Investment Pioneer YOUNGOR Is Undervalued By 35%?

Is YOUNGOR (600177.SH) still a textile and garment enterprise? Nominally, it is not.

It is the most typical A share market.

Three main businesses

In public, YOUNGOR's chairman Li Rucheng never forgot about YOUNGOR.

YOUNGOR was founded in 1979. This small garment factory started with 20 thousand yuan educated youth settlement fee. After 30 years, it has become a listed company with a market value of more than 26 billion yuan.

Over the years, YOUNGOR's textile and apparel business has maintained steady growth, with an average growth rate of 24.39% over the past three years in 2007~2009.

Since 1992, YOUNGOR has entered the real estate industry.

In 2009, YOUNGOR confirmed that its real estate revenue was 5 billion 190 million yuan, and its net profit was 1 billion 190 million yuan.

According to the calculation of CICC, with the delivery of two large scale real estate projects in the fourth quarter of this year, YOUNGOR's annual real estate performance is expected to exceed 1 billion 200 million yuan, basically reaching the level of last year.

According to the data of this year's report, the total area of YOUNGOR's 14 construction projects is 2 million 8 thousand square meters, and the development scale is the highest in the calendar year.

In addition, YOUNGOR has 15 plots to be developed, with a final value of 6 billion 60 million yuan.

The most striking thing that YOUNGOR has been challenged is its third main industry, equity investment.

According to Li Rucheng, YOUNGOR initially set foot in equity investments to enrich its industrial chain. The earliest investment in 002036.SZ and 002103.SZ was this type.

In 1999, YOUNGOR began to invest in the financial industry, and Li Rucheng's investment in 600030.SH was even more known by the industry as "a stroke of inspiration."

Since then, YOUNGOR has entered a lonely investment path.

After trying the equity investment in the industry, YOUNGOR's ambition was aroused.

According to Li Rucheng's statement, after 1998, YOUNGOR began to value the development of the financial industry.

In 1999, YOUNGOR bought a large sum of CITIC Securities, spent 320 million yuan to buy 184 million shares of CITIC Securities, the average cost per share was less than 2 yuan, and by 2007, CITIC stock price was as high as 117.89 yuan.

YOUNGOR also stepped in the market rhythm. When the stock price was high in 2007, YOUNGOR sold 45 million 65 thousand and 600 shares of CITIC Securities and cash in 1 billion 651 million yuan.

Because of this, YOUNGOR's performance explode in that year, and investment income jumped from 530 million yuan in 2006 to 2 billion 750 million yuan in 2007.

After entering the investment field, YOUNGOR's net profit also fluctuated with the ups and downs of the stock market.

In the four years of 2006~2009, YOUNGOR's net profit rose from 770 million yuan in 2006 to 2 billion 480 million yuan in 2007. In 2008, the bear market slipped to 1 billion 580 million yuan and 2009 turned to 3 billion 260 million yuan in one fell swoop.

In the end of 2007, the US Business Week criticized YOUNGOR in name. "Business week" believes that the majority of listed companies' investment income based on stock investment accounts for the lion's share of the total profit. This is terrible. Once the stock price begins to fall, the company will have to write down these investment losses in the income statement, resulting in a decline in profits.

In turn, a slide in profits may trigger a drop in the share price of these companies, leading to a more rapid and deeper fall in the stock market.

In the bear market in 2008, with the collapse of the stock market, the performance of the company declined.

In response to queries and criticisms from all sides, YOUNGOR was unmoved.

A senior YOUNGOR official told reporters that business week's query was due to its ignorance of Chinese listed companies and China's securities market.

YOUNGOR's investment path has not declined because of the bear market.

On the contrary, according to an insider from YOUNGOR, it is precisely because of the sweetness of Li Rucheng's initial taste of capital market that investment in CITIC Securities and so on. In the bear market of 2008, Li Rucheng's willingness to give full play to the capital market was stronger.

Since it invested 200 million yuan in 2006 to set up a specialized investment company, Ningbo YOUNGOR Venture Capital Co., Ltd. and YOUNGOR Investment Co., Ltd., in October 2008, YOUNGOR once again introduced a professional investment team to carry out equity investment business, invested 60%, set up Shanghai Kai Shi Cci Capital Ltd, and hired it as the company's asset investment advisory body.

"One is to make a big investment business.

Second, from the perspective of operation, if a private company is set up inside the company, the cost of operation is too great, and it will be subject to various restrictions when investing in the two tier market. "

An insider from YOUNGOR told the first financial daily "financial intelligence" that Kay stone's investment business is not only looking for private placement and equity investment projects for YOUNGOR, but also engaging in two level market investment.

The investment team of Kai Shi investment is also called luxury. Chen Jiwu, the helmsman, has been rolling in the capital market for 16 years. He is the first generation of Chinese fund manager. His brilliant achievements in 600415.SH and 600269.SH are once among the best of the rich countries.

Li Rucheng's daughter, Li Qionghan, is a deputy general manager in Kay stone investment and directly participates in the company's investment decisions.

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Investment ability

The aura of investment in CITIC Securities and Bank of Ningbo (002142.SZ) still shrouded in YOUNGOR. From 2007 to 2009, most of YOUNGOR's investment income came from CITIC Securities, which accounted for more than 90% of all securities investment income, while YOUNGOR still seemed unable to invest in other projects.

When the market began to enter the downstream channel in 2007, YOUNGOR's investment in Haitong Securities (600837.SH) was a major mistake in its investment.

In November of that year, YOUNGOR invested 3 billion 588 million yuan to participate in the private placement of Haitong Securities, subscribed 100 million shares, but then the market fell all the way.

In 2008, for the investment of Haitong Securities, YOUNGOR was forced to make provision for impairment of 1 billion 133 million yuan.

After introducing Kay stone investment, YOUNGOR shifted its focus to private placement.

It is understood that, under the authorization of YOUNGOR, Kai Shi investment in 2009 has investigated 98 of the 263 companies that have announced the private placement plan and is more feasible. After the proposal was submitted to YOUNGOR, YOUNGOR finally participated in the 9 private listed companies' private placement investment and entered the top ten largest shareholders of the listed companies.

In addition to actively participating in private placement, YOUNGOR is also happy to fight new shares.

According to the annual report, the total investment income generated by the company's new shares purchased in 2008 and 2009 was 789 thousand and 600 yuan and 259 thousand and 100 yuan respectively.

However, in the operation of the two tier market, YOUNGOR made 46 pactions in 2007, all of which were short term pactions, and achieved an investment income of 10 million 330 thousand yuan. In other years, "speculation" was not positive. In 2008, it also lost 2 million 530 thousand yuan due to speculation.

In 2009, the stock market improved, but YOUNGOR only bought three stocks, including Sinopec (600028.SH), Shimao shares (600823.SH) and Shuanghui development (000895.SZ), and invested 157 million yuan.

This year's China Daily reported that the three stocks lost nearly 70 million yuan.

How should a company like YOUNGOR be valued?

Industry researchers generally use their main businesses to spin off valuations, and textile clothing and real estate are valued according to their performance forecasts, while equity investment is calculated by means of net assets.

According to CICC's forecast, YOUNGOR's clothing business has maintained steady growth this year. With the arrival of the fourth quarter peak season, the textile and garment business will maintain strong growth momentum, and the net profit for the whole year is expected to reach 600 million ~7 billion yuan.

According to the industry standard, the textile and garment business has 20 times earnings in 2010, and the value of YOUNGOR in the textile and garment business is 14 billion yuan.

And in the real estate business, YOUNGOR will deliver two large property projects in the fourth quarter. CICC expects that the annual performance of the company can reach the level of last year, and the net profit of the whole year is expected to exceed 1 billion 200 million yuan. According to the industry level, the value of the company's real estate plate is 15 billion yuan.

In addition, according to the three quarter data, the net assets of YOUNGOR investment sector has exceeded 6 billion yuan.

According to CICC's calculation, YOUNGOR's three business

"For a company like YOUNGOR, the market often thinks that it is not doing business properly, and it is more resistant to it."

Cheng Yuan, an analyst with Dongxing securities industry, said in an interview with our reporter that although at present, YOUNGOR is still successful in equity investment, and the company is committed to developing equity investment as an industry in the future. However, due to its low market acceptance, it often gives a discount on valuation.

Cheng Yuan also pointed out that the more reasonable way of valuing the investment sector is to calculate the contribution of the business to the company's share price according to the market capitalization of the financial assets divided by the market capitalization of the company. However, because of the low degree of recognition of the listed companies, the financial assets will often be discounted when they are included in the valuation.

Li Zhenning, chairman of Shanghai Ruixin investment, told this newspaper that during the rise of the stock market, the financial assets held by companies such as YOUNGOR would become a catalyst for the rise of their stock prices. But when the stock market falls, they will also have a reverse effect on them, that is, leverage.

This is indeed more obvious from YOUNGOR's share price trend. For example, in 2007, when the market fell from 6124 points to 1664 points in 2008, the market dropped by nearly 70%, and YOUNGOR fell more than the market.

Since the adjustment of A shares since last week, the Shanghai Composite Index has fallen by more than 7%, while YOUNGOR's decline has reached 9%.