AutoBeta(AutoBeta.net)10/04 Report--

Evergrande Group's capital problems continue to ferment, and it is urgent to sell assets to recover funds.

On October 4, Hong Kong shares of China Evergrande and Evergrande Property announced suspension of trading, and Evergrande Automobile traded normally. At noon, China Evergrande issued an announcement saying that it was pending the issuance of a trading announcement on matters to be disclosed by the Company; Evergrande Property issued an announcement saying that it was pending the issuance of an announcement made by the Company in accordance with the Hong Kong Code on Takeovers and Mergers and constituting inside information and a possible general offer of shares of the Company. In addition, Hopson Development, a listed real estate company, also has a trading limit, which is also "a transaction pending publication (acquisition of shares in a company listed on the Stock Exchange) and a mandatory offer for shares in the target company that may be made by a company related thereto under the Hong Kong Takeovers and Mergers Code".

It is reported that Hesheng Chuangzhan Group plans to acquire 51% equity of Evergrande Property and obtain the controlling interest of Evergrande Property, with the transaction amount exceeding HK $40 billion. After the news, Evergrande shares in Hong Kong shares rose all the way to close up 28%. However, in response to relevant news, Hesheng Chuangzhan said that "everything is subject to the announcement, there is no more information disclosure."

According to the data, Hesheng Chuangzhan was established in Hong Kong in 1992 and listed on the main board of Hong Kong Stock Exchange in 1998. It is a high-quality life operator of the whole industry chain. Its five sectors, namely real estate, commerce, infrastructure, integrated life and investment, are developing side by side, and diversified formats such as science and technology, pension, culture and tourism, education, health, finance and automobile are optimized. The financial report shows that in the first half of the year, Hesheng Chuangzhan realized revenue of HK $16.074 billion, up 49.71% year-on-year; the profit attributable to equity holders was HK $5.632 billion, up 10.4% year-on-year.

Evergrande Property is a subsidiary of Evergrande Group, with national first-class property qualification and one of the leading property management enterprises in China. It was listed in Hong Kong on December 2,2020. According to the financial report, Evergrande Property realized operating income of RMB 7.873 billion yuan in the first half of 2021, with a year-on-year growth of 68.3%; gross profit of RMB 2.839 billion yuan, with a year-on-year growth of 68.6%; net profit of RMB 1.934 billion yuan, with a year-on-year growth of 68.6%. All core indicators were ahead of the industry level.

In addition to Evergrande Property, Evergrande Automobile may also be sold. On August 10, China Evergrande issued an announcement stating that the Company was contacting several potential independent third party investors to discuss the sale of some of the Company's assets, including but not limited to the sale of some interests in China Evergrande New Energy Automobile Group Co., Ltd. and Evergrande Property Group Co., Ltd., listed subsidiaries of the Company.

On September 24, Evergrande Automobile issued an announcement that if the introduction of the above-mentioned strategic investment and/or the sale of potential assets did not achieve any progress in the short term, Evergrande Automobile would lack further capital investment, which was expected to affect the daily operation of Evergrande Automobile, continue to deteriorate the payment of salaries and/or other expenses of the Group's employees, affect the research and development progress of new energy vehicles, and have a significant negative impact on the mass production of new energy vehicles of the Group.

In other words, Evergrande Group reduces liabilities by selling assets, which is beneficial to the future development of Evergrande Automobile. After all, Evergrande Automobile itself relies on the fund support of Evergrande Group. If Evergrande Group has problems in capital chain, Evergrande Automobile will have a hard time. This is also why Evergrande's share price rose sharply after Evergrande sold Evergrande Property.

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