China Evergrande funded Vanke share purchases from its property sales, says CEO

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Xia Haijun, vice chairman and CEO of China Evergrande, said the purchases of China Vanke shares were funded from property sales. Photo: Jonathan Wong

Published: 7:11pm, 30 Aug 2016Updated: 11:05pm, 30 Aug 2016

China Evergrande Group said its 14.6 billion yuan worth of stock purchases in larger rival China Vanke were fully funded by its own property sales as it deflected concerns over its surging debt levels.

The mainland’s second largest home builder came under scrutiny earlier this month when it increased its stake in China Vanke to 6.82 per cent, making it the third largest single shareholder in the country’s biggest home builder.

“Our investment in Vanke has already brought good returns to our shareholders,” said Evergrande chief executive Xia Haijun at an earnings briefing on Tuesday.

Vanke’s Shenzhen-listed shares closed at 22.66 yuan on Tuesday, 17 per cent up from Evergrande’s average cost of 19.4 yuan per share.

The Evergrande relationship with Vanke’s senior management is good, said Xia, but he declined to speculate on Evergrande’s next move amid the ongoing Vanke shareholder battle.

Evergrande saw its first-half net profit slump by 78.6 per cent to 2.02 billion yuan. Core profit, excluding fair value and currency exchange factors, fell 23 per cent to 7.8 billion yuan, while total revenue was up 12.6 per cent to 87.5 billion yuan.

“The bottom line was weighed down by the heavy use of perpetual bonds,” said Raymond Cheng, a property analyst at CIMB Securities.