Leshi shares fall af­ter Sunac is­sues profit warn­ing in HK

China Daily (Latin America Weekly) - - Business -

HONG KONG — Sunac China Hold­ings Ltd, the coun­try’s No 4 real es­tate de­vel­oper, said its in­vest­ment in Leshi In­ter­net In­for­ma­tion & Tech­nol­ogy Corp was a fail­ure and would book a $2.6 bil­lion charge, send­ing shares in the em­bat­tled tech firm slid­ing.

Sunac Chair­man Sun Hong­bin had once been widely viewed as a white knight for the crum­bling LeEco con­glom­er­ate, of which Leshi has been the main listed ve­hi­cle.

Sun’s re­marks fol­low his res­ig­na­tion as chair­man of Shen­zhen-listed Leshi last month — just eight months af­ter he took on the job.

Shares of Leshi plunged more than 8 per­cent to a five­week low in early trad­ing. Sunac ex­ec­u­tives, seek­ing to re­as­sure in­vestors, said the de­vel­oper would not have to worry about a neg­a­tive im­pact from Leshi in the fu­ture.

Founded in 2004, LeEco started as a video-stream­ing ser­vice provider, akin to Net­flix Inc, but grew rapidly into a tech heavy­weight with a pres­ence in smart­phones, TVs, cloud com­put­ing, sports and elec­tric cars.

Leshi made a profit of more than 550 mil­lion yuan ($87 mil­lion) in 2016, but strug­gled along with its par­ent com­pany LeEco in 2017. It re­ceived a $2.2 bil­lion in­vest­ment from Sunac in Jan­uary 2017.

Debt-laden and cash­strapped Leshi re­ported a net loss of $1.84 bil­lion last year, a sharp drop of 2,192 per­cent com­pared with the pre­vi­ous year. It at­trib­uted its op­er­a­tional loss to the fi­nan­cial strain of re­lated par­ties, liq­uid­ity is­sues and ris­ing fi­nanc­ing costs.

LeEco’s founder Jia Yuet­ing re­mains the largest share­holder in Leshi, hold­ing 1.024 bil­lion shares, which ac­count for 25.67 per­cent of the to­tal, even though he has re­signed from all his po­si­tions at Leshi due to un­paid debts and the fi­nan­cial cri­sis.

Sunac also said core profit for 2017 more than tripled to a record 11.12 bil­lion yuan, helped by a big jump in rev­enue.

The gear­ing ra­tio of the ac­quis­i­tive de­vel­oper fell to 66.9 per­cent, from 72.2 per­cent as of June 30. It vowed in Au­gust to slash the ra­tio to 70 per­cent by 2019 by slow­ing its rate of land pur­chases.

The com­pany said it ex­pects tourism projects bought from Dalian Wanda Group in July for $6.5 bil­lion will drive earn­ings in the next three to five years and that it aims to boost con­tract sales by 24 per­cent this year to 450 bil­lion yuan.

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