Evergrande services arm shares halve as trading resumes after 16 months.

Evergrande services arm shares halve as trading resumes after 16 months.

Evergrande Property Services Group

Shares of Evergrande Property Services Group Plunge as Trading Resumes

In a startling turn of events, shares of Evergrande Property Services Group (6666.HK) plummeted by a staggering 50% on Thursday when trading resumed after a 16-month suspension. The steep decline followed the release of the company’s financial results and the conclusion of an investigation into misused funds involving its parent company, China Evergrande Group (3333.HK). This alarming development has sent shockwaves through the volatile property services industry.

Evergrande Property Services Group found itself caught in a financial maelstrom when its debt-ridden parent company, China Evergrande Group, was embroiled in a debt crisis that plagued the entire real estate sector. As the world’s most indebted property developer, the challenges faced by China Evergrande Group had far-reaching consequences for its subsidiary, Evergrande Property Services Group.

Trading in Evergrande Property Services Group had been suspended since March 2022, adding to the uncertainty surrounding the company’s future. Its sister company, China Evergrande New Energy Vehicle Group (0708.HK), resumed trading last week after a 16-month halt, but experienced a steep decline of 69% on the first day of trade. However, trading in the parent company’s shares remains suspended.

The resumption of trading in all three companies is of paramount importance to Evergrande Group, as it forms a crucial part of their offshore debt restructuring plan. The plan entails converting a portion of the debt into equity-linked instruments backed by the parent company and its two subsidiaries. The successful resumption of trading is pivotal to the execution of this plan.

Despite their recent setbacks, Evergrande Property Services Group expressed confidence in its ability to navigate the challenging landscape. The company affirmed that it possesses sufficient assets to sustain its operations and forecasts revenue and net profit growth on par with the industry leaders in the property service sector.

To address the issues stemming from the misused funds involving its parent company, Evergrande Property Services Group instituted remedial measures. These included internal control reviews and staff training, specifically regarding the 13.4 billion yuan ($1.86 billion) of seized deposits that were used as collateral for pledge guarantees by China Evergrande Group. The company believes that these measures are adequate to prevent similar incidents in the future, emphasizing that all directors involved in the pledge guarantee have resigned, alleviating regulatory concerns.

In an effort to recover their losses, Evergrande Property Services Group is actively engaging in discussions with Evergrande Group regarding a repayment proposal. Additionally, they are contemplating the feasibility of pursuing legal action. These steps demonstrate the company’s commitment to resolving the challenges it faces and safeguarding its interests.

Having recently announced their long-overdue financial results for the fiscal year 2022, Evergrande Property Services Group reported a significant decline in profit compared to fiscal year 2020, with a decline of 46.4%. While this news is concerning, the company remains optimistic and determined to regain its financial footing.

The development surrounding Evergrande Property Services Group serves as a vivid illustration of the tumultuous nature of the real estate sector. The repercussions of China Evergrande Group’s debt crisis have reverberated throughout the industry, impacting its subsidiaries and raising concerns for the stability of the market as a whole. As stakeholders eagerly await further updates, all eyes remain on Evergrande Property Services Group as they navigate this challenging landscape.

(Note: Conversion rate used: $1 = 7.1865 yuan)