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Kaisa becomes latest China developer to delay earnings results; shares slide

Stock Markets Mar 23, 2022 07:01AM ET
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© Reuters. FILE PHOTO: A sign of the Kaisa Plaza, a real estate property developed by Kaisa Group Holdings, is seen in Beijing, China December 1, 2021. REUTERS/Tingshu Wang
 
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By Clare Jim

HONG KONG (Reuters) -Cash-strapped Kaisa Group Holdings Ltd has joined a growing list of Chinese property developers unable to publish 2021 audited earnings by March 31 as required by listing rules, deepening market concern about the sector's financial health.

Kaisa late on Tuesday said a virus lockdown in Shenzhen left audit work incomplete so it cannot publish financial results on time. In a filing, it said trading of its shares in Hong Kong will therefore be suspended from April 1 as per bourse rules.

Its stock price dropped 2.7% in Wednesday morning trade versus a 1.7% rise in the benchmark Hang Seng Index.

Bigger peer China Evergrande Group, the world's most-indebted property developer, also on Tuesday said it would not be able to publish results on time due to a large number of additional audit procedures resulting from "drastic changes" in operations since the second half of 2021.

Trading of shares in Evergrande and two Hong Kong-listed subsidiaries has been suspended since Monday.

Other major developers including Sunac China Holdings Ltd and Shimao Group Holdings Ltd also this week said they will delay reporting audited results due to disruption caused by COVID-19, but that they will produce unaudited results on March 31 to keep their shares trading.

However, some have delayed results due to changing auditors. Ronshine China Holdings Ltd on Monday said auditor PwC had quit due to insufficient time to complete auditing work.

Analysts said failure for companies to issue timely 2021 results will further weigh on sector sentiment, which has been hit in the past few months by liquidity concern.

"We think auditors' more stringent checks on project booking/debt might also have played a role," JP Morgan said in a report, referring to the delay.

The U.S. investment bank said it would not be surprised to see more delays because, even for companies that have announced board meeting dates, there is still the possibility of results delays if auditing processes cannot be completed by then.

Nomura said it typically raises red flags when companies change auditors ahead of earnings announcements, and that such a practice causes serious market concern about trustworthiness.

Kaisa, the second-largest U.S. dollar bond issuer among Chinese property developers after China Evergrande, is restructuring its $12 billion offshore debt after defaulting on some bonds last year.

In Tuesday's filing, Kaisa said it has been working with legal and financial advisors in recent months to formulate a solution "for the benefit of all stakeholders" and to ease liquidity issues.

Kaisa also said it has entered "constructive dialogue" with creditors. It has been in talks with bondholders over a debt restructuring deal since late last year.

Kaisa becomes latest China developer to delay earnings results; shares slide
 

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