Evergrande’s Special Dividend Has Investors Seeking Clues

Bloomberg2021-07-26

(Bloomberg) -- As China Evergrande Group mulls a special dividend to revive confidence in its tumbling stock, analysts are gaming out several scenarios that could have markedly different implications ...

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Comments

WwwQY
2021-07-26
WwwQY
Show the money
SharkRider
2021-07-26
SharkRider
If analysts are scratching their heads as to the reason why, I would advise investors to hit and run.
reeve
2021-07-26
reeve
Can help summarise?
ivy888
2021-07-26
ivy888
Like
- BSK100:
  ok
Daruleeee
2021-07-26
Daruleeee
Well damn!
JasonRich168
2021-07-26
JasonRich168
Gogo

Leave a comment

167

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Evergrande needs to reassure the market that it has ample ammunition to make good on its borrowings while also countering short-sellers.\nThe last time Evergrande rewarded shareholders with a special dividend, in 2018, its earnings were soaring though bearish bets abounded then too. It has since seen annual profit drops for 2019 and 2020, with total liabilities swelling to $301 billion.\n“Evergrande may be using the dividend plan to emphasize the stability of its cash flow and profitability, especially after the recent debt pressure,” said Yan Yuejin, research director at Shanghai-based E-house China Research and Development Institute.\nEvergrande’s shares fell as much as 7.2% in Hong Kong. The developer’s 8.75% bond due 2025, one of the firm’s most widely traded dollar notes, continued to drop 1 cent on the dollar to 52.2 cents.\nAnalysts reckon Evergrande will take one of three routes: a cash dividend, a stock dividend or handing out shares in its higher-value listed subsidiaries.\nCash dividend\nA cash dividend would be controversial given its share holding pattern and the dire need to pay down debt. Even so, Evergrande could justify it by pointing to a first half of record sales and cash inflows.\nApart from Hui, who owns almost 77% of the outstanding stock through companies controlled either by him or his wife, others who stand to benefit include billionaire Joseph Lau. Hui and Lau, a long-time supporter whose wife holds 8.9% of the company, are both part of the “Big Two Club” of tycoons who play the poker game of the same name.\n“Paying a large special dividend is effectively a way of recycling capital back to the two main shareholders,” said Travis Lundy, a special situations analyst who publishes on Smartkarma. “They may use the funds to buy more of what Evergrande spins out.”\nHui can’t use too much of the cash to prop up Evergrande’s share price. The developer’s free float is approaching the 22.04% minimum required by the Hong Kong stock exchange. It has though been weighing listings of its tourism and bottled water businesses, according to people familiar with the matter.\nStock dividend\nOthers expect Evergrande to hand out shares from its main listed entity in Hong Kong. While this may benefit long-term investors, a dividend comprised of stocks could end up driving shares lower in the near-term, adding to a 31% collapse in the past month.\n“I am more leaning toward equity distribution given the tight liquidity,” said Eddie Chia, a portfolio manager at China Life Franklin.\nThe third option -- and potentially the one the market would favor -- is giving away shares of Evergrande’s subsidiaries. Options include Evergrande’s Hong Kong-listed new energy vehicle business or its property management operation. Such a scenario could be slightly positive for both shareholders and creditors.\nWith Evergrande’s market capitalization falling below its assets, owning shares in these subsidiaries would be a win for shareholders. Shares of China Evergrande New Energy Vehicle Group Ltd., which was worth more than Ford Motor Co. a few months back, tanked after the dividend proposal.\n“This option makes more sense,” said Nigel Stevenson, an analyst at GMT Research Ltd.\nDepending on the dividend, if Evergrande loses its controlling stake in the electric vehicle start-up, the developer may deconsolidate it from its balance sheet and pare nearly 60 billion yuan of credit tied to the EV unit. That would showcase Evergrande’s efforts to pare debt and meet China’s “Three Red Line” metrics, a move that would benefit its relationship with banks.\n“In reality it doesn’t really solve their liquidity,” issue, China Life Franklin’s Chia said. “But at least they are trying to do something so we can give them credit for that.”","kind":"news","is_publish_news":true,"is_publish_highlight":true,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":800313920,"gmtCreate":1627277406560,"gmtModify":1703486573934,"author":{"id":"3575626976695048","authorId":"3575626976695048","name":"WwwQY","avatar":"https://static.tigerbbs.com/6f9c22c265d387847e42f1190cd93d36","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"3575626976695048","authorIdStr":"3575626976695048"},"htmlText":"Show the money&nbsp;","listText":"Show the money&nbsp;","text":"Show the money","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/800313920","repostId":1137310872,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":800397000,"gmtCreate":1627276384300,"gmtModify":1703486555095,"author":{"id":"3587037754746901","authorId":"3587037754746901","name":"SharkRider","avatar":"https://static.tigerbbs.com/de2adeb4ae77e489f87ea6b1daebff81","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"3587037754746901","authorIdStr":"3587037754746901"},"htmlText":"If analysts are scratching their heads as to the reason why, I would advise investors to hit and run.","listText":"If analysts are scratching their heads as to the reason why, I would advise investors to hit and run.","text":"If analysts are scratching their heads as to the reason why, I would advise investors to hit and run.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/800397000","repostId":1137310872,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":800394073,"gmtCreate":1627276320992,"gmtModify":1703486553630,"author":{"id":"3574669353038503","authorId":"3574669353038503","name":"reeve","avatar":"https://community-static.tradeup.com/news/f54bbbddcd63aa6ec435193a97c18f3d","vip":1,"crmLevel":7,"crmLevelSwitch":1,"idStr":"3574669353038503","authorIdStr":"3574669353038503"},"htmlText":"Can help summarise?&nbsp;","listText":"Can help summarise?&nbsp;","text":"Can help summarise?","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/800394073","repostId":1137310872,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":800396667,"gmtCreate":1627276129459,"gmtModify":1703486551531,"author":{"id":"3579641974902127","authorId":"3579641974902127","name":"ivy888","avatar":"https://static.tigerbbs.com/10358949b7fc96b011ec29ca7fd9c9a4","vip":1,"crmLevel":1,"crmLevelSwitch":0,"idStr":"3579641974902127","authorIdStr":"3579641974902127"},"htmlText":"Like","listText":"Like","text":"Like","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":3,"commentSize":1,"repostSize":0,"link":"https://ttm.financial/post/800396667","repostId":1137310872,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":5337566,"gmtCreate":1627315656390,"gmtModify":1635220934463,"authorId":4087271497625750,"author":{"id":4087271497625750,"idStr":"4087271497625750","authorId":4087271497625750,"name":"BSK100","avatar":"https://community-static.tradeup.com/news/2fedfee145bda2c2ba74dae101b70b22","vip":1,"crmLevel":2,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":800396667,"type":1,"supId":0,"prevId":0,"content":"<u>ok</u>","text":"<u>ok</u>","html":"<u>ok</u>"}],"langContent":"EN"},{"id":800304574,"gmtCreate":1627275698498,"gmtModify":1703486540523,"author":{"id":"3578548392576499","authorId":"3578548392576499","name":"Daruleeee","avatar":"https://community-static.tradeup.com/news/dd07abd6cd5ef4cf14f15cf35dd7e70f","vip":1,"crmLevel":6,"crmLevelSwitch":0,"idStr":"3578548392576499","authorIdStr":"3578548392576499"},"htmlText":"Well damn!","listText":"Well damn!","text":"Well damn!","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/800304574","repostId":1137310872,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":800305055,"gmtCreate":1627275611177,"gmtModify":1703486539207,"author":{"id":"4087419425165680","authorId":"4087419425165680","name":"JasonRich168","avatar":"https://community-static.tradeup.com/news/d83f23970dc1958ec8ad2a6dc638d302","vip":1,"hat":"https://static.tigerbbs.com/4c5ceab71416b120bab4604c0754b52a","crmLevel":2,"crmLevelSwitch":0,"idStr":"4087419425165680","authorIdStr":"4087419425165680"},"htmlText":"Gogo","listText":"Gogo","text":"Gogo","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":3,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/800305055","repostId":1137310872,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":167,"commentSize":12,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 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