Sunac China Holdings (HKG: 1918) shares are up another 61% today. The Sunac share price rise is a continuation of yesterday’s rise. Given that such rises are cumulative this is a well over 100% rise this week.
As we reported yesterday about Sunac: “Sunac China Holdings (HKG: 1918) shares are up 27% today. Sunac shares rising like this is really not, not quite, what we’d expect. For this is not about some general relief about the China Mainland property market. Instead it’s about a proposed special dividend from the company, Which is one of those things we’d really not expect given the Mainlaind China property market woes at present. Paying out capital? Somewhat weird and therefore the price reaction.”
The actual way to read the story, we think: “The way we would tell this story. Sunac China is somewhere between deep in the mire and near bust like many China property companies. There is to be a debt reorganisation. There is some capital within the group but that was at the Services level. This special dividend allows that to be moved up to group level and be applied to underpinning the new debt structure at group level. It makes a reconstruction of the balance sheet easier/ more likely. Thus the share price move.”
We’re not sure whether that’s worth an over 100% share price move but then the information flow out of China into the western markets is often restricted and also in the wrong language for us.
Sunac China Holdings share price from Google Finance
As we’ve reported before about Sunac China the company is, or at least has been, on the verge of being bust.
As we’ve said about Country Garden - linked in the sense of being in the same market, but not linked as companies - the real determinant of Chinese property is what does the CCP intend to do about it all? “If we look at Country purely as a stand alone company then we see someone on that pathway to bankruptcy. Debts to assets, cashflow to service the debt burden, no, one one can really see a way out of this. If we think of Garden as a political player, or at least the subject of political forces, then things might look a little rosier. Is China going to allow the Mainland property development sector to fail overall? Or are macroeconomic conditions going to be changed so that it doesn’t?
The Country Garden share price varies dependent upon which view comes out on top in any particular trading day.”
Putting aside the details of this special dividend that remains our opinion on the valuation of Sunac China as well. It’s dependent upon political action.
