Guangzhou-based property developer China Aoyuan Group encountered a tumultuous return to the stock market on Monday, with its shares plummeting by a staggering 74% by midday, trading at 0.31 Hong Kong dollar (US$0.04). This precipitous decline coincided with the persistent slump in China’s real estate market.
The company had been absent from the market for over a year, since April 2022, when it, alongside several other Chinese property developers, postponed the release of various financial reports. During this hiatus, Aoyuan diligently addressed its debt restructuring obligations, conducted an internal financial investigation, and ultimately disclosed its financial results.
In a recent publication, Aoyuan unveiled its financial performance for the past few years, revealing substantial losses. In 2021, the company incurred losses of 33.07 billion yuan (US$4.53 billion), followed by CNY7.84 billion in 2022 and CNY3.74 billion in the first half of 2023. These figures stand in stark contrast to the CNY5.91 billion profit recorded in 2020, prior to the implementation of stricter property sector regulations by Beijing, which led to reduced liquidity and a sharp decline in sales.
In July, Aoyuan announced ambitious plans to raise billions of U.S. dollars through bond issuance and the issuance of one billion ordinary shares at HK$1.06 each. This strategy was devised as part of the company’s effort to restructure some of its overseas debt with its primary creditors. In a recent disclosure to the Hong Kong exchange last Friday, Aoyuan conveyed that it is making satisfactory progress on this proposed offshore debt restructuring plan and anticipates initiating relevant court filings in the near future.
Despite grappling with these formidable financial challenges, Aoyuan has affirmed that it possesses sufficient working capital to fulfill its financial commitments and is determined to persist as a going concern. An independent investigation into Aoyuan’s internal financial practices concluded that the company maintains robust control systems and identified no concerns regarding the integrity of its senior management.
The challenges confronting real estate firms with a focus on China are conspicuous, as evidenced by the Hang Seng Mainland Properties Index’s 34% decline this year. Nevertheless, Aoyuan remains steadfast in fulfilling its financial obligations and remains an active participant in the market, even amid these adverse conditions.
