China property

Kaisa eyes 2017 turnaround and 34pc growth in sales target

Shares of the developer soared 87 per cent when they traded for the first time in two years in Hong Kong.

PUBLISHED : Monday, 27 March, 2017, 10:53am
UPDATED : Monday, 27 March, 2017, 10:45pm

Kaisa Group Holdings Ltd, whose shares resumed trading in Hong Kong for the first time in two years, said it’s confident of a business turnaround in 2017, after the developer reported its long-overdue financial results.

The Shenzhen-based developer’s 2016 loss narrowed to 612 million yuan, from a 2015 loss of 1.1 billion yuan (US$160 million), and a loss of 1.3 billion yuan in 2014, Kaisa said.

The earnings last year were “dragged down by a series of costs, as we have just completed our debt restructuring,” Kaisa’s senior adviser Tam Lai Ning said during a Hong Kong press conference. “Our operations is doing very well and we’re confident to turn around this year. ”

The company has set a 34 per cent increase in 2017 sales target, to 40 billion yuan, and is aiming to achieve 100 billion yuan of sales by 2019, Kaisa said.

Kaisa’s shares jumped as much as 87 per cent to HK$2.92 when they resumed trading on Monday, before ending the day at HK$2.43.

The company is “qualified” to issue offshore bonds after its shares resumed trading, Tam said, and he believes investors will come back to support them as its outstanding bonds are being traded at prices higher than their par value.

Kaisa, which in 2015 became the first Chinese developer to default on its US dollar-denominated bonds, had been struggling to restructure 65 billion yuan of debt. It also had to publish its much-delayed financial statements, and increase the free float, or the percentage of shares owned by the public, in a bid to resume trading of its shares.

The story began in late 2014 when Shenzhen officials suddenly imposed a sales ban on all of Kaisa’s Shenzhen projects owing to potential business irregularities. Chairman Kwok Ying-shing resigned amid suspected links to Jiang Zunyu, a high ranking official in Shenzhen who was arrested on suspicion of corrupt real estate deals.

The property giant was on the verge of bankruptcy until Kwok unexpectedly returned to the post as chairman to helm Kaisa in April 2015.

Kwok, the Kaisa founder, said he had “tasted the sweetness and bitterness” in the past two years and expressed his appreciation to his employees’ devotion to the company during the hard time.

Kaisa’s prime land reserves, which mostly sit in China’s first-tier and leading second-tier cities, had been the key for the success of debt restructuring, Kwok said.

He said the company will continue to focus its development in the biggest cities such as Beijing, Shanghai, Guangzhou and Shenzhen, and speed up the value realisation of the urban redevelopment projects.

By the end of 2016, the developer owned 21 million square metres of land bank, with another 13 million sq.m urban redevelopment projects, including 8.6 million sq. m urban renewal pipeline in Shenzhen, the country’s most expensive housing market.

Still, the company’s financial performance could face pressure in the next one or two years given the huge debt burden, said Philip Tse, a property analyst at Bocom International.

“Its profit will hardly be reflected until it has paid back most of its debts,” he said.

Kaisa’s outstanding borrowings reached 8.2 billion yuan by the end of 2016, rising from 7.4 billion yuan in 2015, its interest expenses for 2016 alone came in at 6.9 billion yuan.