Country Garden Services Holdings Co. said it’s planning a stock buyback to shore up investor confidence after renewed fears about funding challenges for Chinese property developers.
The property management firm said in a stock exchange filing in Hong Kong late Tuesday that it will buy back as many as 337 million or 10% of total issued shares. It said the move will demonstrate “its confidence in its long-term business prospects” and improve returns to shareholders. Based on Tuesday’s price, the shares would be worth HK$2.8 billion ($363 million).
Read More: Country Garden Services Could Keep Net Cash With Buybacks: React
The company, an affiliate of major Chinese developer Country Garden Holdings Co., has been trying to distance itself from concerns about the main property business. Country Garden shares plunged 7.6% Tuesday, while a key dollar bond also dropped after it scrapped a HK$2.34 billion share placement.
Country Garden Services said it will do the share repurchase at appropriate times on the open market. Its shares jumped as much as 21% on Wednesday as of 10:02 a.m. in Hong Kong trading, mitigating this year’s plunge to about 48%.
It reported preliminary net income of about 2.32 billion yuan ($323 million) to 2.58 billion yuan for the first half. Country Garden Services’ disclosure of a better cash position in the first half should ease investors’ concern about its financial health, Raymond Cheng, head of China and Hong Kong research at CGS-CIMB Securities, wrote in a note Wednesday.
Together with its share buyback intention, positive news on the services arm will likely outweigh the negative impact of the profit alert, Cheng wrote.
--With assistance from Emma Dong and Catherine Ngai.
(Updates with analyst comments, share price)
