C&D Co., Ltd. (600153) is about to acquire 8% of the equity of C&D Real Estate, which marks a key step for C&D Group to solve its historical commitments.
On December 22, C&D Co., Ltd. announced that the company intends to acquire 8% of the equity of C&D Real Estate Group Co., Ltd. (hereinafter referred to as "C&D Real Estate"), a holding subsidiary of the company, held by Xiamen C&D Group Co., Ltd. (hereinafter referred to as "C&D Group"), the controlling shareholder of the company, and the purchase price is about 2.751 billion yuan corresponding to the 8% equity of the target company. After the completion of this transaction, the company holds 62.654% of the equity of C&D Real Estate.
At a time when the real estate market is quite deserted, the transaction of C&D Co., Ltd. has undoubtedly attracted the attention of the market and is of far-reaching significance to the reconstruction of the company's value. In terms of transaction costs, C&D Real Estate grew against the trend, ranking among the top eight in the industry, and the transaction consideration was reduced because of the relatively low level of high-quality assets in the new real estate cycle, which was more conducive to the interests of small and medium-sized shareholders of C&D Co., Ltd. Not long ago, the People's Bank of China, the State Administration of Financial Supervision and the China Securities Regulatory Commission jointly held a forum for financial institutions, and the meeting clearly emphasized that real estate enterprises should be supported to raise reasonable equity financing through the capital market and mergers and acquisitions in the real estate industry.
With C&D Co., Ltd. winning high-quality assets, institutions generally believe that the company will continue to lead the industry in sales growth by virtue of its high-quality land storage layout, and actively acquire land in core cities, and the competitive advantages of real estate business will continue to be superimposed.
Solve the problems left over from history
It is understood that C&D shares obtained a total of 54.654% equity of C&D real estate through asset replacement and equity purchase in the early stage, and due to the limited funds of listed companies, the equity of C&D real estate was not fully placed in C&D shares. At that time, C&D Group promised to transfer 45.346% of the equity of C&D Real Estate to C&D at an appropriate time.
Therefore, in this transaction, C&D Co., Ltd. intends to acquire 8% of the equity of C&D Real Estate held by C&D Group, which is a capital operation action to solve the problems left over from history.
Backed by C&D Group, the largest state-owned enterprise in Xiamen, C&D Real Estate, a subsidiary of C&D Co., Ltd., is a rare "dark horse" that has emerged in the real estate industry in recent years. In the context of the new real estate cycle, C&D Real Estate took the opportunity to enter the TOP10 with sales of 170.32 billion yuan in 2022.
For such a high-quality asset, the right acquisition window is crucial. Since 2023, a new round of real estate policies has been intensively introduced, requiring timely adjustment and optimization of real estate policies to promote the stable and healthy development of the real estate market. In November, the central bank and other three departments made it clear that they support real estate enterprises to rationally fund equity financing and mergers and acquisitions through the capital market. This is undoubtedly the best time to make this acquisition transaction.
With the right time and place, a successful transaction is inseparable from the right price. According to the appraisal report, the book value (consolidated caliber) of all shareholders' equity of C&D Real Estate after deducting perpetual bonds is 27.012 billion yuan, while the appraised value of all shareholders' equity of C&D Real Estate after deducting perpetual bonds is 34.388 billion yuan, with an appreciation rate of only 27.31%.
According to the announcement, the appraisal price of 8% equity of C&D Real Estate also takes into account the secondary market performance of C&D Real Estate's holding company from the asset appraisal reference date to the appraisal report. According to public data, the stock prices of three listed companies, including C&D International Group, are at a relatively low level, and the appraised value of C&D Real Estate has also decreased. In other words, the transaction price is fair, in line with market pricing, and is conducive to protecting the interests of minority shareholders of C&D Co., Ltd.
C&D Co., Ltd. said that after the completion of this transaction, C&D Real Estate will still be included in the company's consolidated financial statements, and the company's equity ratio of C&D Real Estate will increase from 54.654% to 62.654%, which will further enhance the company's profitability. At the same time, this transaction does not involve personnel placement, land leasing, etc., and will not add competition in the same industry. This transaction will not result in the occupation of funds by related parties.
In the long run, the fundamentals of China's economic stability and improvement will not change with policy support, and the real estate market is expected to be further stabilized with the introduction of relevant policies. BOC Securities pointed out that looking forward to the future, with the deepening of the strategic layout of C&D Co., Ltd. internally, the continuous improvement of the international layout externally, and the steady progress of digital construction, the real estate business will focus on high-energy cities and actively obtain high-quality projects, which will help the company accelerate the process of business adjustment and achieve performance recovery.
High-quality assets increase the value of the company
C&D Co., Ltd. plans to acquire 8% equity of C&D Real Estate, which is the best choice for the company to improve asset quality and increase value.
C&D Real Estate is a member of Xiamen C&D Group Co., Ltd., a Fortune 500 company and a wholly state-owned enterprise in Xiamen. In terms of scale, according to the CRIC list, C&D Real Estate's past sales performance has shown a steady growth trend, increasing from 54.5 billion yuan in 2018 to 170.3 billion yuan in 2022, and the sales ranking has jumped from 53rd to 10th.
In 2023, when the overall sales performance of the industry is declining, the performance of C&D Real Estate has achieved substantial growth against the trend. From January to November 2023, full-caliber sales reached 163.9 billion yuan, a year-on-year increase of 13%, ranking 8th in the industry.
In terms of performance, C&D real estate revenue soared from 18.118 billion yuan in 2017 to 106.921 billion yuan in 2022, while net profit also increased from 2.396 billion yuan in 2017 to 6.929 billion yuan in 2022.
In terms of land acquisition investment, C&D Real Estate continuously optimizes the layout of land acquisition on the basis of in-depth urban research and customer research, focuses on key cities and high-quality locations, grasps high-quality opportunities in core cities, actively expands with deep cultivation thinking, takes into account market trends and sales conditions, and does a good job in liquidity, safety and profitability, so as to lay a good foundation for subsequent steady development.
In recent years, under the circumstance that the industry's willingness to acquire land has generally decreased, C&D Real Estate has actively supplemented the value of high-quality goods, focusing on the layout of first- and second-tier cities. In the first nine months of this year, C&D Real Estate added 129.9 billion yuan in value, ranking fourth in the industry after China Resources, Vanke and Poly. As of the end of June 2023, the value of C&D Real Estate's unsold land reserve was 292 billion yuan, of which about 60% was land acquisition projects in 2022 and beyond.
From the perspective of future growth expectations, the high-quality land storage structure means that C&D Real Estate is expected to obtain greater potential benefits in the future pro-cyclical environment, laying the foundation for future performance growth.
With the increasing demand for quality improvement of current home buyers, product strength has become a decisive factor in determining the development of real estate enterprises. C&D Real Estate is one of the few real estate companies in the current market that has long practiced the pure style of "new Chinese products", and has successively launched "new Chinese products" such as "Shengshi Tang Style", "Elegant Song Yun" and "Poetic Oriental".
For C&D Real Estate, "cash profits, high-quality products, and profitable growth" is the moat for C&D Real Estate to grow against the wind, which will help it in branding, financing, land acquisition and other aspects.
With the completion of such high-quality assets, the proportion of C&D shares held by C&D Real Estate will be further increased, which will not only improve its own asset quality and profitability, but also lay a solid foundation for the company's long-term development.
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