Recently, Skyworth electric, the main white power business of Skyworth, submitted IPO materials to the Shenzhen Stock Exchange and plans to log on to the gem.
If Skyworth electric can successfully hold the meeting, it will become the third listed company under Skyworth. The other two are Skyworth Group (0751. HK), the parent company of Skyworth electric, and Skyworth Digital Co.Ltd(000810) (000810. SZ), the main TV terminal equipment.
It is worth noting that Huang Hongsheng, the largest shareholder of Skyworth electric, has not been recognized as the actual controller of the company. It is still in doubt whether this recognition can be recognized by the CSRC. At the same time, Skyworth Electric has high debt ratio, high salary of management and large dividends before listing, which may “hinder” Skyworth Electric’s listing.
Whose Skyworth?
According to the prospectus, Skyworth’s history began in 2013. Its predecessor was Skyworth Co., Ltd., with a registered capital of US $15 million. It is a limited liability company solely established by Skyworth in Hong Kong. In August 2020, Skyworth electric introduced Skyworth Group (Shenzhen) to hold 20% of the shares in the form of capital increase. Skyworth Group (Shenzhen) and Skyworth Hong Kong are enterprises 100% owned by Skyworth Group (Bermuda).
In September 2020, Skyworth Hong Kong transferred its 23% equity of Skyworth Limited (corresponding to a capital contribution of 35.732 million yuan) to Jude industry. Jude industry is the management shareholding platform of the company. Wu Qinan, director and general manager of Skyworth electric, holds 69.57% of the capital contribution of Jude industry and indirectly holds 12.85% of the shares of Skyworth electric, with a total of 15.52% of the shares of Skyworth electric directly and indirectly.
SKYWORTH Co., Ltd. also acquired 100% of the shares of Shenzhen electric appliance through stock exchange merger to assess the net asset value of 131 million yuan. Shenzhen electric appliance is also an affiliated company controlled by Skyworth Group (Shenzhen), and the transaction is a connected transaction. Tianyancha app shows that as early as 2010, when Shenzhen electric was founded, Wu Qinan already held 30% of its shares and served as an executive director. The main business of Shenzhen electric appliance is tablet computer, and the synergy with Skyworth’s main white electricity business is not strong.
It can be seen that Skyworth’s equity composition is mainly from Skyworth Group (Bermuda) holding about 76.4%, and Skyworth’s management Wu Qinan holding about 15.5%. Wu Qinan was also a member of the Executive Committee of Skyworth Group Co., Ltd. before 2017.
However, it is surprising that Huang Hongsheng, the largest shareholder of Skyworth Group (Bermuda), and his concerted action were not recognized as the actual controller of Skyworth.
According to the prospectus, Huang Hongsheng and Lin Weiping (husband wife relationship) directly or indirectly hold 46.92% of Skyworth Group (Bermuda). Among them, 45.01% is held through target success group (PTC) Limited. However, since Huang Hongsheng and Lin Weiping can neither control the voting results of Skyworth Group (Bermuda) at the general meeting of shareholders through their shareholding nor control the voting results of Skyworth Group (Bermuda) at the board of directors through their seats of directors, they can not control Skyworth Group (Bermuda). Therefore, Skyworth group (Bermuda) has no actual controller, SKYWORTH electric also has no actual controller.
Skyworth Group partially overlaps with the board members of Skyworth electric and Skyworth Digital Co.Ltd(000810) . Skyworth Group and its controlled subsidiaries are mainly controlled by the management.
Source: wind, interface news research department
Runaway salary and dividend plans
In the absence of the nominal actual controller, can Skyworth’s management really fulfill their duties and create value for shareholders?
Among Skyworth enterprises, the salary level of management is higher than the industry average.
Lin Weiping, one of the major shareholders of Skyworth Group, received a salary of RMB 6.01 million in 2020, and the salaries of other major managers such as Lai Weide, Shi Chi and Liu Tangzhi were RMB 26.398 million, RMB 12.881 million and RMB 15.834 million respectively. Skyworth Group’s net profit in 2020 was 1.44 billion yuan, including 1.89 billion yuan of non recurring profits and losses. After excluding non recurring profits and losses, Skyworth Group’s operating profit was 408 million, a year-on-year decrease of 52.28%. Under the sharp decline in operating profit, the company’s senior management received a substantial salary increase. The salaries of Lai Weide and Shi Chi increased by 10.094 million yuan and 8.254 million yuan respectively over the previous year.
Among Skyworth appliances, Wu Qinan, the general manager, received the highest salary, which was 4.5634 million yuan in 2020. The salaries of the other six executives are also more than 1.2 million yuan. In 2020, Skyworth’s total executive compensation was 14.17 million yuan. SKYWORTH’s total operating profit in the same year was 173 million yuan, and the ratio of executive compensation expenditure to operating profit was as high as 8.1%. Compared with other household appliance enterprises, Haier Smart Home Co.Ltd(600690) (600690. SH) in 2020, the salary expenditure of all senior executives was 7.323 million yuan and the operating profit was 13.598 billion yuan; Midea Group Co.Ltd(000333) (000333. SZ) the total executive compensation in 2020 was 76.94 million yuan, accounting for only 0.2% of its operating profit. For the smaller Bear Electric Appliance Co.Ltd(002959) (002959. SZ), the total expenditure on executive compensation in 2020 was 4.71 million yuan, accounting for 0.9% of the operating profit. Obviously, Skyworth’s executive compensation expenditure is much higher than the industry level.
Another problem is that Skyworth executives receive high salaries and hold about 25% of Skyworth’s equity through the employee stock ownership platform and individuals, which is suspected of hollowing out the company. For example, Haier Smart Home Co.Ltd(600690) is a common situation in the industry. After completing the employee equity incentive, the executives hold the company’s shares, and the highest salary of the chairman of Haier Smart Home Co.Ltd(600690) is only 2.56 million yuan. The senior management of Hisense Home Appliances Group Co.Ltd(000921) (000921. SZ) has little shareholding, and their salary is 4-6 million yuan.
In addition to the high salary of executives, Skyworth has a high debt ratio, but it has paid a large proportion of dividends year after year, which is also suspected of infringing on the interests of creditors.
Capital pressure is a big problem Skyworth faced before its listing this time. This time, Skyworth electric plans to raise 810 million yuan, of which 240 million yuan will be used to supplement liquidity.
From 2019 to the first half of 2021, Skyworth’s asset liability ratios were 82.52%, 81.39% and 80.09% respectively. The composition of these liabilities mainly comes from accounts payable. In recent years, the price of raw materials has increased. Skyworth Electric said it has increased the stock volume. However, in recent years, with the great increase of working capital pressure, the company continued to pay high dividends.
From 2018 to 2020, Skyworth’s cash dividends were 120 million yuan, 80 million yuan and 80 million yuan respectively. Especially in 2018, Skyworth’s net profit was only 59.53 million yuan, but the dividend was 120 million yuan. According to the 25.3% shares held by the management and the company, the equity dividend income of the management in the three years is about 70 million yuan.
