Produced by | Bullet Finance
Author | Wang Yajing
Edit | Egg total
American Editor | Qianqian
Audit | Ode
Following the green tea restaurant and the old lady's uncle, another catering company has entered the channel of sprinting to the capital market.
On January 16, Xiao Cai Yuan International Holdings Co., Ltd. (hereinafter referred to as Xiao Cai Yuan) submitted a report to the Hong Kong Stock Exchange, with Huatai International and UBS Group as joint sponsors.
This is a new Hui cuisine chain brand, deeply engaged in the public convenience of Chinese catering. According to Frost & Sullivan, among all brands in China's mass convenience Chinese catering market with a unit price between 50 yuan and 100 yuan, Xiao Cai Yuan ranks first (in terms of store revenue as of the first nine months of 2023), with a market share of 0.2%.
(Photo / Small Vegetable Garden Prospectus)
On the eve of the small vegetable garden, there are also investors running to enter the market. According to the prospectus, on December 1, 2023, Xiaocaiyuan issued two rounds of preferred shares, and Jiahua Capital made a surprise investment, and after this round of financing, Jiahua Capital invested a total of 500 million yuan in Xiaocaiyuan.
However, this funding is not without requirements. According to the relevant regulations, investors enjoy the right to repurchase, and after wearing the "tight spell", the small vegetable garden has no way out, but to sprint to the Hong Kong Stock Exchange.
But whether it will be possible in the end remains to be seen by time.
1. Revenue and profits are high, and "old friends" are in a high position
Wang Shugao was born in an ordinary farming family in Tongling, Anhui Province, and left school early due to his poor family background and entered the society. Prior to founding Little Garden, he had been working in the restaurant industry for many years.
Since 2006, he has successively founded Tongling Wangwang Food Forest (hereinafter referred to as Wangwang Cuisine), Tongling Suburban Harmony Hotel (hereinafter referred to as Harmony Hotel) and Tongling Harmony Catering Co., Ltd. (hereinafter referred to as Harmony Catering). Among them, Harmony Hotel has also developed into a business chain hotel with more than 10 stores in Tongling.
From chef to boss, Wang Shugao achieved the first counterattack in his life, but after the investment failed in 2011, he had to embark on the road of entrepreneurship again.
It wasn't until 2013 that the first small vegetable garden opened in Anhui, and Wang Shugao's catering business gradually got on the right track. As of January 11, 2024, Xiao Cai Yuan operated 548 stores, including 542 Xiao Cai Yuan stores and 6 other sub-brand stores.
(Photo / Small Vegetable Garden Prospectus)
Benefiting from this, the performance of the small vegetable garden is also rising rapidly.
According to the prospectus, from 2021 to September 2023, its revenue will be 2.646 billion yuan, 3.213 billion yuan and 3.429 billion yuan respectively, and its profit will be 227 million yuan, 238 million yuan and 430 million yuan respectively.
(Photo / Small Vegetable Garden Prospectus)
It took Wang Shugao less than 10 years to make the income of the small vegetable garden exceed 3 billion yuan, which is rare. But according to upstream news reports, Wang Shugao, who was born as a chef, does not consider himself an entrepreneur, but a "shopkeeper", hoping to "open a small restaurant and let the chefs who follow the small vegetable garden become bosses." ”
Wang Shugao is not untargeted. "Bullet Finance" noticed that in the management of Xiaocaiyuan, Zhou Bin, Tao Xu'an, and Wang Weifang all have a close relationship with Wang Shugao.
Among them, Zhou Bin used to be the executive chef of Harmony Catering, Tao Xu'an served as the head chef of Wang Wang Gourmet and the executive chef of Harmony Catering, and Wang Weifang used to be the manager of Harmony Hotel and the manager of Harmony Catering. Not only that, Wang Weifang is also Wang Shugao's niece.
Today, Zhou Bin, Tao Xu'an, and Wang Weifang have been in the position of executive director and regional general manager of Xiaocaiyuan.
(Photo / Small Vegetable Garden Prospectus)
From a chef to a manager, it is not only a change in identity, but also a change in thinking. In front of the capital market, new propositions such as whether they can quickly adjust the pace to keep up with the pace of the market and improve the attractiveness of small vegetable gardens to investors have been put on the table of these managers.
2. The cash flow is tight, and there is still a large dividend of nearly 300 million
In December 2023, upstream news reported that Wang Shugao said that "Xiaocaiyuan will not do a franchise model, do not seek speed, and win by word of mouth", he understands that for catering, good quality and good taste are the core of the company's success.
But as I walked, the small vegetable garden seemed to have forgotten its "original intention".
According to the plan, Siu Cai Yuan plans to open about 160, 190 and 230 new stores in 2024, 2025 and 2026 respectively. By the end of 2026, the company is expected to operate more than 1,100 small vegetable garden stores.
(Photo / Small Vegetable Garden Prospectus)
In the past 10 years, Xiaocaiyuan has opened more than 540 stores, and in the next three years, Xiaocaiyuan will complete the road of the past 10 years and open about 580 stores.
"Bullet Finance" noticed that even half of the stores opened by Xiaocaiyuan since 2021 have not yet achieved a return on investment.
According to the prospectus, during the track record period, Xiao Cai Yuan opened 231 new stores (editor's note: excluding the two stores that opened but closed during the track record period). As of September 30, 2023, there are 115 small vegetable garden stores that have not yet realized a cash return on investment.
(Photo / Small Vegetable Garden Prospectus)
Among them, 23, 22 and 70 small vegetable garden stores opened in 2021, 2022 and the first nine months of 2023 respectively.
On the one hand, the invested funds have not been fully recovered, and on the other hand, it is necessary to increase the speed to quickly expand new stores, which is a test for the cash flow of the small vegetable garden.
In the past few years, although the performance of the small vegetable garden has been rising, the cash flow of the enterprise is not much. From 2021 to November 30, 2023, the cash and cash equivalents of Xiaocai Garden were 20.371 million yuan, 63.001 million yuan and 353 million yuan, respectively.
(Photo / Small Vegetable Garden Prospectus)
But this did not affect the determination of the small vegetable garden to pay dividends.
According to the prospectus, in 2021, the company will pay a dividend of 150 million yuan, and in the first nine months of 2023, Xiaocaiyuan will pay another dividend of 135.3 million yuan, and the above dividends will be paid in cash.
(Photo / Small Vegetable Garden Prospectus)
At the time of dividend distribution in 2021, Xiaocaiyuan was restructuring to build an offshore structure, and the shareholding changes were mixed. On 31 December 2021, Xiao Cai Yuan Catering Holdings, which is wholly owned by Xiao Cai Yuan Hong Kong, acquired the entire equity interest in Xiao Cai Yuan Catering, the main operating entity in China.
(Photo / Small Vegetable Garden Prospectus)
So far, 7 shareholding platforms created by Wang Shugao, 129 employees of the group, Wang Fuxiang and Wang Yuan in the British Virgin Islands hold 100% of the shares of Xiaocaiyuan.
As of January 11, 2024, Wang Shugao controls 92.99% of the voting rights of Xiaocaiyuan, and Wang Shugao is the sole director of the above seven shareholding platforms. This also means that most of the two large dividends before the listing went into the pockets of Wang Shugao and his friends.
(Photo / Small Vegetable Garden Prospectus)
However, after the completion of the dividend, the small vegetable garden began to raise funds to supplement cash flow. According to the prospectus, a major flow of funds raised is for working capital and general corporate purposes.
A large amount of dividends on the one hand and fundraising to supplement liquidity on the other hand have always been the key to the criticism of IPO companies, which undoubtedly makes it much more difficult for Xiaocaiyuan to knock on the door of the Hong Kong Stock Exchange.
3. Investors raided into shares, and the small vegetable garden put on a "tight spell"
In fact, in the capital market, the financing road of small vegetable garden is not wide.
Prior to the IPO, Xiaocaiyuan had only received financing from one investment institution, Jiahua Capital, and these financings initially came in the form of bonds.
In November 2022, Xiaocaiyuan entered into an agreement with Harvest Delicacy, a subsidiary of Jiahua Capital, under which Harvest Delicacy agreed to subscribe for the convertible bonds issued by the company at a consideration of RMB 150 million equivalent in US dollars.
(Photo / Small Vegetable Garden Prospectus)
In June 2023, Harvest Delicacy agreed to subscribe for a further US$250 million equivalent of the second tranche of convertible bonds.
The convertible bonds issued by the small vegetable garden come with a number of conditions attached. According to the prospectus, the first tranche of 150 million yuan of convertible bonds requires that if the bonds are not converted into shares within 48 months of issuance, Xiaocaiyuan needs to repay the principal and interest to Jiahua Capital.
(Photo / Small Vegetable Garden Prospectus)
Not only that, but the bond has the right to dividends. This also means that before the listing, Jiahua Capital has been rewarded with the previous dividends of Xiaocaiyuan.
In addition, investors have the right to compensation, if the market value of Xiaocaiyuan after listing is less than 130% of the investor's post-investment valuation, Jiahua Capital has the right to require Xiaocaiyuan to issue new shares at a low price, the controlling shareholder to transfer shares free of charge or at nominal consideration, cash compensation and other ways to compensate.
(Photo / Small Vegetable Garden Prospectus)
It was not until Xiaocaiyuan submitted its report to the Hong Kong Stock Exchange that Jiahua Capital converted the bonds into preferred shares and made an additional investment of 100 million yuan.
On December 1, 2023, $400 million under the upfront convertible bonds was used to subscribe for the first round of preferred shares at a cost of $6.19 per share.
(Photo / Small Vegetable Garden Prospectus)
On the same day, Xiaocaiyuan entered into an agreement with Harvest Delicacy, whereby Harvest Delicacy agreed to subscribe for the second round of preferred shares at a consideration of $100 million equivalent in US dollars, at a cost of $9.30 per share.
After the conversion into preferred shares, Jiahua Capital has requirements for the listing of Xiaocaiyuan. According to the prospectus, investors have a repurchase right, which will be terminated when Xiao Cai Yuen submits its return to the Hong Kong Stock Exchange, but will automatically resume the exercise of this right in the event of failure to complete the listing.
(Photo / Small Vegetable Garden Prospectus)
At the behest of Jiahua Capital, there was little way out for the small vegetable garden.
As of November 30, 2023, cash and cash flow equivalents were less than $400 million. In addition, as of January 11, 2024, 10.72% of the investment funds raised by the small vegetable garden have been used. If it needs to be repurchased, it will have a huge impact on the cash flow of the small vegetable garden, and it will also disrupt the pace of enterprise expansion.
(Photo / Small Vegetable Garden Prospectus)
It can be said that the investment of Jiahua Capital is not only an important source of cash flow for small vegetable gardens, but also a sharp sword aimed at the "arteries" of small vegetable gardens. After there is no way to retreat, the small vegetable garden can only fight against the water. As for whether it can successfully knock on the door of the Hong Kong Stock Exchange, "Bullet Finance" will keep an eye on it.
*The title picture in the article is from: the official website of Xiaocaiyuan.