Near the end of the year, it’s time for another year’s shell preservation sprint. On December 1, Zotye Automobile Co.Ltd(000980) , Zhengzhou Sino-Crystal Diamond Co.Ltd(300064) , Lonkey Industrial Co.Ltd.Guangzhou(000523) and other listed companies disclosed the announcement of restructuring progress to speed up the pace of shell preservation.
In the context of stricter supervision and upgraded delisting rules, some companies still try to exploit loopholes. The reporter of Securities Daily noted that since the beginning of this year, delisting risk stocks have lengthened the shell protection front, and some companies have started planning shell protection since the beginning of the year, such as improving business performance through mergers and acquisitions, signing business contracts, establishing new companies and carrying out new businesses. So, can these companies succeed?
59 * ST shares
facing delisting risk
On November 19, the Shanghai and Shenzhen stock exchanges respectively issued guidelines for deduction of operating income, further refined the implementation standards of deduction of operating income, and added a combined delisting index of “the lower of the net profit before and after deducting non recurring profits and losses is negative and the operating income is less than 100 million Yuan”. This also means that it is more difficult to protect the shell of * ST shares.
Shen Meng, executive director of Xiangsong capital, said in an interview with the Securities Daily, “the introduction of the operating income deduction guide is to refine the delisting rules of financial indicators, reduce the uncertain gray areas, give listed companies and the market a clearer judgment standard, and prevent listed companies or hot money from using the fuzzy areas to infringe on the rights and interests of investors.”
According to the statistics of East Money Information Co.Ltd(300059) choice financial terminal, there are 184 risk warning stocks in a shares, including 77 “other risk warning” St stocks and 107 “delisting risk warning” * ST stocks.
According to the data of the third quarterly report, the financial indicators of “the lower of the net profit before and after deducting non recurring profits and losses in the first three quarters is negative and the operating revenue is less than 100 million yuan” and “the net assets are negative” are selected. Of the above 107 * ST shares, 59 touch this situation. If its main business cannot be significantly improved in the fourth quarter, it will face the risk of direct delisting.
shell preservation I:
fancy M & a
As one of the important ways to improve profitability and optimize asset structure, M & A has become the choice for loss making companies. According to incomplete statistics by the reporter of Securities Daily, more than half of * ST companies have issued asset restructuring announcements since this year.
For example, Lead Eastern Investment Co.Ltd(000673) at the end of November, the equity of four subsidiaries held by Horgos contemporary Oriental Cinema Management Co., Ltd., a wholly-owned subsidiary, was listed and transferred for 1 yuan. The total assessed value of shareholders’ equity of the four subsidiaries was -60.9276 million yuan.
Song Qinghui, founder of Qinghui think tank, told the Securities Daily: “without the help of external strategic partners and the lack of assets that can be quickly realized, M & A is the hope of some delisting warning stocks to ‘protect the shell’.”
However, in order to prevent listed companies from “consolidating” their revenue by means of entrusted voting rights, donated subsidiaries or businesses to avoid delisting, the exchange made it clear in the operating income deduction guide that “income from subsidiaries or businesses of business merger obtained by significantly unfair consideration or non trading” will be deducted.
However, some companies still commit crimes against the wind. On October 23, Xinjiang Yilu Wanyuan Industrial Investment Holding Co.Ltd(600145) 0 yuan’s transfer of 41% equity of the subsidiary yixiangyuan triggered an inquiry letter issued by the Shanghai Stock Exchange, requiring the company to explain whether the consideration paid for obtaining the equity of yixiangyuan was obviously unfair and whether the operating income generated met the relevant standards for deducting operating income.
Chen Li, chief economist of Chuancai securities and director of the Research Institute, said in an interview with Securities Daily, “0 yuan purchase of assets or gift of assets, this method can not bring great positive changes to the company’s continuous operation, but more financial adjustment behavior. Because this method is not sustainable, it still depends on whether the company’s performance will continue to improve in the future, which is directly related to the judgment of future investors on the company’s investment value and valuation.”
As of press time, there are still many mergers and acquisitions of ST shares under way. There is only one month left from the end of the year. If you want to protect the shell through mergers and acquisitions, you must race against time.
shell preservation II:
signing large orders to boost performance
The reporter noted that in order to protect the shell, some ST shares will quickly reverse their business performance by signing large business contracts, but such a business model is often not sustainable. The operating income deduction guide released by the Shanghai and Shenzhen Stock Exchange also takes “the income generated by the business that does not form or is difficult to form a stable business model” as the bottom clause of “business income unrelated to the main business”, which completely blocks the behavior of trying to avoid delisting by signing large contracts.
Taking Lawton Development Co.Ltd(600209) as an example, the company announced on November 19 that it plans to sign a cooperation agreement of 250 million yuan with Tencent Technology (Shenzhen) Co., Ltd., and the transaction amount accounts for more than 50% of the company’s latest audited net assets. This sudden large contract aroused doubts in the market. The Shanghai stock exchange quickly issued an inquiry letter asking the company to explain whether the relevant businesses under the bilateral cooperation agreement have a stable business model.
Of course, some * ST listed companies strive to improve profitability, actively expand business and continuously sign business contracts. According to incomplete statistics, more than ten * ST companies have disclosed the large amount of business contracts signed during the year. For example, Lvjing Holding Co.Ltd(000502) in order to improve business performance and expand business, seven engineering construction contracts have been signed since June this year, with a total amount of 155 million yuan. Shanghai Fenghwa Group Co.Ltd(600615) in October, it was disclosed that the total amount of product customization contracts signed by its holding subsidiaries was about 44.18 million yuan, accounting for about 74% of the company’s audited operating revenue in 2020. If the contract can be successfully performed, it is expected to have a positive impact on the financial situation in 2021.
Chen Li told reporters: “the regulators have a very clear attitude towards shell protection. If the company focuses on its main business and improves its business efficiency and level, the signing of large business contracts is worth encouraging. If it makes up its business performance and deliberately makes up financial fraud and revenue, it will be severely punished.”
shell preservation III:
set up a new company to increase revenue
In order to protect the shell, since this year, more than 20 * ST companies have found new profit growth points by setting up subsidiaries, integrating resources and developing new businesses. For such shell preservation actions, the operating income deduction guide also defines the deduction standards of financial and trade business income to crack down on shell preservation activities that want to increase income through trade, finance and other businesses.
For example, Kelin Environmental Protection Equipment Inc(002499) in order to build a new retail and new economic business platform and promote the development of the company’s new business, it raised 10 million yuan to establish a wholly-owned subsidiary Youle optimization (Hainan) Trading Co., Ltd. to engage in Trade brokerage, sales agency, China trade agency and other businesses.
If the trade business income is finally deducted, these companies that set up trading companies to improve their performance may face the situation of “drawing water with a bamboo basket”.
However, it can also be seen that many companies have set up subsidiaries related to their main business to promote the improvement of the company’s profitability. For example, Yunnan Jinggu Forestry Co.Ltd(600265) and its subsidiaries jointly funded the establishment of a limited partnership with Chow Tai Fook (related parties) to invest in forestry related industries.
In this regard, Shen Meng said, “in addition to improving and optimizing asset structure and quality and restoring profitability through M & A, improving performance is also an important way to protect shell. If we can expand business development or open up new profit growth points, it is also the protection of the rights and interests of all shareholders.”
(Securities Daily)
