China / Hong Kong Company Flash Note Refer to important disclosures at the end of this report Page 1 DBS Group Research . Equity 15 September 2015 Analyst: Carol WU +852 2863 8841 Evergrande Real Estate
[email protected] (3333 HK) Danielle WANG CFA +852 2820 4915 HOLD; HK$4.55
[email protected] Price Target: HK$5.35 (under review) (18% upside) Andy YEE CFA, +852 2971 1773
[email protected] Ken HE CFA +86 21 6888 3375
[email protected] Evergrande SG takeaways: Transforming into a holding company • Investors’ focus: margin trend, progress of non- Provider businesses, respectively and is considering buying a property business spin-offs, and balance sheet health listco in Hong Kong for its dairy, grain, and oil businesses. Evergrande expects to own over six listcos to host its non- Plans to reduce funding cost by exploring onshore • property businesses. The key is to enhance disclosure and private bond market and reducing perpetual securities run these businesses separately without capital input from • May not raise funds by spinning off its other the property business. However, capital can only be raised businesses anytime soon once the listcos achieve a certain level of profit. • Share buyback is restricted by quota; aims to maintain Share buyback to continue but restricted by free float a high dividend payout requirement. Evergrande has utilised 7.3% out of its 10% share buyback quota YTD. The company is hosting board meeting to extend the 10% quota. However, it can only Exploring onshore private bonds to lower funding costs. buy back another 8% in maximum, given its free float Evergrande reduced its average funding cost from 9.3% in requirement of 22% (vs.