Wang Xiaosong of Xincheng Holdings: It is impossible for the open market to "explode"

Small bonds are on the market

2024-05-31 16:26Posted in Beijing Finance and Economics Creators

The mall mortgage can replace the remaining $1.7 billion in debt of the new city.

01

"Impossible Thunder"

On May 28, Seazen Holdings (601155. SH) held a general meeting of shareholders, at which Wang Xiaosong, chairman of the board of directors, and other senior executives responded to the company's debt problems, scale shrinkage, whitelist projects, idle land recycling and other issues.

Wang Xiaosong said that the "thunder" in the open market of Xincheng Holdings is unlikely to occur, and it will focus on repaying credit debts.

According to the statistics of "Small Debt Market", there are currently 2 US dollar bonds in existence of Seazen Holdings, with an existing scale of 750 million US dollars, of which 450 million US dollars are due within one year.

In addition, Seazen Holdings also has 10 domestic bonds with an existing scale of 8.1 billion yuan, of which 6.6 billion bonds will mature in 1-3 years.

Seazen Development's future debt service cash flow

In addition, Xincheng Development (01030. HK) has 3 outstanding US dollar bonds, with an outstanding scale of 954 million US dollars.

Overall, the total outstanding US dollar bonds of Seazen Holdings and Seazen Development are US$1.704 billion.

Wang Xiaosong said frankly that pure credit bonds still rely on the company's property assets, so no matter how difficult it has been in recent years, the company has basically realized the opening of asset-heavy businesses on schedule every year. This new part of the business can replace the line of credit with a mortgage.

Up to now, there are about 35 unmortgaged Wuyue Plazas, with a valuation of almost 30 billion yuan, and the company also has 15 unopened asset-heavy Wuyue Plazas, which will also be opened this year and next year.

The 50 asset-heavy malls will all be able to be mortgaged in the future, replacing the company's remaining debt of about $1.7 billion.

On April 10 this year, Moody's downgraded Seazen's corporate family rating from "B2" to "Caa1"; and downgraded the backed senior unsecured rating of the bonds issued by Seazen Global and guaranteed by Seazen Development and Seazen Holdings from "B3" to "Caa2"; At the same time, the negative outlook for the above ratings is maintained.

Moody's ratings

Soon after, Standard & Poor's also downgraded the long-term issuer credit rating of Seazen Development and Seazen Holdings to "B" from "B+"; It also downgraded the long-term issue rating of Seazen's secured senior unsecured notes to "B-" from "B".

Moody's said the company's refinancing risks are increasing due to the continued decline in real estate sales and limited access to financing due to the large amount of debt maturing in the next 12-18 months.

Since the second half of 2022, international rating agencies have downgraded the credit rating of Seazen Development and Seazen Holdings several times, and the company's credit qualification has been deteriorating, and it is facing greater refinancing pressure.

As for the repayment of outstanding debts in the open market, Wang Xiaosong also gave another supplementary path.

This year, the revenue of commercial management of Seazen Holdings is about 12.5 billion yuan, the gross profit margin is 70%, and there will be a large cash flow of several billion yuan as a supplement, and the net profit should be four or five billion yuan.

02

"There's no need to make up for scale"

According to the official website, Seazen Holdings was founded in Changzhou, Jiangsu Province in 1993 and is now headquartered in Shanghai. After 28 years of development, it has become a comprehensive real estate group that spans residential real estate and commercial real estate.

In 2012, Seazen Development was listed on the Hong Kong Stock Exchange. In 2015, Seazen Holdings was listed on the Shanghai Stock Exchange, becoming the first private real estate enterprise in China to convert B to A.

The official website of Metro Development

From the perspective of equity structure, the controlling shareholder of Seazen Holdings is Fuyu Development Group Co., Ltd., with a shareholding ratio of 60.97%, the second shareholder Changzhou Derun holds 6.1% of the shares, Seazen Development is its indirect controlling shareholder, and the actual controller of the company is Wang Zhenhua.

As of the end of February 2024, 467 million shares of the company held by the controlling shareholder of Seazen Holdings were pledged, accounting for 33.91% of the company's shares directly and indirectly held by it, and the equity pledge rate of the second shareholder was 57.33%.

Shareholding structure chart

In 2023, the cumulative contracted sales amount of Seazen Holdings will be about 75.983 billion yuan, a decrease of 34.52% over the same period of the previous year, and the cumulative contracted sales area will be about 9.6878 million square meters, a year-on-year decrease of 18.69%.

In the first four months of this year, the cumulative contracted sales amount of Xincheng Holdings was about 15.652 billion yuan, a decrease of 45.4% over the same period of the previous year, and the cumulative sales area was about 2.1612 million square meters, a decrease of 34.89% over the same period of the previous year, which shows that the company's sales situation is not optimistic.

In 2023, Seazen Holdings will not acquire any new land in the open market, and its investment will shrink across the board.

As of the end of 2023, Seazen Holdings has a saleable land reserve of 38.84 million square meters, of which 40% is in first- and second-tier cities and 21% is in third- and fourth-tier cities in the Yangtze River Delta.

Regarding the scale reduction, Wang Xiaosong said frankly that "there is no need to make up the scale", but also said that he hopes to use the projects under construction and the agency construction business to retain the team and wait for the opportunity to develop the business.

Wang Xiaosong said that the undeveloped land of Xincheng Holdings is about 40 million square meters, and the company's sales will continue to decline, and it will look for opportunities to develop business according to the basic situation of Panwuyue Plaza, and will also consider doing some asset-light projects, and the company's operating income will definitely decrease in the future.

"The essence of real estate development is like putting leverage on stocks", "After this round, I don't think there is any need to make up the scale", and the current business model is like this. We have good underlying assets, we must make good use of them, and maximize returns, rather than maximizing revenue, Wang Xiaosong said.

Regarding the resumption of investment and land acquisition, Wang Xiaosong said frankly that unless the company's total financing and interest-bearing liabilities can be equalized or even slightly higher, the company currently requires 10 development areas to maintain their own capital balance; The headquarters is to improve the company's security with the help of the cash flow brought by Wuyue Plaza and commercial management.

Therefore, we must see that the market is stable and the company is safe, so we will go to take the land.

In terms of performance, in 2023, Seazen Holdings will achieve operating income of 119.174 billion yuan, a year-on-year increase of 3.22%; the net profit attributable to the parent company was 737 million yuan, a year-on-year decrease of 47.12%; In the same period, the net profit after deducting non-profits was 307 million yuan, a decrease of 57.73%.

In the first quarter of 2024, Seazen Holdings achieved operating income of 14.357 billion yuan, a year-on-year decrease of 11.66%; The net profit attributable to the parent company was 227 million yuan, a year-on-year decrease of 65.50%.

Net profit attributable to the parent company

It is worth noting that, out of doubts about the ability to continue operations, the auditor issued an unqualified opinion on the annual report of Seazen Holdings with emphasis paragraphs.

03

Commercial real estate

In recent years, with the continuous advancement of new urbanization, Xincheng has increased the acquisition, storage and development of urban complex projects, forming a strategic model of "two-wheel drive" of residential real estate and commercial real estate.

From a strategic point of view, the simultaneous development of residential and commercial is unchanged, but in the short term, the new city should ensure delivery, reduce risks, and seek transformation, which is also a relatively helpless measure, Wang Xiaosong said.

In 2023, Seazen Holdings will achieve a total revenue of 11.324 billion yuan from commercial operations, a year-on-year increase of 13.17%; Among them, the operating income of property leasing and management was 10.631 billion yuan, mainly due to the increase in the number of Wuyue Plazas opened.

In the first quarter of 2024, Seazen Holdings achieved commercial operating income of 3.039 billion yuan, a year-on-year increase of 20.31%; Among them, a total of 2.835 billion yuan of rental income will be achieved in the first quarter of 2024, a year-on-year increase of 20.25%.

As of the end of March 2024, Seazen Holdings has 161 leased properties, with a leasable area of 9,042,200 square meters.

As of March 31, 2024, the average occupancy rate of Seazen Holdings' rental properties was 96.86%, an increase of 0.41pct from the end of 2023, and the occupancy rate remained high.

As of the end of March 2024, the occupancy rate of properties in 3 provinces of Hainan, Qinghai and Gansu has reached 100%, the occupancy rate of properties in 18 provinces has exceeded 95%, and the occupancy rate of 2 provinces has been less than 90%.

Seazen has been using the Wuyue Plaza brand to acquire a large number of low-cost land in lower-tier cities, and its cash inflows from real estate sales have financed the construction of shopping malls.

In turn, Seazen obtained a working capital loan from Wuyue Plaza.

In 2023, Xincheng will add about 14 billion yuan of operating property loans and other financing collateralized by Wuyue Plaza, and there are still investment properties valued at about 40 billion yuan in an unsecured state.

The financing of Wuyue Plaza that has been mortgaged by Xincheng includes the financing of operating property loans and the financing of China Debt Enhancement Guarantee, with a total of 30.2 billion yuan.

Xincheng has opened 142 operating properties, 46 of which have not made operating property loans, and the corresponding valuation is about 36.8 billion yuan, and if the mortgage ratio is 50% to 70%, the bottom line of the new financing amount is 18.4 billion yuan.

Wang Xiaosong said at the shareholders' meeting that the bank still has reservations about private real estate enterprises, taking Xincheng as an example, although the company has the assets of Wuyue Plaza, but the cash flow brought by this asset is still not so large compared with the cash flow brought by real estate development, so only when the market recovers, the loan can be smooth.

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