China property

China Evergrande’s first-half sales jump 72pc to 244b yuan

PUBLISHED : Tuesday, 04 July, 2017, 11:06am
UPDATED : Tuesday, 04 July, 2017, 11:00pm

China Evergrande Group, the country’s largest homebuilder, said its first-half contracted sales rose 72 per cent from a year earlier to 244 billion yuan (US$36 billion), representing 54 per cent of the company’s annual sales target of 450 billion yuan.

Evergrande achieved sales of 61.1 billion yuan in June, up 95 per cent from a year earlier. Growth in terms of floor area was up 44 per cent to 6.05 million square metres.

The heavily indebted developer said it had paid back all its perpetual bonds, amounting to 112.94 billion yuan.

Evergrande’s shares in Hong Kong jumped as much as 7 per cent to HK$16.42 in morning trading on Tuesday after it disclosed the sales figures. The stock eased back to HK$15.72 at the close.

“We will speed up releasing of projects in the second half, ” Evergrande said in a statement on its website, adding that it plans to launch sales of 233 new residential projects in the second half, compared to 79 projects in the first six months.

The company expects full year contracted sales to reach 500 billion yuan.

With the clearing of high interest perpetual bonds, investment banks estimate Evergrande’s net gearing to improve to below 200 per cent from over 400 per cent as of the end of 2016.

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“We are impressed by Evergrande’s progress in redeeming its perpetual bonds, A-share fundraising exercise and its continued deleveraging,” CIMB Research analysts led by Raymond Cheng wrote in a note on Monday. CIMB raised Evergrande’s target price on the same day.

Evergrande is also planning a back-door listing of its property assets on the mainland A-share market, expected to be completed by the end of the year.

Big Chinese developers continue to post strong sales despite a raft of government cooling measures that have been introduced since late 2016.

According to data compiled by China Real Estate Information Corp (CRIC), Country Garden was the best performer among mainland Chinese developers in the first half of 2017. Its contracted sales more than doubled to 284 billion yuan by the end of June, followed by China Vanke and Evergrande.

Total sales of the top 10 developers amounted to 1.5 trillion yuan, rising 58 per cent from a year earlier.

“The industry consolidation has become more intense,” said Zhang Hongwei, a research director at the Shanghai-based Tospur Consulting.

While bigger developers can grab market share when smaller peers are pushed out amid the market slow down and credit tightening, Zhang warned that profitability will face headwinds due to government price control measures in first- and second- tier cities.