Financial Real Estate Is In Deep Trouble, Youngor Shanshan Hongdou Is Forced To Return To Its Main Business

　　 Financial real estate is trapped in the cycle dilemma and forced to return to its main business!

　　 clothing The three samples of enterprise diversification, Youngor, Shanshan and Hongdou, need to calm down and think.

According to the financial report of last year, Youngor, with the dual industrial structure of "real economy+virtual economy", except for the weak growth in the clothing sector of the basic industry, the real estate business income entrusted with the performance responsibility by Youngor decreased by 46.94% over the same period, and the net profit of the financial investment sector decreased by 60.90% over the same period. In contrast, Shanshan and Hongdou are not so good. Although the former's financial investment business grew by 225% year on year, the lithium battery business invested by huge funds showed negative growth for the first time, with a year-on-year decrease of 8.31%; The real estate business of Red Bean was even worse than that of Youngor, down 48.42% year on year. Is it the time to deconstruct the diversification of garment enterprises?

In April this year, Youngor Li Rucheng, Chairman of the Board of Directors, said at the Group's economic work in the first quarter: "This year's economic situation is grim, and the heads of companies are ready to overcome difficulties." Youngor is facing the most difficult period in the history of the company.

At the peak of Youngor's development, no matter whether Li Rucheng admitted to copying Buffett's path or not, in action, Youngor is indeed like Berkshire Hathaway under Buffett: originally, it was a textile and clothing enterprise, but now it is mainly financial investment. However, just when Youngor was about to create a real Chinese version of Berkshire Hathaway, the dismal performance in 2011 made it return to the past.

What Li Rucheng is facing now is that enterprises are falling vertically from peak to trough. What he needs to do now is to try his best to change the sliding speed of "free fall", seize the effective time and space, and reorganize various industrial institutions. He proposed the solution: "Strictly control the real estate investment, timely adjust the investment scale, and concentrate resources on brand clothing investment." In other words, the troika that once dominated Youngor's real estate, financial investment and clothing business needs to make major structural adjustments and return to the clothing business again.

So, is Youngor a temporary emergency or a long-term strategic decision for the return of the clothing industry? This needs to ask first, what is the position of the two carriages of real estate and financial investment? In the main business of forcing Youngor to return, how big is the driving force of the two?

Real estate: the former "land king" was deeply embarrassed

The real estate business used to be the strongest profit support for Youngor. Before 2011, Youngor continued to increase its operating revenue in this business. In 2010, it reached a record of 6.85 billion yuan. However, with the real estate market entering a downturn, Youngor's real estate business plummeted in 2011, Li Rucheng's goal of "becoming one of the top 20 real estate companies in China in 2015" is getting further and further away. More importantly, Youngor has stepped onto a dangerous capital tightrope.

　 Short term liquidity tightness

According to the 2011 report of Youngor's Board of Directors, the expectations for this year's real estate business have not been lowered: the pre-sale revenue will reach 5 billion yuan, and the revenue will increase by more than 35%. "Whether Youngor's real estate is profitable and whether there are real risks depends on the original land acquisition cost, debt level, sales speed, and the current property price." Gu Haibo, senior economist and independent economist of Shanghai Changning Housing Development Bureau, told reporters that, in terms of short-term effects, debt level and sales speed are two core indicators to measure the risk of a real estate enterprise.

First look at Youngor's short-term debt level. It is mainly based on two financial indicators: first, the proportion of short-term interest bearing liabilities in cash to measure their short-term liquidity; The second is the net debt ratio, which measures its overall financial situation. However, Youngor continued to be poor in two indicators. Youngor's 3.23 billion cash is a short-term interest bearing liability of 17.46 billion. The risk is self-evident. What's more, according to the financial report, 770 million of this cash is "restricted monetary capital".

　　 again financing High debts

If the cash is not enough, we need to speed up the pre-sale of the property. However, the real estate income plummeted from 6.85 billion yuan in 2010 to 3.64 billion yuan in 2011. It is also sufficient to confirm the huge impact of real estate regulation on Youngor's real estate business, making it difficult to sell its house.

According to the financial report, taking the "Xixi Qingxue" project that has not been completed in 2011 but is being presold as an example (see Table 3), 9.83% has been presold by the end of 2010 and 15.38% by the end of 2011, which is equivalent to only 5.55% in 2011. Assuming that the regulation policy is not tight and loose, at this rate, the property will take 15.25 years in total to sell out, that is to say, the whole project will be sold for another 14.50 years even after completion in September 2012. More seriously, due to the downturn in the property market, there have been two sales promotions. According to a reporter's survey, the first round of discount was in the third quarter of last year, which was 22320 yuan/square meter based on 7.44% of the opening price of 30000 yuan/square meter. The second round of discount was on April 27 this year, and the price was lowered again to 22000 yuan/square meter, indicating that the sales situation of the property was worrying.

As for the difficulty of selling houses today, Zhang Jiaxi, the marketing director of Suzhou Youngor Real Estate Co., Ltd. in charge of the Jiangsu market, sighed on his microblog: "Real estate regulation is like a flag, but when the chessboard is full, the chessboard is limited, and eventually everyone suffocates." But the difficulty of selling houses, although limited by the impact of real estate regulation, Youngor must also reflect on its own problems.

Like Li Rucheng, he used "radical strategy" in the past and exerted great influence on the real estate market. Now he is reduced to Song Weiping, the boss of Greentown Holdings who was rescued by Hong Kong Jiulongcang Group. Recently, he introspected: "I have not predicted the length and depth of the disaster (the impact of regulation on it), and I need to review." Perhaps Li Rucheng's understanding of this sentence, Deeper than ordinary people. {page_break}

　 From the time dimension of 2007 to 2010, we can see how Youngor plans a road map of rapid progress:

In the first two years, Youngor played the role of Land King twice. In 2007, it won the land of "former Hangzhou Business College" with 1.476 billion yuan, becoming the land king of Hangzhou that year; In 2008, it won Ningbo "Huachen North No. 9 Plot" with 1.5 billion yuan, becoming the land king of Ningbo that year. After that, both cities were once involved in the rumor of retreat. After construction, the two Diwang buildings were named after Long Island Garden and Yuxi Lake respectively, but now they are facing the situation of policy regulation and discount promotion.

In 2010, Youngor won the Hangzhou "Shenhua Plot 53 and 56" at a total price of 2.42 billion yuan, with a premium rate of 153% and 155% respectively. According to the floor price of these two plots in that year, they are 17751 yuan/m2 and 18114 yuan/m2 respectively. Both set a new high in the floor price of Shenhua plate. This is Youngor's third effort in Hangzhou after the Yuxi West Lake project (the "former Hangzhou Business College" plot) and the Xixi Qingxue project (the "left behind" plot).

Unexpectedly, the "Shenhua plate", which is known as "Xujiahui (a famous CBD area in Shanghai)" in Hangzhou, is now trapped in a price cut circle. The opening price of "Zhongshun · Shangshangting" near the plot is 24000 yuan/square meter, and now the starting price is about 15000 yuan/square meter, which has still been "besieged" by old owners; The opening price of "Ryder Gentry Mansion" is from 23000 to 25000 yuan/square meter at the beginning, and now it starts at 15678 yuan/square meter; The "Saili Green City · Huiyuan", which is close to the quality of the first two buildings, has become the nearby "leader" at 11627 yuan/square meter. Youngor has been troubled by two consecutive price cuts in the plate. Even online rumors began to spread that Youngor had withdrawn two plots of land in the Shenhua plate. Although Shuihualiang, the general manager of Youngor Hangzhou, denied this, some consumers still worried about the way out for these two plots with uncertain future.

As for Youngor's "crazy behavior" in the real estate business, Zheng Yonggang, the chairman of the board of directors of Shanshan Holdings, who also came from Ningbo clothing industry, hit the nail on the head, He said: "At the beginning of the reform and opening up, everyone went to the processing industry to become a world factory, and then reached a certain economic aggregate. We must go to real estate. Ten years ago, if we did not do real estate, we would have been marginalized. Now it is silly to do real estate." It seems that Li Rucheng should carefully chew the words of his fellow countrymen.

According to the financial report, Youngor's real estate inventory includes development costs, products, land to be developed, etc., totaling 21.252 billion yuan, as well as investment in projects under construction. Even if the revenue from pre-sales reaches 5 billion yuan in the next year, it will be quite difficult to resist liquidity.

To resist liquidity risk, Youngor issued a short-term financing bond of 1.8 billion yuan on May 13. According to the purpose, 200 million yuan was used to supplement short-term working capital and 1.6 billion yuan was used to replace bank loans. According to the financial report, Youngor's short-term borrowings, including pledge, mortgage, guarantee, credit and discount of commercial acceptance bills, totaled 12.984 billion yuan. In this view, the "replacement" of only 1.8 billion yuan can only solve 13.86% of short-term liquidity. Of course, there are nearly 9.4 billion financial assets available for sale on Youngor's book, but if we really want to "cut the meat", it means that Li Rucheng will completely bid farewell to the "financial investment business", and one of the three carriages will be removed, but the report of the Board of Directors only states that "the scale of financial investment will be reduced", not abandon the business.

In the real estate business of Youngor, Li Rucheng put forward a series of "prudent" strategies this year. Not only did he not add new land reserves, he also proposed to speed up the sales of existing projects, strengthen the ability to collect payments, and strictly control costs to improve the ability to resist risks. However, Vanke, Gemdale and other real estate giants have focused on the deployment of these "internal control" actions as early as a year ago, and Youngor's risk control has just begun.

　　 Financial investment: the era of lying down and making money is gone forever

In fact, Youngor is not a failure in the financial investment business, and even has always been a successful model for the manufacturing industry to set foot in the financial field. In recent two years, the profit income of its financial investment business has accounted for nearly half of the whole group, and "stock speculation" has become Youngor's largest business. However, the systematic risk faced by the financial investment business was too great. In 2011, the Shanghai Stock Exchange Index fell by 30%, and the bear market market caused heavy damage to Youngor; In addition, its own financial investment strategy is one-way long and lacks hedging mechanism. When the market direction is misjudged, losses will not be recovered.

　 Increased systemic risk

Youngor started to set foot in the financial investment business in 1993, initially from the equity investment field, and then gradually into the securities, banking and other fields. In 1999, CITIC Securities' equity investment was a success of Youngor's unintentional initial investment in PE. At that time, the purchase cost was less than 2 yuan per share, and later the share price was as high as 117.89 yuan. In 2004, Youngor again participated in the private placement of Bank of Ningbo. After the split share structure reform in 2005, together with CITIC Securities, the total income exceeded 10 billion yuan. By 2006, Youngor had taken financial investment as an industry.

Analysing Youngor's previous successful experience, in addition to professional team trading, there is a reason that can not be ignored, which is the distortion of China's capital market: the new speculation rule, as long as the IPO or private placement can win the bid, "you can make money lying down"! Youngor's financial business focuses on new shares (equity investment) and quasi new shares (private placement), and accurately grasps the pulse of the market. {page_break}

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However, the systematic risk faced by financial investment business is too big, and the iron rule of "making new profits" is invalid. According to the latest statistics of Wind Information, as of June 1 this year, 96 of the 368 new shares listed since 2011 had fallen below the issue price on the first day, accounting for 26%; In the two-and-a-half years from the second half of 2009 when IPO was re opened to the end of 2011, China's A-share primary market issued 730 new shares, and 103 new shares were broken on the day of listing, accounting for 14.11%. Gone are the days of making money lying down!

In addition, the Shanghai Stock Exchange Index fell from 2900 at the beginning of 2011 to around 2100 at the end of 2011, shrinking by 30%. The bear market throughout the year also caused a heavy blow to Youngor. Although Youngor had foreseen the market trend in advance and made timely position reduction adjustments, the cumulative amount of private placement and PE investment during the year was 2.95 billion yuan, down 44.78% from 5.342 billion yuan in 2010. However, the stock is too large to pull out. The annual report shows that in 2011, Youngor's financial investment business realized a net profit of 487 million yuan, a sharp decrease of 758 million yuan, or 60.90%, compared with the investment income of 1.245 billion yuan last year.

It doesn't look too bad. Although it has shrunk by 60%, it is at least profitable. However, we can find that Youngor invested more than 10 billion yuan in financial business that year (more than many public funds), which is close to its net assets. Even according to the data of 487 million yuan published in Youngor's annual report, the yield is less than 5%. Compared with the financial expenses of 745 million yuan of interest due to loans, the lowest opportunity cost could not be recovered; In addition, from the perspective of optimizing enterprise management, stock speculation financial investment not only reduces the return on equity (ROE) of the company, but also amplifies the operating risk of the enterprise, which is definitely a loss making business.

　 One way operation without risk avoidance mechanism

In addition to the systemic risks caused by the bear market in 2011, more importantly, Youngor's own financial investment strategy was also the reason for the sharp decline in its performance last year. Because both PE business and private placement belong to one-way long operation, there is no hedging mechanism. When the market direction is misjudged, the loss will not be recovered.

According to Sun Wendi, a Haomai Fund analyst who has been tracking Kaishi Investment for a long time, Kaishi Investment helps Youngor manage more than 10 billion financial assets. With such a large scale, however, the investment is one-way. No matter PE business or private placement business, they must make money on the premise that the market is improving. In 2008 or last year, they will definitely lose.

People from Shanghai Qingyu Investment also confirmed this statement: "Kaishi's fixed increase is to watch the weather. If the market is bad, they can't stop loss in time like retail investors in the secondary market, and can only wait for the lifting of the ban. As long as the price after the lifting of the ban falls below the increase price, they can only recognize losses."

According to Youngor's 2011 annual report, it has successively invested 2.725 billion yuan in the private placement of 13 listed companies, including Guangbai Shares, Haizheng Pharmaceutical, Hailide, Xingrong Investment, Shengyi Technology, Jinggong Technology, Yuntianhua, Shengnong Development, Dongfang Zirconium Industry, Xinjiang Zhonghe, CICC Gold, Huaxin Cement and Shanmei International. As of the end of May this year, the restricted shares of the first seven companies had entered the circulation, and all the restricted shares held by Youngor fell below the entry price for additional issuance.

The reporter made statistics on the 13 shares that Youngor participated in the fixed increase in 2011. According to the current public data, Youngor did not sell the tradable shares that had been lifted. As of the end of the financial report period, there were 12 floating losses, with a total amount of 356 million.

　 Youngor's Bluff

If the additional issuance investment of previous years is included, Youngor held 33 stocks including SPDB and CITIC Securities at the end of the reporting period, with the initial investment cost of about 8.678 billion yuan, the market value of about 12.2 billion yuan at the beginning of 2011, and the book profit of about 3.5 billion yuan. However, the bear market in 2011 led to the decline of all these stocks, and the market value fell to less than 9.8 billion by the end of the year.

This is also on the premise of not counting the newly increased fixed investment of 2.725 billion yuan and the purchase of three stocks of Hangzhou Jiebai, the pioneer of the University of Technology and Air China in the secondary market. If the 2.9 billion yuan is added, the market value in 2011 should fall from 15.1 billion yuan to 9.8 billion yuan, with a floating loss of 5.3 billion yuan! It also shrank by 30%, even slightly losing the market.

In this case, according to the financial report of Youngor, "As of the end of the reporting period, the available for sale financial assets held by Youngor are based on the closing price at the end of the period × Based on the number of shares held, where does the market value of 9.421 billion yuan and the floating profit of 1.125 billion yuan come from? It turned out that Youngor used a very simple way to hide the truth. By playing a time lag, the above floating profit data was calculated by subtracting the cost of buying from the market value of 9.421 billion at the end of 2011 (some may be bought at the bottom in 2008); However, if only based on the performance of 2011, Youngor's financial assets will shrink by 5.3 billion in a single year! {page_break}

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In terms of PE investment, Youngor only carried out two transactions in 2011, namely, the IPO project of Hainan Natural Rubber Industry Group Co., Ltd., which was participated by 60.9539 million yuan (20 million shares of tradable shares with limited sales conditions). Hainan Rubber was successfully listed on the Shanghai Stock Exchange last year. Based on the closing price at the end of the period, the market value of the shares held by Youngor was 136 million.

In addition, an additional investment of 2.25 yuan was made to acquire 15 million shares of UnionPay Commerce Co., Ltd. After the equity transfer, Youngor invested 361 million yuan in total and held 5.05% of the shares of UnionPay Commerce Co., Ltd. Youngor Annual News said that this transaction comprehensively considered the business performance, market potential, resource scarcity and other factors, and recognized the future development space of the bank card professional service market.

When it comes to Youngor's financial investment business, I have to mention the brain trust team behind it. Youngor Group has a company specialized in financial investment business - Youngor Investment Co., Ltd., but behind it is a professional team - Shanghai Kaishi Investment Management Co., Ltd. (hereinafter referred to as Kaishi Investment), which is responsible for providing intellectual support for Youngor's private placement and PE investment.

So how do they cooperate? "They mainly track some listed companies, screen them, and provide us with investment suggestions in the form of reports, but the final decision is made by our decision-making committee here," a person from the board secretary office of Youngor told reporters.

　　 Long term capital occupation problem

Although we have a professional think tank of Kaishi Investment, people in the PE fund industry are not optimistic about Youngor's participation in PE investment. The main reason is that Youngor has not solved the problem of the relationship between the three major businesses of clothing, real estate and finance. Because both PE investment and private placement belong to long-term investment, and long-term occupation of the company's capital is likely to have an impact on the main business.

Taking the private placement of Bank of Ningbo participated by Youngor as an example, in order to raise funds, Youngor announced the financing plan at that time as follows: "Youngor plans to raise RMB 700 million from China Financial International Trust with 138 million shares held by SPDB as collateral, and the buyback period should not exceed 18 months." As a listed company, The general lock-in period of private equity funds is 7-10 years, which is too long for listed companies. Once encountering other better projects or cash problems in real estate and clothing business, Youngor will be difficult to ensure that it will not withdraw from other investments or terminate its continuous investment in an investment project. Once this behavior occurs, it will have a fatal impact.

　 Hard decision: return to the main clothing industry!

In view of the retrogression and severe situation of real estate and financial investment, the board of directors of Youngor had to make a major structural adjustment on the road of diversification for the first time, that is, strictly control the investment in real estate, timely adjust the investment scale, and concentrate resources to invest in brand clothing.

However, from the "2012 Outlook" of its board of directors, there are the following opinions on real estate and financial investment: for the former, it is believed that "real estate still has broad prospects for development"; For the latter, it is proposed that "strengthening risk control is the first element". It seems that Youngor is not willing to withdraw from real estate and financial investment and try to wait for the turning point of the policy and market. It is just that before the good news comes, he will refocus his attention on the clothing sector.

However, although Youngor has a revenue of 7.526 billion (including clothing and textile) in the clothing industry, and owns the whole industrial chain of the industry, the competition in the clothing industry is increasingly fierce, the cyclical shock is increasingly shortened, and foreign brands are encircled. Whether the goal of "achieving 20% growth by the end of 2012" proposed by Youngor can be achieved, It still depends on the specific strategic deployment and strategy change. In the end, the value of the return of the main business is nothing more than the report card one year later.

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