Per reporter: Shu Dongni Per editor: Wen Duo
On the evening of September 7, Kaikai Industrial issued an announcement that it intends to acquire part of the property of the controlling shareholder. The company said that it will use the purchased property to expand the business layout of the medical sector and explore the possibility of opening self-operated medical institutions. Obviously, the opening industry, whose main business is flat and whose annual net profit is in a state of decline, is re-injecting the "big health" industry.
Recently, the Daily Economic News reporter visited the location of some of the properties that Kaikai Industry intends to buy heavily, and was told by the intermediary that the relevant properties have been vacant for many years. The company itself also mentioned in the announcement that due to the opening of self-operated medical institutions affected by the external environment, market changes, industry policies, doctor resources and consumption habits and other factors, and the need to go through a strict project approval process, the specific business to be invested in the purchase of real estate such as No. 1142 Wuding Road, Jing'an District, Shanghai has not yet been determined.
For Kaikai Industrial, whether this investment can achieve the expected results remains to be tested by time.
Shanghai Jing'an District Wuding Road No. 1134, 1132 real estate gate closed Image source: Per the reporter Shu Dongni photo
<h2>Some properties have been allegedly vacant for years</h2>
On the evening of September 7, Kaikai Industry announced that the company and its wholly-owned subsidiary, Shanghai Lei Yunshang Pharmaceutical West District Co., Ltd. (hereinafter referred to as Lei Yunshang), intend to purchase two properties located in Wuding Road and Jiangchang West Road, Jing'an District, Shanghai (hereinafter referred to as Kaikai Group) from Shanghai Kaikai (Group) Co., Ltd. (hereinafter referred to as Kaikai Group), the company's controlling shareholder. The area of the two properties is 4013.7 square meters and 3668.76 square meters respectively, and the estimated value of the asset appraisal agency is 140 million yuan and 110 million yuan respectively.
Among them, the property of Wuding Road in Jing'an District, Shanghai includes 1st floor of No. 1130, 1st floor of No. 1132, 1st floor of No. 1134, 1st floor of No. 1136, 1st floor of No. 1138 (1138-1), and 1st to 2nd floor of No. 1142. The property at Jiangchang West Road has been leased by Lei Yunshang since July 2019 for the medical business of his subordinate Shibei Outpatient Department.
The announcement said that the total amount of the transaction did not exceed 250 million yuan, accounting for 48% of the company's audited net assets in the most recent fiscal year.
The owners of the two real estate title certificates are Kaikai Group, which holds 26.51% of the shares of Kaikai Industry and is the largest shareholder of the listed company. From 2018 to 2020, the revenue of Kaikai Group was 1.742 billion, 1.767 billion and 1.600 billion yuan respectively, and the three-year net profit was 38.4619 million, 50.9545 million and 45.8868 million yuan, respectively. In the first half of 2021, Kaikai Group's revenue was 778 million yuan and net profit was 21.6746 million yuan.
On the morning of September 13, the daily economic news reporter came to Wuding Road in Jing'an District, Shanghai, and saw at the scene: Wuding Road No. 1130~1138 are side-by-side, and the gates are closed (as shown below). Gate 1138 is plastered with the sign of "People's Mediation Committee for Property Disputes in Jing'an District", while gate 1136 is still plastered with "sale" advertisements for chrysanthemum brand clothing, as well as landlords' rent advertisements.
Shanghai Jing'an District Wuding Road No. 1130 ~ 1138 real estate Image source: per the reporter Shu Dongni photo
Several nearby merchants and real estate agents have said that the place has been empty for several years and has not been rented. "They don't rent it, and they only open the door when they are inspecting..." said a chain worker on the opposite side.
According to Qixinbao information, no. 1130 Wuding Road address is registered with Shanghai Xinghualou Food Marketing Co., Ltd. Wuding Road store, Shanghai Jing'an Community Safe Construction Service Center trade union and other institutions. No. 1136 Wuding Road has Xiaochenchen Clothing Store in Jing'an District, Shanghai, no. 1138 Wuding Road on the first floor is the Jing'an Branch of Shanghai Maoyun Industrial Co., Ltd., and no. 1142 has the Shanghai Jing'an District Housing Security and Housing Administration Staff Technical Association on the 1st to 2nd floor. However, industrial and commercial information shows that most of the above-mentioned stores and institutions have been cancelled between 2013 and 2014.
Kaikai Industry said that the main purpose of purchasing real estate such as No. 1142 Wuding Road, Jing'an District, Shanghai is to comprehensively promote the "big health strategy" and implement the three-wheel drive development strategy of medicine, medical treatment and medical care, and intends to use the real estate to expand the business layout of the medical sector and explore the possibility of opening self-operated medical institutions.
However, the company also said that due to the external environment, market changes, industry policies, doctor resources and consumption habits and other factors affected by the external environment, market changes, industry policies, doctor resources and consumption habits, and the need to go through a strict project approval process, the specific business to be invested in the purchase of real estate such as No. 1142 Wuding Road, Jing'an District, Shanghai has not yet been determined.
In addition, the initial investment and cultivation period of newly established self-operated medical institutions are large (the general investment payback period is 3 to 5 years), and depreciation costs and decoration expenses will have a certain negative impact on the company's profits in the early stage of operation. Kaikai Industry is expected to continue to increase investment in the medical and health business sector in the future, and the investment income will be difficult to show in the short term.
<h2>Proposed sale of shares to raise funds</h2>
As soon as the news of the opening of the industry to acquire real estate came out, it immediately triggered a heated discussion among investors. Some investors left a message: "250 million yuan to buy real estate, and it is a commercial real estate with poor liquidity, whether it can recover the cost is unknown." Some investors also believe that "spending 250 million yuan to buy is an unprofitable property, because it is a related party transaction, it should be sold to a listed company at cost price."
Investors' concerns may stem from the average annual performance of Kaikai Industrial in recent years.
From 2018 to 2020, the revenue of Kaikai Industry was 878 million, 870 million and 762 million yuan, respectively, an increase of -8.79%, -0.82%, -12.47% year-on-year, and the revenue could not grow at the same time, the net profit of these three years also showed a negative growth trend, and the net profit in 2018-2020 was 35.2343 million, 21.9763 million and 13.6748 million yuan, respectively, an increase of -9.03%, -37.63%, - 37.77%。
As a listed state-owned enterprise with two long-established Brands in China, "Kaikai" and "Lei Yunshang", for the sluggish performance, Kaikai Industry said in its 2020 annual report that in recent years, the company's two main industries of clothing and medicine have been negatively affected by the global economy and other factors year by year. Where's the solution? The phrase "transformation and great health" has been repeatedly mentioned in annual reports.
According to the latest financial data, in the first half of 2021, the company achieved revenue of 336 million yuan, a decrease of 58.1337 million yuan or 14.75% over the same period of the previous year, and the net profit attributable to the shareholders of the listed company was 5.9446 million yuan, an increase of 2.0226 million yuan over the same period of the previous year of 3.922 million yuan. However, it is worth mentioning that on April 28, Kaikai Industry announced that it had received a government subsidy of 2.9 million yuan from the State-owned Assets Supervision and Administration Commission of Jing'an District, accounting for 21.21% of the company's audited net profit attributable to shareholders of listed companies in the latest fiscal year.
At the same time as announcing the proposed purchase of real estate, Kaikai Industrial also issued an Announcement on the Proposed Authorization to Choose the Opportunity to Sell Stock Assets, which intends to sell the circulating shares of domestic A-share listed companies held by the company and its subsidiaries through secondary market transactions at an appropriate time and at a price not less than the initial investment cost.
According to the announcement, Kaikai Industry currently holds tradable shares of 4 listed companies, namely Gan Consulting (000779,SZ), Bank of Shanghai (601229,SH), Aijian Group (600643, SZ), and Xinhua Media (600825, SZ), with initial investment costs of about 10.542 million yuan, 920,200 yuan, 140,200 yuan and 64,200 yuan, respectively, and the corresponding number of shares held is about 6.2379 million shares, 1.4895 million shares, 96,500 shares, respectively. 118,800 shares.
Image source: Screenshot of the announcement
As of the close of trading on September 17, the stock prices of Gan Consulting, Bank of Shanghai, Aijian Group and Xinhua Media were quoted at 8.65 yuan / share, 7.35 yuan / share, 7.31 yuan / share and 4.20 yuan / share, respectively, according to the above number of shares, the corresponding market value of the shares of the above four companies held by Kaikai Industry was about 53.9578 million yuan, 10.9478 million yuan, 705.44 million yuan and 499,000 yuan, respectively.
According to the reporter's calculation, the initial investment cost of the shares of the above four companies held by Kaikai Industry is about 11.6666 million yuan, and the total market value of the shares held as of the close of September 17 is 66.11 million yuan, and the floating profit is 54.4434 million yuan, earning 4.67 times.
For the sale of shares, Kaikai Industry said that the transaction is conducive to improving the liquidity and use efficiency of the company's assets, optimizing the company's asset structure, meeting the company's future development capital needs, and promoting the company's sustainable and healthy development. According to the Beijing Business Daily, for the use of funds for the sale of shares, the secretary of the board of directors of Kaikai Industry clearly stated that it would invest in the company's big health industry. This coincides with the company's proposed purchase of real estate to increase the size of the big health.
According to the announcement, the total purchase price of the two properties is estimated to be no more than 250 million yuan, and even if all 60 million yuan of the liquidated stocks are used, there is still a funding gap of 183 million yuan. Looking at the data reported by Kaikai Industry, the monetary funds on the account are only 234 million yuan.
For the kaikai industry, which does not have a lot of money at hand, the investment that cannot be returned in the short term does not seem to be a high-quality asset that is urgently needed.
Will spending 250 million yuan to buy a property create greater financial pressure? In recent years, the profitability of Kaikai Industry has declined, is the purchase of real estate in line with the company's long-term development? If the property on Wuding Road in Jing'an District has been vacant for many years, does it meet the needs of the development of the "Great Health" business?
On September 16, the reporter called the secretary office of the board of directors of Kaikai Industry on the above issues and issued an interview letter, but as of press time, no reply was received from the company.
<h2>Outbound investment has been repeatedly frustrated</h2>
The purchase of real estate for 250 million yuan is not the first large-scale investment in the opening of the industry.
In 2001, after the opening of the industry, in the past 4 years, it has invested in the establishment or joint establishment of 9 companies. Among them, on December 24, 2001, Kaikai Industrial invested 80 million yuan (44.44% of the shares) to establish Shanghai Dingfeng Science and Technology Development Co., Ltd. (hereinafter referred to as Shanghai Dingfeng); on December 29, 2003, Kaikai Industry invested 100 million yuan (40% of the shares) to establish Guangdong Zhongshen Lottery Financing Guarantee Investment Co., Ltd. (hereinafter referred to as Zhongshen Lottery); on January 17, 2004, Kaikai Industry invested 120 million yuan (holding 34.29% of the shares). Invested in the establishment of Shanghai Binagao Real Estate Development Co., Ltd. (hereinafter referred to as Binagao Real Estate).
But these big sums of money did not bring much return to the opening of the industry, and they were once in trouble. In 2003, Zhang Chen, then the general manager of Kaikai Industry, conducted a number of related party transactions after investing in Binagao Real Estate and Zhongshen Lottery, and was accused of hollowing out the kaikai industry and suspected of economic crimes.
In August 2014, Kaikai Industrial liquidated and closed down on Binagao Real Estate. In the 2013 annual report, Guangdong Zhongshen Lottery was "still out of control, unable to obtain statements, and the previous year has made a full provision for impairment."
Although Shanghai Dingfeng is still in a state of operation, the operating effect is not ideal. According to the annual reports of previous years, the net profit of Shanghai Dingfeng from 2017 to 2020 was 199,600, 227,200, 224,500 and 197,500 yuan respectively.
How has the company's investment been in recent years? According to the latest financial report, the company's cash outflow from investment activities totaled 150 million yuan in the first half of 2021, and the cash outflow from investment activities totaled 192 million yuan in 2020, compared with 298 million yuan in 2019 and 335 million yuan in 2018.
Image source: Screenshot of the web page
In 2016, Kaikai Industrial acquired a 10% stake in Shanghai Jing'an Yongshanghui Microfinance Co., Ltd., with an investment cost of RMB9.3 million. This is a financial company with loans and related consulting services as its main business, and the 2021 semi-annual report shows that it received only 520,000 yuan in cash dividends in 2020 during the reporting period, recognizing investment income.
The 2020 annual report also mentioned that due to the deterioration of the operating environment and financial situation of the invested enterprises Shanghai Guojia Industrial Co., Ltd., China Service Brand Development Co., Ltd., and Hong Kong KaiKai Pharmaceutical Co., Ltd., the company measured zero yuan as a reasonable estimate of fair value.
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