21st Century Business Herald reporter Wu Shuying intern Yang Jingyi reported in Shenzhen
A month ago, at the performance conference of Color Life, Pan Jun, chairman of the board of directors and CEO of Color Life, also boasted that he would "revitalize the vitality of the first share of the property", and he did not expect that a month later, the "first share of the property" that had unlimited scenery would be lonely.
On the evening of September 28, Country Garden Service Holdings issued an announcement that Country Garden Property Hong Kong Holdings signed an equity transfer agreement with Color Life Services to acquire 100% of the equity of Ryo Le Holdings Group Co., Ltd., a subsidiary of Color Life, for a total consideration of not more than 3.3 billion yuan. Upon completion of the transaction, Country Garden will hold almost all of the core assets of Color Life.
This may be a turning point in the development of color life.
Cai Life landed on the Hong Kong Stock Exchange in 2014, and its parent company is Fantasia, which was founded by Zeng Baobao. At the beginning of the listing of Color Life, its tailor-made story for the capital market once made its market value soar and became the darling of the capital market. However, in the past 7 years of listing, after experiencing many mergers and acquisitions with poor integration, the reputation of lottery life has taken a sharp turn for the worse, and it is still difficult to break through the bottleneck after many strategic adjustments, and the performance growth has stagnated.
At this delicate point in time, the parent company of Color Life, Fantasia, has also encountered turmoil, and its assets are still favored, but it has to embark on the road of "selling itself as a savior".
Prostitution
The sale of core assets to Country Garden Services by Lotto Life is considered by the industry to be a fair price transaction.
According to Country Garden's service announcement, as of June 30, 2021, the unaudited consolidated net asset value of Lingli Le was approximately RMB1.374 billion. As of the end of 2020, Neighborhood Music recorded a profit before tax of about $412 million and a profit after tax of about $309 million. According to this calculation, country garden service's acquisition of the valuation of TheRain Is not more than 11 times PE.
At present, the total market value of Color Life is only about HK$3.7 billion, and the price-to-earnings ratio is about 6.14 times PE. Compared with other head companies, this valuation is at a low level. Bai Wenxi, chief economist of IPG China, told the 21st Century Business Herald that this price is relatively fair, "because Color Life is originally a listed property management company, and its transaction valuation is based on the market transaction price." ”
Country Garden Services set up an installment payment method for this transaction. According to the announcement, Country Garden Property Hong Kong will make three payments in the form of its own funds, equity financing, loans, etc., and each period has corresponding payment conditions.
People close to Cai Life told the 21st Century Business Herald reporter that this transaction has actually been discussed for several months, and Country Garden Service has also bought the most valuable commercial assets of Cai Life, such as Vientiane Beauty Property and New Century International.
A person who understands Country Garden's services also analyzed that "this part of (Country Garden Service) buys is a commercial service, and according to the style of Country Garden's service, it will not buy other assets." ”
In recent years, because of the lack of post-investment management after mergers and acquisitions, the basic service level seems to have been the most criticized aspect, which has also affected the performance of lottery life in the capital market to a certain extent.
Since 2019, Color Life has undergone a number of management changes and corporate strategic adjustments. At the 2020 performance meeting, Pan Jun reported that the overall work has been basically completed through a year and a half of adjustments, including streamlining the management structure, adjusting the business development strategy, optimizing the salary and incentive mechanism.
At this year's interim results meeting, Pan Jun once again reiterated that Color Life is the most acquired company in the property industry, with a total of more than 200 property companies acquiring mergers and acquisitions so far. After a year and a half of integration, the company can enter some corresponding third-party business expansion in the future and return to the track of growth. "In the future, Color Life will pay moderate attention to mergers and acquisitions, and the corresponding scale of the company will also expand moderately." However, under the drastic adjustment, the color life did not usher in rapid development. According to the announcement of the 2021 interim results of Color Life, the company achieved revenue of about 1.7922 billion yuan during the period, an increase of about 0.75% year-on-year, which was lower than the average revenue growth rate in the industry; recorded a gross profit of 534 million yuan, an increase of 0.43% year-on-year. Although revenue turned from falling to rising, the increase was still small and the growth was weak. During the period, the area under management was 553.1 million square meters, and the area under management increased by 0.26% year-on-year, and the growth rate was much lower than that of other leading property enterprises.
Savior
The background of the sale of core assets by Cai Life is that the situation of its parent company Fantasia is not optimistic.
Bai Wenxi said in an interview with the 21st Century Business Herald reporter, "The main reason for the sale of core assets by Color Life is that the parent company Fantasia is facing greater liquidity pressure, and its assets that can be quickly realized and have a relatively strong ability to liquidate are the color life property sector." ”
Fantasia currently has a decline in performance and a top of debt. Bai Wenxi said, "Fantasia's industry status and scale do not occupy much advantage, and the financial situation is not very optimistic, so fantasia's future development pressure is still quite large." ”
According to Fantasia's 2021 interim report, a number of Fantasia's performance data declined and its development was weak. In the first half of this year, in terms of sales, Fantasia's cumulative sales were 28.12 billion yuan, less than half of the 2021 sales target of 60 billion yuan. In terms of revenue, Fantasia's annual gross profit was 2.277 billion yuan, down 26.75% from the same period last year; gross profit margin was about 20.8%, down 38% year-on-year; net profit margin was 2.77%, down 7.58% year-on-year.
At the same time as revenue declines, Fantasia's debt situation is not optimistic. According to the statistics of Shell Research Institute, the asset-liability ratio after excluding pre-collection in Fantasia is 72.7%, the net debt ratio is 74.8%, and the cash short-term debt ratio is 1.59. At the same time, Fantasia currently has borrowings of about RMB16.85 billion, senior notes and bonds of about RMB34.37 billion and asset-backed securities of approximately RMB268 million, with a total borrowing of RMB51.5 billion, an increase of about 10% over 2020.
Against this backdrop, Fantasia has been downgraded by international rating agencies such as S&P, Fitch and Moody's.
According to S&P, about $762 million of Fantasia senior unsecured bonds will mature for the remainder of 2021, $1.15 billion will mature in 2022, about $1.7 billion of domestic bonds will mature or be sold back in November and December, and about $3.5 billion of trust loans will mature within one year. "The negative ratings of the three international institutions mean that the liquidity of enterprises has deteriorated and their solvency has declined, and it also means that the risk and difficulty of financing in the open market have increased, according to Bai Wenxi's analysis. ”
Fantasia management is not without anticipation of such a situation. Previously, Fan Zhannian's chairman and CEO Pan Jun publicly stated that if the policy environment does not improve in June next year, sales will continue this downward trend, and 60% of private enterprise developers may face closure.
At this year's interim results conference, Fantasia management also said that Fantasia is dealing with heavy assets, including long-term investment projects. "The last time I met with investors, I also specifically talked about these actions, such as the disposal of some shopping malls and hotels, which will only reduce debt and increase cash flow for the company's future operations, and there are several commercial projects that are going relatively smoothly."
Judging from the behavior of Colorful Life selling core assets, Fantasia's self-help is relatively positive. It is just that now the real estate industry is in the midst of frequent cyclical changes, and the fate of many housing enterprises that are not accurate enough to predict the situation has finally had to change.
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