Securities code: 000046 securities abbreviation: Oceanwide Holdings Co.Ltd(000046) Announcement No.: 2022-021 Oceanwide Holdings Co.Ltd(000046)
Announcement on reply to the letter of concern of Shenzhen Stock Exchange
The company and all members of the board of directors guarantee that the information disclosed is true, accurate and complete without false records, misleading statements or major omissions.
Oceanwide Holdings Co.Ltd(000046) (hereinafter referred to as “the company”) attached great importance to the letter of concern on the performance forecast of Oceanwide Holdings Co.Ltd(000046) 2021 (company department’s attention letter [2022] No. 105, hereinafter referred to as “the attention letter”) from the management department of listed companies of Shenzhen Stock Exchange, and organized relevant departments and units to sort out, verify and feed back the contents involved in the attention letter at the first time, And replied within the specified time as required. The relevant information is hereby announced as follows:
1、 Main contents of attention letter
On January 29, 2022, your company disclosed the performance forecast for 2021, which shows that your company expects the net profit attributable to the shareholders of the listed company in 2021 (hereinafter referred to as “net profit”) to be a loss of 9-11 billion yuan. The reasons for the loss mainly include: affected by the changes of overseas macroeconomic environment and covid-19 pneumonia epidemic, the recoverable amount of overseas projects is expected to decrease in the future. According to the principle of prudence, the company has made provision for impairment of real estate projects in the United States and power plants in Indonesia; China Minsheng Trust Co., Ltd. (hereinafter referred to as “Minsheng trust”), the holding subsidiary of the company, prudently accrued fair value loss and impairment provision for individual risk projects; Increase in financial expenses included in profit or loss during the reporting period. Our department is concerned about this. Please explain the following issues.
1. Please explain the amount and details of the estimated provision for impairment of U.S. real estate projects and Indonesian power plants in combination with the changes of overseas macroeconomic environment and covid-19 pneumonia epidemic situation, including but not limited to the specific project name, main contents, commencement time, project availability status, original plan arrangement and current progress of the project The book value of the project and the impairment reserves accrued in the previous period.
2. Please explain in detail the situation of Minsheng trust withdrawing fair value loss and impairment provision for individual projects, and explain the prediction of the recoverability of relevant creditor’s rights investment and funds, as well as the basis and rationality of withdrawing impairment loss in combination with the main issuers, credit status and cash flow involved in individual risk projects, Whether the provision for impairment of relevant assets is sufficient and reasonable. 3. Please explain the content and amount of financial expenses included in profit and loss during the reporting period, and the reason, amount and rationality of the increase of financial expenses.
4. Please explain whether there are significant changes in the accounting policies and determination basis for the provision for impairment and the recognition of financial expenses compared with the same period of the previous year, whether the relevant accounting treatment complies with the relevant provisions of the accounting standards for business enterprises, and on this basis, explain whether the provision for asset impairment and the recognition of financial expenses of your company in previous years are sufficient, and whether there are any problems through the provision for asset impairment Cross period recognition of earnings management expenses, etc.
Our ministry is concerned about this. Your company is requested to make a written explanation on the above issues, submit relevant explanatory materials to our department and disclose them to the public before February 14, 2022, and send a copy to the dispatched office at the same time. At the same time, remind your company and all directors, supervisors and senior managers to strictly abide by the securities law, the company law and other laws and regulations, as well as the stock listing rules of the exchange, and perform the obligation of information disclosure truthfully, accurately, completely, timely and fairly.
2、 Company reply
(I) please explain the amount and details of the estimated provision for impairment of real estate projects in the United States and power plants in Indonesia in combination with the changes of overseas macroeconomic environment and covid-19 pneumonia epidemic situation, including but not limited to the specific project name, main content, commencement time, project availability status, original plan arrangement and current progress of the project The book value of the project and the impairment reserves accrued in the previous period.
[reply]
During the reporting period, from the perspective of the external environment, the regulation of the real estate and financial industries was still tight, and the overseas covid-19 pneumonia epidemic repeatedly had a certain negative impact on the normal business order; From the perspective of internal environment, the company is facing greater capital pressure and certain liquidity risks. In particular, the contradictions caused by litigation and takeover of some overseas projects have been prominent, and the project operation has been greatly negatively affected. After comprehensively considering the impact of external environmental factors and the company’s plan for future business development, according to the requirements of accounting standards for business enterprises and other relevant regulations, and based on the principle of prudence, in order to truly and accurately reflect the value of the company’s assets, the impairment test is carried out for some U.S. real estate projects and Medan power projects in Indonesia with signs of impairment, Professional evaluation institutions are employed to evaluate the recoverable amount of relevant assets and withdraw the impairment provision accordingly. Up to now, the evaluation work has not been completed. The evaluation methods, estimated recoverable amount and impairment provision amount of main projects are described as follows:
1. New York real estate project
The New York real estate project is located in the core area of the lower Manhattan harbor area, covering an area of about 1367 square meters and a planned construction area of 83600 square meters. It is planned to build a mixed use building including high-end hotels and residences. The project is in the preliminary planning and design stage.
The recoverable amount of the New York project is evaluated according to the market method. In the fourth quarter of 2021, the company plans to sell the New York project to repay the loan. The estimated future recoverable amount is determined based on the appraiser’s valuation and the discount of the management’s estimated sale price. The New York project withdraws an impairment provision of $217 million according to the difference between the estimated future recoverable present value of $220 million and the book value of $437 million, Equivalent to about 1.4 billion yuan.
2. Hawaii West Project
The project is located in kapore District, Oahu Island, Hawaii, with an area of about 2.05 million square meters. It is planned to be built into commercial and residential buildings. After the completion of delivery in October 2016, the plot is still in the stage of land leveling.
The recoverable amount of Hawaii west area project is evaluated according to the market method. In the fourth quarter of 2021, the company plans to sell the west area project to repay the loan. Therefore, the estimated future recoverable amount is determined based on the appraiser’s valuation and the management’s estimated sale allowance, According to the difference between the estimated future recoverable present value of US $116 million and the book value of US $142 million, the impairment provision of Hawaii west project is US $26 million, equivalent to about 170 million yuan.
3. Hawaii land 1 and land 2 projects
The project is located in Corinna District, Oahu Island, Hawaii. The No. 1 land project covers an area of about 106311 square meters and is planned to be built into an international luxury resort named after the Atlantis brand. The No. 2 land project covers an area of about 70000 square meters and is planned to be built into a luxury brand hotel and apartment. Both projects are in the planning and design stage.
The recoverable amount of land 1 and land 2 projects in Hawaii is evaluated according to the market method. The estimated future recoverable amount refers to the surrounding transaction cases. The market transaction price in 2021 is lower than that before. According to the estimated future recoverable present value of $496 million and book value of $605 million
4. Los Angeles project
The Los Angeles real estate project is located in the core area of Los Angeles. The total plot area of the project is about 18700 square meters, with a capacity area of about 138300 square meters. It is a large commercial complex, including high-end apartments, five-star luxury hotels and a shopping center of about 15476 square meters. The construction of the project started in November 2014, and the capping of all main structure works has been completed in 2018. Due to the problem of funds, the progress of the project has been suspended in October 2020. It was originally planned to restart the construction in the first half of 2021, but the progress of relevant work did not meet expectations.
The recoverable amount of the Los Angeles project is determined according to the present value of the estimated future cash flow. However, due to the covid-19 pneumonia epidemic and the shortage of funds of the company, the deferred status of the project leads to the extension of the cash recovery cycle of the project (the original 2020 is expected to be completed in 2023 and delayed to 2025), resulting in the reduction of the discounted present value of the project cash flow prediction model, At the end of 2021, the estimated value was about US $1.28 billion, and the estimated recoverable amount of the project was lower than its book value of US $1.505 billion. The company made an impairment provision of US $225 million, equivalent to about RMB 1.46 billion.
5. Medan project in Indonesia
Medan project in Indonesia is two coal-fired steam power plants located in Medan Industrial Zone in Indonesia. The project company signed a power purchase agreement with Pt perusahaan Listrik Negara (PERSERO), a local state-owned power grid company. The “five supplies and one leveling” project was started in October 2014, and the piling and construction project were started in November 2015. At present, the overall completion of Medan project is more than 70%, the design work of the whole plant is roughly completed, and the overall actual completion of on-site construction is about 50%.
The recoverable amount of Medan project in Indonesia is determined according to the present value of the estimated future cash flow. However, due to the expected impact of the dual carbon target on the financing and price of the coal-fired power plant project, and the delay of the project construction period due to the impact of funds, the cash recovery cycle is prolonged (the original 2020 is expected to be completed in 2023 and delayed to 2025), In addition, the increase of discount rate (from 9.3% in 2020 to 9.5% in 2021) reduces the discounted present value of the project cash flow prediction model. The estimated value at the end of 2021 is about 316 million US dollars. The estimated recoverable amount of the project has been lower than its book value of 365 million US dollars. The company has made an impairment provision of 49 million US dollars, equivalent to about 320 million yuan.
The estimated future recoverable amount of major projects is summarized as follows:
Evaluation in 2021 evaluation method in 2020
Whether the reason and method for the change of the project evaluation value over the previous year have changed
Planned sale, valuation combined with appraiser’s New York project market method market method no
Valuation and management’s estimated sale allowance
Planned sale and valuation combined with appraiser’s market method for Hawaii west project market method no
Valuation and management’s estimated sale allowance
Market method for the project of No. 1 land in Hawaii market method no market price changes
Market method of Hawaii No.2 project market method no market price changes
Due to the lengthening of the cash recovery period of the project, the discounted cash flow of the Los Angeles project will lead to the decline of the present value of the estimated future cash flow
On the one hand, the cash recovery cycle of the project is prolonged; On the other hand, the discount rate increases. The cash flow of Medan project in Indonesia is discounted. Is the cash flow discounted
The increase will lead to the decrease of the present value of the estimated future cash flow
The provision for asset impairment of major projects is summarized as follows:
Unit: USD, 100 million yuan
Provision at the end of 2021 minus the accumulated expected provision items in the current period by the end of 2020
Amount of provision for impairment of book value before pre assessment of valuation value
New York project 2.2 4.37 0.87 2.17
Hawaii West Project 1.16 1.42 0.06 0.26
Hawaii 1 project 2.99 3.51 0.66 0.52
Hawaii land 2 project 1.97 2.54 0.13 0.57
Los Angeles project 12.8 15.05
