Another private real estate enterprise turned into a state-owned enterprise.
On December 31, South China City Holdings (01668. HK) announced that it allotted and issued 3.35 billion new shares to Shenzhen Special Administrative Region Construction Development Group or its wholly-owned subsidiary at the subscription price of HK $0.57 per share, and the total proceeds from the issuance of subscription shares are estimated to be about HK $1.91 billion. After the completion of the subscription, Shenzhen Special Zone Construction Development Group will account for 29.28% of the issued share capital of South China city after the allotment and issuance of subscription shares.
The special zone construction and development group, established in 2011, is a wholly state-owned enterprise under the jurisdiction of Shenzhen state owned assets supervision and Administration Commission. As one of the development and operation entities of state-owned industrial parks in Shenzhen, it is responsible for major infrastructure construction.
In other words, the construction and development group of Shenzhen state-owned special zone will become the main shareholder and the single largest shareholder of South China City, and the shareholding proportion of Founder Zheng Songxing will be diluted from 28.5% to 20.16% to the second largest shareholder. In addition, Tencent remains the third largest shareholder, with its shareholding diluted from 11.81% to 8.35%.
South China city said that as a shareholder of the company, the special zone construction and development group can bring its resources and industry experience, so that the company can improve management and operation efficiency and enhance financial strength. The company’s ability and resources to develop and explore other potential under the comprehensive business logistics ecosystem mode will be further enriched and supplemented. On the other hand, the company will explore cooperation opportunities with the special zone construction and development group to achieve business synergy, strive to improve shareholder returns and support the sustainable development of the real economy.
Different from the traditional high turnover real estate enterprises, South China City focuses on the creation of the “business logistics +” business model, forming a project of core business forms such as commodity trading center, warehousing and logistics distribution, e-commerce, convention and Exhibition Center, residential and living facilities, multi-functional property and commercial complex. Previously, Wang Zhibin, assistant chairman of South China city and head of corporate financing and investor relations, said that the ultimate goal of South China city is to become a leading operator and developer of Commerce and logistics platform. “If the company continues to develop, it should pay more attention to the concept of operator with the concept of developer. Our ultimate goal is to become an efficient and leading operator of Commerce and logistics platform.”
Then, due to the continued deterioration of the domestic and foreign financing environment, the continuous strengthening of supervision, and the international trade friction of the company’s cross-border e-commerce projects, the performance of South China city is not ideal. According to the interim financial report of 2021, the revenue of South China City in the first half of this year was HK $6.166 billion, a year-on-year decrease of 13.2%, including property sales and financial leasing revenue of HK $4.483 billion, a year-on-year decrease of 22.5%. In recent years, South China city has shown a weak performance of increasing income without increasing profit, and the annual compound growth rate of net profit has continued to decline. Some securities companies attribute it to the negative accumulation of operating income from rental income.
At the 2021 interim report performance meeting at the end of November this year, the company’s management did not avoid capital pressure. As of the first half of this year, the short-term debt of South China city was nearly HK $14.6 billion, while the cash and cash deposits at the end of the period were only about HK $9.6 billion. On the latest December 15, S & P downgraded the long-term issuer credit rating of South China city from “B” to “B -” and pointed out that there are still three large offshore payments due in South China City in February, June and November 2022, totaling USD 970 million.
From the outside world, the allotment price of HK $0.57 is close to the average trading price of HK $0.56 in South China city on the 20th. At present, the net assets per share of South China city reach HK $5.22, with a price to book ratio of 0.14 times, which is in a serious net breaking state. For the special zone construction and development group, it is equivalent to obtaining the majority shareholder seat of the comprehensive commerce and logistics enterprise with net assets of HK $42.277 billion at a cost of HK $1909.5 million. In the words of some investors, it is “low purchase price and not expensive”.
Meanwhile, in terms of assets, South China city has 8 South China city projects, with a total planned construction area of more than 80 million square meters; Among them, the saleable and operating area exceeds 10 million square meters. In addition, South China City disclosed in the first half of the year that it has officially launched the phase I urban renewal project plan of Shenzhen South China city. It is expected that after the renewal, the construction area will exceed 2.5 million square meters and the commercial value will exceed 100 billion yuan. These are regarded as part of the core high-quality assets of South China city.
A Shenzhen broker told the first financial reporter that South China City, with core land assets and Operation Oriented “business logistics +” business model, is owned by major state-owned shareholders, which may alleviate the pressure of capital and debt in the short term and further drive the development of business model potential and the decline of financing costs in the long term.
While other investors hold cautious expectations, “the investment cycle of ‘trade logistics +’ is long and there is a lot of capital precipitation. Whether it can stimulate the potential of the business model remains to be seen for a long time, and the running in between the major state-owned shareholders and the Zheng family in terms of business philosophy and business model needs to be further observed.”
South China city said that the net proceeds from the issuance of subscription shares are estimated to be about HK $1893.8 million. The company plans to use the net proceeds to repay its existing debts and for general corporate purposes.
(First Finance)
