2020-10-18

Invalid prospectus:”traffic jam” in the listing track of small and medium-sized real estate companies

By yqqlm yqqlm
getInterUrl?uicrIvZQ=a4a4e3e40cceef3b7b5e1c53ddcda4d5 - Invalid prospectus:"traffic jam" in the listing track of small and medium-sized real estate companies

Liu Wei/Article
Small and medium-sized real estate companies always”do not abandon or give up” on the way to docking with the capital market.

On October 12, Sichuan’s leading real estate enterprise Territory Holdings Group Co., Ltd. (hereinafter referred to as “Lingdi Holdings”) submitted an updated prospectus document to the Hong Kong Stock Exchange.

Three days ago, the first prospectus submitted by Territory Holdings in April of this year was shown as”invalid”. This means that after the first listing in Hong Kong, Territory Holdings quickly started the IPO process again.

In fact, it is not uncommon for small real estate companies to hit IPO failures in recent years. At the same time as Territory Group, there are Shangkun Real Estate, Datang Real Estate, Sanxun Holdings, and going forward, there are Wanchuang International and Helenborg , Orsun Holdings, including Wanchuang International’s four landmarks before and after, the sprint IPO still failed.

“The invalidity of the prospectus submitted by the real estate company to the Hong Kong Stock Exchange does not mean that the company cannot be listed. Resubmitting the prospectus after the update indicates that the company believes it has the ability to solve the current problem.” Huang Lichong, executive director of Securities (Hong Kong) and managing director of the investment banking department, believes that the reasons for repeated submissions that failed to pass the hearing of the Hong Kong Stock Exchange are more complicated.

“Invalidation-Update” cycle

Almost at the same time as Territory Holdings, on October 9, Shangkun Real Estate Group Co., Ltd. (hereinafter referred to as””Shangkun Real Estate”) submitted a prospectus to the Hong Kong Stock Exchange for listing on the Main Board, and the sole sponsor is ABCI. This is the second prospectus submitted by Shangkun Real Estate. As early as the end of March this year, Shangkun Real Estate submitted an application for the first time. As of the end of September, the application had expired.

Coincidentally, after submitting a form to Hong Kong in October 2019 to seek listing, in May this year, Anhui small real estate company Sanxun Holdings chose to continue its listing for the second time.

On October 17, 2019, Sunsun Holdings officially submitted a prospectus to the Hong Kong Stock Exchange, and CCB International served as its sole sponsor. As of April 17 this year, six months after the expiration, Sansun Holdings has not been approved.

According to incomplete statistics, since 2019, the real estate companies that have submitted prospectuses to the Hong Kong Stock Exchange include Shangkun Real Estate, Lingdi Holdings, Sanya Holdings, Dragon Real Estate, Real Estate, Datang Group, Xiangsheng Many of the real estate companies, such as Holdings, Wanchuang International, Helenberg, etc., submitted the updated prospectus again after the prospectus expired, and the willingness to go public was obvious. Among them, as of December 2019, Wanchuang International, an Anhui real estate company, was still rejected by the Hong Kong Stock Exchange after 4 consecutive submissions.

A person in the real estate finance industry told a reporter from the China Real Estate News that, taking Territory Holdings as an example, the company’s listing was rejected mainly because of the high debt ratio, low profit margin, and the scope of land acquisition. Third, fourth, and fifth-tier cities face greater limitations and risks in their future performance.

However, Bo Wenxi, chief economist of IP Global China, offered his views from another angle. During the interview, he stated that the main concern of the Hong Kong Stock Exchange when hearing a company to be listed is the formal compliance and procedural legality of the application materials submitted by the listed company. Therefore, real estate companies such as Territory have failed to submit their forms, more because of the possible flaws in the confirmation of their own assets, and the financial aspects may also have some non-compliant areas that need to be adjusted. In addition, the information declared and disclosed by the company may not be sufficient and complete to meet the Hong Kong Stock Exchange’s letter and disclosure requirements for the company to be listed, so it was rejected by the Hong Kong Stock Exchange.

There are still some”lucky ones”

Nevertheless, there is still a house on this crowded track leading to the Hong Kong Stock Exchange. The company was born as a”lucky person”.

On July 15 this year, Dragonair China Land Group Co., Ltd. (hereinafter referred to as”Dragonair China Land”, 06968.HK), which submitted forms to the Hong Kong Stock Exchange twice, was officially listed on the Hong Kong Stock Exchange It went public, but suffered a break on the first day.

Dragon China Land is the second mainland real estate company approved for listing in Hong Kong this year and the first listed mainland real estate company after the outbreak of the epidemic. The offer price is set at HK$3.93 per share.

Although there is Henderson Land Chairman and Managing DirectorSuccessful Lotus and Zhongyi Capital, which are wholly-owned by Li Jiajie, are cornerstone investors. The two institutions subscribed for 40 million Hong Kong dollars respectively, but Dragonair China Real Estate fell to 3.73 Hong Kong dollars on the morning of the first day of issuance. /Share, a decrease of 5.08%, the decline narrowed in the afternoon, the closing price of the day was 3.92 Hong Kong dollars per share, a decrease of 0.25%.

The above-mentioned real estate financiers said that Dragonair China Real Estate meets the requirements for listing, but its business scale and profits are limited, the land acquisition area is skewed, and the development space does not have high imagination, so it is not widely Recognized by investors.

On October 14, a Crane Securities analyst said in an interview, “The reason why Dragonair China Land was able to land on the Hong Kong Stock Exchange was because it was on the Hong Kong Stock Exchange. There is no enterprise to compete with a good target, which also results in that even if it can go public, there is not much room for premium.” In the near future, Ant Group’s listing on the Hong Kong Stock Exchange will attract a large amount of capital. For real estate companies, this is not a good listing opportunity.

Bai Wenxi analyzed that the current”high debt and high turnover” business model of mainland real estate companies is no longer sought after by the capital market. Therefore, the price-earnings ratios of many listed real estate companies are relatively low.

“In order to solve the problem of financing and liquidity pressures, small and medium real estate companies have found a discovery after listing. This is not a specific company’s problem, but the entire Chinese property stocks are more common. Most Chinese property stocks have relatively low valuations, and their share prices are basically lower than the net assets per share.”

The increasingly crowded”road to market”

On April 9 this year, Territory Holdings submitted an IPO prospectus on the Hong Kong Stock Exchange, exposing its wealth for the first time.

According to the prospectus, the revenue of the Territory Group from 2017 to 2019 was 5.339 billion, 4.514 billion, and 7.568 billion, respectively, achieving a compound annual growth rate of 19%. However, net profit margins have been declining. The net profit margins from 2017 to 2019 were 12.2%, 11.5%, and 8.9%, respectively. The profitability continuously underperformed the industry average, and the net profit margin in 2019 was even lower than half of the industry average.

Let’s look at Helenborg and Sansun Group, which are also stuck outside the door of the Hong Kong Stock Exchange. From 2016 to 2018, Helenberg’s profits were 2.898 billion yuan, 1.98 billion yuan, and 2.256 billion yuan; while Sanxun’s profits were 55.99 million yuan, -3.875 million yuan, and 44.99 million yuan. It can be seen that the profits of these two companies have increased and decreased in the three years, and the following two years have not been as good as the first year. Among them, the unstable operation of the Sanxun Group is particularly obvious.

In terms of debt, Qi Gao’s debt has become a burden for Territory Holdings to continue its expansion. According to the prospectus, from 2017 to 2019, the territory’s net debt ratio was 60%, 110%and 140%. ; And Heilenberg’s net debt ratio continues to rise, respectively 69.4%, 83.4%and 133.7%. In addition, Helenberg also expected in the prospectus that in the future”will continue to maintain a fairly high level of borrowing.”

Small and medium-sized real estate companies are eager to enter the capital market and use relatively”cheaper” funds to”save their lives”, but the road to listing has become increasingly crowded.

The above-mentioned securities analysts said that if small and medium-sized real estate companies fail to break through the IPO, it also means that the future living environment will become more difficult. “No matter how big the boss’s own circle is, it is also limited; It’s not a long-term solution.”

Small and medium-sized enterprises need to carry out some necessary innovations in business models to increase their valuations and stock prices to give them new value; in addition, they may also need In terms of income, it provides more room for imagination in the capital market; thirdly, it is necessary to shape a concept of high growth. As for how to tell the story of high growth, it depends on the various companies showing their abilities. Bowen Hi think.