China Daily

CAPITAL INFUSION

Funding scheme lifts shares of Evergrande

- By QIU QUANLIN in Guangzhou qiuquanli@chinadaily.com.cn

Shares of Evergrande Group, a mainland property developer, rose 9.38 percent on Tuesday after it said it would sell 60 billion yuan ($9.04 billion) worth of stocks in its property assets business that is slated for a backdoor listing in Shenzhen.

The Guangzhou-based company said on Monday evening that it had signed a capital infusion agreement with six strategic investors, to finance its real estate business.

Evergrande shares closed at HK$30.9 ($3.96) in Hong Kong on Tuesday. The company’s shares have surged nearly 500 percent this year in anticipati­on of the planned backdoor listing of its real estate assets, fresh capital from strategic investors and share buybacks.

According to the company’s financial report for the first six months, Evergrande’s net debt ratio will drop by nearly 40 percent after the introducti­on of the strategic investment.

This is the third time this year that Evergrande is introducin­g strategic investors, after two infusions of 30.5 billion yuan and 39.5 billion in January and June respective­ly.

“The largest equity financing in the history of domestic real estate enterprise­s and the introducti­on of investment reflects investors’ approval of the developmen­t prospects of Evergrande. It also reflects the company’s determinat­ion to increase efficiency, reduce debt and deleverage,” said Lin Jiang, head of the public finance and taxation department of the Sun Yat-sen University.

The announceme­nt also shows that Evergrande’s net profit will increase to 165 billion yuan in the next three years.

Xu Jiayin, chairman of the board of directors of Evergrande, said earlier this year that the company will transform its developmen­t strategy of “scale” to “benefit”, which features low debt, low leverage, low cost and high turnover.

Evergrande’s sales reached 187.9 billion yuan in the first half of 2017, an increase of 114.8 percent year-on-year, according to the company.

“After the introducti­on of strategic investment is completed, Evergrande’s net assets will increase substantia­lly,” said Lin.

As one of the strategic investors, Suning Holdings Group Ltd, which will hold 4.7 percent of shares of Evergrande Real Estate, will boost its online and offline business in the years ahead, according to Zhang Jindong, chairman of Suning.

“The partnershi­p with Evergrande was based on both sides’ products and services that are specially made for customers,” Zhang told the National Business Daily.

In addition to the capital increase, both sides will cooperate in sectors such as finance, smart homes, property services and sales, he said.

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