Datang real estate goes public in Hong Kong on the red line

category:Finance
 Datang real estate goes public in Hong Kong on the red line


Datang real estate has been dormant for more than 10 years since it was proposed to be listed in Hong Kong in 2009. After many twists and turns, Datang real estate failed to fulfill its dream of listing. However, with the announcement of the global offering plan, the company is only one step away from ringing the bell in Hong Kong.

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The road of listing is full of twists and turns

Datang real estate originated in Taiwan of China and rose in inland China.

In 1984, Yu Yingyi, a Taiwanese, first developed the Datang aristocratic family project in Taiwan.

In 1995, Yu Yingyi and his good friend Zhang fuzhang came to Xiamen to set Guoyun real estate as the companys positioning, and took a douerdun facial mask as the logo, which opened the pace of Datang real estates march into the mainland.

When entering the Xiamen market, the sales of Datang aristocratic family project was hot, which really made Datang real estate get a good start. However, due to the limitation of its Taiwan investment background, not only the financing environment is restricted everywhere, but also the national layout has not been opened.

However, Datang real estate began to plan for listing in Hong Kong. According to media reports, Yu Yingyi publicly said in April 2008 that the listing had entered the mid-term preparatory stage, and Datang real estate was expected to become the first mainland Taiwan funded real estate enterprise to list in Hong Kong.

In 2010, Fuxin group, controlled by Huang Xi, the richest woman in Xiamen, has integrated the precarious Datang real estate. At that time, Fuxin Hong Kong, controlled by Huang Xi, acquired 70% of Datang real estate. In October 2019, Fosun Hong Kong further acquired the remaining 30% equity with RMB 77.6 million.

In December 2019, Datang real estate submitted a prospectus to the Hong Kong stock exchange. According to the prospectus, in 2011, Huang Xi entrusted the operation and management authority of Datang real estate to Wu Di. At present, Huang Xi is the controlling shareholder of Datang real estate, holding 77.79%; Wu Di is the chairman of Datang real estate, holding 21.21%; the director and core management of Datang real estate hold 1%.

However, the prospectus submitted by Datang real estate expired six months later, and the listing plan failed again. On the evening of May 31, 2020, Datang real estate once again submitted the prospectus.

Under the background of the disclosure of the prospectus for listing in Hong Kong, Datang real estates excessive dependence on the blood transfusion of Fuxin group has also been exposed. According to the public information, Fuxin group was established in 1993. After more than 20 years of development and growth, it has formed a well-known domestic comprehensive private enterprise group with finance as the engine, real estate as the main business, high-tech industry as the guide, including trade and sports industry.

From the perspective of financial business, as the sponsor, major shareholder and director unit of China Minsheng Bank, Fuxin group has successively invested in Bank of communications, Yongan insurance and other national banks, insurance and other financial institutions, as well as Hankou bank, Hangzhou United Bank and other local commercial banks, and participated in corporate governance.

In terms of real estate business, Fuxin group takes Datang real estate as its core brand. As we all know, real estate is a typical capital intensive industry, so the financial business of Fuxin group just provides a trump card of capital support for the expansion of Datang real estate.

According to the financial report of Minsheng Bank, in 2017, Fuxin system obtained a loan of 1.505 billion yuan from Minsheng Bank, of which 1.2 billion yuan was used for the acquisition of Datang real estate. In 2018, Fuxin system received 2.367 billion yuan from Minsheng Bank, an increase of 57.17% year on year. In 2019, the loan balance of Fuxin system in Minsheng Bank is 3.033 billion yuan, and most of the funds will flow to the real estate sector.

Datang real estates latest prospectus also shows that Wu Di, the companys executive director, provides personal guarantee for all loans made between the company and Minsheng Bank. As of June 30, 2020, the total amount of outstanding principal closing of these loans was about 2.376 billion yuan, accounting for about 29% of the total loans as of the same date.

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In terms of revenue, from 2017 to the first half of 2020, Datangs revenue was 4.019 billion yuan, 5.496 billion yuan, 8.108 billion yuan and 1.785 billion yuan respectively; the companys net profit during the period was 413 million yuan, 588 million yuan, 627 million yuan and 89.97 million yuan.

As for the composition of interest bearing liabilities, as of June 30, 2020, the total amount of interest bearing liabilities of Datang real estate was 8.191 billion yuan, an increase of 5.42% over the end of last year. The total amount of cash that can be used is RMB 2.499 billion, of which RMB 1.692 billion of which can not be fully covered by cash.

It is worth mentioning that the debt level of Datang real estate has changed greatly in recent years. According to the latest IPO data, from 2016 to 2019, Datangs net debt ratio was 1085.3%, 1087.9%, 408.8% and 119.2%, respectively. As of the first half of 2020, Datangs net debt ratio was 128.5%.

For the short-term sharp decrease of net debt ratio, Datang real estate gives three reasons in the latest prospectus: the continued increase of retained profits, the increase of capital injection by shareholders, and the use of surplus cash to repay loans.

In August this year, the central bank and the Ministry of housing and urban rural development put forward quantitative regulatory requirements on real estate financing, and implemented differentiated management on real estate enterprises with different financial conditions. The policy has been summarized as three lines and four grades by the outside world. Among them, three red lines refers to that the asset liability ratio is greater than 70%, the net debt ratio is greater than 100% and the cash short debt ratio is less than 1 times after excluding advance collection.

According to the different situations of the three red lines touching the line, the supervision also divides the pilot real estate enterprises into red, orange, yellow and green four blocks, so as to determine the upper limit of the annual growth rate of interest bearing liabilities of real estate enterprises when financing. Specifically, the annual growth limit of interest bearing liabilities is 15% for Green Housing enterprises without stepping on the line; the upper limit of annual growth rate of interest bearing liabilities is 10% for yellow Housing enterprises with stepping on one line; the upper limit of annual growth rate of interest bearing liabilities is 5% for orange real estate enterprises with stepping on two lines; Red Housing enterprises with stepping on three lines cannot add new interest bearing liabilities. As far as Datang real estate is concerned, by the end of June 2020, the asset liability ratio, net debt ratio and cash short debt ratio of Datang real estate after excluding the accounts received in advance are 84.7%, 128.5% and 1.34 respectively. The first two indicators are far beyond the red line set by the regulatory authorities. This means that the total debt of Datang real estate, which is about to ring the bell in Hong Kong, will not increase by more than 5%. The future financing situation is worrying. In 2018 and 2019, Datang real estate put forward the slogans of 50 billion in three years and breaking 100 billion in three years respectively. However, the actual sales data and industry ranking are still far from the target proposed at that time. Source: Heichi finance editor: Yang Bin_ NF4368

According to the different situations of the three red lines touching the line, the supervision also divides the pilot real estate enterprises into red, orange, yellow and green four blocks, so as to determine the upper limit of the annual growth rate of interest bearing liabilities of real estate enterprises when financing. Specifically, the annual growth limit of interest bearing liabilities is 15% for Green Housing enterprises without stepping on the line; the upper limit of annual growth rate of interest bearing liabilities is 10% for yellow Housing enterprises with stepping on one line; the upper limit of annual growth rate of interest bearing liabilities is 5% for orange real estate enterprises with stepping on two lines; Red Housing enterprises with stepping on three lines cannot add new interest bearing liabilities.

As far as Datang real estate is concerned, by the end of June 2020, the asset liability ratio, net debt ratio and cash short debt ratio of Datang real estate after excluding the accounts received in advance are 84.7%, 128.5% and 1.34 respectively. The first two indicators are far beyond the red line set by the regulatory authorities.

In 2018 and 2019, Datang real estate put forward the slogans of 50 billion in three years and breaking 100 billion in three years respectively. However, the actual sales data and industry ranking are still far from the target proposed at that time.