Following Zhengrong Real Estate, Tianyu Property, and Jiayuan International, Territory Holdings has been added to the list of real estate companies that have crashed. Stock prices presented a frightening scene on May 19, dropping by more than 80% in a single day, hitting a new low of HK$0.55 since listing on December 10, 2020.
Behind the company’s plummeting stock price are the decline in the company’s performance, the pressure on cash flow, and the doubling of debt repayment pressure.
According to the financial report data, in 2021, Territory Holdings’ sales were 23 billion yuan (3.4 billion dollars), which increased 4% year on year, but net profit fell sharply by 43.2%.
As of the end of 2021, the net debt ratio of Territory Holdings was 62.3%, the asset-liability ratio after excluding advance receipts was 72.1%, and the cash-to-short-term debt ratio was 1.25.
The cash and bank balances were about 5.224 billion yuan, while the bank and other loans due within one year were 3.232 billion yuan. Total trade payables and bill payables in the same period were 8.206 billion yuan, of which 7.645 billion yuan were due within one year.
While the share price of Territory Holdings plummeted, the share price of its property management company, Lingyue Service Group, also declined 62.96% to HK$1.1 per share.
The reason for the sharp dive in the stock price and a significant trading volume is not yet apparent. The board of directors confirms that the operations of the Group remain normal.
Kenneth Ho, a Goldman Sachs researcher, said, [quote] “In 2022, we have a base-case estimate for a China property high-yield default rate of 19%.” [end quote] As defaults on Chinese property bonds continue to elevate, the outlook for China’s Property Sector remains low.