New Asia Electronics Plans To Be Listed On The Main Board, Trapped In A Strange Circle Of "Money"

Xinya Electronics Co., Ltd. (hereinafter referred to as "Xinya Electronics") from Yueqing, Wenzhou, Zhejiang Province, will be subject to the examination of the 126th IPO application of the IEC in 2020 on August 27.

One year ago, on June 18, 2019, Xinya electronics first submitted the IPO application draft, planned to log on the main board of Shanghai Stock Exchange, and updated the prospectus on January 7, 2020.

According to the latest disclosure of the prospectus, Xinya electronics, which focuses on the research and development, manufacturing and sales of fine electronic wire rod, plans to raise 650 million yuan, which will be used for the capacity expansion project of 3.85 million kilometers of intelligent fine CNC wire rod (510 million yuan), the construction project of technology research and Development Center (40 million yuan), and the supplementary working capital (100 million yuan).

Behind the sharp increase of net profit

According to the prospectus, Xinya electronics mainly produces a series of products, such as consumer electronics and industrial control wire rod, automotive electronic wire rod, high frequency data wire rod and special wire rod.

From the perspective of performance, from 2016 to June 2019, Xinya electronics achieved revenue of 613 million yuan, 874 million yuan, 897 million yuan and 439 million yuan respectively, with an increase of 42.73% and 2.54% in 2017 and 2018, respectively.

Over the same period, the net profit attributable to parent company of Xinya Electronics Co., Ltd. was 50835600 yuan, 50728400 yuan, 106.5 million yuan and 47.5378 million yuan, respectively. The net profit after deducting non-profit was 49018000 yuan, 78969800 yuan, 86852900 yuan and 45958300 yuan, respectively. In 2017 and 2018, the net profit after deduction of non-profit increased by 61.1% and 9.98% year-on-year.

Xinya electronics pointed out that in 2017, the company's revenue and net profit after non deduction increased significantly compared with the same period of last year; in 2018, affected by the macro economy, the growth rate of revenue and net profit after non deduction decreased, and there was a certain risk of business performance fluctuation.

The 21st century economic report found that the net profit of Xinya Electronics Co., Ltd. increased from 50728400 yuan in 2017 to 106.5 million yuan in 2018, which was mainly due to the sale of shares of two loss making joint-stock companies in 2018, which resulted in an investment income of 2003.04 million yuan.

As for the two equity disposals that contributed to the performance of 2018, the CSRC paid attention to the first and second issues in the initial feedback in December 2019, and asked them to explain the pricing basis and fairness of the relevant equity transfer price, and whether there is any situation that damages the interests of the issuer.

As can be seen, the two companies sold by Xinya electronics are Yantai North Wenzhou City Development Co., Ltd. (hereinafter referred to as "Yantai North City") and Xinya Dongfang Electric Energy Technology Co., Ltd. (hereinafter referred to as "Xinya Dongfang").

Through the sale of equity, Xinya electronics obtained a total investment income of 2003.04 million yuan in 2018. Among them, the investment income from the disposal of Yantai North City was 17.8244 million yuan, accounting for the majority.

Specifically, in August 2011, Xinya electronics obtained 44% equity of Yantai North City with a capital contribution of 13.2 million yuan through equity transfer. The latter is mainly engaged in real estate development and operation, and its main income comes from the sale of shops, apartments, villas and shopping malls.

At the beginning of its investment in Yantai northern city, Xinya electronics explained: "at that time, Yantai's housing price was relatively low. Xinya electronics and other investors were optimistic about the future prospects of Yantai real estate market, and thought there was a large room for appreciation. Under the leadership of Zhengtai Group Co., Ltd., the company followed the investment in the Taipei Fangcheng project."

However, due to the project sales not as expected, Yantai North City has been in a loss state from 2016 to 2017 and the first seven months of 2018, with net profits of - 16.0131 million yuan, - 17.6802 million yuan and - 8.4938 million yuan, respectively.

In order to concentrate resources and develop its main business, in May 2018, Xinya electronics sold its 44% equity and creditor's rights of Yantai northern city to the outside world, with a transfer price of 103 million yuan.

Coincidentally, on May 20, 2018, Xinya Co., Ltd. transferred 45% equity of its subsidiary Xinya Dongfang (subscribed capital contribution of 27 million yuan and paid in capital of 3.5 million yuan) to the controlling shareholder, Lixin holdings, with the divestiture of New Asia Oriental from June 2018.

New Asia Oriental mainly produces charging pile modules for new energy vehicles. Before the transfer, from January to may in 2016-2018, it only achieved net profits of 92800 yuan, - 4791600 yuan and - 3031800 yuan.

Large sum of dividends for four consecutive years

In addition to the large fluctuation of net profit, it is worth mentioning that before the IPO, Xinya electronics made a large amount of dividends for four consecutive years, with an accumulated amount of 103 million yuan.

According to the prospectus, in 2016, Xinya electronics distributed cash dividends of RMB 3 million (including tax) to all shareholders; in 2017, it distributed cash dividends of RMB 30 million (including tax) to all shareholders; in 2018, it distributed cash dividends of RMB 50 million (including tax) to all shareholders; in the first half of 2019, it distributed cash dividends of RMB 2001.6 million (including tax) to all shareholders. The proportion of cash dividends in each period is 5.9%, 59.14%, 46.95% and 42.11% respectively.

As of the signing date of the offering, Zhao zhanbing, the actual controller of Xinya electronics, controls 66.61% of the company's shares. Based on the 33.36 million new shares issued this time, Zhao zhanbing will still directly and indirectly control 49.96% of the shares after the issuance.

Why is Xinya electronics planning to raise 650 million yuan, of which 100 million yuan is used to supplement working capital?

On August 24, the 21st century economic reporter called Xinya electronic securities affairs department on this, and the other side said that "it is in a silent period, and it is not convenient to reply to relevant issues".

In addition, the SFC's initial feedback noted that during the reporting period, Xinya electronics had a variety of related party transactions, such as related party purchase, related sales, related party guarantee, fund lending and related party loan charge off, and Xinya electronics offered a large amount of funds to the actual controller Zhao zhanbing.

In this regard, on August 24, a financial practitioner in Shanghai pointed out to the reporter of 21st century economic report that "the main reason is that related party transactions are easy to manipulate profits, such as transferring profits, making high-income and low-cost through related parties; transferring funds, moving funds through related parties to other places, etc.", so the supervision focused on it.

For example, from 2016 to June 2019, Xinya electronics sold electronic wires to Zhejiang Xinya technology, with the amounts of 27.1133 million yuan, 30.2053 million yuan, 16 million yuan and 974800 yuan respectively, accounting for 4.47%, 3.49%, 1.8% and 0.22% of the current main business income.

In this regard, Xinya electronics said, "since the IPO was launched in 2017, the transactions with the related party Zhejiang Xinya technology have been reduced year by year, and the surplus capacity has been transferred to other customers; at the same time, Zhejiang Xinya technology has also turned to other alternative suppliers, sending samples from other suppliers to the end customers to replace Xinya electronic wires. After a period of transition, the substitution has been basically realized.".

For example, in 2016, Xinya Electronics Co., Ltd. lent funds to actual controller Zhao zhanbing, with a loan balance of RMB 49.0531 million at the beginning of the period, RMB 93.8495 million in the current period, and RMB 61.9938 million at the end of the period; in 2017, Xinya Electronics Co., Ltd. lent 61.9938 million yuan to Zhao zhanbing, the actual controller, with a cumulative repayment of 94.0565 million yuan in the current period.

Xinya electronics said that "during the reporting period, based on the demand for capital turnover of related natural persons, it lent funds to related parties such as Zhao zhanbing, the actual controller's spouse Lin Xiaoyan, and the company's shareholder Huang Dingyu.".

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