Reuters logo
UPDATE 3-China's Kaisa shares leap 87 pct after first earnings report in 2-1/2 years
March 27, 2017 / 11:49 AM / 10 months ago

UPDATE 3-China's Kaisa shares leap 87 pct after first earnings report in 2-1/2 years

* Expects to post profit in 2017, sales 30 pct higher

* “Absolutely able” to issue offshore bond this year

* Total borrowings $12.7 bln in 2016 vs $11 bln mid-2014

* Core 2016 loss 4.2 bln yuan vs 2.2 bln yuan profit in 2013 (Adds fresh analyst comment and company comment)

By Clare Jim and Umesh Desai

HONG KONG, March 27 (Reuters) - Kaisa Group Holdings Ltd is confident of a turnaround to profit in 2017, it said on Monday, signalling a full recovery for the first Chinese property developer to default on offshore bonds.

Kaisa shares leapt as much as 87 percent on Monday as trading resumed after a 2-year suspension and its first earnings report in 2-1/2 years on Sunday hinted at a sales recovery. Last year its results were undermined by restructuring fees.

Kaisa’s stock has been on hold since it became unable to report 2014 earnings after local authorities blocked the sale of some of its properties, rendering the developer incapable of repaying creditors. In its last report for the first half of that year, Kaisa was saddled with $11 billion worth of debt.

Kaisa told an earnings conference on Monday it targets sales at 40 billion yuan this year, 30 percent higher than 2016, benefiting from saleable resources in major cities, especially its home base Shenzhen where prices have rocketed in the past year.

“It has been two years of hardship, and two years of hard work; I am very happy Kaisa resumed trading today,” said company senior consultant L.L. Tam. “Leveraged on our presence in the Pearl River Delta, Kaisa has greater capability to grow stronger.”

Neither the Shenzhen-based firm nor local authorities disclosed reasons behind the sales block. Its predicament was widely interpreted as highlighting the uncertain operating conditions and amounts of debt that Chinese developers have faced.

Kaisa has slowly recovered after proposing to restructure debt in 2015 and having its sales unblocked, posting record contracted sales of 29.8 billion yuan last year - about 25 percent over its last reported sales in 2013.

With its earnings updated, Kaisa’s Hong Kong-listed shares were able to resume trading after being suspended on March 31, 2015. On Monday, the shares closed up 55.8 percent higher at HK$2.43.

Kaisa said its aggregate borrowing totalled 87.5 billion yuan ($12.7 billion) at the end of last year, of which about 9 percent was repayable within the year.

Tam said the company, which owed $2.5 billion to offshore creditors as of last March, “absolutely has the ability” to issue offshore bond this year. The company added it will explore any refinancing opportunities to reduce cost of funding and term out maturity, and it will partner with onshore banks to co-develop projects to reduce leverage.

Kaisa plans to repay offshore debt from 2019 after addressing onshore debt over 2017-19.

Overall for 2016, Kaisa booked a core loss of 4.16 billion yuan, up 2 percent from a year earlier. That compared with the 2.8 billion yuan core profit of 2013.

Kaisa also said it has sufficient working capital for at least 12 months of operation, and has enhanced internal controls to prevent accounting fraud and buttress auditing credibility.

The developer had said in December that financial adviser FTI Consulting had found 30.8 billion yuan in misclassified outstanding loan liabilities for 2012-2014.

“The very fact that we have accounts is a good start in itself. Finally we have a picture of the financial position, which seems to be on track with the business plan released at the time of the restructuring,” said Rick Mattila, Head of Market Strategy at MUFG Securities.

“The reported cash balance exceeds near-term debt so liquidity appears reasonable. The equity move is largely a catch up reflecting the better sentiment in China property over the past two years.”

Its bonds were broadly higher after it announced strong sales on the back of a strong Shenzhen market. Bonds due 2020 were up nearly a point at 100.25/101 cents on the dollar. ($1 = 6.8870 Chinese yuan renminbi) ($1 = 7.7670 Hong Kong dollars) (Reporting by Clare Jim and Umesh Desai; Editing by Christopher Cushing/Ruth Pitchford)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below