China Overseas Land reassures investors after CEO’s sudden resignation
Turnover in leadership sparks concerns over company’s ongoing deal to acquire Citic Group’s mainland residential development business
China Overseas Land and Investment (COLI) sought to reassure investors following the surprise resignation last week of its chairman and chief executive Hao Jianmin, which sent the company’s share price tumbling.
Former senior vice president Xiao Xiao, who was elected chairman and appointed chief executive officer in Hao’s place, told reporters on Monday that the company’s operations are running normally.
When asked about drop in COLI’s shares since Hao’s resignation, Xiao said there is “no need for shareholders to worry, since everything with the company is fine”.
After the announcement to the Hong Kong exchange last Thursday, the company’s share price fell 3.3 per cent to HK$22.00.
It has rebounded slightly since to HK$22.05 at Monday’s close.
While the abrupt leadership change sparked concerns for COLI’s ongoing acquisition of China International Trust and Investment Corporation (Citic) Group’s mainland property assets, Xiao said that as far as he knows there have been no changes to the deal.
“The merger has almost entered the final stage,” Xiao said.
The market’s focus has now shifted to the question of Hao’s successor since Xiao, while a seasoned employee of COLI, has just reached China’s official retirement age of 60 and is not likely to remain the post for too long.
Analysts expressed surprise at Hao’s resignation, with investment banks J.P.Morgan, Macquarie and UOB Kay Hian all cutting their target stock price for the company in response.
COLI’s growth strategy has been driven in recent years by mergers and acquisitions, such as the deal with Citic, so Hao’s departure could signal challenges ahead, Macquarie said.
J.P. Morgan analysts said the 60-year-old Xiao’s appointment exposed the company’s manpower problem.
“Today’s result is more due to Hao not separating the function of chairman and CEO, which resulted in today’s lack of senior management and succession plan,” they said.
But analysts appear confident in the long-term profitability of the company’s core operations, even if there is a short term negative impact.
“The change of chairman in the two companies will not materially alter their strategic directions or interrupt their daily operations, given their established operating procedures and corporate management systems,” said Kaven Tsang, a Moody’s vice president and senior credit officer.
Hao, who was 51, had served as chairman for three years since 2013. No reason was given for his departure.
“Mr Hao has confirmed to the company that he has no disagreement with the board and there is no matter relating to his resignation that needs to be brought to the attention of the shareholders of the company,” the company’s exchange filing said.
COLI is one of China’s largest state owned developers. In the first 10 months, the contracted sales of the company and its subsidiaries reached HK$196 billion, a 43 per cent year-on-year growth.