China Evergrande Group (formerly: Evergrande Real Estate Group) (3333.HK)

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#1
http://www.citronresearch.com/wp-content...search.pdf

Deception on a Grande Scale

Citron Research is pleased to present our analysis of Evergrande Real Estate Group.  This research and analysis, compiled over several months, presents the conclusion that HK:3333 is essentially an insolvent company that has consistently presented fraudulent information to the investing public.

We prove this conclusion in the following presentation.

Evergrande is not a story about the “China real estate bubble”; rather it is a tale of a company who has abused the capital markets as well as the generous lending of the Chinese Government in order to enrich one man, aggrandize his personal ego and support his pet projects.

Bribery, excessive spending, and off-balance sheet transactions are the foundation of Evergrande’s financials.

The situation at Evergrande is so murky that, within the last year, even the Chinese Ministry of Finance fined Evergrande for reporting inaccurate financial statements.

Citron wants to make one thing clear:  we do not recommend shorting any of China’s state owned banks or any construction project backed by the Government of China.  On the other hand, we believe that Evergrande has misled investors and represents the worst of Chinese neo-capitalism, and therefore represents a good short opportunity in relation to other exposure in the Chinese capital markets.

Whether it be the capital markets, government enforcement, hard or soft landing, the endgame for Evergrande is a certainty; the only uncertainty is the timing.
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#2
Quote:Bribery, excessive spending, and off-balance sheet transactions are the foundation of Evergrande’s financials.

I was always wary of their gearing so I didn't bother to dig. But it's quite funny how they basically admitted paying bribes (payments without official invoices, see Note 25 of the 2010 AR). They were at least semi-smart about disguising loans (as JVs with a buyback requirement).
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I do not give stock tips. So please do not ask, because you shall not receive.
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#3
Is Evergrande a stock that we must avoid at all cost?
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#4
Evergrande just declared a 0.43 RMB dividend.
At current price of 3.75 HKD that is a 14% dividend yield with a P/BV of 1 and a P/E of 4
http://www.bloomberg.com/quote/3333:HK
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#5
http://www.hkexnews.hk/listedco/listcone...826125.pdf
sales up , earnings up , EPS 0.48 RMB meaning it already recovered the super dividend paid past July.
If these data are true, this is indeed a super stock.
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#6
(28-08-2014, 06:43 PM)Gaudente Wrote: http://www.hkexnews.hk/listedco/listcone...826125.pdf
sales up , earnings up , EPS 0.48 RMB meaning it already recovered the super dividend paid past July.
If these data are true, this is indeed a super stock.
The market is concerned because (1) leverage never seems to come down, (2) they seem unfocused. First there was the football team investment (which at least was justified as a form of advertising for the real estate biz) but now they are also investing in a bank and, if I recall correctly, the food biz and no one knows what is next. Operationally (in the real estate biz) they are good but their substantial leverage is a concern in a slowing market. As a point of comparison, you can get 9%ish yield on their five year USD bond. I would only buy the stock if the real estate market starts looking more rosy. Then it is a great leveraged bet on the sector.....
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#7
http://www.hkexnews.hk/listedco/listcone...330419.pdf
again proposed a 0.43 RMB dividend which offers a 13% yield even on the current quote of almost 4 HKD (was 3 not long ago) Big Grin
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#8
(28-08-2014, 09:10 PM)GreedandFear Wrote: As a point of comparison, you can get 9%ish yield on their five year USD bond.
The problem with bonds is they require a minimum investment of 200,000 USD , while with stocks I can just bet my usual 100,000 HKD chip which if it goes bust doesn't ruin me. Besides , stocks are traded on a regulated market while with bonds you are at the mercy of OTC sharks.
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#9
sold my entire holding today at 6.10 Big Grin
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#10
Well done. Your thinking beats the professional brokers.

Less than 2 months ago, JP Morgan had set a target price at $2.40. and BofA Merril Lynch had put their target share price at $3.50
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