Chinese real estate developers Evergrande cannot release earnings on time

A view of the Evergrande Changqing community on September 24, 2021 in Wuhan, Hubei province, China.

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A slew of Chinese property developers said this week they were either unable to release their financial results on time or had yet to hold board meetings for them.

Among them is struggling property developer Evergrande which rocked investment markets last year due to its debt crisis.

The developers gave various reasons for not being able to do this.

In a statement to the Hong Kong Stock Exchange on Tuesday, Evergrande said that due to “drastic changes” in its operating environment since the second half of last year, its auditor has added “a large number of audit procedures extra” this year.

Coupled with “the effect caused by the Covid-19 outbreak”, Evergrande will not be able to report results by the end of March for its fiscal year ending December 31, 2021, it said in the case.

He said he would release the audited results “as soon as possible” after the audit is complete.

Other developers said the resignation of auditors meant they could not release their fiscal 2021 results on time, according to Japanese bank Nomura.

When developers change auditors ahead of annual earnings season, it usually raises red flags about potential audit issues and should cause serious concern in the market…

Developer Ronshine said on Monday that PricewaterhouseCoopers (PwC) had resigned, citing lack of time for the audit as well as the resurgence of Covid in China as two main reasons for the resignation.

Over the past two months, developers such as Aoyuan, Shanghai Shimao, and Hopson have also announced a change in listeners.

“When developers change auditors ahead of annual earnings season, it typically raises red flags about potential audit issues and should raise serious concerns in the market about the reliability of their financial numbers,” he said. Nomura said in a Monday note.

Compressed margins and lower profits expected

As of Monday, nine real estate developers had yet to announce dates for their fiscal 2021 board meetings, Nomura noted.

The likelihood that more developers won’t be able to release their results on time increases, Nomura said, given that listed companies must announce their board meeting dates at least seven business days before the date. their actual results – which should be March 31 through the latest.

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“Even if the developers manage to release their FY21 results on time, we expect qualified opinions and weak results in general (compressed margins, lower profits and reduced payment of dividends for FY21-22F) for the sector in the next two weeks, which should further weigh down the sector’s share price, in our view,” Nomura said.

Prospects for ownership shares

Investor confidence was boosted in mid-March when China signaled support for Chinese equities and said authorities would work to stabilize its struggling real estate sector. This sent Hong Kong markets soaring last week, including real estate stocks.

However, real estate stocks have struggled to orient themselves since, oscillating between gains and losses.

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