InvestIdeas

Property plays chart growth by Mandy Lo, The Standard HK:-

Evergrande Real Estate, which yesterday began meeting potential investors in its bid to raise up to HK$11.7 billion, is expected to see its net profit surge to eight billion yuan (HK$9.08 billion) next year after net income hit 500 million yuan in the first half.

The developer plans to pay about 985 million yuan from its initial public offering for land-use rights of a site in Shanghai while the rest of the proceeds will go to buy land and for general working capital, sources said.

It also plans to repay a HK$1 billion loan.

http://www.thestandard.com.hk/news_deta ... 91013&fc=2

Evergrande Seeks Up to $780 Million in Share Sale, E-Mail Says By Bei Hu

Oct. 19 (Bloomberg) -- Evergrande Real Estate Group Ltd., the largest Chinese developer by third-quarter sales, plans to raise as much as HK$6.05 billion ($780 million) in a Hong Kong initial public offering, according to a sale document.

The Guangzhou-based developer and shareholders are offering a combined 1.51 billion shares at HK$3.00 to HK$4.00 each, according to the document e-mailed to fund managers.

Evergrande is reviving a share sale after volatile stock markets prompted the company to abort an attempt to raise as much as HK$16.6 billion in March 2008 in what would have been the largest Hong Kong IPO by a Chinese property company at the time. The developer is joining competitors including Excellence Real Estate Group Ltd. and Yuzhou Properties Co. in tapping this year’s stock rally to raise money.

Evergrande spokeswoman Li Chenxi wasn’t immediately available for comment outside of Chinese office hours.

Joseph Lau, chairman of Chinese Estate Holdings Ltd., and Cheng Yu-tung, the billionaire behind Chow Tai Fook Enterprises Ltd., will each take $50 million worth of shares as cornerstone investors in Evergrande’s IPO, the e-mail said. Cornerstone investors are guaranteed shares in an IPO in return for a commitment not to sell them for a number of months.

Of the shares on offer, 900 million are newly issued, representing a 6 percent stake in Evergrande, the e-mail said.

The high end of the range values the company at 6.6 times its 2010 earnings as estimated by banks involved in the sale, or 39 percent less than its discounted net asset value for next year.

Bank of America Merrill Lynch, BOC International (Holdings) Ltd., Credit Suisse Group AG and Goldman Sachs Group Inc. are managing the sale. Final pricing is tentatively scheduled for Oct. 29 with trading to start Nov. 5, the e-mail said.

Evergrande beat domestic rivals in terms of third-quarter revenue and area sold, according to a statement from CRIC (China) Information Technology Co. CRIC didn’t give Evergrande’s ranking for the same period a year earlier.

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Developer cuts fund target by Mandy Lo

Developer Evergrande Real Estate has slashed its fundraising size by 22.6 percent and now aims to raise up to HK$6.04 billion after testing investors' appetite, market sources said.

It originally targeted HK$7.8 billion.

The mainland developer plans to float 1.51 billion shares - 900 million new shares and 611.315 million secondary shares held by existing shareholders - to tap the market for between HK$4.53 billion and HK$6.04 billion.

"From the company's side, why not limit the size especially if you think the valuation will get better in the next six to 12 months. For investors who participate in the IPO, it is a good thing as well," a source said.

Another source said the firm decided to lower the initial public offer size after undertaking pre-marketing last week. "It shows how determined Evergrande is to put forward the IPO plan despite fierce competition among mainland developers,"said CASH Financial Services executive director Ben Cheng Man-bun. The developer first wanted to list in March last year but shelved the move because of poor market sentiment.

Four other mainland developers - Yuzhou Property, Excellence Group, Mingfa Group and Fantasia Group - will kick off their IPOs this week, aiming to reap as much as HK$22 billion in total.

Evergrande will price its shares at between HK$3 and HK$4 each, at a price- to-earnings multiple of between five and 6.6 times, according to the term sheet.

The offer size of 1.51 billion shares accounts for 10 percent of 15 billion shares outstanding.

A board lot of 1,000 shares will cost a minimum of HK$4,040.36.

Evergrande starts its roadshow today and its retail book will open from Thursday until Wednesday next week. It will list on November 5.

http://www.thestandard.com.hk/news_deta ... 91019&fc=1

Evergrande taps stiff demand by Mandy Lo, The Standard HK

Evergrande Real Estate's offering received warm response as its institutional portion was oversubscribed by two times after it kicked off its roadshow yesterday.

Li Ka-shing-controlled Cheung Kong (0001) said the firm had subscribed to the IPO but did not reveal any figures.

"[Evergrande's] scale is large and has property projects nationwide," said Cheung Kong executive director Edmond Ip Tak- chuen. He said Cheung Kong did not invest as a cornerstone investor because of the six- month lock-up period.

Emperor Group chairman Albert Yeung Sau-shing, who attended the investor presentation yesterday, also expected to subscribe for at least HK$100 million worth of shares.

New World Development (0017) chairman Cheng Yu-tung, who agreed to subscribe for US$50 million (HK$390 million) as a cornerstone investor, said the share subscription is "a long-term investment."

Chinese Estates (0127) chairman Joseph Lau Luen-hung also subscribed for US$50 million worth of shares to be another cornerstone investor.

The developer aims to raise HK$6.05 billion from floating 1.51 billion shares at HK$3 to HK$4. It is set to go public on November 5.

http://www.thestandard.com.hk/news_deta ... 91020&fc=2

Firms warm to Evergrande by Mandy Lo, The Standard HK

The institutional portion of Evergrande Real Estate's initial public offering was more than three times oversubscribed and it starts its public offering today to tap up to HK$6.46 billion.

The developer slashed its IPO offering size as it does not want to undersell its shares, chairman Hui Ka-yan said yesterday.

"Originally we planned to raise HK$1 billion to HK$1.5 billion. But we decided to issue less shares after the offer price range was set which we think is too cheap," said Hui.

The shares will be priced between HK$3 and HK$4 apiece, which represents a price-to-earnings multiple of between 38.9 and 51.9 times its forecast earnings for 2009.

"Our land bank amounted to 51.2 million square meters as at September 30, which is enough for three to five years' development," said chief executive James Xia Haijun.

Underlying profit, excluding revaluation of investment properties, is seen at 417 million yuan (HK$473.3 million) for the year ending December 31.

Net income including 616 million yuan in revaluation gains may reach 1.03 billion yuan, nearly double the 524.8 million yuan in 2008.

The developer saw first-half net income tumble 34.2 percent to 500.2 million yuan as at June 30 from 759.9 million yuan a year earlier, as turnover declined 35.2 percent to 1.64 billion yuan. Evergrande is set to go public on November 5.

http://www.thestandard.com.hk/news_deta ... 91022&fc=7

Evergrande in financing lead by Mandy Lo, The Standard HK

At least HK$1.45 billion was locked in yesterday as Evergrande Real Estate kicked off its initial public offering, according to margin financing orders received by five brokerages.

"Margin financing of Evergrande apparently outperformed other IPOs, thanks to its sound fundamentals,"said Phillip Securities corporate finance officer Carmen Wong.

However, most subscriptions were small.

Wong said there were only five orders from Group B, a category for subscriptions over HK$5 million.

From Phillips:-


Risk

Sales will be lower than our expectation.

The company will pay amounts of costs of idle land for possible government's regulation on idle land.

And the local government will withdraw the parts of land which isn`t developed as schedule.

Financing cost may be affected by obvious changes of interest, and the company's sustaining operation may be affected by worsening financing surrounding.


Valuation

Evergrande's profit will increase explosively in 2009, and net profit's CAGR from 2008 to 2010 will be 226%. We expect that Evergrande's profit in 2009 and 2010 will be RMB 1.186 billion and 3.206 billion, diluted EPS will be RMB 0.08 and 0.21 respectively, representing to HKD 0.09 and 0.24.

Besides, the company's equity also increases significantly in the round of recovery. Evergrande's equity in 2009 and 2010 will be RMB 11.6 billion and 14.5 billion, diluted BVPS will be RMB 0.78 and 0.97 respectively, representing to HKD 0.886 and 1.1.

Based on the valuation of big listed property companies and fresh properties companies of IPO in 2009, we give Evergrande 22x forecasted PE and 3.3x forecasted PB, 12m TP of HK$4.5, suggesting 11.3% up room from upper limit of its issue price. We recommend a “Buy” rating.

Meanwhile, the institutional portion of Evergrande was six times oversubscribed. The Guangzhou developer will close the retail book of its HK$6.46 billion deal tomorrow.

Its retail portion was at least 3.5 time oversubscribed as six brokerages got margin financing orders of HK$2.91 billion as at Friday.

BOA Merrill Lynch, Goldman Sachs, BOC International and Credit Suisse are managing the deal

Source: The Standard HK

Applied.

Evergrande offer favored by Mandy Lo, The Standard HK

Evergrande Real Estate froze nearly HK$5 billion for the retail portion of its HK$6.46 billion initial public offering, outshining its undersubscribed home developer peers.

According to seven brokerages polled by The Standard, Evergrande bagged a retail subscription of HK$4.94 billion via margin financing, with KGI Asia getting orders worth HK$1.1 billion.

Applied.

Evergrande offer freezes up $30b by Mandy Lo, The Standard HK

Evergrande Real Estate triumphed over other listing candidates in the mainland property sector with its retail portion 46 times oversubscribed despite recent market fluctuations.

Evergrande got the best reception among the four mainland developers that have launched initial public offering since the middle of this month.

Evergrande locked in more than HK$30 billion from its public portion when its retail book closed yesterday, sources said. Its institutional tranche was 11 times oversubscribed. According to a clawback mechanism, the retail tranche of the HK$6.46 billion deal will rise to 484.5 million shares, making up 30 percent of the offering.