Chinese property developer CIFI swings into a loss in the first half of the year, shares plunge after trading suspension lifted
Shares of debt-stricken property developer CIFI Holdings Group plunged by the most on record after trading resumed following a six-month suspension due to delay in filing financial results, with the company unveiling overnight a loss in the first half of the year.
The stock fell by 59 per cent to HK$0.31, and it has now lost nearly 96 per cent of its value from a peak in April 2021. Its capitalisation has been reduced from an all-time high of around HK$64 billion (US$8.2 billion) to a mere HK$3.3 billion.
In its delayed earnings release, the company turned to a loss of nearly 9 billion yuan (US$1.2 billion) for first half of the year, from a profit of 1.9 billion yuan a year ago. It logged a 13 billion yuan loss for 2022, filings showed. But the company’s long-term liabilities shrank to 34.8 billion yuan by the end of June 2023, from 41.3 billion yuan at the end of 2022 while working capital dropped to 30.6 billion yuan from 49 billion yuan in the same period, indicating balance sheet downsizing.
Meanwhile, China’s property debt crisis continued worsening, with China Evergrande Group, the world’s most indebted developer, missing yet another bond repayment this week even as it faces a winding up petition next month. The company has scrapped six creditor meetings scheduled for this week, and it disclosed its inability to meet regulatory requirements to issue new bonds while its mainland China unit failed to repay a note.
CIFI Holdings (Group) headquarters in Shanghai. Photo: Handout
A gauge tracking mainland developers listed in Hong Kong declined 6.2 per cent this month to trade near a one-year low. Meanwhile, an ICE BofA index tracking US$18.2 billion worth of Chinese junk bonds, mostly issued by developers, has lost nearly a quarter of its value this year.
CIFI’s woes started last October when it failed to make a repayment on a US$318 million offshore bond, which was followed by a downgrade by Moody’s to “C” from “Caa1”. Moody’s analysts said the downgrade reflected the company’s “increased liquidity and default risk, and weakened recovery prospects for the company’s creditors because of its liquidity stress and pressure on operating performance”. In the following month, the company terminated discussions with individual creditors and offshore creditors, dealing a setback to its restructuring efforts. Later in March, the developer sought to sell its major assets in Shanghai after a state-guaranteed bond issuance hit a snag.
“Given the default risk remains imminent for distressed property developers, their valuations and bond prices would still be under pressure. It may in turn weaken and narrow their refinancing abilities,” said Toni Ho, director at Lianhe Ratings.
“The property market is still suffering from the overheated prices in tier-1 and 2 cities and high leverage practices for some developers. It may still take time for the property market to get back to stabilised property price and sales volume,” said Ho.
China’s housing authorities vow support as property crisis deepens
China’s housing authorities vow support as property crisis deepens
Beijing has in recent weeks relaxed a raft of home-buying rules, including cuts to mortgage rates, but analysts said these measures are insufficient to fix the low consumer confidence problem.
“The stimulus policies for the real estate market were not as expected, hence the market was unable to continue its momentum of recovery,” CIFI managements said in the filing. “There has been no significant improvement in the market sentiment in a short period of time.”
CIFI’s contracted sales for the six months ending in June shrank 33.6 year per cent on year to 41.94 billion yuan “due to tough business environment in the real estate industry,” the company said.
“The strength of supportive policies will directly affect the subsequent development of the real estate market,” the firm’s management said while calling for bigger stimulus measures.
It said that China’s real estate market is witnessing “significant changes between supply and demand” and that the company would strengthen its sales efforts especially “in the cities with incentive policies”.
