Recently, Hong Kong Kingboard Group released its 2023 financial report, Kingboard Group's revenue last year was HK $39.713 billion, a decrease of 20% compared with the previous year, and its net profit decreased by nearly half.
However, the founder Leslie Cheung went against the grain, not only increasing his holdings in the company, but also expanding the scale of production, which can be described as bold.
Kingboard Group was founded in 1988 and is mainly engaged in the production of copper clad laminates, which are the raw materials for various electronic devices.
In just 5 years, Leslie Cheung led the group to a successful IPO and became one of the world's largest copper clad laminate production companies.
The company has more than 60 factories around the world, with total assets of more than 99 billion Hong Kong dollars, and has sold more than 100 million copper clad laminates in one year. Leslie Cheung himself also won the title of "King of Copper Foil".
Not only that, Leslie Cheung has also made small achievements in the real estate industry, and is the financier behind many real estate companies such as Country Garden.
But now that the economy is in a downturn, whether it is in the manufacturing industry or the real estate industry, Leslie Cheung is under tremendous pressure.
There are many legends in Chinese companies, and Leslie Cheung can be counted as one of them.
Although Kingboard Group is a Hong Kong company, Leslie Cheung is from Shenzhen and only went to Hong Kong to work in his early years.
When he first arrived in Hong Kong, he was young and ignorant, and he almost lost his hard-won job.
In order to keep his job, Leslie Cheung could only plead again and again, hoping that the boss would not fire him.
"After this experience, I realized that I was lucky to have a job, so I worked very hard to do it in the future," Leslie Cheung later recalled.
Later, Leslie Cheung, who had some work experience, left the factory and went to a company called Minnesota Mining Manufacturing, where he started as a warehouse clerk and then worked as a messenger and salesman.
Minnesota is a large company with a history of 100 years and a sound internal system, although Leslie Cheung is often scolded, he has also learned many modern management methods.
At that time, Leslie Cheung was able to have a high-paying and stable job, which made many people envious, but he was not willing to be a "worker" all the time, and soon after, he decided to give up this job and start a business.
The family believed in Leslie Cheung's ability very much, and also gave him financial support, and his mother borrowed 100,000 Hong Kong dollars from the bank with a real estate in Hong Kong as a guarantee.
With this initial capital, Leslie Cheung started buying and selling chemical raw materials, at that time, most of Hong Kong's industrial salt came from the United States, and it cost $10 a kilogram, but Guangzhou's industrial salt was only $1.
So, he took Guangzhou's industrial salt to Hong Kong for sale, and successfully made his first money.
Later, he partnered with others to engage in trade businesses such as copper clad laminates and electronic accessories.
Although his business is becoming more and more prosperous, this trade can only earn the difference, and he has no control over the purchase price, and is highly susceptible to the influence of suppliers.
Leslie Cheung discussed with his partners to build a copper clad laminate production plant in Hong Kong.
He traveled all over Hong Kong to find land to build a factory, but the price of land, electricity, water and other prices was too high, and if he set up a factory here, the cost of products would also rise.
At this time, Leslie Cheung looked at the preferential policies of the mainland.
In 1988, Kingboard Chemical Group was established, and the factory was selected in Liantang, Shenzhen, where the cost was lower.
To control the cost, the price of copper clad laminate is much cheaper than before, and the number of product orders has increased dramatically.
In 1991, Leslie Cheung opened a second factory in Longhua, Shenzhen. Since then, the group has grown by leaps and bounds, and in the fifth year after its establishment, it was successfully listed in Hong Kong.
However, at this time, more and more Hong Kong businessmen came to invest in Shenzhen, and the preferential treatment enjoyed by Kingboard Group was cut, and production costs increased, so Leslie Cheung had to move the factory to the more "cheap" city of Qingyuan.
"We need 10,000 kilowatt-hours of electricity to produce a ton of copper foil, and at present, it takes 1 yuan for one kilowatt-hour of electricity, but Qingyuan only needs 0.4 yuan. ”
Immediately afterwards, he invested in the construction of a fiberglass cloth factory and a copper foil factory in Qingyuan, and the production cost was directly reduced by 30%.
Today, Kingboard Group has established more than 20 subsidiaries (factories) in Qingyuan, such as Kingboard Chemical, Kingboard Copper Foil, and Warm Core Technology.
At the end of 1999, Kingboard Copper Foil was listed in Singapore, and in 2006, its copper clad laminate business was successfully listed.
At the same time, the group also bought the listed company Elec & Eltek to enter the printed circuit board market.
For every four mobile phones produced in the world, one uses Kingboard circuit boards, and automotive circuit boards account for one-third of the market share.
In 2009, Kingboard Group's revenue reached HK$23.7 billion, and in 2010 it exceeded HK$30 billion, making it one of the world's largest manufacturers of copper clad laminates and the largest manufacturer of printed circuit boards in China.
While Kingboard Group's main business is booming, its side business is not inferior.
Kingboard Group's side business is divided into two forms: investing in commercial real estate and investing in residential real estate.
In terms of investment in commercial real estate, the Group has made a lot of profits through rent collection.
In 2008, Kingboard received a rent of HK$90.072 million (about 76.4618 million yuan), in 2009, it received a rent of HK$90.8 million (about 77.0014 million yuan), and in 2010, it achieved a rent of HK$126 million (about 107 million yuan), an increase of 38% over the previous year.
In 2012, Kingboard Group started the "buy, buy, buy" model and invested in a number of overseas commercial buildings.
In May, the Group purchased Shek Mun Huida Building in Shatin, Hong Kong, and in October, it purchased a commercial building of about 8,000 square meters in the United Kingdom.
These two investments can bring in rental income of HK$100 million (about HK$84.868 million) per year.
From 2015 to 2019, the group made a number of acquisitions, buying a building in London, 15 Canada Square and several floors of the Overseas Trust Bank Building in Hong Kong, as well as the Guangdong Huiyang property.
By the end of 2020, Kingboard's revenue from this business reached HK$8.132 billion, or about RMB6.9 billion, accounting for 19.1% of the total turnover.
In terms of investment in real estate, the group also performed well.
In 2009, Kingboard Group listed real estate as one of the company's businesses, and spent 131 million yuan to set up a real estate company, Kunshan Guorui Real Estate Co., Ltd.
The following year, the Shanghai Yuhuayuan project, developed by the real estate company, was officially launched, making it the first residential development project of Kingboard Group.
In the following decades, the group gradually owned brands such as "Yu Garden" (residential) and "Kingboard Plaza" (commercial), mainly concentrated in Kunshan, Shanghai, Guangzhou and other places, with a total construction area of more than 6 million square meters.
In 2020, Kingboard Group's real estate revenue reached HK$8.33 billion, accounting for approximately 19% of the Group's total revenue.
It is worth mentioning that Leslie Cheung spent 1 million yuan in 2014 to buy the land of the old factory in Shenzhen, and then sold the land to Evergrande at a price of 2 billion yuan, which can be described as a huge profit.
In addition to buying land and building residential buildings, the group also set its sights on mainland developers.
Leslie Cheung is the financier behind a number of giant real estate.
In 2018, R&F Properties issued US$600 million in public notes, and Kingboard Group purchased US$120 million in notes, and then gradually bought them, accumulating to HK$2.283 billion.
In 2021, a subsidiary of the group lent 1.88 billion yuan to Country Garden, with an annual interest rate of 8.5%.
However, with the downturn of the real estate industry, Kingboard Group's real estate revenue fell from more than 7 billion yuan to more than 1 billion yuan, and its investment in mainland real estate companies also fell into crisis.
By June 2023, the Group's investment costs in R&F totaled HK$2.283 billion, but it suffered a loss of HK$1.581 billion.
The loan given by Kingboard Group to Country Garden should be repaid by the end of 2023 according to the agreement, and for this reason, Kingboard Group issued a reminder letter two months before the expiration, but Country Garden did not repay the loan on time.
The two sides failed to negotiate the debt, and Kingboard Group adopted a more extreme approach.
On February 27, 2024, Ever Credit Limited, a subsidiary of Kingboard Group, took Country Garden to court and demanded its liquidation.
This decision seems to have pushed Country Garden to a dead end, but in fact, although Country Garden's total debt is as high as 1.4 trillion, its total asset value is 1.7 trillion, which is not insolvent.
If it is really liquidated, it will not be beneficial to Kingboard Group, it will lose a lot of the amount of funds it recovers, and Country Garden's debt restructuring will also be affected, and finally create a lose-lose situation.
In this regard, some industry insiders said that the purpose of Kingboard Group is not to fight a lawsuit, but to put pressure on Country Garden to fight for more benefits for itself in debt restructuring.
In fact, Kingboard Group has always been optimistic about Country Garden, and even became its shareholder long ago.
In August 2023, Country Garden gave Kingboard Group new shares worth 351 million yuan, which is counted as part of the arrears, and the original arrears of 1.88 billion Hong Kong dollars have been reduced to about 1.598 billion Hong Kong dollars.
In this way, Kingboard took a low price of about 1.25% of Country Garden's shares, which means that Leslie Cheung is still willing to wait for the day when Country Garden recovers.
In fact, there is another important reason why Kingboard Group is so anxious to collect money, the company's main business is going downhill, and Leslie Cheung wants to stop losses in time.
At present, Kingboard Group follows a vertical production model, on the one hand, it masters the upstream raw materials, realizes self-supply, and even exports, and on the other hand, controls production and sales.
This model can not only reduce product costs, but also enjoy the benefits brought by upstream and downstream price increases, but when market demand declines, the impact on the company's performance is also all-round.
From 2022 to 2023, the demand in the international electronics consumer market will decline rapidly, and orders for printed circuit boards will also decrease, and the core raw materials of printed circuit boards will also be affected.
At the same time, the domestic market is not optimistic, according to the Shanghai Ganglian Copper Division personnel said: "The domestic demand for copper clad laminates is insufficient, and it will take some time for the market to recover." ”
Under such pressure, Leslie Cheung can only choose to reduce prices many times, the price reduction rate of products is greater than the price reduction speed of costs, profit margins are compressed, and corporate income declines.
In 2022, the Group's operating income was HK$49.376 billion, down 13% year-on-year, the 2023 mid-year performance statement showed that the company's revenue was HK$18.72 billion, down 33% from the same period last year, and the net profit of the Group's holders also decreased by 45% to HK$1.39 billion.
The group's 2023 annual report shows that the company's net profit has fallen by more than 40%.
In addition, the shares of the two listed companies, Kingboard Grassroots Board and Kingboard Enterprises, continued to fall, and by mid-March, 70% of the stock prices of the two companies had evaporated, with a total loss of more than HK$60 billion.
Although the company's earnings are unsatisfactory and the stock price has fallen, Leslie Cheung is very optimistic about the future development of the group.
Since the company went downhill, Leslie Cheung has been constantly buying the company's shares.
In the second half of 2022, the group's share price was 24 yuan, and Leslie Cheung accounted for 0.48% of the shares, and after nearly a year of continuous buying, his shareholding increased to 0.98%.
During this period, although the stock price rebounded by 30%, it could not withstand the economic downturn, and finally fell to 13.68 yuan.
In March 2024, Leslie Cheung bought 150,000 shares at a price of HK$17.1133 per share, spending about HK$2.567 million.
At this time, he held 11.0894 million shares of the group, and the proportion also increased from 0.98% to 1.00%.
In 2021, Hallgain accounted for 40.24% of the shares, while the latest data shows that the share of the shares has reached 42.61%.
Of course, Leslie Cheung's move is not blindly confident, but has a basis.
According to the analysis of industry insiders, although the development of the industry at both ends is weak and it is difficult to improve in a short time, it is predicted that there will be a rebound in the second quarter of 2024, and the involution of enterprises will also intensify.
Moreover, affected by the demand for AI computing power, there is a huge demand for high-end copper clad laminates, which has become a new opportunity for domestic manufacturers.
Kingboard Group has long been prepared for this.
In 2023, the Group announced an increase of 700 tonnes of copper foil per month at its plant in Lianzhou. The group also proposed to implement an expansion plan in Thailand in 2024, with a monthly production capacity of 400,000 copper clad laminates.
At the same time, the Group will continue to strengthen the core competitiveness of its PCB brands Kehui, Elec & Eltek and Yangxuan to achieve a monthly production capacity of 200,000 square feet of multi-layer PCBs at its Thailand plant.
The Group has also expanded its chemical raw material production business, and at present, there are three production projects under construction, namely bisphenol A, phenol acetone and acetic acid, with annual output of 240,000 tons, 450,000 tons and 800,000 tons, respectively.
In fact, this crisis, compared with the ups and downs that Leslie Cheung has gone through for more than 30 years, is not worth mentioning, from a "farmer" to the helm of a global enterprise, this achievement is no longer comparable to ordinary people.
However, he himself believes that his greatest achievement is to break through the production problem of domestic copper clad laminate raw materials.
When no one was willing to sell us the raw materials of copper clad laminates, Leslie Cheung resolutely decided to independently develop and not rely on foreign countries.
This is also the spiritual core of China's manufacturing industry, which does not flinch in the face of difficulties, realizes self-research and self-production, and realizes "China's intelligent manufacturing".
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Resources:
21st Century Business Review: "99 Billion Copper Foil King, Building a Factory Against the Trend"
See: "He is the investment ambassador of Qingyuan, Hong Kong's "first brother in the manufacturing industry"
Seeing and hearing real estate: "Hong Kong real estate hidden back stabbing Country Garden"
Bronco Finance: "Kingboard Group Buys a Property in London for 2.5 Billion Yuan, Can It Support Real Estate Business by Relying on Rent?"
Author: Tinglan