which showed a strong growth despite a downturn in the Chinese real estate market.

The group's total revenue in 2014 reached 242.48 billion yuan with a 30 percent year-on-year growth. Net profit also surged, but the statement did not include a specific figure.

Wanda Commercial's sales revenue in 2014 stood at 160.15 billion yuan, 26.8 percent higher than 2013, and its culture business posted 34.14 billion yuan in revenue with 32.3 annual increase.

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