Can Fuli Return To A And Stop H-Share Circulation Solve The Problem Of High Debt?

The H-share full circulation policy, which was launched at the end of 2019, makes the capital road of R & F unexpected.

On July 15, the H-share full circulation plan of Fuli, the leader of the five tigers in South China, was approved. 63.15% of the shares in China will be transferred to the Hong Kong stock exchange for listing, realizing full circulation. This is another enterprise benefiting from the full circulation policy.

But at the same time, Fuli also gave up the IPO queue of a shares and terminated the application. For many years, Fuli's strategy has been shelved.

The full circulation of H shares will help to smooth the financing of R & F, but it is still unclear how much this will play in terms of the net debt ratio of the company, which has been high for years.

Under the background that the financing of real estate enterprises is still tight and the debt repayment peak is facing, all the real estate enterprises will "put sales first and cash is king". However, in the first half of this year, Fuli's equity sales reached 51 billion, only 34% of the annual target. In the second half of this year, sales still need to be strengthened to obtain sufficient debt repayment and working capital and relieve the pressure of cash flow.

The circulation of H shares

After 13 years at the gate of Shanghai Stock Exchange, Fuli still gave up.

On July 15, R & F announced that the application for the full circulation of H shares was approved by the CSRC. 22% of the total shares which have not been listed in Hong Kong Stock Exchange within 12 months can be converted into the shares which have not been listed in Hong Kong Stock Exchange within 12 months.

Prior to that, on July 10, the name of R & F appeared in the "list of enterprises whose initial public offering application for termination of examination in 2020" released by the CSRC. The review was terminated on July 9, and before the "termination of examination", Fuli ranked fourth in the IPO queue list.

Fuli's road to capital is full of difficulties. 13 years ago, Fuli, which had been listed in Hong Kong, returned to a and landed on the Shanghai Stock Exchange, forming a "a + H" structure.

In the prospectus first disclosed in 2007, Fuli applied to the Shanghai Stock Exchange to issue 450 million shares in a shares, which will be used for the development of property in the mainland. At the same time, it will expand new financing channels to ease the pressure of capital liquidity.

Since then, the capital market of real estate companies has slowed down since 2008, but many real estate companies have been restricted in the capital market since then.

It seems that at the beginning of 2015, the land and resources Regulatory Commission no longer needs to relax its opinions. In June of the same year, Fuli announced that it would restart its A-share listing application, issuing 1.08 billion new shares and raising 35 billion capital.

Fuli has been lining up for several years since. But five years later, Fuli terminated the matter.

Since 2007, Fuli began to carry out the layout, during which it has been postponed and suspended for many times. Until now, Fuli has stopped its journey back to a in 13 years.

Market news that this is Fuli initiative to apply for termination. According to the CSRC documents, in February 2020, Fuli submitted the application materials for the full circulation of H shares, which was officially accepted in March. This shows from the side that Fuli has been making two-hand preparations very early.

It's a date brought about by the new deal. As a reform initiated in November 2019, after the implementation of the H-share full circulation policy, all domestic shares that could not be circulated on the Hong Kong stock exchange could be listed and circulated by mainland companies adopting the H-share structure.

Obviously, this will break the unfair phenomenon of "the same shares and the same rights but different interests" between the H-share domestic shareholders and the Hong Kong circulating shares shareholders. At the same time, the financing cost, valuation and liquidity of enterprises will also be greatly improved.

Qi zejin, head of investment consultant of Anxin securities Tianjin Branch, believes that the approval of the H-share full circulation plan is a significant benefit to Fuli, which can reduce the financing cost, relieve the debt repayment pressure, and improve the liquidity.

The deer lost in the central plains were chased by all the males. Since the beginning of this year, there have been many real estate and property companies, trying to "H-share full circulation". In the past two months, in addition to R & F, the H-share full circulation plan of Blu ray development subsidiary Blu ray Garbo service and Yaju Leya life has been approved, and the first application for the full circulation of H shares is also being accepted.

Where is Fuli going?

To be able to go to the Hong Kong stock exchange again and realize the full circulation of shares, it can be said that Fuli is "timely help".

In recent years, due to a series of mistakes and swallowing Wanda Hotel, Fuli, once the top five tigers in South China, has dropped out of top 20 in 2019, and its net debt ratio is always on the high side. Since 2015, Fuli's net debt ratio has continued to be above 100%, and even closer to 200% by the end of 2019.

According to the data of Yihan think tank, the net debt ratio of R & F increased by 14.8 percentage points to 198.9% (nearly twice the industry average) by the end of 2019, which means there is long-term debt repayment pressure. The short-term debt to cash ratio dropped to 0.6 times, and monetary funds could not fully cover short-term interest bearing liabilities.

At the end of 2020, the real estate company's short-term liabilities could not reach 22.7 billion, while the short-term cash flow of real estate was only 33.7 billion at the end of 2020.

Fuli also realized the urgency of reducing debt and suspended land acquisition in the second half of 2019. Li Silian, Fuli's co chairman, said he hoped to slow down the debt ratio by speeding up sales and buying land smoothly.

Since 2020, R & F has raised more than 20 billion yuan. On May 19, 10 billion small public offering corporate bonds of R & L real estate were submitted for registration in Shenzhen stock exchange for repayment or resale of seven bonds due in 2020.

The full circulation of H shares will help Fuli obtain new financing. Qi zejin said that there are more financing channels for A-share listing, and many high-quality enterprises will still insist on waiting for the return of a shares. However, due to the regulatory requirements of the mainland and other factors, the waiting time is longer. For enterprises such as Fuli, which need capital urgently, the full circulation shares of H-shares can be financed more quickly.

Fuli has been looking for money through the capital market. In December 2019, Fuli placed 273 million new H shares and raised a total of HK $3.735 billion to repay overseas debts.

In recent years, it seems that Li Silian and Fuli share a similar proportion in the two companies when they share the same strength.

Besides Fuli, both have their own platforms and careers. The sales volume of Zhang Ruike's real estate in Hong Kong in 2019 is only 19.6 billion, which is the real estate sales volume of Zhang Ruike.

According to the on-the-spot prospectus, many of the 98 affiliated companies are related to R & F. among them, Guangzhou Tianli Construction Engineering Co., Ltd. has contributed 108.4 million yuan, 254.8 million yuan and 16.64 million yuan in revenue respectively in the past three years.

The two owners also put their eyes on the property company. Since the end of last year, when the share price of property stocks is booming, Fuli has carried out a series of related party transactions and sold several of its property companies to Li Silian and tension.

From the end of December 2019 to now, Fuli has successively sold all shares of Datong Hengfu property, Tianjin Huaxin property and Guangzhou Tianli property to Li Silian and tensi respectively holding 50% of the shares of Fuxing Investment. The former two property companies have both priced 5 million yuan. Tianli property, which is mainly responsible for undertaking the property management business of R & F, has only a price of 300 million yuan, which is less than 6 times of P / E ratio.

If the current market earnings ratio of Lianhe Changli is about 300 million yuan, the average profit of Lianhe management company is about 300 million yuan.

At present, the most important issue for Fuli is still liquidity. According to Yihan think tank, with the severe situation in the industry, it is particularly important for fuli to adjust its debt structure in the future, maintain its stability, and reduce its liquidity risk.

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