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China Property

Sunac continues buying spree with 4b yuan purchase of a 17pc stake in Jinke Property

Deal comes days after country’s fifth largest private property developer bought 42 projects from PC maker Legend Holdings for 13.8b yuan

PUBLISHED : Thursday, 22 September, 2016, 11:39am
UPDATED : Thursday, 22 September, 2016, 10:53pm

Sunac China, the country’s fifth largest private property developer, has paid 4 billion yuan to buy a 17 per cent stake in Jinke Property to become its second largest shareholder.

Jinke is listed in Shenzhen and owns the largest land bank in Chongqing of any mainland listed companies.

Sunac has bought 907 million Jinke shares at 4.41 yuan per share, a slight premium on Jinke’s average price in the past five trading days of 4.39 per share, the company said in a statement to the Hong Kong stock exchange on Wednesday.

Sunac’s shares traded in Hong Kong rose 0.33 per cent to HK$6.08 on Thursday.

“Buying a company is much more lucrative than buying public land right now, as land prices in first- and second-tier cities are too expensive, ” said David Hong, head of research at China Real Estate Information, adding valuations of mainland property companies are comparatively low.

Scale is everything for the company [Sunac] right now
Alan Jin, property analyst, Mizuho Securities

According to Sunac’s statement, Jinke currently has around 75 real estate projects under construction, and its land reserves available for construction exceed 17 million square metres, in cities including Chongqing, Beijing and Chengdu.

As most of Jinke’s developments are in core second-tier cities, the deal will produce good investment returns in the future, said Sunac’s chairman Sun Hongbin in the filing.

The Jinke deal came just three days after Sunac revealed it had bought 42 property projects from PC maker Legend Holdings for 13.8 billion yuan.

Sunac made headlines in 2014 when it sought to become the largest shareholder in Greentown China, one of the country’s biggest property developers, a deal which later fell through.

In 2015, Sunac again emerged as a white knight, proposing to take over troubled Shenzhen developer Kaisa Group. But the attempt failed because of disagreements over Kaisa’s debt restructuring.

Alan Jin, a property analyst at Mizuho Securities, expects Sunac to continue its buying spree.

“Scale is everything for the company right now,” he said.

Sunac’s contracted home sales in the first eight months of 2016 surged 95 per cent year-on-year to 78.1 billion yuan. In August, it raised its full-year sales target by 38 per cent to 110 billion yuan.