Hang Seng Index laggard Country Garden Services surges 18 per cent, regains US$640 million in value on buy-back plan

Country Garden Services Holdings, the property-management affiliate of Chinese property developer Country Garden Holdings, surged by 18 per cent to regain US$640 million in market capitalisation after it revealed a plan to buy back up to 10 per cent of its shares.

The stock – the worst performer on the Hang Seng Index this year until Wednesday – closed 18 per cent higher at HK$9.91 in Hong Kong, after jumping by as much as 21 per cent in morning trading, while the benchmark Hang Seng Index fell by 2.5 per cent. About 190 million shares of Country Garden Services changed hands, almost four times its 30-day average, according to Bloomberg data.

“The board believes that the shares have been trading at a price level which does not fully reflect the intrinsic value,” Country Garden Services said in the statement. “The board also believes that the group is in a stable financial position and is able to maintain sufficient financial resources to meet the needs of its continuous business growth while carrying out the share repurchase.”

Before the announcement, shares of Country Garden Services had tumbled 57 per cent and were trading at a 20 per cent discount to book value this year as concerns about the financial health of its affiliate Country Garden weighed on its business outlook. The company is valued at seven times its projected earnings for this year, compared with an average of 29 times projected earnings over the past five years, according to Bloomberg data. The stock has a less than 0.5 per cent weighting on the Hang Seng Index.