Source: Nanfang Daily

Evergrande, the real estate giant in South China, is officially listed at the mainboard of Hong Kong Exchange Union today. Its code is 3333.HK. According to reports, Evergrande finally determines to issue 1,610 million shares, which account for 10.8% of the capital stock of the company. Calculated based on the price of 3.5 HKD per share, the total market value of Evergrande will reach 52,500 million HKD, and Evergrande will become a mainland property with the largest market value in the Hong Kong stock market.
Sought-after by share-holding magnates in Hong Kong
      Evergrande has been sought-after in the previous process of calling-for capital. In the beginning, Cheng Yu-tung and Li Ka-shing become shareholders, which causes the excessive subscription of the international placement. Later, the public offering is sought-after by retail investors, with 44.72 times of excessive subscription.
      According to the well-informed persons, after Evergrande starts the clawback mechanism, the distributable shares in the public offering are increased to 484 million shares, which is equivalent to about 30% of the total sales all over the world.According to statistics, its public offering obtains effective applications for 7,384 million shares, which is equivalent to 44.72 times of excessive subscription, and freezes 29,537 million HK dollars. Because there are too many subscribers, the first-hand lot wining rate is only 50%. Retail investors can obtain only 1 out of 7 subscribed hands.
      Though a number of mainland property stocks call for capital in the same period, Evergrande is undoubtedly the best sought-after “star share”, which attracts a large number of magnates in Hong Kong to become shareholders. Li Ka-shing of Cheung Kong Holdings, Albert Yeung of Emperor Group, Cheung Chung Kiu of C.C. Land and Alan Li of Macau Jockey Club subscribe the shares of Evergrande through the international placement. Cheng Yu-tung, who is already the shareholder of Evergrande, increases investment by 50 million U.S. dollars. The shares held by him account for about 4.18% to 5.56% of the total capital stocks of Evergrande.
      Share buying by magnates in Hong Kong has become the most vivid advertisements for Evergrande in the process of calling for capital. After attending the investor promotion conference held by Evergrande, Cheng Yu-tung said “I like to buy Evergrande”, and explained that he takes a fancy to its large sales volume and “good price”, and firmly believed that investors of Evergrande will not “suffer losses”. IP Tak Chuen, executive director of Cheung Kong, who contributed 100 million US dollars to subscribe the shares, also said at the same occasion that the business of Evergrande is all over China, and he recognizes such sales mode.
3.5 HKD surrendering part of profits to investors
       Evergrande is sought-after not only because its operation mode, land reserve and growth rate, but also due to another important factor, as stated by Cheng Yu-tung, the attractive issue price. The issue price offered by Evergrande is 3 to 4 HKD, which is 5 to 6.6 times of the predicted P/E ratio of 2010. The allowance of the share price vs the net asset value reaches 39% to 54%, which is very cheap compared with other property stocks in the same period.
       According to reports, Xu Jiayin, president of board of directors of Evergrande, said publicly that the issue price is “so low that it hurts heart”, and said jokingly that there will be 4 types of people after listing of Evergrande, i.e. “those who do not subscribe will regret, those who subscribe a small quantity will feel sorry, those who subscribe a lot will have a sense of achievement, and the original shareholders of Evergrande will feel heartbroken, because the shares are sold at so low prices”.
      According to reports, the final public offering by Evergrande is 1,610 million shares, which account for 10.8% of the total capital stocks of the company, with about 6 billion HKD raised. Calculated based on the price of 3.5 HKD per share, the total market value of Evergrande will reach 52,500 million HKD, which exceeds that of Country Garden which was listed previously, and Evergrande will become a mainland developer with the largest market value.
      It is reported that Evergrande fixes the issue price to be 3.5 HKD in order to give more “profits” to investors and to provide more space for increasing of the stock price. According to the reports by Hong Kong media, the grey market trading price of Evergrande is between 3.8 HKD and 4 HKD, 14% higher than the issue price, which indicates that investors consider the listing of Evergrande to be promising. Evergrande is also expected to clear away the misfortune of China South City, Glorious Property and Yuzhou whose share prices fell below the issue prices on the first day of listing, and reverse the declining tendency of mainland developers in listing in Hong Kong.
Expected to become a private enterprise with the largest market value
      According to the prospectus of Evergrande, as of the end of September of this year, Evergrande has signed the sales contracts of 23,100 million yuan, increasing by 3 times than 5,400 million yuan of the same period last year. As of September 30, the total cash of the company reaches 10 billion yuan, increasing by about 96% than the end of the first half of the year. As of June 30, the total equity and total asset value reach 8,900 million yuan and 48,100 million yuan respectively.
      The prospectus also shows that as of September 30, 2009, Evergrande has 51,200,000 square meters of land reserve, with the average land cost of 445 yuan / square meter only. Calculated based on this, the land cost of Evergrande only accounts for 8.6% of its average sales price. The advantage in land cost is obvious.
According to analysts, the successful listing of Evergrande this time not only ignited the enthusiasm of the HK market investors in subscribing new mainland stocks, but also made a number of records in the year. Such records include the mainland private enterprise with the largest market value, the largest IPO scale in Hong Kong this year and the largest amount of capital raised.
      It is reported that Evergrande is the largest mainland developer which is listed in Hong Kong this year, and ranks the first in terms of land reserve and construction area. Evergrande sells 1,610 million shares and raises 6 billion HK dollars, which is hard to surpassed by other developers except Longfor Group in this year.
      Among the developers who seek to be listed this year, besides Evergrande, Longfor Group, which is calling for capital, is also a “star enterprise”. But the total capital stock of Longfor Group is 5 billion shares, and it allocates 1 billion shares, which is 20% of the total capital stock, to raise the funds. Evergrande obviously restricts sales, and lowers the capital raising proportion from 15% to 10% in advance.
Because the capital raising process of Evergrande is quite smooth, insiders estimate that the tendency of Evergrande will become the "wind vane” of the mainland property stocks, and may change the viewpoints of HK investors in the new mainland property stocks, and change the situation where mainland property enterprises suffer one setback after another in calling for capital in Hong Kong.