[Epoch Times November 17, 2021](The Epoch Times reporter Luo Ya and Lin Cenxin interviewed and reported) Sun Hongbin, the chairman of Sunac China, known as the “M&A King”, has frequently dumped assets for cash in recent years. On the 15th, Sunac China announced the placement of new shares and reduction of Sunac services. Sun Hongbin will provide $450 million in interest-free loans to Sunac. According to industry analysts, Sunac may face high debt risks.
Sunac China recently announced a 10% discount for new shares, placing 335 million shares at HK$15.18 per share, and selling 158 million shares in Sunac Services at HK$14.75 per share. The two placements will raise HK$7.42 billion (approximately US$952 million). , Of which half is used for operations and half is used for loan repayment.
Sun Hongbin also stated that it will provide its own funds of US$450 million and interest-free loans to the group. Although Sun Hongbin paid for it out of his own pocket, the market does not seem to buy it. On the 15th, Sunac China’s share price fell 11.5% to HK$15.08, falling below the placement price, Sunac Services fell by more than 13%.
Sunac frequently sells assets to cash out
In 2017, Sunac jumped to the fourth place in sales, which can be called the peak of Sun Hongbin. In July of the same year, Sunac Real Estate acquired 91% of Wanda Group’s 13 cultural and tourism projects for RMB 43.844 billion, and R&F Properties acquired all the shares of Wanda’s 77 city hotels. Among them, the cultural tourism city project acquired by Sunac is under construction, including hotel projects.
In September 2021, Sunac terminated 21 management contracts with Wanda Hotels ahead of schedule and paid 133 million yuan as termination compensation. Sunac said it was affected by the epidemic and adjusted its business strategy.
At the end of October, Sunac China sold some Shell American Depositary Shares (ADS) and cashed out US$554 million (approximately RMB 3.8 billion). In the first half of last year, Sunac also sold shares of Jinke, a large real estate company, for 10.62 billion yuan in cash.
On November 12, according to a Bloomberg report, Sunac China is considering selling its cultural and tourism assets to withdraw funds to ease liquidity pressure and prepare for subsequent debt payments.
Analysis: Sunac’s inventory is increasing year by year, solvency is limited
China’s real estate industry veteran Ms. Li told The Epoch Times on the 15th that from the relevant data, Sunac faces the risk of high debt.
According to the annual report for the first half of 2021, Sunac needs to repay current liabilities within a year of 755 billion (RMB, the same below), but its quick assets are only 249.5 billion, with a quick ratio of 0.33. According to Ms. Li’s analysis, the main reason is that Sunac’s inventory reaches 632.7 billion, accounting for 69.50% of current assets, and is showing an upward trend year by year, which affects the repayment ability and faces the same problems as Evergrande.
She said that recently the real estate industry has been generally affected by the epidemic, the “three red lines” of financing, and the “double red lines” of housing loans, and market uncertainty has greatly increased. In some cities lacking population and economic support, housing prices have shrunk, and the sales cycle has increased. “For companies like Sunac, which are acquired on a large scale and acquired land with high leverage, are facing inventory squeeze.”
According to her analysis, in terms of total liabilities, Sunac’s current liabilities and other items in the first half of 2021 were 319.8 billion, mainly for Hong Kong listed companies’ interest-bearing debt. Even with 101.1 billion in monetary funds, it can meet 91 billion in short-term borrowings, but in the face of current liabilities and other sectors, it is a drop in the bucket.
Sunac’s accounts payable and bills amounted to 248.282 billion, which was an increase of more than 80 billion in just one year compared to 162.628 billion in the first half of 2020. Ms. Li believes that this shows that Sunac is responding to the country’s “three red lines” policy to reduce interest-bearing debt At the same time, deliberately defaulted on payment to suppliers and construction units. Coupled with long-term loans of 212.568 billion yuan, Sunac faces the risk of high debt.
Analysis: In the second half of the year, the market suffers from many difficulties in the industry
According to statistics from the Shell Research Institute, Sunac China led the way with 63.9 billion yuan in equity transactions among the first batch of centralized land-providing real estate companies in the country. In the first half of this year, Sunac China has acquired more than 90 billion yuan of land through the open market. Coupled with the 9.91 billion acquisition of Changtai Group, Sunac has spent more than 100 billion yuan on expanding its land bank.
At the end of August, Sun Hongbin predicted at the interim performance investor meeting that the real estate market in the second half of the year would be “comparatively tragic” and sales pressure would be high. Sunac would take the land conservatively.
Ms. Li, a veteran industry insider, told The Epoch Times that the many difficulties Sunac will face in the future are in fact the difficulties that all real estate industries will face. First of all, policy preference suppresses real estate, China’s cross-cycle industry positioning is clear, and the real estate industry will become a doomsday; second, financial funds are limited, following the policy guidance, the overall inflow of real estate funds has decreased, causing terminal housing prices to fall, and the market is not optimistic.
Ms. Li believes that “after the Evergrande incident, the entire investment community is not optimistic about real estate and is unwilling to invest.” She said that even the lack of investor confidence has affected financing; coupled with the impact of the epidemic, China is facing a cross-cyclical transformation and economic system. Sexual risks and the lack of money in the market make large real estate companies precarious.
Editor in charge: Li Qiong#
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