*ST Xinlian announced yesterday evening that the company's shares will be revoked from the opening of the market on May 21, and the stock abbreviation will be changed from "*ST Xinlian" to "Xinhualian". The company's shares will be suspended for one day on May 20 and resume trading from the market open on May 21.
The company's rebirth was mainly due to the completion of its bankruptcy reorganization last year. On December 29, 2023, the Company received the Civil Ruling served by the court, ruling to confirm the completion of the implementation of the Company's reorganization plan and terminate the Company's reorganization procedure.
However, it is worth noting that *ST Xinlian's operating income has "declined twice", and although the company's net profit attributable to the parent company will turn around in 2023, the net profit after deducting non-profits will be -2.9 billion yuan, and it has been negative for 4 consecutive years. During the same period, the company's gross profit margin also fell to 8.99% from 20.71% in 2022, indicating that profitability has not improved substantially.
The reorganization is complete, and the stars are about to be taken off the hat
According to the disclosure, *ST Xinlian's previous "wearing stars and hats" was mainly due to the company's audited net assets at the end of the period in 2022 being negative, and "three consecutive years of losses + uncertainty of the ability to continue operations". However, the above situation is eliminated in the company's 2023 annual report.
According to the announcement, Zhongxing Cai Guanghua Certified Public Accountants issued a standard unqualified "Audit Report" for the 2023 financial report of Xinhualian Cultural Tourism. The company's application for the cancellation of the risk alert for delisting of stock trading and other risk alerts has been approved by the Shenzhen Stock Exchange.
*ST Xinlian mainly engaged in residential and commercial real estate in the early days, and began to transform into cultural tourism real estate in 2012. Due to the company's previous large amount of financing, and the development cycle of cultural and tourism real estate projects is usually long, Macrolink's revenue has gradually fallen into liquidity difficulties since 2019. As of the end of the third quarter of 2023, its debt-to-asset ratio has reached 102.14%.
Last year, the company successfully completed the judicial reorganization, effectively resolved the debt of 24.756 billion yuan, and recognized the debt restructuring income of 3.178 billion yuan, the asset-liability ratio at the end of the year fell to 59.51%, and the net assets were 5.377 billion yuan. As of the end of the first quarter of this year, the company's short-term borrowings and debts due within one year were 694 million yuan, down more than 90% from 12.38 billion yuan at the end of the third quarter of last year, and long-term borrowings were 1.349 billion yuan, which was also significantly lower than before the reorganization.
The company said that after the implementation of the reorganization plan, the scale of interest-bearing liabilities will drop significantly, and the asset-liability ratio will return to a reasonable level. At the same time, the company's business structure has been further improved, the main business of cultural tourism has become more prominent, and relying on the all-round support of the reorganization of investors' incremental funds, operation and management, and resource integration, the company's profitability and sustainable operation ability have been enhanced.
Since the beginning of this year, *ST Xinlian has focused on the development of the main business of cultural tourism, continued to revitalize high-quality cultural and tourism assets, and its operating income in the first quarter increased by 64.10% over the same period last year, and the net profit attributable to shareholders of listed companies turned around year-on-year.
Looking to the future, the company previously said at the 2023 annual results briefing, "With the continuous growth of the company's cultural tourism scenic spots, the future cultural tourism revenue will continue to increase." At the same time, with the release of most real estate projects and the carryover of sales of remaining real estate projects, it is believed that in the near future, the company's cultural tourism revenue will account for more than 50%, and the company will also bid farewell to real estate completely, which is beneficial to the company's overall valuation. ”
There are still hidden concerns about business ability
Although *ST Xinlian successfully completed the restructuring and lifted the delisting risk alert and other risk alerts, this does not mean that its profitability has improved substantially.
In fact, the income from bankruptcy reorganization and debt restructuring is the main reason for *ST Xinlian's profit in 2023. In 2023, the company's net profit attributable to the parent company will achieve a turnaround, but its net profit after deducting non-recurring gains and losses will be -2.992 billion yuan, which is not significantly narrowed compared with -3.075 billion yuan in 2022.
Previously, on April 10, the Shenzhen Stock Exchange also issued an annual report inquiry letter to *ST Xinlian, focusing on the company's ability to continue operations and inventory. After 3 postponements, *ST finally disclosed the reply announcement yesterday evening.
In terms of profitability, in 2023, *ST Xinlian will achieve operating income of 3.875 billion yuan, a year-on-year decrease of 26.23%, which has declined for two consecutive years, and the net profit after deducting non-profits has also been negative for four consecutive years. At the same time, the company's gross profit margin will decline to 8.99% in 2023 from 20.71% in 2022, of which the gross profit margin of the integrated business of cultural tourism will be -8.60%, which is a large gap with comparable companies in the same industry, China Youth Travel Service and OCT A.
Source: Company announcement
*ST Xinlian explained in the reply letter that the two consecutive declines in revenue were mainly affected by industry trends, company transformation and other factors, and the operating income generated by commercial housing sales declined for two consecutive years. The net profit after deducting non-profits has been negative for four consecutive years, mainly due to various factors such as large financial expenses and the provision of asset impairment losses.
As for the gross profit margin of the comprehensive business of cultural tourism is not as good as that of its peers, the company said that due to the difference between the business model, the scale of assets held, and the stage of the business from comparable companies, the gross profit margin of the comprehensive business of cultural tourism in 2023 will have a certain deviation from that of comparable companies in the same industry.
According to the company, the new scenic spot needs a certain cultivation cycle from opening to maturity, and the company's main cultural tourism project, Tongguanyao Scenic Area, began to receive tourists in 2018, and encountered a certain force majeure impact after opening, resulting in the extension of the cultivation cycle.
In contrast, CYTS acquired control of Wuzhen through investment in 2006, when Wuzhen was a mature scenic spot with a high reputation, so there was no market cultivation period. The main cultural tourism project of OCT A is Happy Valley, and Shenzhen Happy Valley is the first Happy Valley built by OCT A, which has been put into use since 1998, and has a high brand awareness after years of cultivation.
In fact, when the Tongguanyao Ancient Town project first opened, it had experienced a word-of-mouth "Waterloo". Many tourists complain about the modernization of the "ancient town" architecture, the serious lack of cultural heritage in commercialization, etc., and at the same time, comments such as "low cost performance" and "expensive fare" also appear frequently.
Titanium Media APP noted that with the significant recovery of China's tourism market, the operating income of Tongguanyao Ancient Town in 2023 will be 193 million yuan, an increase of 63.66% over the same period of the previous year; Gross profit margin increased by 99 percentage points over the previous year. However, based on this calculation, the revenue of the scenic spot only accounts for 5% of the company's total revenue, and the overall gross profit margin of the company's cultural tourism business is still negative when the gross profit margin of the scenic spot has risen sharply. In the future, after "bidding farewell" to the real estate business, if the profitability of the cultural tourism business cannot be improved in the short term, it will inevitably have an adverse impact on the overall performance of *ST Xinlian.
(This article was first published in Titanium Media APP, author|Zhai Biyue)