Home » Evergrande Survival with Broken Arms, the debt crisis that has been fermenting for a year, has reached a new node-Finance News

Evergrande Survival with Broken Arms, the debt crisis that has been fermenting for a year, has reached a new node-Finance News

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  Original Title: Evergrande Survival with Broken Arm

  Source: Finance Eleven

The Evergrande debt crisis that has lasted for a year and has been fermenting has reached a new node

Under the debt pressure that lasted for a year, Xu Jiayin finally decided to transfer the equity of the listed company of Evergrande to alleviate the pressure.

On August 10, China Evergrande (3333.HK), Evergrande Automobile (0708.HK), and Evergrande Property (6666.HK) simultaneously issued announcements stating that the company’s controlling shareholder, China Evergrande Group, is approaching potential independent third-party investment , To explore the sale of part of the equity including but not limited to Evergrande Auto and Evergrande Property.

A news from Jiemian News on August 9 stated that many state-owned and private enterprises are having in-depth discussions with Evergrande regarding the shareholding of Evergrande Motors and Evergrande Property, which are listed in Hong Kong, and the cooperation is expected to land soon.

Reuters also reported that Evergrande is also trying to sell a batch of urban renewal projects in Shenzhen.

Evergrande’s public relations department responded to this, and could not disclose the specific institutions of the third-party investors, and everything is subject to the company’s announcement.

  A financial director of an asset management company believes that the “third-party investor” stated that the company intending to negotiate acquisitions and shareholding matters with Evergrande is not a shareholder or investor of Evergrande, which means that old shareholders will not increase their capital.

Affected by the good news, Evergrande’s stocks rebounded for three consecutive days. From the opening on August 9 to the closing on August 11, China Evergrande rose 22%, Evergrande Auto rose 18.5%, and Evergrande Property rose 45.4%.

At the beginning of 2021, the market value of China Evergrande and Evergrande Properties exceeded 200 billion Hong Kong dollars, and the market value of Evergrande Auto was closer to 700 billion Hong Kong dollars, but by early August it had fallen to around 70 billion Hong Kong dollars, 55 billion Hong Kong dollars and 130 billion Hong Kong dollars. The total evaporated market value is more than 800 billion Hong Kong dollars. Evergrande, once the king of profits, has become the most eye-catching risk target in the market this year.

Evergrande has previously adopted various methods such as issuing new shares, selling houses at discounted prices, returning commercial bills, and selling assets to alleviate financial pressures. On June 22 and August 1, Evergrande sold 19% equity of its film and television company Hengteng Network twice, raising approximately HK$7.7 billion.

On July 30, China Evergrande sold about 7% of its shares in Shenzhen High-tech Investment Group to Vanke’s companies, but did not disclose the transaction amount. The original investment amount of the equity was 983 million yuan.

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On January 24, Evergrande Motor once issued 952 million new shares to six investors at a price of HK$27.3 per share, raising HK$26 billion in funds, with a lock-up period of 12 months.

The financial report shows that as of June 30 this year, China Evergrande’s interest-bearing liabilities totaled more than 570 billion yuan. But the market believes that the debt of the entire Evergrande department is far more than that, and a considerable part of the debt is outside the financial report.

  Guangzhou Urban Investment and Vanke entered the game

The most likely to save Evergrande are Vanke and Guangzhou Urban Construction Investment Group (hereinafter referred to as Guangzhou Urban Investment).

  The Caijing reporter learned that Vanke is participating in transaction-related negotiations and is one of the potential buyers. Moreover, Vanke’s focus is not limited to Evergrande Property, they are also studying related assets of Evergrande Auto.

  The Caijing reporter also learned that Guangzhou Urban Investment’s employees are already preparing for possible transactions, both in terms of funds and preparations for taking over certain businesses.

There are 6 urban investment platforms in Guangzhou. In addition to Guangzhou Urban Construction Investment Group, there are Guangzhou Communications Investment, Guangzhou Metro, Guangzhou Water, Guangzhou Environmental Protection, etc. These companies are often referred to as “urban investment” in the daily context.

At the same time, Caijing learned that the Guangdong Provincial Government has not discussed and made arrangements for the state-owned equity investment in Evergrande.

A related person from the Guangdong Provincial SASAC told the Caijing reporter that within the scope of his division of labor, he has not heard any news about participating in Evergrande’s asset and debt restructuring.

Another person familiar with the working procedures of the government told the Caijing reporter that all urban investment companies in Guangdong hold large amounts of funds, and the provincial government has fully delegated powers. Urban investment companies can freely search for suitable investment targets in the market, but this is only Limited to pure commercial activities. “If it is a policy-based government bailout behavior, the government must discuss it in advance and make overall arrangements.”

There are also rumors in the market that the negotiation with Evergrande also includes Guangzhou Yuexiu Financial Holding Group (hereinafter referred to asYuexiu Financial Holdings) And other local state-owned enterprises, and central enterprises such as China Resources and Poly.

The reporter from Caijing separately verified the above companies.

Relevant people in China Resources expressed surprise at the news, saying that they had never heard of it. Relevant middle-level managers of Yuexiu Financial Holdings stated that they had not received any relevant instructions from the company, and I also learned relevant information from public channels.

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On the afternoon of August 11, Yuexiu Financial Holdings officially stated on the investor platform that the company’s current business does not involve Evergrande Group, nor does it participate in the asset restructuring of Evergrande Group.

As of press time, Poly Group has not explicitly responded to the inquiries of Caijing reporters.

  Evergrande Automobile Evergrande Property, who is better to sell

Judging from the announcement, currently Evergrande is mainly preparing to sell the equity and assets of Evergrande Property and Evergrande Auto.

However, the asset quality of Evergrande Auto and Evergrande Property’s method of attracting wars makes it difficult for investors to start with equity.

  A person in charge of the strategy department of a state-owned car company analyzed to a reporter from Caijing: It is hard to imagine that someone will take over the Evergrande auto business.Its production lines are designed in accordance with luxury models such as BMW and Mercedes-Benz, which is not practical. It is impossible for anyone to invest in support of Evergrande’s car-making model for real estate developers.

Due to defaulting on payment from suppliers, Evergrande’s subsidiaries have been involved in multiple legal proceedings, most of which are contract disputes. If you invest in Evergrande Motors, you need to consider paying for the historical burden of Evergrande Motors, including annual financial expenses, depreciation, amortization and other operating expenses.

According to the company’s announcement, Evergrande Automobile will lose 7.7 billion yuan in 2020 and is expected to lose 4.8 billion yuan in the first half of 2021. At the end of 2020, Evergrande’s net cash flow from operating activities was -1.96 billion yuan.

In fact, Evergrande Auto has become insolvent.

At the end of 2020, the company’s total liabilities were 155.9 billion yuan and total assets were 150.1 billion yuan. After deducting 200 million yuan of minority shareholders’ equity, the equity attributable to shareholders of the parent company was -6.1 billion yuan.

Due to the development of huge debts, Evergrande Motor’s financial expenses in 2020 will reach 2.7 billion yuan. Frequent acquisitions have also brought Evergrande’s 2020 goodwill and intangible asset impairment reserves to 1 billion yuan.

In addition, Evergrande Automobile is building factories in various places. In 2020, the depreciation expenditure of fixed assets will be 500 million yuan, and it will not be able to form real production and sales in the short term.

Evergrande’s R&D expenditures are included in intangible assets. In 2020, its intangible assets have accumulated to 10.2 billion yuan. In the future, it will gradually be transferred to intangible assets amortization, which will become an annual operating cost. In 2020, intangible assets will be amortized to 400 million yuan. .

In other words, the total annual fixed expenditure of Evergrande Automobile is at least 4.6 billion yuan.

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Compared with the car manufacturing business, the land owned by Evergrande is more valuable. At the end of 2020, the land use rights included in the company’s financial report were 4.2 billion yuan.

Therefore, investors may only be interested in the land assets of Evergrande Auto.

  Although Evergrande Real Estate has better financial fundamentals than autos, if the transaction model is to sell minority shares instead of selling assets, it will be less attractive to leading real estate companies.

The head company buys property assets and prefers the holding model.For example, Wanwuyun (formerly known as Vanke Property Development Co., Ltd.), a subsidiary of Vanke recently acquiredSunshine CityIn order to obtain a controlling stake in the property assets of Sunshine City, it has issued 4.8% of Wanwuyun shares to all shareholders of Sunshine Zhibo, a subsidiary of Sunshine City.

Scale is the core indicator of the property management industry. The layout of Chinese property companies is entering the final competition period. The more area under management, the more room for sustainable growth in the future, and there are more stories to tell in the capital market. .

Since last year, Country Garden, Vanke, and Sunac have been scanning real estate companies that are in financial crisis. If Evergrande is willing to sell all of its property assets, it should not be difficult to find buyers.

In 2020, Evergrande’s property operating income was 10.509 billion yuan, a year-on-year increase of 43.31%; gross profit was 4.006 billion yuan, a year-on-year increase of 128.26%. It is a high-quality asset.

As of the end of 2020, Evergrande’s total contracted property management area is approximately 565 million square meters, covering 22 provinces, 5 autonomous regions, 4 municipalities and Hong Kong, a total of 290 cities. Among them, Guangdong, Hainan, Jiangsu, Zhejiang, Hunan and other popular provinces are all areas that Evergrande focuses on.

In addition to Evergrande Auto and Evergrande Property, according to “Caixin” reports, China Evergrande has also planned to sell real estate assets since early June, but only sells the assets of the project company and does not involve the equity of listed companies. Since China Evergrande is unwilling to sell at a loss, the transaction has not yet been finalized.

A relevant person at Evergrande said that they would not comment on market rumors.

The distribution of the area under management of Evergrande Property Source: the company’s annual report

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Editor in charge: Feng Tiwei

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