Can Marco Polo, the first company to go to the meeting after the IPO restart, successfully "break through"?

Economic Observer reporter Zhang Xiaohui After three months, A-shares re-ushered in the IPO (new stock listing) of enterprises.

On May 10, the official website of the Shenzhen Stock Exchange announced that the Listing Review Committee of the Exchange is scheduled to hold a review meeting of the Listing Review Committee on May 16 to review the initial listing application of Marco Polo Holdings Co., Ltd. (hereinafter referred to as "Marco Polo"). Since the Spring Festival in 2024, no IPO company has been reviewed by the Listing Committee for three consecutive months, with the last IPO meeting of the Shanghai Stock Exchange and the last IPO meeting of the Shenzhen Stock Exchange on February 7. With Marco Polo about to be reviewed by the Shenzhen Stock Exchange, it means that the exchange has begun to gradually resume the review of IPO and refinancing issuance.

On May 14, when a reporter from the Economic Observer Network called the Marco Polo Securities Affairs Department and asked the company what expectations it had for the IPO review of the Shenzhen Stock Exchange on May 16, the staff replied, "We are ready."

accounts receivable was 1.599 billion yuan

Marco Polo is a well-known enterprise engaged in the business of architectural ceramics, the main products are glazed tiles and unglazed tiles, the company's predecessor can be traced back to the establishment of Guangdong Weimei Ceramics Co., Ltd. in 1992. The actual controller is Dongguan entrepreneur Huang Jianping, who held a total of 42.12% of Marco Polo's shares before the IPO.

Marco Polo's ceramic tile products are widely used in the construction field, and the main customers are large building materials dealers and well-known real estate development enterprises. In 2023, the company will achieve an operating income of 8.925 billion yuan and a net profit of 1.353 billion yuan.

As we all know, due to the difficulties faced by many real estate development enterprises, Marco Polo's accounts receivable have increased significantly. In his prospectus, Marco Polo specifically warned about the risks of accounts receivable.

According to the prospectus, as of the end of 2023, the book value of Marco Polo's accounts receivable was 1.599 billion yuan, accounting for 20.45% of the current assets at the end of the period, and the receivables mainly came from engineering customers such as real estate. Marco Polo's business model has the problem of relatively large sales scale and long payment cycle, and most of them are settled by accounts receivable or commercial paper.

Marco Polo's engineering customers are mainly large-scale real estate enterprises, with certain financing capabilities and anti-risk capabilities. However, during the reporting period, some of Marco Polo's real estate customers defaulted or overdue, which affected the company's cash flow and operating performance to a certain extent.

In addition, Marco Polo's accounts receivable of 1.599 billion yuan is calculated according to the book value, and through the provision for bad debts, the book balance of its accounts receivable in 2023 is 2.648 billion yuan, and the provision for bad debts is 1.049 billion yuan, with a provision ratio of 39.61%.

Marco Polo explained that the company adopted a single provision for bad debts for the accounts receivable of some real estate customers with a high risk of debt default, prudently taking into account the risk of bad debt losses, and making a separate provision for receivables.

Marco Polo's list of bad debt provisions for 2023 shows that more than a dozen well-known real estate companies such as Sunac Real Estate, Greenland Real Estate, Times Real Estate, Sunshine City Real Estate, Excellence Real Estate, Shimao Real Estate, Blu-ray Real Estate, Agile Real Estate, Jinke Real Estate, China Fortune, and Country Garden are all customers of Marco Polo. Among them, there are 10 bad debt provisions with a staggering amount of 100%, with Sunac Real Estate having the highest book balance of 151 million yuan and bad debt provisions reaching 133 million yuan, with a provision ratio of 88.19%.

The large accounts receivable and the high bad debt rate are a risk that cannot be avoided in this IPO of Mark Polo.

A number of customers exploded, resulting in lawsuits

It is worth noting that the prospectus shows that in 2023, Evergrande Real Estate, which has exploded, ranks second among the top five customers in Marco Polo's sales revenue, with an amount of 399 million yuan, and Evergrande Real Estate is also the second largest customer of Marco Polo's sales revenue in 2022 and 2021.

On page 382 of the prospectus, in the "specific amount of related party transfer claims and bad debt provision", Evergrande Real Estate's claims of 510 million yuan in 2021 were 100% accrued for bad debts; Sunac Real Estate's debt of 51.6878 million yuan in 2021 will be charged with 80% of bad debts.

The explosion of many real estate developers has led to a long and unresolved lawsuit between Marco Polo and his subsidiaries and related parties. and Sunac Real Estate, Sunshine City Real Estate, Greenland Real Estate, Jinke Real Estate, Times Real Estate and other companies have lawsuits worth more than 10 million yuan that have not been executed or unpronounced. According to its prospectus, there are as many as 13 unfinished lawsuits with an amount of more than 10 million yuan.

The accounts receivable dispute also brought Marco Polo a mortgaged property.

Marco Polo said that during the reporting period, the company had real estate customers to repay debts, and the amount of debt assets was 175 million yuan, although the company actively handled the online signing and filing procedures or related real estate registration procedures for the debt-bonded real estate, as of the signing date of this prospectus, the company has completed the online signing and filing procedures for 13 sets of debt-bonded real estate, 2 sets have been delivered, and 2 sets have been re-sold, accounting for 38.07% of the total amount. According to the prospectus, Capital Real Estate, Zhongliang Real Estate and Agile Real Estate all paid off their debts to Marco Polo.

A large number of real estate customers exploded, and at the same time, it also led to a significant decline in Marco Polo's net profit in the past three years.

In the prospectus, Marco Polo also revealed the risk to investors. From 2021 to 2023, Marco Polo's operating income will be 9.365 billion yuan, 8.661 billion yuan, and 8.925 billion yuan respectively, and the net profit will be 1.653 billion yuan, 1.514 billion yuan, and 1.353 billion yuan respectively. Marco Polo reminded that because the company's downstream real estate is greatly affected by macroeconomic and policy regulation, if there are major adverse changes in the macroeconomic environment or the company's competitive environment, it may affect the stability of the company's product prices and operating performance, and the company's operating profit has the risk of further decline.

As far as the architectural ceramics industry is concerned, the industry is highly dependent on the real estate industry and is highly correlated with the real estate market.

According to the data of Guolian Securities, as of May 12, 2024, the number of enterprises announced by the Shanghai, Beijing and Shenzhen Stock Exchanges to terminate the review (withdrawal + termination of registration + failure to pass the review) since 2024 has reached 137 (46 companies have been withdrawn by the Shanghai Stock Exchange; 56 companies were withdrawn from the Shenzhen Stock Exchange; 35 companies were withdrawn from the Beijing Stock Exchange), setting a new high in the number of companies withdrawn in the same period in the past five years, of which 134 companies chose to withdraw voluntarily, and only 1 company was rejected.

Dongguan Securities believes that at present, the issuance and review meeting that has been suspended for several months has been reconvened, and the recent secondary market prosperity has improved, and the counter-cyclical adjustment is expected to be gradually relaxed, and the investment banking business of securities companies is expected to usher in marginal improvement.