"Competition In The Same Industry" Plagued Tong Qing Building, Catering Industry, A Shares Listed In The Past Ten Years, Can It Break The Curse Again?

In December 6th, the CSRC official website data showed that the Tong Qing building catering Limited by Share Ltd (hereinafter referred to as "Tong Qing building") will be examined by the SFA Audit Committee on December 12th, and it has been three and a half years since its first IPO filing in June 2016.

Compared with the Hong Kong stock market, "a hundred flowers bloom" - "Wei Wan China", "Siu Mei Xia", "seabed fishing" and other successful listing, 99 Fen also formally submitted the listing application. In view of the A share market, the catering companies listed on the market are cold and clear. In the past ten years, only Guangzhou restaurants have been listed successfully, and the road of IPO has also experienced seven twists and turns.

Among the old listed catering companies, xiangeqing has already been renamed as the Zhongke cloud network, and the remaining two leading food companies, Quanjude, have gone down the altar. The net profit has dropped by half. The annual net profit has shrunk by half. The net profit of Xi'an's catering industry has been negative for six consecutive years, and the loss in the first three quarters of 2019 has been further expanded to 23 million 680 thousand yuan.

At the moment, there are only two restaurants catering to A shares. In addition to the Tong Qing building, there is also a share of the Chinese liquor which has just submitted the declared materials in June 2019. 99 Fen of the queues in the same period with Tong Qing building are waiting for three years to go to the Hong Kong stock market in June 2019. Can the old name Tong Qing building break through the curse of dining difficult to list? What is the success of IPO?

Sharp fluctuations in net profit

Public information shows that Tong Qing building is mainly engaged in catering services, positioning to meet public consumption, products including Anhui cuisine, Cantonese cuisine, Shanghai Hangzhou cuisine, Sichuan cuisine, Hunan cuisine, Huaiyang cuisine and so on. In 2010, Tong Qing building was the only representative of the eight major cuisines of China, and settled in Expo Park.

On the scale of operation, the volume of Tong Qing building is higher than that of the A share market, but the profit margin is not high, and there is a certain fluctuation in the performance during the reporting period. Among them, in 2015, a 47 million 631 thousand and 400 yuan non recurring loss was recognized as a result of the confirmation of share payment, resulting in the company's net profit being cut. In 2016, the company's net income increased sharply despite the increase in operating income.

In 2014 -2016, the business income of Tong Qing building was 1 billion 68 million yuan, 1 billion 161 million yuan and 1 billion 272 million yuan respectively, with net profit of 71 million 861 thousand and 600 yuan, 31 million 434 thousand and 400 yuan and 124 million yuan respectively, with a profit margin of 6.74%, 2.71% and 10.26% respectively.

In 2016, the growth of Tong Qing building was most obvious, operating income increased by 9.47% compared to the same period last year, and net profit increased by 2.93 times compared with the same period last year. Guangzhou restaurant, which is the leading segment of the catering industry with distinctive domestic characteristics, has an operating income of 1 billion 936 million yuan in 2016, an increase of 11.49% over the same period last year, achieving a net profit of 266 million yuan, an increase of 13.67% over the same period last year.

For the specific reasons for the sharp fluctuations in the performance, there is no specific disclosure of Tong Qing building, but insiders pointed out that there are structural surplus in the catering industry, fierce competition, low industry concentration, and the impact of the Internet, the macroeconomic cycle and policy implications.

"Catering enterprises A share IPO is difficult to deal with a lot of financial problems, because the traditional catering enterprises are generally small, multi single, cash transactions, account transparency is not high, many procurement links, consumption links are non-standard situation; in addition, food safety problems, fierce competition, internal control management and standardization is also difficult because of the low rate of securitization of catering enterprises." In December 9th, a medium-sized brokerage's catering and tourism industry analyst pointed out.

It is worth mentioning that Tong Qing building and its affiliated companies have encountered many times "food safety crisis". During the reporting period (2014 -2016), the company received 26 administrative penalties for food safety, sanitation and environmental protection, some fined up to 100 thousand yuan, some were ordered to stop production and business, and some even had their business licenses revoked. During the reporting period, the major City Consumers Association of the company accepted 15 complaints from the same building.

In addition, employees' social security problems of Tong Qing building were also questioned. Prospectus disclosure, Tong Qing building in 2014 -2016 social security and provident fund deposit ratio is relatively low, as of June 30, 2016, the number of employees of more than 6000 people, but the number of social security and provident fund deposit no more than two thousand people.

Query competition

In addition to the sudden explosion of business performance in 2016, the competition among shareholders of Tong Qing building is also the focus of the market.

According to public information, Shen Jishui, Shen Jiqian, the real controller of Tong Qing building, has been engaged in the catering industry for many years. As of the date of signing the prospectus (June 2017), Shen Ji directly and indirectly controlled 12 companies, most of which were monk catering related enterprises and engaged in the same or similar business with Tong Qing building.

According to official data, a company called Meng Du group under Shen Qi's Front Banner is a large comprehensive enterprise group mainly catering chain enterprises, Gaestgiveriet Hotel management, real estate development, tourism and entertainment. The headquarters is in Ma'anshan, Anhui. The registration hall of Tong Qing building is located in Hefei, Anhui.

It is worth mentioning that all the stake in the dream food group of the dream capital group was transferred to Shen Ji and Wang Yan by Shen Jishui in 2011.

Although Tong Qing building has repeatedly stressed, "Shen Ji controlled enterprises have similar or similar businesses in the control of enterprises, but because they are independent entities in equity, finance, assets and other aspects, they do not affect the issuer's operation and finance. This situation does not constitute a competition in the same industry, which does not constitute a substantive obstacle to the issuer's issuance and listing." however, this issue still attracts the attention of the SFC.

The SFC requested the same building to explain that Shen Jishui transferred all the shares of dream restaurant to Shen Ji and Wang Yan rather than issuers, whether the price basis is fair, whether the transaction is true, whether the price is paid or not, whether there is equity ownership before and after the transfer of the stock ownership, the main business data of the catering business, the main financial data during the reporting period, and the situation of Shen Yuan and Shen Jiqian's foreign investment, whether the two parties hold the ownership of the other controlling company, and whether they hold positions in the other party's controlling company.

At the same time, the SFC also questioned whether the sponsors and issuers' lawyers were able to make a judgement on the competition of the same industry based on their business scope, whether they only identified the differences in the operation area, subdivision products and market segments, and did not constitute competition among the same businesses, and whether there were potential conflicts of interest or competition.

"Competition in the industry is indeed an important issue in the process of listing, but it has been put forward in the first feedback. Enterprises and sponsors must carry out self-examination. If they can not be solved, they may withdraw the materials or suspend their applications before the meeting. If they can get to the trial conference, they will be more prepared and communicated by the enterprises and sponsors. Of course, they will not be able to persuade them." A medium-sized private institution in Southern China has been interviewed.