According to a report published by J.P. Morgan Chase, Ruian Real Estate (00272-HK) fell short of expectations last year, with high financial leverage and increased operating costs. It is believed that the share offering was to adjust the balance sheet and support the construction progress of existing projects, but it weakened the book value and net asset value by 16-19 percent. The bank downgraded its rating from “increase in holdings” to “neutral”, and the target price was cut 35% from 4.2 yuan to 2.75 yuan.

According to the report, Ruifang's core profit fell 89% year-on-year to 142 million yuan (same below) last year, which is 80% lower than the bank's forecast. Despite high interest expenses and a lack of delivery projects, which were already expected by the market, operating and current expenses were higher than expected, and Motong lowered its net asset value forecast for the end of this year by 44%.

Ruifang announced three grants to one, raising HK$3.6-4.1 billion, with a share price of $1.84, a 70% discount from the net asset value forecast in December this year, corresponding to 0.35 times the 2012 market account rate. Motong believes it is close to the liquidation price, and major shareholders have promised to participate in the stock offering.