2020-09-30

Sell ​​again! Sunac China, with a net debt of 149%, has a difficult life

By yqqlm yqqlm

Sunac China is selling off its assets. On September 29, Guo Guangchang’s Shanghai Yuyuan Tourism Mall (Group) Co., Ltd. issued an announcement stating that the company intends to acquire 100%of Chengjiang Yibang at a price of 1.184 billion yuan, thereby obtaining Yunnan Fairy Lake Landscape International Leisure Tourism Resort Park Project development rights.

It is understood that Kunming Ronghan Real Estate Development Co., Ltd., a subsidiary of Sunac China, holds 70%of Chengjiang Yibang, and Kunming Yibang Investment Co., Ltd. holds 30%equity of Chengjiang Yibang.

In addition to this item, another item is also on sale. On the evening of September 28, according to Times Finance reported that Sunac has sold a commercial property in the Shanghai Xiangyihuacheng project to Blackstone at a discounted price of about 700 million yuan.

It can be said that Sunac, which has the top three debt ratios on the”three red lines”, has a hard time. The performance of the stock market also caused headaches for Sunac and their investors.

On September 30, Hong Kong stocks and Chinese real estate stocks saw a general rise again. Shimao, China Resources, Country Garden, Vanke, Sunac, etc. all achieved good gains. Among them, Sunac China rose more than 3%.

However, Sunac China has fallen for several consecutive trading days, especially on September 25, Sunac China The decline was more than 5%at one time, and the stock price fell below 29 Hong Kong dollars, a record low since April. Since the high of HK$48.2 at the beginning of the year, Sunac China’s share price has fallen by nearly 40%. Investors who participated in Sunac’s allotment at a high price at the beginning of the year have suffered losses of more than 30%so far, and the financing cost of debt 320 billion has doubled.

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Buying, buying and buying has become selling and selling

As the most prestigious real estate industry”M&A expert”, Sun Hongbin has always been keen to”buy, buy, buy”. During the six years from 2014 to 2019, the M&A targets listed by Hongbin Sun in the purchase list include but not limited to Greentown, Kaisa, Yurun, Raycom, LeTV, Wanda, Oceanwide, Xinhu Zhongbao, Global Century and Equity or projects of companies such as Times Global.

In the past, mergers and acquisitions have been regarded by the industry as an effective shortcut for real estate companies to quickly achieve large-scale overtaking in curves.

Sorting out the path of Sunac can be described as the best specimen. Through mergers and acquisitions that cannibalize other real estate companies and projects, Sunac was able to rapidly expand its land reserves. In five years, its scale increased by 7.57 times, and its industry ranking quickly jumped from 9th to 4th, only one step away from the top three real estate sales. .

However, Sunac China has also piled up many problems with its rapid growth. In the first half of 2019, Sunac China’s sales growth rate was only 11.8%year-on-year, which was a sharp decline from the 106%and 140.3%sales growth rates in 2016 and 2017, and even when compared to 27.3%in 2018, it also declined significantly.

In order to ease the pressure on debt, in the first half of this year, Sunac received more than 10.6 billion yuan through the sale of Jinke shares. This transaction not only recovered the cash, but also relied on the proceeds obtained from”stock speculation”, and Sunac China achieved a slight increase in its net profit after tax in the first half of this year.

This means that in the first half of this year, 36.7%of Sunac China’s net profit came from “stock speculation”. If this part of the income is excluded, Sunac’s net profit in the first half of the year will drop sharply from the same period last year.

At the investor meeting in March this year, Hongbin Sun said that the current urban differentiation is serious, and some cities have higher risks. In order to balance the risks, Sunac Resolutely sell assets, hotels and parks are all commodities for sale. At the same time, he also said frankly that as long as someone is willing to take over,”a little discount is fine.”

In the second half of the year, Sunac is facing more tension. Situation. On the one hand, by the first half of the year, its annual sales target was less than 50%completed. Sunac needs to do its best to fill the performance gap caused by the epidemic in the first half of the year; on the other hand, the”three red lines” new policy has made Sunac’s financial alarm bells ring forever .

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The chain reaction of high debt

Generally speaking, short-term cash debt If the ratio is less than 1, it indicates that the company has debt repayment pressure. Real estate companies with a background in central enterprises and state-owned enterprises have less debt pressure, but large-scale private enterprises such as Evergrande and Sunac have been reducing leverage, but due to the faster pace of investment, the debt-to-asset ratio has always been in the forefront of the industry.

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The financial report shows that as of the end of the first half of this year, Sunac China’s net debt ratio is 149%. Although it has dropped by 23.3 percentage points year-on-year, it is still far higher than the”three red lines” net debt ratio of less than 100%.

As of the end of the first half of the year, Sunac China’s asset-liability ratio after excluding advance receipts was 62.13%, with total liabilities of 862.521 billion yuan.

Among them, contract liabilities or advance receipts are 243.379 billion yuan, and total borrowings are 320.332 billion yuan. The total debt of Sunac China exceeded 500 billion yuan in 2017, and by 2018, the total debt reached 600 billion yuan, and in 2019 it reached 846.55 billion yuan.

Accompanied by high debt are Sunac China’s financial costs and declining cash.

According to the financial report, Sunac China’s financial expenses in the first half of the year were 1.59 billion yuan, a year-on-year increase of 159.38%. Among them, financial costs were 2.451 billion yuan, doubled from the previous year, and financial income was 861 million yuan, an increase of 38.87%year-on-year. In terms of cash, in the first half of this year, Sunac China’s cash balance was 120.86 billion yuan, a decrease of 3.87%from 125.73 billion yuan at the end of the previous year.

On August 26, 2020, Sunac China released its interim report:revenue of 77.34 billion yuan, a year-on-year increase of 0.7%; net profit attributable to the parent was 10.96 billion yuan, A year-on-year increase of 6.5%.

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The answer sheet is generally good, and some breakdown data is not lacking in hidden dangers. As of June 30, 2020, Sunac China’s interest-bearing liabilities totaled 320.33 billion yuan; the net debt ratio was 149.0%, a sharp drop of 23.3%, which was still higher than the peer average.

Interest costs have increased, and expensed interest has increased by 450 million yuan over the same period last year to 1.54 billion yuan. The financial report explained the reason for the increase in the weighted average financing balance.

At the same time, there are financial costs. From January to June 2020, the company’s financial costs were 2.452 billion yuan, a 98.86%increase compared to 1.233 billion yuan in the same period in 2019. After deducting capitalized interest expenses, Sunac China’s net financial costs were 1.59 billion yuan, an increase of 160%compared to 613 million yuan in the same period in 2019.

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Under capital pressure slows down the ambition to acquire land

Review Sunac The land acquisition situation in the first half of 2019 was close to the total amount of land acquisition in 2018, and the land acquisition intensity reached 0.81. Under the main theme of the word”stable” in the industry, Sunac China has the taste of going against the trend.

It is worth mentioning that the chairman of the board of directors Sun Hongbin once emphasized in the August 2019 interim results that”there are basically no targets in the second half of the year.” Then the voice just fell. , In October of the same year, Sunac acquired tens of billions of land, won the Changshi Group’s Dalian Xigang project with 4 billion yuan; won the Beijing Daxing Sun Village plot with a total land price of 2.03 billion yuan.

According to data, Sunac’s new land reserve in 2019 is worth up to 150 billion yuan, ranking first among the first-tier real estate companies, even higher than” Reserve King” Country Garden.

In January 2019, Sunac China spent 12.553 billion yuan to acquire Wuhan Central Business District Co., Ltd. under Oceanwide Holdings. In November of the same year, Sunac China’s indirect wholly-owned subsidiary acquired 51%of each of Global Century and Times Global held by Yunnan Urban Investment Group at a consideration of 15.269 billion yuan. Buying and buying all the way, the funds are naturally under pressure.

So, in 2020, a financing model was launched.

On January 8, 2020, Sunac China announced that it will issue US$540 million 6.5%senior notes due in 2025, and the funds will be mainly used for cash There is debt refinancing.

In other words, this is a typical”borrowing the new and repaying the old”, showing that it is pushing the risk into the future. In addition, it also adopts allotment methods to obtain funds.

On January 10, Sunac China issued an announcement to place 18692 million placing shares at HK$42.80 per share. The placing shares account for the company’s existing issued shares Approximately 4.20%of the number, and approximately 4.03%of the number of issued shares after the expansion of the placing. The total proceeds are approximately HK$8 billion, and the net amount is approximately HK$7.958 billion.

Unfavorable sales, debt pressure, low gross profit margin, frequent financing, and many issues have also affected the attitude of capital. Since the beginning of 2020, Sunac China’s stock price has been in a turbulent phase.

According to the financial report data, in the first half of this year, the financial innovation increased its land bank by about 17.3 million square meters, and the new value of goods was about 233 billion yuan, a sharp drop of 64%year-on-year. That is, the new land bank is only 1/3 of last year. In the list of companies’ land acquisition amount released by Crane in the first half of the year, Sunac ranked 13th with only 34.5 billion yuan, only half of Evergrande, and even less than medium-sized real estate companies such as Sunshine City and Binjiang.

According to the analysis of Yihan Think Tank, Sunac China strictly controlled the pace of land acquisition in the first half of the year, which provided strong support for companies to reduce debt.

“Accelerating the reduction of leverage ratio as an important measure will be implemented in the next three-year plan. The current net debt ratio of Sunac is 149%. At the end of this year, there will be a more substantial decline, and the goal is to control the net debt ratio to below 100%next year.” Wang Mengde said.

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The contradiction between radical and quality

Like most industries, real estate The”radical” and”quality” are often a pair of contradictions.

While Sunac China is expanding rapidly, it has also received many complaints from users.

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December 30, 2019 was the final delivery stage of the Sunac No. 1 Courtyard Project in Hefei Administrative District, but many owners started to defend their rights.

According to media reports, the rights defenders believe that the hardcover standard stated in the purchase contract was RMB 5,000 per square meter, but according to the decoration details and model announced by the developer Calculated by the house configuration, the decoration cost per square meter is about several hundred to 1,000 yuan, which is far from the standard hardcover model house promised by the developer before buying the house. Many owners refuse to accept the house.

At the same time, some owners reported that in the house decoration, the wall tiles are not neatly pasted and the gap is large, and the kitchen sliding door is actually glued with glass glue . In addition, the decoration details such as doors, wallpaper, ceilings, cabinets, and floors are also rough, and the materials used are cheap and not environmentally friendly.

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Coincidentally,”Anhui Public Daily 315″ reported that Ms. Wu from Hefei bought an apartment in Building 22, Sunac No. 1 Yard in Hefei Administrative District. It was supposed to be handed over on June 30, but it was the handover date. It was found that the gate was still damaged and the facilities were not perfect. The community developer promised to reply within 30 days, but to this day, there is still no maintenance.

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Sunac China also experienced a number of illegal construction problems in 2019. On December 14, the Zhengzhou Municipal Bureau of Ecology and Environment issued the”Notice on the Accountability of the Sunac Project Violated Control and Control Operations and the Relevant Persons Responsible in the Xincheng Road Office of Huiji District”, which showed that the on-site inspection was conducted at 3 am on December 13 It was discovered that 7 hooking machines of the Pangzhuang Village Sunac Project Blocks 6 and 7 illegally used more than 60 black slag trucks from other provinces, cities, and this city, and they were violating the orange warning control to clear and transport the slag, and black refueling was found 3 cars.

The notification also shows that since 2019, the municipal supervision team has found a total of 23 serious problems in the Zhengzhou Sunac project and 23 penalties. 16 cases have been filed. A total of 470,000 fines were imposed, and 8 cases were closed; the Zhengzhou Sunac project involved a total of 51 points deductions, and the Municipal Dust Control Office blocked them based on credit evaluation methods.

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Not only have housing quality and construction issues been repeatedly complained, Sunac China has also been questioned in terms of supporting services.

According to the company’s investigation, Sunac Services currently involves more than 1,000 judgment documents, of which more than 900 are disputes over property service contracts. Among them, the number is the most in 2018 and 2019.

For many Chinese, houses that cost millions of dollars are the dreams of the whole family or even two or three generations. In the face of complaints, it is obvious that while this is rubbing the interests of consumers and damaging the image of Sunac’s leader, it is also contrary to Sun Hongbin’s vision of”integrating service providers for a better life in Chinese families”.

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Cultural tourism”giant baby” with a production cost of hundreds of billions

The land acquisition ambition has slowed down compared to previous years, but Sunac has made new moves in other projects. According to data, Sunac Culture & Tourism has deployed 12 cultural tourism cities and 4 tourist resorts in China, covering 49 parks and nearly 150 mid-to-high-end hotels.

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According to Sunac’s performance report for the first half of 2020, the construction and operation of Sunac Cultural Tourism City achieved revenue of 980 million yuan, accounting for only 1.3%of the group’s total revenue, a decrease of 9.3%from 1.08 billion yuan in the same period last year . It’s not the same as the real estate business with hundreds of billions in revenue.

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It is true that the epidemic is an important factor leading to the decline in the cultural and tourism business, but it cannot conceal the overall weakness of Sunac’s cultural and tourism sector. Even in 2019, Sunac’s cultural and tourism sector revenue growth rate was as high as 40%, but the revenue was still only 2.85 billion, and the revenue accounted for less than 2%in the past three years.

In stark contrast to the weak revenue, Sunac’s huge capital investment.

Starting in 2017, Sunac has officially started its acquisition of cultural tourism. On July 19 of that year, Sunac acquired a 91%stake in 13 cultural tourism projects held by Wanda Commercial Management with a huge investment of over 40 billion yuan, which included 10 cultural tourism cities. The following year, Sunac purchased the design and management company of Wanda Cultural Tourism City for more than 6 billion yuan, forming a cultural tourism team of thousands of people.

Also in 2018, Sunac Cultural Tourism Group was formally established and operated independently. According to sources close to the cultural and tourism sector, Sunac’s management consciously or unintentionally on certain occasions since then regarded the cultural and creative sector as a new growth pole.

In 2019, Sunac invested another 15 billion yuan to bring Global Century and Times Global into the bag, and enrich the exhibition format under the cultural tourism sector.

If you count the newly opened Chengdu-Chongqing cultural tourism cities, only the large sums of money on the bright side, Sunac will build the cultural tourism sector. It costs nearly hundreds of billions of dollars. Industry insiders said bluntly,”This is very Sunac, and Sun Hongbin.”

Related information shows that at the end of 2019, Sunac has sold a hotel and another Four hotels have been put on shelves. In addition,”some businesses and parks will be sold.” For a time, the cultural and tourism sector that had high hopes became”abandoned sons.”

In the face of financial crisis, sharp decline in cash flow, and high debt that is difficult to reduce, Sunac China has found another way-entering cultural tourism projects, no doubt It made the group worse. Not only did it fail to succeed, it paid a price of 100 billion yuan.

When the problem is not solved, the risk of Sunac China choosing a new project (cultural tourism) will only increase. Hundreds of billions of”giant babies” are ultimately just victims on the cruel battlefield.