Huarong management said that the 42 billion yuan raised in the war will be used to supplement the core Tier 1 capital. The premium of the issued stock price exceeds 20%, safeguarding the interests of all investors; the secondary market share price depends on internal factors such as the company's operating performance, as well as external factors such as the macroeconomic environment, regulatory policy orientation, industry trends, and market sentiment
Text | Caijing reporter Tang Jun
Edit | Yuan Man
On January 5, China Huarong (2799. HK) announced the resumption of trading. Before the suspension, China Huarong's share price was fixed at HK$1.02 per share. On January 5, the company's share price opened at HK$0.61, down about 40% from before the suspension. After the opening of the market, the stock price further oscillated lower, falling nearly 54% at one point. As of the close of the day, China Huarong's share price was HK$0.51 per share, down 50% from before the suspension.
On the same day of the resumption of trading, China Huarong held a press conference to increase capital. At the meeting, the media asked about Huarong's stock price, and the person in charge of the company's board of directors office said, "From the perspective of net assets per share, the company's net assets per share after the additional issuance will be increased from 0.46 yuan to 0.75 yuan, an increase of more than 60%, which increases the shareholders' rights and interests, fully explains that investors recognize the company's investment value and are optimistic about the company's long-term development; from the stock price point of view, the company's stock price before the suspension of trading is 1.02 Hong Kong dollars / share, calculated according to the issue price, the premium is more than 20%, which protects the interests of all investors, especially small and medium-sized investors." From the valuation point of view, the valuation of financial institutions in recent times is low, or even lower than the net assets, and the company's realization of premium issuance, the valuation will be greatly improved compared with before the resumption of trading, which is conducive to enhancing the company's investment value. ”
At the same time, the person in charge also stressed that the stock price of secondary market companies depends not only on internal factors such as the company's operating performance, but also on external factors such as macroeconomic environment, regulatory policy orientation, industry trends, and market sentiment. For China Huarong, the company's primary task at present is to strive to do a good job, strive to improve performance, and adhere to standardized operations to ensure the healthy and sustainable development of the company, so as to create value for the majority of investors.
Since the Lai Xiaomin case in 2018, China Huarong has experienced a series of turbulences such as management changes, late issuance of annual reports, and plunge in overseas bonds, superimposed on external impacts such as the new crown pneumonia epidemic and macroeconomic downturn, and some of Huarong's assets have been exposed, with a net profit loss of 102.9 billion yuan in 2020, recording the largest loss since its listing.
Affected by this, China's capital adequacy ratio fell to 4.16% at one point, significantly lower than the regulatory requirements. As a result, the company launched a capital increase to lead the war. On December 30, 2021, China Huarong announced the completion of the capital increase to China Citic Group Co., Ltd. (hereinafter referred to as "CITIC Group"), China Insurance Rongxin Private Equity Fund Co., Ltd. (hereinafter referred to as "China Insurance Rongxin Fund", a fund company in which China Insurance Investment Co., Ltd. participated in the investment and establishment of The Fund Company), China Cinda Asset Management Co., Ltd. (1359. HK), ICBC Financial Asset Investment Co., Ltd., and Chinese Life Insurance (Group) Company and other five major investors issued 39.216 billion domestic shares and 1.961 billion H shares, with a total scale of 41.177 billion shares, raising 42 billion yuan.
According to the person in charge of the above-mentioned board of directors office, China Huarong raised 42 billion yuan, and after deducting the relevant issuance expenses, all of it will be used to supplement the core Tier 1 capital. The funds raised in place can ensure that the company's capital adequacy level meets regulatory requirements.
At the same time, China Huarong actively returned to the main business, integrated non-financial subsidiaries, and cleaned up financial licenses unrelated to the main business. As of the end of 2021, the company has completed the equity transfer of Huarong Trading Center and Huarong Consumer Finance, and has successively issued announcements on the equity restructuring or transfer of financial subsidiaries such as Huarong Trust, Huarong Securities, Huarong Financial Leasing and Huarong Xiangjiang Bank. It is reported that the transfer price of Huarong consumer finance is 1.091 billion yuan, which is a relatively large premium compared with the appraisal price of 727 million yuan. Xu Yongli, vice president of China Huarong, said that the transfer of financial subsidiaries will enhance the company's endogenous development momentum and market core competitiveness.
It is worth noting that at this press conference, China Huarong did not disclose the latest situation of the disposal of risk assets.
"A new beginning breeds new hope." Wang Wenjie, executive director and vice president of China Huarong, said that the completion of the capital increase work marks that Xinhuarong Construction has achieved historic stage results, and Xinhuarong Construction will enter a new stage of development.
For the next stage of Xinhuarong's construction, Xu Yongli introduced that the company will be based on the functional positioning of financial asset management companies, accelerate the promotion of business transformation, and continue to strengthen and refine the main business. Specifically, the company will continue to enhance the four major business functions of "disposal of problem assets", "revitalization of problem projects", "restructuring of problem enterprises" and "rescue of crisis institutions" to further strengthen the core competitiveness of the main business.
At the press conference, the company's new second largest shareholder, CITIC Group, and the third largest shareholder, China Insurance Rongxin Fund, also came to the scene to speak out, and representatives of the two major shareholders said that they were optimistic about the non-performing asset management industry and the future development of China Huarong itself.
Xu Wei, deputy general manager of the strategic development department of CITIC Group, said that in the future, CITIC Group will continue to promote the synergy and cooperation between the five major business segments and Huarong, focusing on the establishment of a coordination mechanism with Huarong in terms of project expansion, investment, financing and business innovation. Luo Yihong, general manager of China Insurance Rongxin Fund and senior executive director of the investment team of China Insurance Investment Co., Ltd., also said that in the future, China Insurance Investment Company will further expand the space for integration with China under the premise of legal compliance with laws and regulations and controllable risks, and actively explore cooperation opportunities in asset restructuring and market-oriented debt-to-equity swaps.