On June 25, China Universal Fund, one of the largest fund companies in China in terms of comprehensive assets, decided to value the "Country Garden" held by its fund at HK$0 per share from June 24. As the largest real estate company with assets of 600 billion yuan in the past, it was valued at 0 by the fund company, which is rare in history.
What does $0 valuation mean?
On April 2 this year, Country Garden started to suspend trading due to the postponement of the 2023 results announcement, and has been suspended for nearly 3 months so far, and announced on the Hong Kong Stock Exchange again on June 6 that the Hong Kong High Court ordered a further postponement of the hearing of the winding-up petition to July 29, 2024. As of the suspension of trading, Country Garden's share price was HK$0.485 per share, and China Universal Fund directly gave a valuation of HK$0 per share this time.
What does $0 valuation mean? It means that the fund company has carefully evaluated and believes that the stock has a greater risk of delisting, and if the stock is delisted, then investors may face significant losses. Therefore, fund companies act in advance to protect the interests of investors by lowering the valuation of stocks.
However, on June 27, Country Garden issued an announcement that it had received the resumption guidance from the Stock Exchange. The fund company adjusts the valuation to 0, which also avoids investors from suffering losses due to a sharp drop in stock prices after the resumption of trading, and gives early warning.
Either way, it's a huge downside for Country Garden.
The same thing happened to Sunshine City in 2023, and it was also calculated as 0 by a fund company, and on August 4 of the same year, Sunshine City was decided to terminate its listing by the Shenzhen Stock Exchange.
In addition, in August 2022, Huaan Fund valued China Evergrande at HK$0.01 and Evergrande Property at HK$0.01.
All financial data intensified and deteriorated
A few days ago, Country Garden announced the delay in the issuance of its 2023 annual report, and the company's shares will also be suspended.
Before 2022, the company's net profit attributable to the parent company has never been negative, and in 2022, it will turn from profit to loss, with a huge loss of more than 6 billion yuan, and a loss of nearly 50 billion yuan in the first half of 2023, as of the first half of 2023, Country Garden's total liabilities are 1.36 trillion yuan, equity assets are 254.369 billion yuan, interest-bearing liabilities are 257.9 billion yuan, and the book cash flow is 101.115 billion yuan.
In the first five months of 2024, Country Garden achieved contracted sales attributable to shareholders of the Company of RMB21.65 billion, down 80.8% from RMB112.76 billion in the same period last year. The contracted sales floor area attributable to shareholders of the Company was 2.248 million square meters, a decrease of 84.39% from 14.42 million square meters in the same period last year.
In September last year, Country Garden's six domestic bonds totaling about 8.5 billion yuan were extended for three years.
In terms of offshore debt restructuring, Country Garden said that the company is actively exploring all feasible offshore debt restructuring options with creditor groups and their advisers, including the Coordination Committee representing bank creditors and the project team representing bondholders, and work is underway on a comprehensive restructuring plan.
Sell off the "important weapon of the country" to raise funds
According to a recent report by brokerage China, Country Garden Venture Capital, a subsidiary of Country Garden, is seeking to sell its stake in Changxin Storage Technology Co., Ltd. to raise about 2 billion yuan. However, the timing of the sale is still under negotiation, and the final outcome is still uncertain. In response, Country Garden said that the company is committed to actively exploring various strategies to optimize the asset-liability structure, including prudent evaluation of the asset portfolio and potential asset disposal opportunities.
Changxin Technology is known as a leading DRAM memory company in China and a representative enterprise of "domestic alternative memory chips", and its shareholders include not only national and local industrial investment funds, but also industrial investment funds led by CITIC Group and China Merchants Capital, as well as financial and insurance institutions such as CICC, CMB, CCB and Sunshine Insurance.
Country Garden Venture Capital is one of the earliest strategic investors of Changxin Storage.
In September 2021, Country Garden Venture Capital entered the list of shareholders of Changxin Storage as a strategic investor, holding 2.2426% of the shares at that time. The selling price of Country Garden's 2 billion yuan is equivalent to a 6% discount.
Source: Distressed Asset Headlines