YOUNGOR'S Investment Drifting

One family does

YOUNGOR group is an alternative to listed companies. Its investment income of 1 billion 625 million yuan in 2009 accounted for 49.8% of net profit.

But in the twinkling of an eye, nearly 3 billion yuan of assets disappeared.

According to the 2010 semi annual report, the company's assets fell by nearly 20%, not just net assets, operating profit, gross profit, net profit and other indicators also fell, plummeting 57%, 48% and 59% respectively.

Behind the ups and downs, YOUNGOR is the main reason for its deviation from industry and investing in stocks, along with the ups and downs of the stock market. Even this drifting has threatened the development of the main business.

Playing capital addiction

Among the nearly 1000 listed companies with foreign investment behavior, China's banking, industrial and commercial bank, CITIC Securities, Southwest Securities and other financial institutions and PetroChina, Changjiang Electric Power and other giant central enterprises are the main force.

The so-called "foreign investment" of other players is only "spare money" to "fry" and "fight new", and occasionally participate in private placement.

But a non-financial listed company like YOUNGOR is so keen on foreign investment that it makes itself a shining example.

Let's take a look at how YOUNGOR changed from player to professional speculator.

Ningbo YOUNGOR group is a famous brand in the field of shirts and suits.

Gross profit margins have remained above 30% for many years.

Compared with the many "Chinese made" enterprises that are "more profitable than razors" all over the southeast coast, it is profitable.

YOUNGOR has made the first pot of gold and its strong "local advantages" made by garment business, becoming the main player in Ningbo's real estate industry.

By 2007, the income of clothing and non clothing business was 4 billion 660 million yuan and 2 billion 180 million yuan respectively.

YOUNGOR also used surplus funds to sneak into financial institutions such as CITIC Securities and Bank of Ningbo. The two companies listed on YOUNGOR have tasted great benefits.

After cash in 1 billion, the market value of YOUNGOR's holdings in CITIC Securities is still as high as 12 billion 370 million yuan! In November 2007, YOUNGOR invested 3 billion 588 million yuan to subscribe for 100 million shares of Haitong Securities.

In 2007, YOUNGOR bought and sold shares in the two tier market about 150 times. Investment income jumped from 530 million yuan in 2006 to 2 billion 750 million yuan in 2007, which is equivalent to 111% of net profit.

YOUNGOR gained a lot of investment income. In addition to its abundant capital and the reasons for the A share market, the new accounting standards implemented in January 1, 2007 are decisive factors.

The biggest beneficiaries of the new accounting standards are listed companies such as YOUNGOR and UFIDA holding large financial assets or investment assets.

For example, in 2003, UF subscribed 50 million shares of Beijing bank for 85 million yuan. Under the old guidelines, the investment can only be included in assets at 50 million yuan.

According to the new accounting standards, the shares of the above bank of Beijing will be accounted for at 1 billion 122 million yuan (whichever is the closing price of the last trading day in 2007), UFIDA's net assets increased by more than 1 billion yuan, and the net profit of UFIDA in 2006 is only 173 million yuan. The investment of Beijing bank is more than the sum of its four or five year profits. Similarly, there are also Jilin Ao Dong, Liaoning Cheng Da, year old Bao thermoelectric, nitidine, new hope, etc.

However, the investment income of these companies is much more than that of YOUNGOR.

But there is laughter when there is crying.

In 2008, the stock market adjustment, especially the Haitong Securities and Jinma shares continued to decline, YOUNGOR had to make provision for more than 1 billion 300 million yuan of assets impairment.

The annual net income and net assets decreased by 36.05% and 42.73% respectively.

In the four years of 2006~2009, YOUNGOR's net profit has gone up and down, rising from 770 million yuan in 2006 to 2 billion 480 million yuan in 2007, slipping to 1 billion 580 million yuan in 2008, and turning to 3 billion 260 million yuan in 2009.

47 thousand garment workers create a net profit of less than 450 million yuan a year, while more than 20 listed companies will win 1 billion 350 million yuan if the whole line is closed.

But in the past six months, YOUNGOR's life has not been easy.

According to the 2010 China Daily report, the company's assets declined again, or nearly 20%.

The assets of YOUNGOR shareholders nearly 3 billion yuan "disappeared" because the "fair value of the sale of financial assets has been reduced".

Not only net assets, operating profit, gross profit, net profit and other indicators also fell, plummeting 57%, 48% and 59%, respectively. Under such unfavorable circumstances, YOUNGOR's anti market expansion and risk taking took place.

By the end of June 2010, net cash flows from operating activities had decreased by 91.84% compared with the end of 2009.

Investment and real estate wandering in the wind

No one can predict that China's Shanghai Composite Index will be 2000 or 8000 in 2011, and YOUNGOR's investment income will not be predicted.

The real estate development that occupies a huge proportion in the group business is also uncertain, so the performance of YOUNGOR has been ups and downs.

In 1999, YOUNGOR invested in CITIC Securities at a cost of 320 million yuan. After the lifting of the ban, it was cash in excess of 6 billion yuan.

By the end of 2009, there were still 110 million shares.

The investment in Haitong Securities is not so lucky.

In 2008, YOUNGOR was forced to make an allowance of 1 billion 133 million yuan against Haitong's investment.

By the end of 2009, YOUNGOR had only 10 million shares of Haitong Securities left behind, and only 332 million yuan had been lost.

The myth of successful investment in CITIC Securities is no longer possible.

Though a fall, the YOUNGOR, who had a big fortune, did not retreat.

In 2009, the net income of YOUNGOR from "financial assets" was 1 billion 850 million yuan, of which 1 billion 723 million yuan came from CITIC Securities and Haitong Securities.

From 2009 to the first six months of 2010, YOUNGOR invested about 4000000000 yuan to participate in the Shanghai Pudong Development (1 billion 759 million yuan subscribed 106 million shares), Suning Appliance invested 688 million yuan to subscribe 40 million shares, Futian Automobile (253 million yuan subscribed 14 million shares), ZOOMLION (561 million yuan subscribed 30 million shares) and other listed company's private placement, and also invested in Shanxi's sunshine coking and other 8 projects.

The stock market value of more than 20 listed companies exceeded 13 billion 500 million yuan, and the net assets of the listed companies increased by 52.62% over the same period last year.

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.

By the end of 2009, the total area of YOUNGOR's 15 construction projects was 2 million 246 thousand square meters, and the investment has been completed by 8 billion 770 million yuan.

The completion of these projects will cost more than 8 billion yuan, and funds will be under great pressure in the next two years.

Only 612 million yuan can be sold in hand.

In addition, YOUNGOR has 18 "land to be developed", that is, land reserve.

The total area of these 18 sites is 2 million 626 thousand square meters (construction surface), which costs 6 billion 960 million yuan and the average floor cost is 2650 yuan.

6 of the total 625 thousand square meters of land were built in 2009, but the floor cost is more than 10000 yuan.

Large quantity, large area and high price data indicate that YOUNGOR is quite aggressive in real estate business.

The core competitiveness of YOUNGOR's investment lies in the financial strength and popularity of enterprises. The equity financing business of CITIC Securities, Haitong Securities, Ningbo bank, Suning Appliance, ZOOMLION and other large companies will come to the market.

Although getting the "first hand", it does not mean that we can earn no money.

By the end of 2010 6, most of the 16 listed companies held by YOUNGOR were mainly engaged in private placement, but the market value of the 16 listed companies had shrunk by 1 billion 980 million yuan in the past half year.

Of course, the risk of losing money is much smaller than that of investors.

As for stocks in the two tier market, Li Rucheng's team that hired heavily is not brilliant, but he made several hands in the last two years.

Today, YOUNGOR has little to speculate in stocks, and only 3 in the first half of 2010.

It is embarrassing that the whole game loses: Sinopec loses 57 million 370 thousand yuan, Shimao shares lose 14 million 500 thousand yuan, Shuanghui development deficit 710 thousand yuan.

"YOUNGOR style bubble" is at a loss.

The misleading of "YOUNGOR bubble" is not just the ups and down of the enterprise's book assets, but more importantly, if the phenomenon spreads, the capital market "mutual flattering bubble" and the original logic of enterprise valuation will encounter challenges, which will eventually impact the colleagues who are addicted to the real industry and pursue a century old shop.

In the non-financial listed companies of A shares, the phenomenon that equity investment income is greater than that of main business income is rare.

For example, UFIDA invested in Beijing bank and Jilin AAO investment GF Securities.

For a long time and large-scale financial investment such as YOUNGOR, I am afraid there are only a handful of Fosun Pharmaceutical, Volkswagen, Waigaoqiao and so on.

However, if the cash flow of listed companies is abundant, undistributed profits or too much funds are raised, the external financial investment may grow rapidly.

GEM companies have so much fund raising that their main businesses can not accommodate them. Under strict supervision, they only enjoy "negative interest" on bank accounts.

Allowing these funds to participate in private placement is a win-win option.

But first of all, we need to reflect on the "YOUNGOR phenomenon" and take measures as soon as possible, otherwise it is likely to cause two problems.

The first is to blow up asset bubbles.

If the listed companies take part in the private placement, the 1000 families who are short of money will raise 100 billion yuan from the other 1000.

If the investor is able to increase the net profit of 1 yuan for every 1 yuan, the investment of 100 billion yuan will increase the total market value of the investor by 2 trillion yuan according to the 20 times earnings ratio.

Assuming that the investors share 1/10 yuan (200 billion yuan) of 2 trillion yuan, the market value of these listed companies has increased by 4 trillion yuan.

The listed companies who have tasted the sweetness have invested 100 billion yuan in each other for second years, while the price earnings ratio of the hot capital market is 30 times. The total market value of the A shares will increase by 12 trillion yuan! The real benefit of the 200 billion yuan investment for two years is only 200 billion yuan, and the total market value of the A shares will increase by 18 trillion yuan.

Second, investors are not at all aware of the valuation of listed companies.

Volatile financial assets can lead to fluctuating performance.

Suppose someone buys CITIC Securities with 500 thousand yuan. When the face value reaches 1 million yuan, it will be nice to seek a mortgage loan and melt into 700 thousand yuan.

No one will give a 4 times "market rate" and the value of the account is 2 million yuan.

No one will give 20 times the "price earnings ratio" and the value of the account is 10 million yuan.

So, what is the basis for YOUNGOR to trade on the market at 20 times price earnings ratio? 24 billion yuan in financial assets looks very beautiful, but it is normal to experience a 1/3 shrinkage in the market within a year.

The net assets of listed companies will suddenly decrease by 8 billion yuan, and how much shirts will be sold to make up for this deficit (similar things have happened in YOUNGOR)? Therefore, the valuation of the mature market for financial listed companies is very low.

Goldman Sachs and Merrill Lynch's top investment banks also gained seven or eight times earnings.

GE is always careful to control revenues in the financial sector below 40% of total revenue so as not to be classified as financial companies by the market.

The recent subprime crisis has once again proved that this valuation is correct.

From a micro perspective, YOUNGOR's strategy of driving the three carriages with textile, clothing, real estate and equity investment is understandable.

It is commendable that every business has done well.

The cycle of textile and garment industry is not as obvious as that of the real estate industry. When RMB appreciation and clothing export are blocked, asset prices (including equity and real estate) will increase, and the complementarity of these three businesses is established.

But on the other hand, YOUNGOR's "mixed industry" is not conducive to building itself into a "century old shop".

The so-called "benefit from one country, without chaos" means that benefits should flow out of only one hole to give everyone the right direction.

If the future YOUNGOR operators invest in the hard work of the shirt business, but earn hundreds of millions of dollars, and catch up with a big bull market, they can get more than ten billion yuan of investment income. Who will build the clothing brand?

To change the situation, YOUNGOR has two options.

First, the three major businesses of service, real estate and equity investment are divided into three independent listed companies.

In the developed capital market, it is only a matter of effort, and in the "shell" so expensive China, Li Rucheng only bought a shell at a high price, and the other was emulating Microsoft's big dividends.

In those days, when Microsoft was in the period of high speed growth and overcharged accounts, it bought $about 30000000000 by buying stocks and dividends on a large scale.

Microsoft's shareholders get money, like financial stocks that can buy Goldman Sachs, planes that can buy Boeing stock, and energy that can buy ExxonMobil...

Or choose different styles of funds, do not bother to drive Microsoft, and Gates did not have this interest!

The root may be in our view of wealth.

The extra money needed for personal life can be called wealth, which is actually the power to control resources.

An entrepreneur who can mobilize 10 billion yuan means that he has the right to choose the money to repair the airport, dock or build an automobile factory.

Gates and Buffett have looked down on this power, preferring to let it go out and exercise control over them through charitable organizations.

Li Rucheng still has a great distance from that realm, not only will he not let his fortune dominate, but also exercise power for YOUNGOR's shareholders.

Meng Zi said: "the sage has made it clear that it is so clear that it has made people clear now." the three industries have prevented YOUNGOR from becoming a "non sell" product for investors. Even if the annual report can be produced annually, investors will only be a "migratory bird" who has been patronizing in the spring. YOUNGOR is determined to make its "clear" day seem to be out of date, and the industrial environment is getting worse.