420 billion gold land, wave goodbye to the leading big brother

Source: Visual China

Reporter丨Jiang Yiwei, Ma Xiaoyu, Editor丨Tan Lu

A generation of real estate tycoons suddenly resigned, triggering a double killing of stocks and debts.

On the 17th, many domestic bonds of Gemdale fell by 20%, and some bonds triggered a temporary stop due to excessive decline, and their stock prices also fell by nearly 10%.

That night, Gemdale urgently issued an announcement, saying that President Huang Juncan was acting as chairman of the board, which was a normal management team handover.

Gemdale announced on the evening of the 16th that Lynk applied to resign as chairman due to physical reasons.

The soul of Gemdale retreated at a critical moment in debt repayment. For sensitive markets, a little turmoil can bring all kinds of concerns.

The sales amount in the third quarter of 2023 has recovered for three consecutive months.

On the 18th, Gemdale bonds continued to fall, of which "16 Gemdale 02" fell by more than 20%, and trading was temporarily suspended during the session. The closing share price fell by 2.17%, with a market value of about 24.379 billion yuan.

Weak sales, double killings of stocks and debts, and debt peaking, the situation faced by his successor Huang Juncan is really tricky.

Gradually retreat

Lynk is one of the founders of Gemdale Group and is 64 years old.

In 1992, he joined Shenzhen Shangbu District Industrial Village Construction Service Company, the predecessor of Gemdale Group.

In his 30 years in Gemdale, he witnessed the golden age of Gemdale from its establishment to listing to "Zhao Bao Wanjin", and its sales increased from 534 million yuan in 2001 to 286.7 billion yuan in 2021, an increase of 536 times.

Lynk believes in the principle of scale and profit balance, and when many real estate companies are vying to increase leverage and expand rapidly, he chooses conservative development, which also leads to the gradual decline of the company's industry ranking, and was once questioned as "falling behind".

Lynk has his own rhythm, "A good company, live long, more important than suddenly brilliant." ”

His decision was the right one. In 2021, the real estate industry is weak, land prices and costs are increasing, profits are less than expected, and many real estate companies have thundered.

Gemdale became an exception, achieving sales of 221.8 billion yuan in 2022 and returning to the top 10 of the sales rankings.

"The balance between scale and efficiency comes first, and I don't want to be too aggressive in any area." Lynk always stuck to this idea.

In addition to residential, Gemdale also lays out commercial properties, industrial properties, long-term rental apartments, and develops agency construction and other businesses.

Gemdale has not defaulted on its debt. In May last year, the regulatory authorities pushed high-quality housing enterprises to resume public market financing, and Gemdale was also selected into the list of demonstration housing enterprises for many times.

The situation of the industry is such that it is difficult for Gemdale to stand alone.

In the first half of the year, Gemdale's revenue was 36.9 billion yuan, a year-on-year increase of 31%, and its net profit was 1.532 billion yuan, a year-on-year decrease of 22%.

In July, the prices of many of Gemdale's bonds fell in stages.

Since July, Lynk has also stepped down from the directorships of Wensheng Investment, a subsidiary of Gemdale Group, and its various platform companies.

Debt is topping

Lynk chose to retire at this time, which may not be the right time.

On October 18, Moody's downgraded Gemdale's Corporate Family Rating (CFR) to B3 from Ba3 and the CFR of Gemdale's wholly-owned subsidiary Brilliant Commerce Co., Ltd. from B1 to Caa1.

Moody's expects Gemdale's contracted sales to fall to about 159 billion yuan in 2023 and 145 billion yuan in 2024.

Gemdale's reduction in land acquisitions to maintain liquidity over the past year will also limit sales over the next one to two years.

Source: Gemdale Group

In the first nine months of this year, Gemdale's contracted sales were 121.9 billion yuan, down 25% year-on-year, underperforming the market.

At the mid-September results meeting, Lynk reluctantly said that the systematic and comprehensive return of the market to the upward channel in the short term is a small probability event.

Weak sales will weigh on Gemdale's operating cash flow and liquidity.

Gemdale's unrestricted cash balance decreased from $54.4 billion at the end of 2022 to $45.5 billion at the end of June 2023.

Moody's expects Gemdale to have a sizeable debt maturation, including about 23 billion yuan of onshore and offshore bonds, which will mature or be available for sale by the end of 2024.

Given its weakened access to financing, the company will use internal cash to repay most of its debt, which will put further pressure on its liquidity position.

Limited assistance

Replacing Lynk is Huang Juncan, a veteran of Gemdale Group.

Huang Juncan, 52, joined Gemdale Group as a management trainee after graduating from Tongji University in 1992 with a major in industrial and civil construction, and has been in the past 30 years.

Starting as an engineer, he served as the deputy general manager of the Beijing company, and then returned to Shenzhen to serve as general manager, financial director and group president.

After full communication from many parties, President Huang Juncan acted as the chairman. We believe that this arrangement will contribute to the smooth transition of the company's management team and the long-term stable development of the company. Gemdale Group said.

Huang Juncan's ability cannot be underestimated.

A person who has worked with Wong Chun-chan commented that Wong Juncan is well versed in business logic, comfortable in the two fields of real estate and finance, and good at cross-disciplinary integration.

However, due to the characteristics of Gemdale's mixed-ownership enterprises, the group's equity is scattered, and it is still unknown whether it can obtain the help of shareholders.

Prior to 2013, Gemdale's largest shareholder had been Shenzhen Futian Investment and Development Co., Ltd., wholly owned by Shenzhen Futian District State-owned Assets Supervision and Administration Bureau.

In 2014, insurance companies raised their brands as Gemdale, and Fude Life replaced Foton Investment as the largest shareholder of Gemdale, with a shareholding ratio of nearly 30%, and the second largest shareholder was occupied by Big Insurance.

Since 2021, everyone has been anxious to "escape" real estate stocks and has repeatedly reduced its holdings in Jindi.

Tianyan investigation shows that as of the end of June 2023, the largest shareholder of Gemdale Group is still Fude Life Life, with a shareholding ratio of 29.83%; Foton Investment returned to the position of the second largest shareholder, with a shareholding ratio of 7.79%; Everyone Insurance retreated to third place.

At the critical moment, the insurance capital is not very reliable.

"The company's professional manager system has lasted for many years, and among the top two shareholders, Fude Life Life has a low willingness to provide financial support, Foton Investment has a small shareholding ratio, and Gemdale does not expect too much from shareholder rescue." The relevant person in charge of Gemdale previously revealed at an investor communication meeting.

On September 16 this year, Gemdale Group announced that Futian Investment, the second largest shareholder, will study credit enhancement measures such as providing guarantees for Gemdale Group's issuance of corporate bonds or medium bills in the open market according to the needs of regional development.

Gemdale Group may provide corresponding counter-collateral.

However, so far, such guaranteed bond issuance has not yet been implemented.

It seems that the management of Gemdale, headed by Huang Juncan, still has to rely on itself to get through the difficulties.