Rightway Holdings Co.Ltd(600321) transformation difficulties behind “flickering” repo

A-share market is now “flickering” repurchase! On February 22, Rightway Holdings Co.Ltd(600321) (600321. SH) announced the termination of the repurchase of the company’s shares. Since the repurchase amount was only 7.64% of the lower limit specified in the original repurchase plan, the company was questioned by the “lightning” of the Shanghai Stock Exchange.

The financial Associated Press reporter noted that Rightway Holdings Co.Ltd(600321) is facing the difficulty of transformation behind the inquiry of “flickering” repurchase. Not only the development of “diversification” is not smooth, the debt repayment pressure is huge, and the debt problem of controlling shareholders is still difficult to solve.

“flickering” repo was questioned by “lightning”

Back on March 2 last year, Rightway Holdings Co.Ltd(600321) announced that it planned to use its own / self raised funds to buy back the company’s shares at a price of no more than 2.30 yuan / share for the implementation of employee stock ownership plan or equity incentive. The subsequent repurchase report shows that the company plans to repurchase no less than 50 million yuan and no more than 100 million yuan, and the repurchase implementation period is from March 1, 2021 to February 28, 2022.

The day after the release of the repurchase plan, the company’s shares rose by the limit, but since then, the share price has been below the repurchase set of 2.3 yuan / share for a long time. However, no matter how depressed the share price is, Rightway Holdings Co.Ltd(600321) has not been sold until June 29 last year. Judging from the repurchase results, several “Dragonfly style” repurchases only repurchased 1.6602 million shares, accounting for 0.11% of the total share capital of the company, and the total amount of funds paid was 3.564 million yuan (excluding transaction costs). The number of shares actually repurchased accounted for 7.64% of the lower limit specified in the repurchase plan, and the total amount of funds actually used accounted for 7.01% of the lower limit specified in the repurchase plan. Neither the number of repurchases nor the total amount of funds used reached the lower limit of the repurchase plan.

In this regard, the company explained in the announcement that during the implementation period of repurchase, the sharp rise of bulk raw materials and other supply chain changes led to more cash expenditure on operating activities; The company is under pressure to repay its due debts; Matters related to the advance payment of commercial housing have a certain impact on the efficiency of the company’s working capital. The company carefully considered and decided to terminate the repurchase of the company’s shares and give priority to the daily operating expenses, rigid debt repayment and other matters related to maintaining the stability of daily operation.

However, the exchange was obviously dissatisfied with this statement. It sent a letter asking the company to explain whether the early-stage decision was prudent and whether the failure to complete the share repurchase was reasonable in combination with the capital situation at the time of formulating the repurchase plan, the subsequent capital changes and use, and the stock pledge risk of major shareholders.

The financial Associated Press reporter found that the so-called debt pressure and business arrangements of the company could be foreseen as early as last year before the repurchase plan was formulated.

According to the data, at the end of 2020, the company had short-term loans of 66.0223 million yuan and long-term loans of 1.921 billion yuan, but the monetary capital in the hands of the company was only 62.8133 million yuan. The pressure of short-term debt repayment already existed, and the interest cost of the company was as high as 26.051 million yuan in that year.

Rightway Holdings Co.Ltd(600321) debt situation

As early as September 29, 2020, the board of directors of the company considered and approved the proposal on adjusting and optimizing the medium-term planning of wood-based panel business, and several feasible alternative bases had been determined at that time. Although it was announced on February 24 and September 30, 2021 to invest 500 million yuan respectively in Cuiping District of Yibin and Gongjing District of Zigong City to build “smart home high-end panel manufacturing project”, the medium-term planning of wood-based panel business is an established investment project. Similarly, zhengyuanhui industry city integration real estate project invested in 2019 is also a project that has been invested. The company should consider the capital needs of such established projects in advance when making any capital expenditure plan.

controlling shareholders are deeply in debt crisis

On the surface, the “flickering” share repurchase is a problem of Rightway Holdings Co.Ltd(600321) , but in fact it reflects the controlling shareholder.

The predecessor of Rightway Holdings Co.Ltd(600321) was Guodong Construction, which mainly engaged in wood-based panels. At the end of 2016, Zhengyuan real estate under fuyanbin invested 2.5 billion yuan to win 23.7% equity of Sichuan Guodong Construction, becoming the new controlling shareholder of Guodong Construction, and renamed it ” Rightway Holdings Co.Ltd(600321) ” the next year.

Public information shows that fuyanbin’s initial intention was to let Zhengyuan real estate backdoor listing, but during the suspension planning period, important changes have taken place in the regulatory policy and the environment of the capital market. Backdoor listing has become a key regulatory object. Finally, Zhengyuan real estate had to enter Guodong Construction by transferring the equity of Guodong group, and then seek the listing of real estate business.

Unfortunately, during the non-public offering of shares in 2010, Guodong Construction promised that in order to focus on the main business of wood-based panel, the company will not enter the real estate industry directly or indirectly in any way in the future. Now it seems that Zhengyuan real estate is lucky that it has not been injected into the listed company, because at the beginning of last year, Zhengyuan real estate was in a thunderstorm and was deeply in a debt crisis, but the debt crisis that has not been solved by the controlling shareholders has still become a cloud over the top of the listed company.

The company disclosed that the principal of its real estate was about RMB 6.065 billion, and the principal of its real estate was about RMB 6.065 billion {1} was torn up according to the plan of RMB 6.065 billion. The financial Associated Press reporter found that since the announcement on May 22, 2020 that the shares of the company held by Zhengyuan real estate were applied for judicial freezing by Hongxin securities, the company has frequently issued the announcement of new holding shareholders waiting for freezing, reaching a total of 7 times. Up to now, 375 million shares of the company’s non tradable shares held by Zhengyuan real estate (accounting for 24.84% of the company’s total share capital) have been pledged / judicial frozen / waiting to be frozen.

A lawyer told reporters that the shares held by Zhengyuan real estate have been frozen again. Although it may not have an adverse impact on the equity institutions, control rights and normal operation of Listed Companies in the short term, it is certainly not conducive to their financing and subsequent development in the long term.

It should be noted that Fu Yanbin has been engaged in the real estate industry for many years. Although he cannot directly inject Zhengyuan real estate into Rightway Holdings Co.Ltd(600321) , the new management still included development and construction in the development strategy in 2017, paving the way for the subsequent real estate business of listed companies. According to the announcement at that time, the new direction of Rightway Holdings Co.Ltd(600321) covers five sectors: sector and wood industry, development and construction, trade logistics, hotel operation and financial investment. From then on, it has opened the so-called “diversified” Transformation Road as Rightway Holdings Co.Ltd(600321) .

The year after Zhengyuan real estate became the owner, Rightway Holdings Co.Ltd(600321) announced to change the original commitment of “not involved in real estate development business”. The reason given is that due to the adjustment of government policies and regulations, the industrial land held by the company will be changed to residential and commercial land. In 2019, the company announced that it plans to invest and build a comprehensive industry city integration project integrating characteristic commercial street, business office, conference hotel and international residence in relevant plots, named Shuangliu Zhengyuan international industry city integration project. The project started investment and construction in 2019, with a total investment of about 10 billion yuan, of which the direct investment is about 8.5 billion yuan. It is constructed in three phases, and the construction period is expected to be 5-8 years. At that time, the company said that the construction of the project could create higher benefits for the company’s shareholders.

However, large projects require large investment and are accompanied by large risks.

In order to raise project funds, in March 2020, Rightway Holdings Co.Ltd(600321) transferred 49% of the equity of the project company zhengyuanhui real estate to Qingdao Yueyou enterprise management partnership (limited partnership) under Jindi, so as to obtain a financing amount of 750 million yuan, with a comprehensive financing cost of 15.5% per year. The property of the project is also undertaken by Jindi.

However, the high financing cost investment does not necessarily mean that buyers are willing to pay. According to public information, three batches of zhengyuanhui residential projects have been opened on December 24, 2020, July 13, 2021 and January 13, 2022. However, the historical opening situation shows that the sales situation of the project is not ideal. The number of applicants for the three times does not meet the lottery standard. At present, there are still houses on sale. Especially in the latest batch, only 2 people participated in the lottery.

In this regard, the real estate consultant of the project explained to the financial Associated Press, “it is true that the project site is relatively remote and less popular than some online Red discs in Chengdu, but at present, the remaining houses in the first and second batches are mainly stacked houses, and there are a small number of high-rise houses with poor floors in the second batch.” As for the scarcity of three batches of people involved in lottery, the real estate consultant prevaricated on the grounds of delayed opening time affected by the epidemic and real estate regulation. When the reporter asked about the third batch of houses, he said that in addition to the middle floor of the high-rise, you can basically choose what you want to choose, which shows that the sales situation of the third batch is not optimistic. After that, there will be many batches of houses in the follow-up of the project.

On February 23, the financial Associated Press reporter actually explored the zhengyuanhui project and found that there were many “hard injuries” in the zhengyuanhui residential project, and the smooth sale was reasonable. For example, the project site is 1.6km away from yingtiansi station, the nearest subway station. The road between them is a trunk road with large traffic flow, and there is no pedestrian or non motor vehicle lane in this section, so it is very inconvenient and dangerous to walk / ride; At present, the surrounding area of the project is very desolate, mostly wasteland or farmland; In addition to a small number of businesses planned for the project, there are no bottom merchants, shopping malls and vegetable markets around the project, and there is a lack of living facilities; Under the price of 17000 / ㎡ of second-hand houses nearby, the average price of clean water delivery of the building is 17000 or even higher… Of course, these “hard injuries” have been beautified as “at present, this is a planned new city, and we should look to the future.”

Although the sales are not ideal, real estate is the advantage of Rightway Holdings Co.Ltd(600321) in the company’s chairman he Yanlong. Looking through the company’s 2019 and 2020 annual reports, there is no mention of the contribution of the project to the company’s performance. Until the 2021 performance forecast mentioned that the sold commercial houses of the phase I 3# plot of the project were delivered in November 2021. The revenue recognition conditions were met during the reporting period, and the sales revenue was carried forward in the current period.

deep in transformation dilemma

The real estate industry is regulated, the real estate market is pre cooled, and there are many “hard injuries” in the project land. The controlling shareholder is in prison after years of real estate operation experience. The future of Rightway Holdings Co.Ltd(600321) real estate business is uncertain; In terms of the company’s current ill fated “diversified” transformation, it is also difficult to be optimistic.

In 2017, Rightway Holdings Co.Ltd(600321) expanded the trading business of wood products, chemical products and grain and oil commodities in order to make effective use of the company’s upstream and downstream industrial chain experience and resource channel advantages in wood-based panel manufacturing. In 2017 and 2018, the business achieved revenue of 444 million yuan and 916 million yuan respectively, and became a major contributor to revenue for a time. However, in 2019, the business revenue plunged to only 135 million yuan. And the gross profit margin of this business is finally low. In 2020, the company directly gave up its trading business.

Coincidentally, from 2017 to 2020, the company’s Xiyue Hotel (later renamed Zhengyuan Xiyue Hotel) also developed for a time, but the hotel business ceiling is obvious and it is difficult to become a performance support. From 2017 to 2019, the revenue was 51.8809 million yuan, 66.5723 million yuan and 65.5553 million yuan respectively. In 2020, affected by the epidemic, the income fell to 46.0397 million yuan; It rebounded in the first half of last year, with a half year income of 26.9001 million yuan, but it is still lower than the same period in 2019 before the epidemic.

It should be noted that in 2017, Rightway Holdings Co.Ltd(600321) also indirectly invested in Beijing Taihe maternity hospital by taking shares in Beijing Xinxing Boyuan investment management partnership (limited partnership), laying out the large health field. However, up to now, it is only limited to financial investment, and there has been no action in this field since then. Paradoxically, after the company’s annual reports in 2017 and 2018 focused on the layout of the field of great health, the company’s regular reports did not contain any more words about “great health”. However, at the 2020 annual general meeting of shareholders, he Yanlong told the associated press that he continued to be optimistic about “great health”.

In addition, the main business of wood-based panel, which was unable to make achievements at the beginning of Guodong Construction, has still not improved in the hands of Zhengyuan real estate. From 2017 to 2020, the company’s sector business revenue was 565 million yuan, 804 million yuan, 817 million yuan and 563 million yuan respectively, and the gross profit margin was as low as – 3.58%, 3.46%, 0.42% and – 22.12%. In other words, the company’s sector business has been operating at low profit or even discount for a long time.

After years of poor transformation and superimposed debt operation, Zhengyuan real estate Rightway Holdings Co.Ltd(600321) has been walking on the edge of loss and meager profit. According to the data, in 2020 and January September 2021, the company’s asset liability ratio was 55.65% and 63% respectively. From 2018 to 2020, the company’s interest expense reached 39.2693 million yuan, 30.062 million yuan and 26.051 million yuan respectively, and the net profit attributable to the parent company in each period was 36.3383 million yuan, 22.0115 million yuan and – 768456800 yuan respectively.

Rightway Holdings Co.Ltd(600321) net profit

The Associated Press reporter sorted out the relevant issues and sent them to the company, but as of press time, no reply has been received.

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