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

 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.

The road of listing is full of twists and turns

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

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.

2009 was originally the year when Datang real estate planned to go public in Hong Kong, but in the previous year, due to the crisis of capital chain break and the unfortunate death of the founder, the company failed to achieve its listing plan.

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%.

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.

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.

According to the data of Minsheng Banks semi annual report this year, as of the end of the first half of this year, the loan balances of Tianjin Haihui Real Estate Development Co., Ltd. and Zhangzhou Tangcheng Real Estate Co., Ltd. in Minsheng Bank were 1.08 billion yuan and 416 million yuan respectively, up 58.82% and - 4.59% compared with the end of last year.


Sudden reduction of debt for listing

Although there is financial support from Fuxin group, Datang real estate itself still has some hidden crises.

However, the above brilliant performance is not good. Some data show that in 2019, the equity sales and equity proportion of Datang real estate decreased by 35.15% and 70% respectively year-on-year. From January to October 2020, the two data of the company fell again, with equity sales of only 16.15 billion yuan and 50.14% respectively, while the ranking dropped 20 places to 88th place.

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.