Evergrande builds up pre-IPO land reserve
Updated: 2008-03-13 07:04
By Amy Lam(HK Edition)
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Property developer Evergrande Real Estate Group is confident it will be able to maintain its strong mainland growth this year, saying tightening policies there won't have much of an impact on the second-tier cities that the company focuses on.
Evergrande, which hopes to raise as much as HK$16.6 billion in a Hong Kong initial public offering (IPO), has rapidly built up its land bank in the past two years and plans a sharp step-up in its completion of projects this year. The efforts come despite cooling measures put in place by the central government that aim to tame the overheating property market.
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People examine the model for a property-development project at a mainland real-estate fair. Mainland real-estate developers such as Evergrande are keen on listing in the Hong Kong stock market to absorb capital. China Daily |
"Austerity measures mainly target major cities such as Beijing and Guangzhou. Evergrande will focus on second-tier cities which are less affected by the measures," Evergrande Chief Executive Officer Xia Haijun said.
The Guangzhou-based developer has a land reserve of 45.8 million sq m worth of gross floor area in 22 cities - enough to fuel development for the next five years. The company plans to complete 7.53 million sq m worth of property developments by the end of this year, compared with 0.4 million sq m in 2007.
The company - looking to list on March 28 despite the recent IPO market woes - is selling 2.96 billion shares, 96 percent of which are new shares, to raise up to HK$16.6 billion. The offering range is HK$3.50 to HK$5.60 per share, with one trading lot being 500 shares.
Under the tightening policy, the mainland has regularly raised interest rates, imposed taxes on capital gains and land appreciation, stopped non-residents from buying too many apartments and told banks to curb loans to developers to deter land speculation.
Property developers face great difficulty in financing projects, as they must compete for new land under intense competition.
Evergrande, which has aggressively acquired land in past years, is under financing pressure and decided to list its shares to meet financing needs.
Nonetheless, the offering range has been priced at a big discount to its net asset value due to the choppy market conditions.
Some corporate investors, such as Merrill Lynch, Temasek and Deutsche Bank, will invest in the firm's IPO.
Merrill Lynch, Goldman Sachs and Credit Suisse are jointly arranging the deal.
Chief Financial Officer Tam Wai-ying said the company's current credit, property sales, cash and IPO proceeds should be able to finance the investment needs this year. The company is expected to report 2007 net profits of 1 billion yuan.
Meanwhile, Wing Fat Printing, a spin-off of conglomerate Shanghai Industrial Holdings, plans to raise up to HK$690 million in a Hong Kong IPO, which opens its retail-subscription period today.
Wing Fat produces packages for tobacco products and wines. It is selling 150 million new shares at between HK$4.05 and HK$4.60 per share.
BNP Paribas and UBS are arranging the deal.
(HK Edition 03/13/2008 page3)