HONG KONG (Reuters) - Shares of China Evergrande Group (3333.HK) jumped as much as 8.5 percent on Monday after it said it would sell 60 billion yuan ($9.05 billion) worth of shares in its property assets business that is slated for a back door listing in Shenzhen.
Brokerage firms including Morgan Stanley, Nomura and RHB Securities raised their target price for the developer, and said this third round of fundraising, which exceeded the strategic investments Evergrande had initially planned to introduce, would further lower the company’s gearing and funding costs.
As of 0213 GMT, shares of China’s third largest property developer by sales rose 4.6 percent to HK$29.55. The Hang Seng Index .HIS was up 1.1 percent.
The company’s shares have surged 500 percent this year in response to a widely expected back door listing of its real estate assets in China, fresh capital from strategic investors, and share buybacks.
After Evergrande’s announcement, Morgan Stanley raised the target price of Evergrande by 27 percent to HK$29.5 while Nomura raised its target 16.3 percent to HK$32.55.
Morgan Stanley said in a research report on Monday that after the latest fundraising Evergrande would be valued at HK$31.8 per share, and its pro-forma net debt-to-equity ratio would drop to 151 percent from 240 percent as at end-June.
Evergrande, which has the second-largest debt among China’s corporates, had pledged to slash its debt by 2020 after a jump in first-half profits aided by the early redemption of some high-interest bonds.
The developer is planning a back door listing in China, where valuation is usually higher, injecting almost all its property assets held by Hengda Real Estate Group into Shenzhen Real Estate 000029.SZ.
Citi said in a report that after the latest share sale, Evergrande’s stake in the onshore entity will be lowered to 63.46 percent.
Reporting by Clare Jim; Editing by Stephen Coates and Eric Meijer