[ET Net News Agency, 2 October 2019] Credit Suisse lowered its target price for China
Evergrande Group (03333) to HK$25.7 from HK$34.4 and maintained its "buy" rating.
The research house said China Real Estate Information Corp's (CRIC) preliminary data
showed Evergrande's contracted sales increased by 31% to Rmb83bn in September.
Credit Suisse expects the growth momentum to remain resilient in October, given a faster
launching schedule and more aggressive promotion activities.
But it noted that Evergrande's senior notes are trading at 11-14% yield, implying that
investors are turning more concerned on its balance sheet. The second major concern among
investors is the penalty term arranged with first/second batches of strategic investors
(i.e., Rmb70bn original investment and 50% compensation).
Credit Suisse sees a relatively high chance of management extending the deadline with
most investors if A-share listing cannot be completed by 31 Jan-2020.
It also cut its FY2019/20/21 earnings forecasts by 9%/10%/10% to factor in the home
price cut of 5% from the current level. (KL)