YOUNGOR "Broken Arm To Stabilize" Divestiture Investment Business, Said The Return To The Main Business But Huge Sums Of Property.

Since April this year, YOUNGOR has frequently repurchased capital markets. In December 3rd, YOUNGOR (600177.SH) announced that as of November 30th, the company had repurchased 219 million shares through centralized bidding transactions, accounting for 4.36% of the total share capital of the company, and the lowest price was 6.11 yuan. The highest price was 6.79 yuan, with a total payment of 1 billion 395 million yuan.

Nearly 1 billion 400 million yuan of the amount of repurchase has attracted market attention, and even more striking is that at the beginning of the year, the high-profile YOUNGOR announced that it was returning to the main garment industry, but now it is raising the property market. According to the China Index Research Institute, in 2019 1-10, the total amount of YOUNGOR was 6 billion 800 million yuan, far exceeding 3 billion 418 million yuan in 2018, ranking ninety-eighth in China's real estate enterprises.

When the market is sensitive, YOUNGOR's return to its main business has always aroused heated debate.

　　 Overweight property market, back to the main industry questioned

As the first brand of Chinese clothing, YOUNGOR was founded in 1979, because of its good performance in investment business. Since its entry into the capital market in 1999, YOUNGOR has invested in CITIC Securities, Guang Bo shares and Bank of Ningbo. Its investment income has been over 20 billion, and has gradually built up an industrial pattern of diversified clothing, real estate and investment.

After 20 years in the capital market, YOUNGOR announced that it would divest its investment business to its main business. In April 30th this year, YOUNGOR announced that in order to achieve the goal of maximizing the value of the company, it is planning to make a major adjustment to the development strategy. In the future, it will further focus on the development of the main garment industry. Besides strategic investment and continuing investment commitments, the company will no longer carry out the financial equity investment in the non principal sectors, and choose to deal with existing financial equity investment projects.

In October 23rd, Li Rucheng, chairman of YOUNGOR, said at the 40th anniversary celebration of the company that YOUNGOR's new dream was to build a century old enterprise and build a fashion group. At present, however, the net profit of YOUNGOR's three major business segments is the least. YOUNGOR's three quarterly report in 2019 showed that in the first three quarters, the net profit of clothing was 775 million yuan, while the net profit of investment was 1 billion 392 million yuan, about two times of the main business income, and the net profit of real estate was 910 million yuan.

YOUNGOR, which has always relied on the three carriages of clothing, real estate and financial investment, has to return to the main garment industry and divest the investment business with the highest profit. After divest the investment business, can YOUNGOR maintain its good performance? The blue whale financial reporter has repeatedly called YOUNGOR on the issue, and has not received a reply until the deadline.

While expressing doubts, the blue whale correspondent found that YOUNGOR's business behavior was not consistent with its strategic focus. Three quarterly report shows that as of the end of the reporting period, YOUNGOR has 7 land reserves. Compared with the beginning of the year, new Changfeng block, Jiangnan highway lots and five Jiangkou blocks were added to Ningbo. During the reporting period, YOUNGOR real estate completed the delivery of several projects, operating income of 2 billion 634 million yuan, an increase of 173.23% over the same period, accounting for 38% of the total revenue of 6 billion 868 million yuan.

Claiming to return to the main garment industry, but increasing investment in real estate business, YOUNGOR does not seem to be determined to return to the main industry.

In fact, this is not the first time YOUNGOR has announced its return to its main business. As early as in 2012, Li Ru's achievements have publicly stated that the company will strictly control the investment in real estate, adjust the scale of investment and return to the main garment industry. In 2016, Li Rucheng announced in a high-profile way that he rebuilt a YOUNGOR in five years. In 2018, Li Rucheng announced again to the main industry again in a high-profile manner. "The United States has Nike, Germany has ADI, YOUNGOR also has the strength to become such a group." Repeatedly announced that the return of the main business, but no end, the operation is bold and resolute, or is it "old dream review"?

　　 Chopping investment = breaking arm to seek stability?

At the time of the 40th anniversary startup of the company, YOUNGOR announced the gathering of the main garment industry and the withdrawal of equity investment. Is it really necessary to reinventing a clothing empire or is there something else?

Guo Jin securities analyst told reporters that YOUNGOR recently massive disposal of investment projects, an important reason for divestiture business is the implementation of new accounting standards. Under the old accounting standards, listed companies often classify equity investments into "ready to sell financial assets". The rise and fall of stock prices are included in other comprehensive income and are not attributable to profit items. Even if the shares are substantially depleted, it will not affect profits.

Since January 1, 2019, YOUNGOR has implemented the new accounting standards, designated financial assets other than long-term equity investments as "financial assets measured in fair value and whose changes are included in other comprehensive income". Its value fluctuations and disposal do not affect the current profits and losses. Only the dividend income can be included in the current investment income, thereby affecting the current profits and losses.

That is to say, the stock price fluctuation of YOUNGOR's stock will affect the profit of every profit. If the share price has risen sharply, the company's performance has gone up sharply and vice versa. In this regard, the company can only passively accept, there is a greater risk. Public information shows that by the end of 2019 3, YOUNGOR had invested 39 projects, with an investment cost of 30 billion 400 million yuan and a final face value of 32 billion yuan.

It can be seen that the adjustment of accounting standards has made YOUNGOR firmly determined to divestiture its investment business. In May this year, Li Rucheng admitted at the shareholders' meeting held in May this year, "in recent years, there are many variables in the investment business. There are two main reasons: first, the restriction on equity investment withdrawal by the securities and Futures Commission, and the more difficult it is to withdraw. This is a great pressure to us. Two, the change of accounting standards is too large for YOUNGOR to bear the huge fluctuation of share price."

Stripping the investment business back to the main business, YOUNGOR seems to have planned its own risk response strategy. But in the background of the overall decline of the garment industry, how YOUNGOR will manage the main garment industry will also face enormous challenges.

　 Return to main business: action and planning need to be matched

At the 40th anniversary celebration of the company's establishment, YOUNGOR announced the goal of becoming a world-class fashion group, and said that this goal should be completed in three steps in the next 30 years. The first step is to develop 5-10 private brands, the second step to buy 5-10 international brands, and third steps to build a platform for online and offline integration to create a fashion empire.

Since 2019, YOUNGOR has indeed increased its investment in clothing business. In the first three quarters, the R & D cost of the company was 77 million 941 thousand yuan, an increase of 347.90% over the same period last year. However, the real estate investment sector is still the main contributor to net profit, so YOUNGOR is slowly adjusting its strategy.

From past experience, YOUNGOR has repeatedly announced its return to the main garment industry, but the actual action did not match the strategic planning. In 2016, Li Chengru put forward another five years to invest 10 billion yuan to create thousands of annual turnover of more than ten million yuan of self run stores. However, the blue whale reporters looked at the financial data and found that YOUNGOR's "thousand shops and tens of millions" plan did not roll out in large scale.

According to the financial report, in 2016, the operating cost of YOUNGOR was 8 billion 680 million yuan; by 2018, it had dropped to 4 billion 709 million yuan, less than half of the cost in 2010; in terms of operating expenses, 2016, 2017 to 2018 were 1 billion 787 million yuan, 2 billion 21 million yuan, 2 billion 200 million yuan, and there was no obvious increase; besides, the management cost of YOUNGOR was declining. In 2016, the management cost of the company was 821 million yuan, and it was 657 million yuan and 693 million yuan in 2017 and 2018 respectively.

Will YOUNGOR's "focus on clothing industry" become a weak slogan as before? Blue whale journalists will continue to pay attention.