What is Zheng Jiachun's intention to join the Zhongce Group

Last Friday, The story of hong Kong's "big d club" in the top rich circle is always very eye-catching, last Friday, the son of the deceased Hong Kong top rich man Zheng Yutong and the chairman of the New World Group, Cheng Ka Chun, joined the Zhongce Group (0235.hk), spending 204 million Hong Kong dollars to take control of the Zhongce Group, so that the "Big D Club" once again entered the market eye.

The largest shareholder of Zhongce Group was originally Sun Zhuohong. In Hong Kong, Sun Kuohong, known as the "Shell King" and "Immortal Stock King", rarely appears in public, appearing low-key and mysterious. In 2015, Sun Zhuohong suddenly took a stake in Zhongce Group, holding 9.89% of the shares and becoming the largest shareholder. Now that Zheng Jiachun has struck, Sun Zhuohong has relinquished the position of majority shareholder.

It is worth mentioning that Sun Kuohong and Zheng Jiachun have a very close relationship with Xu Jiayin, a rich man in the mainland.

In October 2009, Evergrande held a listing promotion meeting in Hong Kong, Zheng Yutong, Liu Luanxiong and Zhang Songqiao all came to the platform, the three were also regarded as the core members of the "Big D Meeting", Xu Jiayin was able to survive the financial crisis in the previous year thanks to the help of "Shark Guts Tong" Zheng Yutong.

There are also inextricable links between Sun Andhong and Evergrande. In November 2016, Vanke's equity dispute was fierce, Xu Jiayin and his allies increased their stake in Vanke, and Zhongce Fuhui, a subsidiary of Zhongce Group, also bought 2.8% of Vanke's equity, which was interpreted by the market as a move to aid Evergrande.

Now that Zheng Jiachun has taken over the baton from Sun Zhuohong, how many stories of rich allies are involved in this small deal?

Sun Gave way

On November 20, the announcement of Zhongce Group showed that after the trading hours of the day, Zhongce Group entered into a subscription agreement with the subscriber Zheng Jiachun, zhongce Group conditionally agreed to allocate and issue shares, and Zheng Jiachun conditionally agreed to subscribe for shares, and the subscription price of each subscribed share was HK$0.060. The closing price of Zhongce Group on the previous trading day was HK$0.07 per share, and the subscription price was 85.71% of the closing price of the previous trading day.

Before the completion of the above transaction, the single major shareholder of Zhongce Group was a wholly-owned company owned by Sun Zhuohong, with a shareholding ratio of 9.89%. After the completion of the transaction, Zheng Jiachun's shareholding increased to 16.67%, replacing Sun As the company's largest shareholder, who diluted his shareholding to 8.24% to become the second largest shareholder.

After Zheng Jiachun's shot, on November 23, the stock price of Zhongce Group rose by 47.76%.

Zhongce Group, which is favored by Cheng Ka Chun, is mainly engaged in investment securities, commodity and electronic component trading, money lending and securities brokerage business. According to the 2020 semi-annual report, the profit of Zhongce Group for the current period was HK$51.651 million, compared with a loss of HK$139.5 million in the same period last year. In the half year of 2020, zhongce group's revenue decreased by 76% to HK$143.1 million, compared to HK$605 million in the same period last year, mainly due to the decrease in sales of trading business and interest income from the money lending business.

Wind data shows that from 2016 to 2018, the operating income of Zhongce Group climbed, reaching the peak of the last five years in 2018, and after 2018, the operating income of Zhongce Group declined year by year.

In the main business of Zhongce Group, the interest income from lending accounts for more than half. However, in the money lending business, due to the impact of the new crown epidemic this year, especially the current economic situation in Hong Kong, the average amount of loans made by Zhongce Group to borrowers decreased in the first half of the year, and on the other hand, some loans were granted that defaulted on the time.

From the perspective of the solvency of Zhongce Group, as of June 30, 2020, the asset-liability ratio of Zhongce Group was 35.59%, which did not change significantly from 39.79% in 2019, but from the perspective of current ratio, the current ratio of Zhongce shares decreased from 5.42 in 2019 to 2.48, the liquidity of assets was weakening, and the short-term solvency was also weakening.

The transfer of control has brought an infusion of funds to Zhongce Group, and the announcement shows that the total proceeds from the subscription will be HK$203.9 million, and it is expected that the net proceeds after deducting related expenses will be about HK$203.5 million, and Zhongce Group intends to use the net proceeds as general working capital.

Hong Kong Big D Association

The relationship between Zhongce Group and dadhui has always been talked about by the outside world.

According to the semi-annual report of Zhongce Group, as of 30 June 2020, Zhongce Group held a portfolio of financial assets of HK$1.585 billion recorded at fair value through profit and loss. In the first half of 2020, the portfolio generated revenue of HK$4.608 million.

In this asset portfolio, Evergrande Health accounts for 87.46% of the total assets and 26.49% of the total asset book value of Zhongce Group, while Emperor International accounts for 3.52% of the total assets and 1.39% of the total asset book value of Zhongce Group.

Whether it is Xu Jiayin, the actual controller of Evergrande Health, or Yang Shoucheng, the head of Emperor International, they are regarded as members of the Big D Society.

In 2015, Zhongce Group invested in Evergrande Health, and as of June 30, 2020, Zhongce Group held 1.55% of the equity of Evergrande Health.

On December 23, 2015, Evergrande Real Estate announced its intention to issue us$1.5 billion in permanent convertible securities to several investors, with Zhongce Group subscribing for $100 million. The subscription further diluted Xu Jiayin's rising equity ratio due to large-scale repurchases, avoiding the embarrassment of triggering a privatization delisting offer. On December 30 of that year, Zhongce Group announced that it had completed the subscription of US$100 million perpetual securities of Evergrande Real Estate, and with the consent of both parties, the securities would not be subject to the exchange of shares in the main terms announced earlier, and the distribution rate should be adjusted from 7% per year to 9%.

In the equity dispute of Vanke, the big D will also be described as a full battle, with Dingpei Securities, a new world royal brokerage led by the Zheng family, holding 8.84% of Vanke H shares, and Zhang Songqiao's private equity fund nexus Capital holding 11.54% of Vanke H shares. In November 2016, after the help of the Big D Club, Zhongce Fuhui, a subsidiary of Zhongce Group, also bought a 2.96% stake in Vanke, spending nearly HK$800 million according to market value, which was interpreted by the market as a move to aid Evergrande. In the end, Evergrande left with a huge loss of 7 billion.

In December 2016, for being accused of being involved in the Vanke equity war, Ke Qinghui, chairman of Zhongce Group, clarified in Hong Kong that Zhongce Fuhui, a securities company under Zhongce, only held shares on behalf of customers, although he himself knew who bought it, but it could not be disclosed due to customer privacy. It can be seen that Zhongce Group acts as a channel in Vanke's equity station.

On March 29, 2017, Zhongce Group once again announced that Jiazhi Investment, an indirect wholly-owned subsidiary of the Company, had completed the acquisition of 9.50% China Evergrande senior notes with a total principal amount of US$50 million and a total consideration of US$50 million.

However, the involvement between Zhongce Group and Evergrande is not over, in June 2019, Evergrande and Zhongce Group met again in the process of Evergrande's acquisition of control of Shengjing Bank, and on the evening of June 20, 2019, China Evergrande announced that Evergrande Group (Nanchang) Co., Ltd., a subsidiary of the company, subscribed for 2.2 billion shares of Shengjing Bank at a subscription price of 6 yuan per share, with a total consideration of 13.2 billion yuan. So far, Evergrande Group holds a total of 36.3965% of the equity of Shengjing Bank, making it the largest shareholder of Shengjing Bank.

At the same time, Shengjing Bank entered into h-share subscription agreements with Zhengbo and Future Capital respectively, pursuant to which Zhengbo and Future Capital each had conditional consent to subscribe, and Shengjing Bank had conditionally agreed to issue 400 million h-shares to each of them, accounting for about 6.9% and 4.55% of Shengjing Bank's issued share capital and the bank's expanded issued share capital respectively, with a subscription price of HK$6.818182 per h-share (equivalent to about RMB6). Zhengbo is wholly owned by Sun Kuohong.

Zhongce Group announced on June 3 that between May 27 and June 2, Jiazhi, an indirect wholly-owned subsidiary of the Company, sold a total of 5.8 million shares of Shengjing Bank in the open market for a total consideration of RMB39.582 million, equivalent to an average price of RMB6.82 per share, bringing in a gain of HK$4.369 million for Zhongce Group.