Billionaire Lau's Chinese Estates Can't Get Enough of Evergrande

(Bloomberg) -- Billionaire Joseph Lau’s Chinese Estate’s Holdings Ltd. just can’t seem to get enough shares of property developer China Evergrande Group -- whose shares have soared more than 500 percent this year.

To get a sense for the scale of Chinese Estate’s buying spree of Evergrande shares, consider this: The firm has spent HK$12 billion on the purchases since April, representing more than 18 times its free cash and more than three times 2016 revenue. The shares aren’t cheap, trading at 11.3 times estimated earnings, compared with the average ratio of 9.5 times for a Bloomberg Index of 22 mainland developers.

Hong Kong tycoon Lau’s wife Chan Hoi-wan personally held 100 million Evergrande shares as of the end of September, making her a wealthy woman in her own right. That may well be cash well spent for the Lau family, as Evergrande has been the best performing MSCI China member this year, with its sixfold gain eclipsing Chinese Estate’s 13 percent increase.

Short sellers, meanwhile, have gotten squeezed. After mounting an attack in the the earlier part of the year, bears have now retreated, with short interest falling to 8.5 percent from 21 percent of free float in early May, according to IHS Markit Ltd.

Chinese Estates has said they are going to sell these shares at "a satisfactory and attractive level." What that implies is anyone’s guess.

--With assistance from Emma Dong

To contact the reporter on this story: Moxy Ying in Hong Kong at yying13@bloomberg.net.

To contact the editors responsible for this story: Divya Balji at dbalji1@bloomberg.net, Sree Vidya Bhaktavatsalam