By Esther Fung
SHANGHAI--Chinese property developer Evergrande Real Estate
Group Ltd plans to invest around HK$950 million ($122.5 million)
for a controlling stake in a Hong Kong-based magazine publisher,
New Media Group Holdings--its latest foray in a new business line
as the firm looks to diversify to cushion the risks from a weakened
property market.
The Guangzhou-based developer in recent times has been expanding
into businesses that have no link to real estate, such as solar
energy, baby formula and bottled water.
Evergrande said in a stock exchange announcement late Friday
that it has signed a memorandum of understanding to buy 647.95
million shares, or a 74.99% stake in New Media Group, a firm that
publishes Chinese-language magazines such as Oriental Sunday and
Weekend Weekly.
Last month, the developer said it plans to invest a total of
HK$1.2 billion in a U.S. solar company, Solar Power Inc., and
another Hong Kong-listed firm, Guocang Group Ltd., as part of its
plans to develop business in the new energy sector.
Evergrande, well-known in China for owning a successful soccer
team, said in August it would spend 10 billion yuan in China's oil,
grain and dairy markets. Last year, it started a new business line
distributing bottled water.
Chinese real-estate developers have been facing tighter margins
and weakened property sales as the country struggles with
ballooning levels of housing inventories. Some are expanding into
real-estate development abroad to cater to demand from Chinese
buyers who are eyeing homes outside the sagging domestic
market.
Analysts have raised concerns about Evergrande's strategy of
diversifying, noting its high-debt levels and a large inventory of
apartments.
Following Evergrande's move to invest in solar energy, ratings
firm Moody's Investors Service lowered its outlook on the property
developer to negative from stable.
"Evergrande's cumulative investment in non-property businesses
has risen substantially in recent years, indicating the company's
increased risk appetite to invest in businesses in which it has
little experience," Franco Leung, a vice president and senior
analyst at Moody's, said in a note last month. "These investments
will take time to generate meaningful cash flows and in the
meantime will consume cash and generate losses over the next 12-18
months."
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