AOKANG IPO Doubts: Family Wealth VS Group Loss

The growth rate of AOKANG's shares declined in 2010.

In terms of solvency, AOKANG shares' liquidity ratio and quick ratio are significantly lower than those of the same industry. In the past 4 years, the number of AOKANG's self produced leather shoes has basically remained unchanged, and the utilization rate of their own capacity has never been saturated.

All sorts of "not good" can not help people wonder why AOKANG shoes industry can still smoothly pass the audit in such a weak environment. How many listed companies are there in the A share market? What are the interests of investors in the listing of an enterprise?

In the memory of investors, the A share market focuses on

The AOKANG shoe Limited by Share Ltd of Zhejiang went through the main board of Shanghai Stock Exchange in September 23rd. It plans to issue no more than 81 million shares and raise 1 billion 22 million yuan.

It is also the second time that Guoxin Securities, a sponsor of AOKANG shares, joined hands with the related party Hongling venture capital to launch the trial committee.

Although "pass through" successfully, but this is known as the first Chinese men's shoes.

Low gross margin VS "hi tech enterprise"

According to the prospectus, AOKANG shoes industry was founded in November 12, 2001, with a registered capital of 70 million yuan. It is a research and development, production, distribution and retail business of leather shoes and leather products, and involved in commercial real estate, biological products, etc.

In 2010, "AOKANG" is the only second brand of leather shoes in the world, which is only inferior to "San Da". Its market share is 5.7%.

However, although the company is leading the industry, the gross profit margin of AOKANG products is very low.

Prospectus shows that in 2008-2010 years, the gross profit margin of AOKANG shares was only below 30%, but last year, other shoe making companies including BELLE international, Daphne international, and Ying Jin group reached a gross profit margin of 60%, almost double the AOKANG shares.

AOKANG shares said that the company's sales channels are mainly dealers, and some profits need to be sold to dealers, so the gross profit margin is low.

And the same industry listed companies mostly use direct mode, so the gross profit rate is higher.

Insiders said that the reply of AOKANG shares was not satisfactory.

AOKANG shoe industry, which has such low gross margin, is still a "high-tech enterprise" and enjoys preferential tax rates of 15% of high-tech enterprises.

Some media questioned that according to the provisions on the management of new and high technology enterprises, the high and new technology enterprises must satisfy six conditions at the same time.

The products (services) of high and new enterprises belong to the scope specified in the new and high technology field supported by the state.

The key areas supported by the state are divided into eight categories: electronic information technology, biological and new medicine technology, aerospace technology, new material technology, high tech service industry, new energy and energy saving technology, resources and environmental technology, and high and new technology pformation of traditional industries.

But compared with these regulations, AOKANG shoe industry does not have a link with leather shoes and leather products that AOKANG shares are engaged in.

In the same field, Saturday is not a high-tech enterprise with higher profitability. Its corporate income tax rate is 25%.

In addition, the income tax rates of shoe companies such as BELLE international and Daphne international listed in Hongkong, China do not enjoy the preferential tax rate of 15% of high-tech enterprises.

In addition, hi-tech enterprises must have "more than 30% of the total number of scientific and technological personnel with a college degree or above, including R & D personnel accounting for more than 10% of the total number of employees in that year".

The prospectus of AOKANG shares shows that as of June 30, 2011, the number of R & D personnel, namely technical personnel, was 242, accounting for 3.21% of the total number of companies, which is far from the 10% required by the high-tech enterprises; and in terms of academic qualifications, the number of people with bachelor's degree or above in AOKANG shares is only 250, accounting for 3.32%.

It is noteworthy that the company did not disclose the number of "specialist" or above, but disclosed the number of "specialist" or "below" education.

In fact, AOKANG stock prospectus stated that the proportion of R & D expenses in operating revenue in the first half of 2008 -2011 was 0.16%, 0.79%, 1.05% and 0.88% respectively.

Since the operating income of AOKANG shares has exceeded 1 billion yuan since 2008, the proportion of R & D expenses should be no less than 3% according to the rules of high and new enterprises.

Family wealth VS group loss

AOKANG shoe's prospectus also shows that if successful listing, AOKANG shoe industry will invest the main part of the fund-raising funds to build direct stores.

The company will open 348 outlets in the one or two and three tier cities in the future, with a total investment of 876 million yuan.

But judging from past performance, AOKANG shoes industry is not strong enough to control direct stores, so that the company's revenues are increasingly relying on distributors.

The data show that the revenue contributed by the distributor to AOKANG shoe industry is on a rising trend. The proportion of distributors in the three years of the above 66.88% years is 66.88%, 65.85%, 58.33% and 36.85%, respectively. As a result, the proportion of direct channel revenue of AOKANG footwear industry is 21.44%, 20.17%, 21.75%, 28.67%.

Niu Haipeng, a professor of business school at Renmin University of China, recently pointed out that the reason why AOKANG shoe industry wants to expand its direct stores is to encirclement in the name of expanding shop.

Poor operating ability did not affect AOKANG's big shareholder family.

At the early stage of establishment, AOKANG Holdings Limited (AOKANG group) held a shareholding ratio of 50%, while Wang Zhentao and his younger brother Wang Jinquan held 30% and 10% respectively, while Miu Yanshu held 5% and Pan Changzhong held 5%.

When the AOKANG shoe industry was established, its total capital stock amounted to 70 million shares.

In the following 10 years, AOKANG shoes industry made 3 capital increase and 1 equity pfer.

After several changes in the registered capital, the proportion of AOKANG's investment is 63.83%, because Wang Zhentao, the second largest shareholder of AOKANG shoe industry, owns 90% of AOKANG's investment, and Wang Zhentao directly owns 18.7% of the AOKANG footwear industry. It has a direct and indirect share of the 76.15% share of the AOKANG footwear industry (243 million 664 thousand and 770 shares), and Wang Zhentao is the actual controller of the AOKANG footwear industry.

In addition to the above two shareholders, the shareholders of AOKANG footwear industry also include 3 natural persons and Hongling venture capital, Chang Ting venture capital two institutional investors.

It is noteworthy that the 3 natural persons Wang Jinquan, Miu Yanshu and Pan Changzhong are Wang Zhentao's younger brother, Wang Zhentao's uncle and Wang Zhentao's brother-in-law, with a total shareholding ratio of 12.47%.

That is to say, the Wang Zhentao family altogether holds 88.62% of AOKANG shoe industry, and the number of shares is 283 million 564 thousand and 770 shares.

Judging from the number and operation of the AOKANG shoe industry, the issue price is expected to exceed 25 yuan / share, and the Wang Zhentao family will be worth 8 billion yuan.

From the point of view of disclosure, the actual controller of AOKANG footwear industry Wang Zhentao also holds 16 other enterprises, including 6 enterprises whose main business is real estate development and operation, and the Yongjia Ruifeng microfinance Limited by Share Ltd (small loan company).

In 2010, the company that realized the highest net profit was AOKANG group. Its main business was investment, creating a net profit of 104 million yuan; however, it lost 7 million yuan in the first half of 2011, while the small loan company whose net profit was only 16 million yuan in 2010 has achieved net profit of 14 million yuan in the first half of 2011, becoming the most profitable company of Wang Zhentao, whose registered capital is 200 million yuan.

In fact, the main business can not earn much money.

Just as people questioned how such a listed company is enough to give investors a satisfactory explanation, the achievements of AOKANG shoe industry in the past 3 years are worrying again.

The growth rate of AOKANG's shares declined in 2010.

In 2009, business revenue increased by 54.51% compared with 2008. In 2010, it increased by only 32.64% compared with 2009. In terms of net profit, 2009 increased by 363.04% compared with 2008, while 2010 increased by only 39.75% compared with that in 2008.

In terms of solvency, AOKANG shares' liquidity ratio and quick ratio were significantly lower than those of Listed Companies in the same industry. In 2010, the asset liability ratio was 46.58%, which was also significantly higher than that of the same industry listed companies.

The turnover rate of accounts receivable in 2010 was 4.12, which was also significantly lower than that of listed companies except Saturday.

In addition, for the self produced leather shoes, AOKANG shoes industry is quite popular in the prospectus, and thinks that it contributes a lot to the profitability of the company.

But in the past 4 years, the number of AOKANG's own shoes has basically remained unchanged. The annual output of AOKANG shoes is 7 million 489 thousand and 500 pairs, 6 million 894 thousand and 800 pairs, 7 million 813 thousand and 100 pairs, and has never been more than 8 million pairs. The utilization rate of its own capacity is 83.47%, 83.55%, 75.77% and 84.4% in the first three years of the year, and has never been saturated in the past 2008-2010 years.

All sorts of "not good" can not help people wonder why AOKANG shoes industry can still smoothly pass the audit in such a weak environment. How many listed companies are there in the A share market? What is the interest of investors in the listing of an enterprise?