Evergrande profit surge brings share price gains to almost 400%

Hong Kong

CHINA Evergrande Group, the developer targeted by shortsellers this year for its high debt levels, resumed a run of share price gains after reporting a surge in profit and announcing a shift to a low-debt strategy.

The shares rose as much as 7.2 per cent in Hong Kong on Tuesday.

Evergrande pledged to target net gearing of 70 per cent from 2020, compared with about 240 per cent now, in an earnings briefing in Hong Kong on Monday, where it disclosed a jump in first-half profit. It also said it plans to raise 30 billion yuan (S$6.1 billion) to 50 billion yuan from strategic investors in a third round of fundraising before its backdoor listing.

Evergrande's share price has climbed almost 400 per cent this year, dealing a blow to shortsellers who wagered against the company after its debt soared during an acquisition spree. The gains have been fuelled by share buybacks and the firm's plans for a backdoor listing on the mainland.

The company indicated to analysts that its A-share listing could take place in the first half of next year, according to banks including Citigroup Inc. The firm had previously indicated this year, according to analysts. A strengthening balance sheet may mean that the listing is no longer "critical" for the firm, Citi-group analysts said in a note.

The company, controlled by billionaire Hui Ka Yan, reported a 250 per cent jump in core first-half profit, which excludes one-time items, to 27.3 billion yuan on Monday, citing increased property sales and prices.

Revenue more than doubled to 188 billion yuan, the firm told Hong Kong's stock exchange. Evergrande said it expected to beat a 450 billion yuan sales target for the year.

The company is also reported to be planning to build 15 theme parks in China. It declared no dividend, saying that a special dividend would come after the firm's reorganisation. CEO Xia Haijun told a briefing that he did not expect shareholder Chinese Estates Holdings Ltd, controlled by the family of billionaire Joseph Lau, to sell its stake yet as the shares remained cheap. BLOOMBERG