China Securities Journal 2010-6-9 LinZhe

The 15%-off discount policy has generated a sharp rise in the sales volumes of Evergrande Real Estate (3333.HK) across China. According to the sales statistics for May published by Evergrande on June 8 shows that a total contracted sales volume of 4.05 billion yuan was realized in May, 328.6% up; a total area of 640,000m² was sold by contract, 240.3% up, and the averagae contact price for May was 6,326 yuan per square meter, 26% up over the same period of last year.

Compred with the same period of last year, the contract sales volume and the total sold area of Evergrande in May incrased by 8.3% and 10.7% respectively, while the averagae price was 2.2% down compared with the previous month. Evergarnda Oasis Villas in Nanchang that was newly launched onto the market in May and Evergrande Oasis in Guangzhou sold at high prices even with a 15%-off promotional policy helped increase the sales volume and significantly wrote off the fall in price. The average price for May, if impacts of the said projects were excluded, saw a fall of 6% compared with April.

With major control policies gradually implemented since April, the real estate markets in major cities came to a stand. On May 6, Evergrande announced its 15%-off policy for all the housing projects under its name, with the view of speeding up the fund recovery, increase the fund turnover and getting ready for a new round of growth. Between May 6 and May 31, the average daily contract sales volume of Evergrande was 135 million yuan, 110% up compared with 64 million yuan before the implementation of the policy, and the average area sold per day was 220,000 m², 134% up compared with 9,400 m² before.

Statisitics showed that in May significant growth in terms of sales volume of Evergrande housing products was seen in Chongqing, Chengdu, Hefei, Guangzhou and Shenyang. Thanks to the 15%-off promotional policy, the sales volumes of the products in Tianjin, Baotou, Xi'an and Taiyuan saw a growth of over 100% compared with the same period of last year, with Tianjin taking the lead with a growth of 308%.

Between January and May, a total contracted sales volume of 16.18 billion yuan was realized, 150.8% up over the same period of last year; a total area of 2,533,000m² was sold by contract, 85.2% up, and the averagae contact price was 6,387 yuan per square meter, 35.5% up. By May 31, Evergrande Real Estate had a balance of HK$19.99 billion on its accounts.

According to some well-informed insiders, the basic need of real estate products on the domestic markets, especially in the second- and third- tier cities, remains competent. If the price is satisfactorily adjusted, the sales volume would hopefully look up.