HONG KONG, Dec 2 (Reuters) - Shares of Evergrande Property
Services fell marginally on their Hong Kong debut on
Wednesday, shedding initial gains as the spinoff of China's
second-largest property developer struggled to shake off worries
about debt and competition.
Concerns about the financial health of its parent, China
Evergrande Group, have clouded Hong Kong's
third-largest listing of the year, with China's most indebted
developer planning to use half the $1.8 billion raised for its
own debt repayment.
The stock opened at HK$8.84 per share, a 0.45% premium to
the HK$8.80 initial public offer price, but closed 0.2% lower at
HK$8.78. It fell as much as 3% during the session.
Shares of China Evergrande fell 2.5%, while the Hong Kong
market was down 1%.
"There are simply too many property management companies
already listed," said Dickie Wong, executive director at
Kingston Securities. "(The) mother company's net gearing ratio
is simply very high."
There have been 15 property service deals in Hong Kong this
year, raising a total of $7.2 billion, compared with $1.67
billion in 2019 and $1.4 billion in 2018, according to Refinitiv
More recent listings in the sector have struggled, with KWG
Living losing 23% and Shimao Services and
First Service dropping 23% and 27%, respectively, on
their first days of trade in October, Refinitiv data shows.
Bigger rival Sunac Services, however, gained 22% in
its debut on Nov. 19.
Investors' response to Evergrande Property Services' IPO
last week was lukewarm with the stock pricing near the lower end
of the HK$8.50 to HK$9.75 per share range, undermined by
concerns about the high debt level of its parent.
Thomas Kwok, head of equity business of CHIEF Securities,
said the market is concerned about the parent company and the
prospects of restructuring.
China Evergrande has been scrambling for cash as Beijing
tackles what it considers excessive borrowing in the real estate
development sector with planned new debt-ratio caps.
In an attempt to improve cashflow, Evergrande, whose
borrowings totalled $124 billion, has also recently sold
secondary shares and agreed with strategic investors of a
now-terminated Shenzhen backdoor listing to not demand
(Additional reporting by Clare Jim; Editing by Sherry
Jacob-Phillips, Sam Holmes and Louise Heavens)