IPO makes property tycoon China's richest man

Evergrande Chairman Xu Jiayin answers questions from reporters Thursday in Hong Kong Stock Exchange where his company was recently listed. Photo: CFP

By Chen Yang

Evergrande Real Estate Group made a better-than-expected debut on Hong Kong's stock market Thursday, even as the benchmark Hang Seng Index fell 0.63 percent, sending its chairman's family fortune to the country's top position.

The company's shares closed at HK$4.7 ($0.6), a 34.3 percent increase from its initial public offering (IPO) price of HK$3.5 ($0.45). With 10.2 billion shares, or a 68 percent stake, Chairman Xu Jiayin and his wife's fortune amounted to HK$47.94 billion ($6.2 billion), surpassing battery-powered car maker Wang Chuanfu's $5.8 billion, who had the leading spot on the Forbes China Rich List released Thursday.

Guangzhou-based Evergrande, which has the largest land reserves of all domestic property developers, raised HK$5.65 billion ($729 million) by selling 1.61 billion shares in October. Last year it planned an IPO worth up to $2.1 billion in Hong Kong, but later backed out due to the financial crisis.

The company realized sales of 23.1 billion yuan ($3.4 billion) in the first nine months of 2009, up 150 percent year-on-year. It currently has property projects in 24 cities including Guangzhou, Tianjin and Chongqing.

Xu said Thursday his company had not made a schedule for entering the Beijing and Shanghai markets, but the approval of the Shanghai Disneyland Project would bring opportunities to their Qidong project, which is located in Jiangsu Province. Qidong will be just one-hour away from Shanghai when a bridge connecting them is finished.

Evergrande is outperforming many other mainland property companies that had planned IPOs in Hong Kong but met with cool receptions from cautious investors.

Shenzhen-based Excellence Real Estate Group shelved plans for an IPO in Hong Kong that could have raised up to HK$7.8 billion ($1 billion) due to "market conditions" in October. Mingfa Group also postponed its IPO and scaled down its fundraising plans by reducing its offering price by nearly 30 percent.

Xiamen-based Yuzhou Group, which began trading Monday, closed at HK$2.53 ($0.33) Thursday, down from its HK$2.7 ($0.35) IPO price.

Evergrande attracted investors because of its low valuations and high growth potential, said Yang Hongxu, an analyst at Shanghai-based E-house China Research and Development Institute.

Evergrande's stock represents a price-to-earnings ratio of 5.8 times next year's estimated earnings, while other mainland property stocks trade at over 10 times, he said.

Goldman Sachs, an underwriter for Evergrande, predicted that its sales would increase to 41 billion yuan ($6 billion) next year, with an expected profit of 7.7 billion yuan ($1.1 billion), 7.7 times of the expected profit of 1 billion yuan ($146.5 million) this year.
 

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