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Taikang 3.3 billion's new rules for financing may become a "catalyst".
Sep 11,2020 10:32CST
translation
Source:Financial Union
The content below was translated by Tencent automatically for reference.

SMM Network News: Yangguang City Group Co., Ltd. (000671.SZ, hereinafter referred to as "Sunshine City") has made the latest progress in the introduction of strategic investors.

Taikang Life Insurance Co., Ltd. and Taikang Endowment Insurance Co., Ltd. signed an equity transfer agreement with Shanghai Jiawen Investment Management Co., Ltd., the second largest shareholder in Sunshine City, according to Sunshine City on the evening of September 9. Taikang Life and Taikang pension transferred Shanghai Jiawen's 13.53% stake in Sunshine City, of which Taikang Life Insurance was transferred 8.53% and Taikang pension 5%. The price of this share transfer is about 3.378 billion yuan.

"I have been in contact with investment institutions for a long time. This risky investment is actually a landing move by the company to introduce strategic investors. We have been in contact with Taikang for more than half a year. " A person close to Sunshine City told the Financial Associated Press.

It is worth noting that Taikang Life Insurance and Taikang pension shares in Sunshine City, Sunshine City in the corporate governance, future dividends, performance commitments and compensation, are not low requirements.

"for the time being, it is not possible to know what the initial plan of the previous negotiations between the two sides was, but judging from the terms announced, Sunshine City seems to have made a lot of concessions." Said an analyst at a real estate agency in Shanghai.

It is understood that Taikang Life Insurance and Taikang pension will nominate two director candidates to become directors of Sunshine City, and the total number of Board of Directors of Sunshine City will be adjusted to 12 accordingly.

In terms of future dividends, the company pays cash dividends at least once a year, and the annual profits distributed in the form of cash should not be less than 30% of the distributable profits realized in that year.

In addition, Sunshine City controlling shareholders made a performance commitment to the company's return net profit in the next ten years, and clearly set the compensation plan. Sunshine City promises that the average annual growth rate in the first five years is not less than 15%, and the cumulative net profit in the first five years is 34.059 billion yuan (that is, the average annual growth rate is not less than 18.13%); the annual growth rate in 6-8 years is not less than 10%, and the annual growth rate in 9-10 years is not less than 5%.

In cases where performance commitments are not met, the agreement also makes corresponding arrangements. "if the listing performance requirements are not met, the controlling shareholder shall compensate part of the difference to the listed company." Sunshine City said.

A research manager of the Kerry Research Center believes that the average annual growth rate of 15% in the first five years and the phased growth rate thereafter are relatively easy to achieve in a single year, but if they are put into a long-term framework, it is indeed difficult for a growing company to lock in the realization of homing net profit for ten years.

"there are cycles in the industry, there are certain ups and downs in the operation of enterprises, and various changes such as policy regulation and control may be encountered, all of which have increased the uncertainty of business performance; if they fail to meet the requirements, there will be differential compensation. Taken together, these requirements are difficult for Sunshine City. " The above research manager said in an interview with reporters.

The previous strategic investor in Sunshine City was China Minsheng Investment. China Minsheng Investment previously held 18.04 per cent of Sunshine City through Shanghai Jiawen, a wholly-owned subsidiary of Zhongmin Jiaye, but transferred half of his stake to Fujian Jiecheng Trading Co., Ltd. at the end of February 2019 because China Minsheng Investment was caught in a liquidity crisis.

On March 18, 2019, Sunshine City disclosed that Sunshine Group, the company's controlling shareholder, has increased its shares in the company to 18.05% of the company's total share capital through the securities trading system of the Shenzhen Stock Exchange, making it the single largest shareholder of the company.

At the performance meeting held in April this year, Sunshine City executives announced to the media six major work goals for this year, the first of which is to introduce strategic investors.

As to why the introduction of strategic investors was listed at the top of this year's work goal, a management of Sunshine City once told reporters that after China Minsheng Investment transferred the company's shares, the company has been considering the introduction of war investment; in addition, there is room for further optimization of the company's finance, and the introduction of war investment will help optimize the company's finance, and it will also be beneficial to the company's long-term development.

Industry insiders believe that Sunshine City introduced insurance funds as a war investment, housing enterprises financing new rules "three red lines", to a certain extent or played a catalytic role.

"the introduction of war investment is the goal of Sunshine City this year, but judging from the terms of the performance commitment in the fuze investment plan, Sunshine City may have made concessions. Sunshine City has grown rapidly in recent years, but it also faces some problems. According to the standard of "three red lines" in the new financing rules, the company has stepped on two. The introduction of Sunshine City war investment, although there is no additional issuance is just the transfer of equity, but Taikang is real gold and silver shares, the company can quickly get a considerable amount of cash. Through the transfer of shares of cash, you can quickly repay some debts, so that you can quickly get rid of the situation of 'stepping on the red line'. " Said the above-mentioned Kerry research manager.

However, Sunshine City told reporters that the company's introduction of war investment is a strategy that has been established before. "before the new financing rules, we are sure to introduce war investment, and it is only a matter of timing when to introduce it."

An analyst at Zhongyuan Real Estate believes that the introduction of war investment into Sunshine City has a certain reference significance for other enterprises to improve their finances at the strategic level.

"some large enterprises take advantage of the discount promotion during the peak sales season to speed up the return of cash by selling more houses, but the effect of getting money back through sales is not as fast as that of war investment. One obvious effect that the introduction of war investment can bring is to get cash quickly, rather than through new debt, which is a good idea for some real estate enterprises that 'step on the red line'." The aforementioned Zhongyuan real estate analyst pointed out.

On whether Sunshine City will introduce other war investment, or whether Taikang has arranged to continue to increase its holdings of the agreement, Sunshine City said to reporters, "do not understand."

However, people familiar with the matter told the Financial Associated Press that other strategic investors are not expected to be introduced in the short term.

"for the time being, we do not know how the two sides discussed and whether there is an exclusive agreement on the issue of continuing the war, but it is expected that no new investment will be introduced in the near future. If the next few years in line with investment expectations, do not rule out the possibility of continuing to increase holdings. " This person said.

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