Leshi shares fall after Sunac issues profit warning in HK
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.