On the verge of delist­ing, firms sell prop­erty

China Daily (USA) - - BUSINESS - By BLOOMBERG in Shanghai

Strug­gling Chi­nese com­pa­nies, some on the brink of delist­ing, are turn­ing to the soar­ing prop­erty mar­ket to bol­ster their books.

At least 12 firms listed on main­land ex­changes an­nounced plans to sell real es­tate hold­ings in Septem­ber amid a surge in prop­erty prices, ac­cord­ing to Bloomberg cal­cu­la­tions from stock ex­change dis­clo­sures. Among them, seven suf­fered losses in the first half, while four have been placed on the ex­changes’ watch list for pos­si­bly be­ing delisted. Most of them are in busi­nesses un­re­lated to real es­tate.

“The com­pa­nies faced earn­ings pres­sures in their core busi­nesses, so they are look­ing to sell real es­tate in the high-price en­vi­ron­ment to air­brush the book­sand­pre­vent a delist­ing sce­nario,” Zhang Haidong, chief strate­gist at Jinkuang In­vest­ment Man­age­ment in Shanghai, said by phone. “That’s why in­vestors need to be pru­dent when look­ing at the re­sults, es­pe­cially on taking out the non-re­cur­ring prof­its from the gains.”

Run­away prop­erty prices are giv­ing flail­ing com­pa­nies a shot at sur­vival amid un­cer­tainty over China’s growth and a vo­latile stock mar­ket. Un­derChina’s ex­chang­erules, com­pa­nies are warned with the pos­si­bil­ity of delist­ing af­ter two con­sec­u­tive years of losses, and are sus­pended if they post a net loss in the fol­low­ing year.

Nan­jing Pu­tian Telecom­mu­ni­ca­tions Co, a loss-mak­ing telecom­mu­ni­ca­tion equip­ment man­u­fac­turer listed in Shen­zhen, planned to sell two apart­ments in the heart of Bei­jing’s school dis­trict to shore up its bal­ance

Such sales won’t change the longterm prof­its of these firms.” a strate­gist at KGI Se­cu­ri­ties in Shanghai

Ken Chen, sheet, it said in fil­ings last month. The value of the res­i­dences rose 16-fold since the firm bought them in 2004.

Shanghai Xin­mei Real Es­tate Co, whose stock was halted from trad­ing in Shanghai in April af­ter it re­ported three straight years of losses, said in a state­ment on Sept 14 that it hoped to sell prop­er­ties for at least 150 mil­lion yuan ($22 mil­lion) to “op­ti­mize its as­set struc­ture and re­sume trad­ing as quickly as pos­si­ble”.

Weifang Yax­ing Chem­i­cal Co, Xi’an Tian He De­fense Tech­nol­ogy Co, Shen­zhen Shen­bao In­dus­trial Co and Shanghai Green­court In­vest­ment Group Co are among the other com­pa­nies with plans to sell real es­tate, fil­ings show.

“Such sales won’t change the long-term prof­its of these firms,” saidKenChen, a strate­gist at KGI Se­cu­ri­ties in Shanghai. “They’re just buy­ing more time to re­cover their busi­ness amid an eco­nomic turn­around.”

Home prices in China surged by the most in six years in August, of­fi­cial data show. At least 21 cities have in­tro­duced pur­chase re­stric­tions or tough­ened mort­gage lend­ing in the past month, re­vers­ing two years of eas­ing to sup­port home buy­ers.

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