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MarketScreener Homepage  >  Equities  >  Hong Kong Stock Exchange  >  China Evergrande Group    3333   KYG2119W1069

CHINA EVERGRANDE GROUP

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China Evergrande : Slimmed-down share sale darkens outlook for China Evergrande's cash dash

10/13/2020 | 11:54pm EST
FILE PHOTO: The logo of China Evergrande Group is seen in an exterior view of the China Evergrande Centre in Hong Kong

HONG KONG (Reuters) - China Evergrande Group, the country's most indebted property developer, on Wednesday said it has raised $555 million in a secondary share sale, settling for half its initial target and sparking a 16% drop in its share price.

To help pay debt, the firm sold 260.65 million shares at HK$16.50 ($2.13) each - the low end of a price range flagged by its bankers in a term sheet when the deal launched on Tuesday.

Evergrande has been scrambling to raise cash as China's government tackles what it considers excessive borrowing in the real estate development sector with new debt-ratio caps.

Since August, the developer has raised $3 billion in pre-IPO funding for a property management unit, given a 30% discount on properties to boost sales, and reached a deal to stop investors asking it to repurchase their $12.66 billion holding of another of its units. This week, it conducted an onshore bond sale.

The Hong Kong-listed company had planned to sell 490 million shares at HK$16.50 to HK$17.20 each, to raise $1.04 billion to $1.087 billion, the term sheet showed.

"The market is particularly concerned about high-gearing property developers, so even though the share discount this time was quite big, investor appetite was cold," said Conita Hung, investment strategy director at Tiger Faith Asset Management.

The set price was a 14.7% discount to Evergrande's closing price on Monday of $HK19.34. After the announcement, Evergrande shares were trading at HK$16.24 as at 0154 GMT on Wednesday.

Hung said while a liquidity crunch at Evergrande was unlikely, the market needs to see how else the firm is going to raise cash because it has already tapped several channels.

People with direct knowledge of the matter said Evergrande often set "ambitious" targets, and that investors in the deal were already familiar with the developer and not worried the firm would become insolvent.

"It's too well connected," said one of the people, who were not authorised to speak with media and so declined to be identified.

Market concern has mounted in recent weeks that Evergrande - whose borrowings totalled 835.5 billion yuan ($123.93 billion) at June-end - was headed for a cash crush if it could not get government approval for a backdoor listing in Shenzhen that has languished for four years.

But analysts including those at S&P Global Ratings said they did not see a risk of default as the firm has various fund-raising channels, including as much as 800 billion yuan in sales this year, domestic bond issuance and spin-off plans.

CGS-CIMB Securities forecast Evergrande's net gearing to fall below 100% in 2021 from 200% in the first half of 2020.

After completion of the subscription, Chairman Hui Ka Yan's interest in Evergrande will fall to 70.32% from 71.72%.

Evergrande said in a stock-exchange filing the share sale would enhance its financial position and net asset base for long-term development and growth.

($1 = 7.7500 Hong Kong dollars)

($1 = 6.7418 Chinese yuan renminbi)

(Reporting by Scott Murdoch and Clare Jim; Editing by Christopher Cushing)

By Scott Murdoch and Clare Jim


© Reuters 2020
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Financials
Sales 2020 647 B 83 475 M 83 475 M
Net income 2020 33 544 M 4 328 M 4 328 M
Net Debt 2020 619 B 79 805 M 79 805 M
P/E ratio 2020 6,24x
Yield 2020 6,91%
Capitalization 215 B 27 767 M 27 769 M
EV / Sales 2020 1,29x
EV / Sales 2021 0,89x
Nbr of Employees 131 615
Free-Float 14,9%
Chart CHINA EVERGRANDE GROUP
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China Evergrande Group Technical Analysis Chart | 3333 | KYG2119W1069 | MarketScreener
Technical analysis trends CHINA EVERGRANDE GROUP
Short TermMid-TermLong Term
TrendsNeutralNeutralNeutral
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus OUTPERFORM
Number of Analysts 15
Average target price 20,16 HKD
Last Close Price 16,26 HKD
Spread / Highest target 96,1%
Spread / Average Target 24,0%
Spread / Lowest Target -6,61%
EPS Revisions
Managers
NameTitle
Hai Jun Xia Vice Chairman & Chief Executive Officer
Shou Ming Shi President
Ka Yan Hui Chairman
Da Rong Pan Chief Financial Officer & Executive Director
Dong Feng Chen Head-Information
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