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Zheng Yangpeng

China Evergrande Group, China’s third-largest developer by sales, issued a positive profit alert on Thursday, saying that it expected a “substantial increase” in 2017 net profit, in the order of “four to five times that of last year”, thanks to reductions in interest expenses and other factors.
The profit alert was made in a filing to the Hong Kong stock exchange after the close of trading. Evergrande also said net profit from core business operations is expected to be around twice that of last year.
Evergrande said the substantial increase was attributable to improvements in product quality, enhancements in “product added value”, and an increase in floor area of completed properties. The developer also cited a reduction in expenses and “the redemption of the perpetual capital instruments by the Group during the relevant period”.
Chinese property developers’ stocks could gain as much as 40 per cent this year
The full year result is expected to be released in late March.
Evergrande’s Hong Kong listed shares surged to a high of HK$31.6 in October, gaining more than five times since the beginning of the year.
The developer’s shares were up 3.8 per cent to HK$23.1 on Thursday.
“This [profit upsurge] is not surprising, giving its strong revenue growth, redemption of perpetual bonds, and increase in profitability,” said CIMB property analyst Raymond Cheng. “But another important reason is it has a low comparison base of 2016.”

Evergrande last year raised 129.5 billion yuan (US$20.4 billion) through three rounds of fundraising from strategic investors. It used the funds to pay down debt, including high-interest perpetual bonds that cost the 10.6 billion yuan in interest payments in 2016. The move helped Evergrande to bring down the company’s gearing ratio to below 200 per cent, from 240 per cent by mid-2017.
China Evergrande raises a further US$9 billion to cut debt ahead of Shenzhen listing
Cheng estimated the debt cut alone saved Evergrande 5 billion yuan to 6 billion yuan in interest expenses a year. He also estimated the gross margin will have risen to 33 per cent from 28 per cent.
Evergrande’s contracted sales jumped 34.2 per cent to 501 billion yuan in 2017, and were up 64 per cent in the two month period through February 2018 on year.


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China property

Evergrande issues positive profit alert, saying 2017 net income should rise ‘4 to 5 times’ from last year

Evergrande’s shares have rallied sharply during the past year on expectations that a capital raising had helped the company to lower interest expenses on its perpetual bonds. Photo: AFP

Evergrande Mansion in Foshan Nanhai Gaoxin district, in Guangzhou. 10JUN17 SCMP / Xiaomei Chen

China Evergrande switches to convertible bonds at last minute, pares it down to US$2.3 billion

China Evergrande said in a stock exchange announcement that it would use the proceeds to refinance existing debts. Photo: Reuters

China Evergrande raises a further US$9 billion to cut debt ahead of Shenzhen listing

A visitor looks at a model of a new apartment complex at a showroom of Evergrande Real Estate Group. The company is planning to list its property arm on the Shenzhen stock exchange. Photo: Reuters

China Evergrande first-half profit jumps 832pc on strong sales, lower debt

China Evergrande chief executive Xia Haijun at the company’s interim results press conference at the Grand Hyatt Hotel. Photo: Dickson Lee

China Evergrande beats HSBC to top most charitable Hong Kong companies list in 2016

The Chinese property firm gave HK$1.8 billion to good causes last year, while overall philanthropic activity by listed companies increased from the previous year

The logo of China Evergrande at a construction site in south China. The company was the most generous in terms of charitable donations among Hong Kong listed companies last year, a report found. Photo: Reuters