Recently, the Hong Kong Stock Exchange showed that Aoshan Holdings, which updated its listing application on May 23 this year, once again showed the status of the prospectus submitted as "invalid".
Despite the ups and downs, Okuyama Holdings still has a great obsession with listing. On June 28, the headquarters address of Okuyama Holdings was moved to Shanghai, and the CFO was changed in October this year.
Before and after the first prospectus submitted by Aoshan last year, the former Zhengrong CFO Tan Mingheng was recruited to Aoshan Holdings as the vice president and CFO responsible for financing, and by October this year, Tan Mingheng had transferred to Xiangsheng Real Estate.
Okuyama Holdings has since appointed Vice President of Financing and CFO Tan Weimin, who has worked for Haitong Securities, Xincheng and Greentown.
Recently, there have been many small and medium-sized real estate enterprises listed in Hong Kong, including Huijing Holdings, Helenburg, China Tianbao Group, Wanchuang International, Jingye Mingbang, Sanxun, etc., of which Jingye Mingbang is backed by Agile and the listing prospects are relatively clear, while for other small-scale housing enterprises, the interest in the capital market may not be large.
There are few soil reserves, high debt, and high financing costs
Some insiders said that the factors hindering the listing of Okuyama may be high debt and low soil reserves.
According to the prospectus, for the years ended December 31, 2016, 2017 and December 31, 2018, Aoshan's revenue was $1,312 million, $1,552 million and $1.89 billion, respectively, representing a compound annual growth rate of 20.1%, while in 2016, 2017 and 2018, the company's net profit was $46 million, $195 million and $240 million, respectively.
In 2016, 2017 and 2018, the Company's gross profit was RMB355 million, RMB663 million and RMB731 million, respectively. Gross margin increased from 27.0% in 2016 to 42.7% in 2017.
From the perspective of revenue, gross profit and net profit, Okuyama's market performance is still satisfactory, but "the mountain is in front of us."
According to Okuyama Holdings, for the years ended December 31, 2016, 2017 and December 31, 2018, the Company's total borrowings were RMB2,533 million, RMB5,338 million and RMB5,968 million, respectively, while as at the same date, Okuyama's net capital-liability ratio was 316.5%, 568.9% and 283.1%, respectively.
Although the net gearing ratio fell sharply from 2017 to 2018, in fact, its interest-bearing borrowings and other borrowings increased from 5.338 billion yuan in 2017 to 5.968 billion yuan.
In addition, as at 31 December 2016, 2017 and 2018, the Company's weighted average effective interest rate on outstanding bank and other borrowings was 9.9%, 9.9% and 9.4%, respectively.
At the same time, its prospectus shows that between 31 December 2018 and the last practicable date, the Company entered into loan agreements and trust financing agreements with financial institutions in the aggregate amount of RMB341 million and RMB2.02 billion respectively. Loan interest rates range from 10% to 18%, and trust financing rates range from 10% to 13%. This shows the high cost of financing.
Hong Kong's capital market has always attached great importance to the land reserves of real estate enterprises, but in terms of land reserves, Aoshan is not outstanding.
As of March 31, 2019, the Company had a total of 25 projects in Hubei, Anhui, Sichuan, Chongqing and Zhejiang with an estimated gross floor area of approximately 3.4 million square metres of land bank attributable, including development properties with a total planned area of approximately 2 million square metres and a total planned area of approximately 1.1 million square metres for future development properties.
Ice and snow features are just a "concept"
On June 28, the headquarters address of Aoshan Holdings was moved to Shanghai, which was regarded as a signal for Aoshan's layout of the whole country, which was undoubtedly a new challenge for this Hubei regional enterprise that had been in a corner for 22 years of entrepreneurship. After all, the real estate enterprise turn is like "fat man turning".
In fact, the Group has always focused on Hubei Province, and from the distribution of the company's soil reserves in the prospectus, it can be seen that 63.2% of the company's land reserves are located in Wuhan, of which the Aoshan International Ice and Snow Sports Town covers an area of 21%, which can be seen that the company's focus on development is inclined to Wuhan and the ice and snow sports town.
Founder Wu Jiangang established the Aoshan Group business in Hubei in 1997 and began to enter the construction and decoration industry. In 1999, Okuyama Group acquired its first residential real estate development project in Wuhan, Hubei Province.
In 2003, Okuyama Real Estate was established as a real estate development business platform.
In 2010, Wuhan Aoshan Commercial was established, and Aoshan Group further expanded its business to commercial property operation and management.
In 2013, Okuyama developed the first true ice rink in Wuhan.
Although its prospectus shows that its business is divided into three major segments: property sales, commercial real estate management and operation, and ice and snow sports and entertainment services, its real estate sales account for a large proportion in terms of revenue. Specifically, property sales reached $1,781 million, accounting for 94.2% of total revenue; commercial properties were $107 million, or 5.7%,7%, and ice and snow business and entertainment were $2.95 million, or 0.1%.
At present, its ice and snow projects include Aoshan True Ice Rink, Wuhan Optics Valley Ice and Snow Complex and Aoshan International Ice and Snow Sports Tourism Town, of which only Aoshan True Ice Rink is in operation, and the other two projects will be completed in 2021 and 2020. Moreover, the revenue of the ice and snow business fell from 8.68 million yuan in 2017 to 2.95 million yuan in 2018, a decrease of 66%. In other words, Okuyama Holdings' source of income is still extremely dependent on traditional property sales.
According to the data of relevant institutions, from 2013 to 2017, the market size of China's ice and snow industry increased from 117.7 billion yuan to 397.6 billion yuan, an increase of nearly 3 times. Although the growth rate of the industry has declined due to macroeconomic impact, the overall ice and snow industry is still in a period of expansion. It is estimated that in 2020, the market size of China's ice and snow industry will exceed 600 billion yuan.
In addition, the prospectus shows that in 2018, "Jingkai Aoshan International Ice and Snow Sports Tourism Town" was successfully selected into the "2018 National Preferred Sports Industry Project Directory", which will become a national AAAA-level tourist attraction and a training base for the Wuhan 2022 Beijing Winter Olympics after completion. However, none of this has been cashed into real operating income in Okuyama.
It is worth noting that Aoshan also has a Ozan Film and Television Culture Co., Ltd., which is reported to have invested in a number of main theme film and television dramas such as "Qin Moving My Heart" and "The First President", of which "Qin Moves My Heart", played by Wu Jiangang's daughter Wu Zhenlin. This may be seen as An attempt to diversify and expand Wu Jiangang's film and television communication, culture and education.
Listing is a thirst for capital for Aoshan, and can also be seen as a watershed, the cost of financing after the listing is lower, and the financing channels are wider, but after the prospectus fails again, Whether Aoshan can still be favored by capital in the future will be tested by time.
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