Country Garden share sale knocks property stocks
Mainland property stocks fell across the board yesterday after Country Garden Holding said it would raise money by selling shares at a discount, triggering fears of a fresh round of fund-rasing amid credit tightening and shrinking home sales.
Country Garden said it planned to generate HK$2.14 billion in net proceeds through the share sale to fund capital expenditure and for 'general corporate purposes'.
Through a 'placing and subscription agreement', Country Garden's controlling shareholder Concrete Win will sell 677.19 million existing shares for HK$3.23 per share, a discount of 7.98 per cent to its closing price on Wednesday.
According to its filing to the stock exchange, Concrete Win, which holds a 59.83 per cent stake in the firm, will then buy back the same amount of shares at the same price within 14 days of signing the deal to sell the shares. It will simultaneously issue the same amount of shares, as a result of which its stake in the company will drop to 57.5 per cent even as it buys back the shares.
Country Garden shares fell 8.83 per cent on news of its move to sell shares. Other mainland stocks reacted negatively as well, with Evergrande Real Estate Group falling 8.11 per cent to HK$4.53, R&F Properties losing 8 per cent to HK$9.42, Agile Property losing 5.73 per cent to HK$9.86 and China Overseas Land & Investment falling 5.53 per cent to HK$15.36.
Alan Jin, head of regional property research at Mizuho Securities, said Country Garden's decline was primarily caused by the hefty discount it was offering to sell its shares.
'Most companies are keen to explore different alternatives including tapping the equity market to shore up their financial position,' he said.
Country Garden's move came just a day after it announced its net profits rose 35.5 per cent to 5.8 billion yuan (HK$7.2 billion) last year. Announcing the results, the company had said it had a strong cash reserve of 10 billion yuan.
Jin said mainland property stocks jumped 50 to 60 per cent last month and investors may be booking profit, which could be another reason for the drop in share prices. 'The sector will turn volatile this month,' he said.
David Ng, a property analyst at Macquarie Capital Securities, however, said the performance of mainland developers could improve in the next two months as local governments tried different ways to ease the housing cubs to revive the real estate market.
Average home prices in 100 mainland cities fell this much in February from a month earlier, a private sector survey shows