Tan Kin Lian - Investment Journey Review of Country Garden (2007.HK)
Country Garden is the largest developer in China. Its share trade in HK stock exchange under the symbol 2007.HK.

The highest price was in April 2019 when it reached HK$14. Due to covid pandemic and the controls by the China government on the property sector, the share price dropped to $3 in November 2022 and stayed there for a few months. 

The cash flow problems faced by CG, which also affect most property developers in China, caused CG to default on the repayment of its international bonds. The stop price dropped to $0.70 which is only 5% of its price at the high, just 4 years earlier. 

The debt burden of CG is not high. I consider the drop to be excessive, and that the value of CG, based on its assets, is much higher than the stock price. 

I invested S$200,000 in CG and held to my shares. 

Recently, it was reported that the China government will ask the banks to give working capital loans to 50 large developers, and that CG is one of them. It resulted in the price of SG moving up to $1. 

A recent report from an analyst pointed out the following problems for CG:

a) Their inclusion in the white list of 50 developers is not confirmed. They may be excluded due to their debt default. 
b) Even if they have the working capital financing, the property market is still weak and the people do not have the confidence to invest in property. It may take a long time. 

I hold a different view to this analyst. I believe that the government want to help the 50 large developers, including CG, to protect the property sector from collapse. The buyers will return to the property market when they find that the prices have stabilized. The properties are now selling at 40% below their peak prices, and represent a bargain. The loan financing will also ease.

I will hold on to my shares and sell them at $1.50, i.e. 50% higher than the current price. 

Disclaimer: This is a personal opinion. I am not giving investment advice. I am sharing my own perspective.

Tan Kin Lian 
 

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