Sunac China shares are up 400pc year to date, but bullish investors see even more upside

Aggressive expansion and heavy debt are nothing to worry about – at least for investors in Sunac China.

The Chinese property developer, which specialises in luxury flats, saw its Hong Kong-listed shares reach an all time high for a fifth day on Friday, jumping 12.4 per cent to HK$33.5, giving it a record market value of HK$138.5 billion.

In fact, it is one of the best performers on the Heng Seng Index this year, gaining 400 per cent year-to-date. As a result, the personal wealth of its chairman, Shanxi-born real estate magnate Sun Hongbin, quintupled to roughly HK$57 billion from HK$10 billion at the beginning of the year.

The huge share price gains stand in contrast to the company’s first-half results, which generated only 1.3 billion yuan in profit, but was actually a loss when one-off gains from mergers and acquisitions were excluded. Net gearing almost doubled to 394 per cent, the highest among its peers.

But analysts said investors are bullish because they believe Sunac is following the path of industry leader China Evergrande and is set to see significant profit growth in 2018 and 2019.

“Sunac will be the next Evergrande,” said Liu Feifan, a property analyst at Guotai Junan International.