Mass Phil Fashion IPO Shadow Heavy 7 Subsidiaries 6 Loss

Female fashion leader from Shenzhen, Mass Phil fashion Limited by Share Ltd of Shenzhen (hereinafter referred to as "Mass Phil") is now at the most critical moment of IPO.

The prospectus shows that the project is listed on the SME Board of Shenzhen Stock Exchange. It intends to issue no more than 50 million shares, of which there are no more than 9 million shares of the old shares to be pferred. It intends to raise funds of 2 billion 380 million yuan, and the sponsor is Southwest Securities.

In a reading of its prospectus, times weekly reporter found that behind Mass Phil's brilliant performance, he kept high inventory, accounts receivable increased year by year, and asset liability ratio far exceeded peers.

Meanwhile, according to the data released in its prospectus, nearly 80% of the company's revenue came from the "Marisfrolg" brand in 2011~2013, and there was a risk of income dependence on a single brand.

What is more worrying is that 6 of Mass Phil's 6 wholly owned subsidiaries and 1 stock control companies have made net profit losses in 2013. Among them, a wholly owned subsidiary, Akant, is also facing the risk of being recovered from corporate income tax.

In addition, Mass Phil still has excessive use of dispatched workers, the proportion of labor dispatch workers in 2013 is 45.27%, far exceeding the 10% of the Interim Provisions on labor dispatch considered by the Ministry of human resources and social security.

Times weekly telephoned Mass Phil on the above issues, and his secretaries staff Li Jiangfan told the times weekly reporter that the company is in a quiet period and is not allowed to make a sound. It only told reporters that Mass Phil is complementing the semi annual report. It is expected to be disclosed on the SFC website next month. Mass Phil will be returned to normal audit by the "review of the suspension review".

High inventory of goods

Mass Phil is one of the leading enterprises in the high-end women's clothing industry in China. Its main business is the design, production and sale of high-end fashion products, which mainly include tops, trousers, coats and so on.

From the financial data, Mass Phil's total assets in 2011~2013 were 1 billion 474 million yuan, 1 billion 501 million yuan and 1 billion 892 million yuan respectively; operating income was 1 billion 403 million yuan, 1 billion 570 million yuan and 1 billion 849 million yuan respectively; net profit attributable to shareholders of the parent company was 543 million yuan, 510 million yuan and 562 million yuan respectively, showing an overall upward trend.

However, behind the seemingly beautiful performance of Mass Phil, it concealed risks, and its inventory increased year by year during the reporting period.

Prospectus shows that in 2011, 2012 and the end of 2013, Mass Phil's inventory book value was 414 million yuan, 465 million yuan, 504 million yuan, accounting for 28.09% of the total assets, 30.98% and 26.62%.

At the same time, Mass Phil's inventory turnover in 2011~2013 was 0.72, 0.68 and 0.71 respectively, declining year by year, far behind the average of 1.59, 1.36 and 1.19 in the same period.

Inventory turnover is the ratio of main business income to average inventory balance in a certain period of time.

It is used to reflect the turnover speed of inventory, that is, the liquidity of stock and whether the amount of stock fund is reasonable. Low inventory turnover indicates that the inventory management of enterprises is bad, the liquidity of inventory is weak and the amount of stock fund is unreasonable, and the utilization efficiency of inventory is low.

Although Mass Phil said that the overall growth trend of the company's inventory is compatible with the scale of the company's business, this is mainly determined by the direct selling mode and the strict discount policy of the company.

Inventory occupies more business capital, although the company has taken corresponding measures to strengthen inventory management, and according to the requirements of accounting standards, the provision of stock price depreciation has been put forward. But if the market environment changes dramatically or the competition intensifies, the company has the risk of unsustainable effective management and elimination of inventory, which may have adverse effects on the company's financial and operating performance.

As inventories rise year after year, Mass Phil's accounts receivable also increase year by year.

The financial data disclosed in the prospectus show that in 2011~2013, the book value of Mass Phil's accounts receivable was 80 million 830 thousand yuan, 122 million 50 thousand yuan and 153 million 60 thousand yuan respectively.

In the same period, the turnover rate of accounts receivable was 17.37, 13.75 and 11.86 respectively, showing a declining trend.

Behind the unbearable financial situation, it is the high asset liability ratio of the company.

From 2011 to 2013, Mass Phil's assets liabilities ratio was 85.32%, 45.35% and 30.78% respectively.

Despite declining year by year, it is still far above the average level of peers.

During the same period, the assets and liabilities ratio of wicknash, a listed company in the same industry, was only 18.71%, 12.63% and 6.37%.

Revenue depends on a single brand.

According to Mass Phil prospectus, the company's main business is high-end fashion design, production and sales.

Before 2012, the company had only two brands: "Marisfrolg" (Mass Phil dress) and "MASFER.SU" (Mass Phil Su dress).

"Marisfrolg" is a typical representative of Mass Phil brand. The core consumer group is the elite woman of 30-50 years old.

In 2013, "Marisfrolg" achieved a comprehensive market share of 3.66%.

According to the data released in its prospectus, the main business revenue of "Marisfrolg" in 2011~2013 was 1 billion 180 million yuan, 1 billion 283 million yuan and 1 billion 434 million yuan respectively, accounting for 85.70%, 83.05% and 78.52% of the total revenue respectively, although the proportion of the brand's revenue accounted for a downward trend overall, and by the end of 2013, its share was still at a high level of nearly 80%.

In 2013, the company began to implement the multi brand development strategy. The newly developed brands include "MARISFROLG" (Mass Phil Mens) and "ZhuChongYun" (Zhu Chongyun women's clothing), and bought the "AUM" (OEM women's wear) brand women's clothing. At present, they are buying the famous women's clothing brand "Krizia" in Italy.

Although the new brand's design style, brand positioning and target customers are complementary to the original two brands, the promotion of new brands needs more investment in the early stage. Whether the new product can be accepted by the market and become a new profit growth point of the new product is still uncertain.

Fashion design is a direct reflection of fashion, a starting point of business and a core part of value.

Under the influence of various media and large-scale marketing activities, Chinese women consumers are becoming more and more aware of fashion trends. The trend of women's clothing, especially high-end women's clothing market, is changing rapidly. With China's vast territory, the tastes and preferences of women consumers in different regions are different and changeable. All of these require and challenge the management and development of high-end women's clothing enterprises.

If the company can not accurately judge the market trend and market demand, its marketability and the company's performance will be adversely affected.

Mass Phil also admitted in the prospectus that women's clothing as a traditional industry has low barriers to entry for the full competition industry.

Although Mass Phil is positioned in the high-end women's clothing market, since its establishment, its main business income has continued to grow, and has formed a strong market competitiveness and a higher market position.

However, at the same time, there are quite a number of influential enterprises in the high-end women's clothing market in China. While competing with these enterprises, Mass Phil also has to face the impact and challenges of the first and second tier women's clothing brands.

"If the company can not maintain its advantages in the design level, product quality, service level, brand influence and marketing in the process of rapid development, it will make the company's business performance fluctuate and affect the future development of the company."

Mass Phil said.

In November 2011, it was reported by the media that some consumers in Shandong Zibo shopping center bought Mass Phil's dress in Shenzhen. The material was shoddy, and the ten thousand yuan Mass Phil women's wear was actually rabbit hair instead of chinchilla hair.

Mass Phil's "shoddy consumer fraud" incident has triggered a crisis of consumer confidence.

Shandong Zibo industrial and commercial bureau accepted the fraud in Mass Phil Shandong Zibo commercial building. Afterwards, Mass Phil and Shandong Zibo business mansion also admitted that the quality of clothes was not qualified.

However, Mass Phil did not mention this incident in the prospectus.

6 companies are in trouble.

Despite the fact that Mass Phil has disclosed a brilliant performance in the prospectus, 6 of the 6 wholly owned subsidiaries and 1 controlling subsidiaries of Mass Phil have been negative in 2013.

Prospectus shows that the end of 2013, Akant fashion year net assets loss of 7 million 187 thousand and 100 yuan, to achieve annual net profit of -868.71 million.

Not only is Akant's fashion, but among the 7 subsidiary companies mentioned by Mass Phil, Mass Phil, a wholly owned subsidiary in Macao (Macao), has achieved a net profit of 5 million 900 thousand and 400 yuan in 2013, except for other reasons.

Huizhou Yi Du industry achieved an annual net profit of -677.54 million yuan in 2013; Huizhou Ming Jia Hao industry achieved a net profit of -846.06 million in 2013; Mass Phil (Korea) in South Korea's Seoul lost 1 million 661 thousand and 500 yuan in 2013 net profit; Mass Phil Singapore lost 348 thousand and 600 yuan in 2013, and Mass Phil M lost 276 thousand and 700 yuan in 2013.

In addition, Akant Shenzhen Fashion Co., Ltd. (hereinafter referred to as "Akant fashion") is also facing the risk of being recovered from corporate income tax.

Akant fashion was founded in March 9, 2006 and was established as a foreign invested enterprise. Its business scope is wholesale and retail of garment production, clothing, garment fabrics and accessories.

Mass Phil's controlling shareholder invested 100 thousand yuan in Shenzhen's kindness, accounting for 10% of his stake, and the real lottery invested 872 thousand yuan in Hong Kong dollars, occupying 90% of the registered capital.

In March 6, 2007, the notice issued by the Shenzhen State Administration of Taxation on reduction and exemption of tax was issued (deep tax relief No. [2007]0048). Akant enjoyed the preferential tax policy of two exemption, three and half of the income tax for foreign invested enterprises at that time, namely, tax exemption in 2006 and 2007, and enterprise income tax in 2008, 2009 and 2010.

According to the provisions of the Shenzhen Municipal People's Government on Several Issues concerning the tax policy of the Shenzhen Special Economic Zone (Shenzhen government [1988]232), the newly established productive enterprises in the Shenzhen Special Economic Zone, with a period of 10 years or more, can enjoy two exemption and three half of the enterprise income tax concessions.

Akant fashion became a domestic enterprise in December 5, 2012. Due to the fact that Akant's fashion management period has not yet expired for 10 years at the time of change, according to the relevant laws and regulations, Akant's fashion is likely to be recovered because of the less tax paid by the above preferential treatment.