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High-growth Chinese real estate firm Evergrande Group fell as much as 23% to its lowest level in a decade on Tuesday, as it reported that second-quarter revenue dropped by 12.9% year-on-year and that it earned 10% less than a year ago.
At the opening bell, Evergrande shares plunged as much as 23% to their lowest level in a decade, according to CNN Money.
Last year was a miserable one for many Chinese companies.
Others like Sichuan Jiayuan Health Management, China Railway Engineering, Xiaomi and Meituan-Dianping had flirted with billions of dollars in market value but all have fallen below their IPO prices.
Speaking at a forum, founder and chairman of Evergrande group and chairman of brokerage Cowen Group Richard Li expressed his confidence in the company, saying the firm had “turned a dark moment into a bright moment” by improving its governance and internal controls.
Graphic: Fitch shows the impact of Chinese REITs:
Lei Dong, an analyst at Huatai Securities in Shanghai, told CNN the company’s business model was still very good and he thought its share price is still relatively low compared to its book value.
“While the performance this quarter was not good, they have been operating profitably and the stock has not been a money loser. It will be improved in the future,” he said.
According to Li, Evergrande will continue to focus on its property development division, where the company controls more than 600,000 new homes and a diverse real estate portfolio, such as healthcare, tourism and retail.
“We believe Evergrande Group has chosen the most sound commercial and development strategies of real estate business,” Li said in a statement.
Most assets are in tier 3, 4 and 5 cities
Li was speaking at a forum for the World Economic Forum in Davos, Switzerland, where he stressed the company’s commitment to the meeting.
“Evergrande Group, together with the rest of China’s private and quasi-private enterprises, is in a tenuous stage due to the new exchange rate policy introduced at the beginning of the fourth quarter of last year, under which the renminbi weakened significantly against the US dollar,” he said.
“One year later, the impact of the policies’ positive development on China’s key services sectors, RMB and economic growth is hard to detect. Therefore, we hope that the authorities demonstrate cleverness and wisdom in dealing with the current environment.”
Evergrande, which has assets of about $116 billion, ended 2017 on the back of a slide in property prices, prompting it to slash prices in 60 cities. The company said its property division incurred losses of $841 million over the first half of 2018.
Evergrande said that around 2.4 billion yuan ($380 million) in revenue over the first half of the year is expected to be realized in the second half of the year due to selling some period products.
In July the company suffered its most tumultuous two weeks in its history after the country’s anti-corruption watchdog said it was targeting an annual salary of more than $900,000 per year for executive chairman Richard Li.