| HONG KONG, March 31
HONG KONG, March 31 Executives from Evergrande
Real Estate Group painted a rosier picture of China's
real estate market than their peers after the company posted a
49 percent rise in net profit and outpaced analyst estimates for
Hong Kong-listed Evergrande's strong earnings come as
investors are becoming increasingly jittery about softening
prices and defaults in the sector.
Earlier this month government officials told Reuters that
Zhejiang Xingrun Real Estate Co was on the brink of bankruptcy.
Though Zhejiang Xingrun is a smaller, local developer, investors
are worried that it could signal cracks in the Chinese debt
Evergrande, whose net profit rose last year by 49.3 percent
to 13.7 billion yuan and whose core profit rose 66.3 percent to
10.3 billion yuan, seemed to allay at least some of those fears.
The core profit beat a median analyst forecast of 8.8 billion
yuan, according to a poll by Thomson Reuters Smart Estimates.
That view was reinforced by management. "The property market
in the first quarter was not totally bad, and it will get
better," Chairman Hui Ka Yan told an earnings conference on
Evergrande's traditional markets in third and fourth tier
cities have seen some of the biggest declines in property
prices. But Hui and Chief Executive Xia Haijun said on Monday
that they would continue to invest.
"Future development has to be in third tiers because
urbanisation is a major national policy," Xia said. He said
Evergrande is also investing in top tier cities and is aiming to
have half of its sales come from first and second tier cities
and half come from third and fourth tier cities.
First tier cities, such as Beijing, Shanghai and Nanjing,
accounted for 17.6 percent of sales in the first two months of
2014, up from 1.4 percent in the whole of last year, the company
Evergrande spent 22.4 billion yuan ($3.61 billion) in the
last six months of 2013 acquiring a total of nine plots of land
in the top tier cities.
The Guangzhou-based property developer managed to cut its
gearing ratio by 14.5 percentage points to 69.5 percent by
disposing of some investment properties. It said such a ratio
Evergrande is scheduled for two coupon payments this year,
with $1.5 billion notes due on April 30 and $1.35
billion notes due on July 27.
The yield rate on the $1.5 billion five-year notes
, which will mature in Oct 2018, hiked by over 2.0
percentage points to 10.72 percent since the start of the year,
compared to a coupon rate of 8.76 percent, reflecting investor
concern in a tight liquidity market.
Evergrande's contracted sales gained 8.8 percent to 100.4
billion yuan, making it one of seven Chinese developers to
recorded annual sales of over 100 billion yuan last year.
The company said it was targeting 2014 sales of 110 billion
yuan, up 10 percent.
"We like the company's strategy change of moving up to first
and second tier-cities because those are the cities we feel
upbeat about," said Haitong International analyst Jason Huang.
"We're not worried about its gearing; it's not too high
compared to the industry average of 60 to 70 percent."
($1 = 6.2122 Chinese Yuan)
(Editing by Jeremy Laurence)