About Beijing Zhongfeng Assets Appraisal Co., Ltd
Reply on asset appraisal in the inquiry letter on Shenzhen Guohua Network Security Technology Co.Ltd(000004) 2021 Annual Report
Listed company management Department II of Shenzhen Stock Exchange:
Beijing Zhongfeng Assets Appraisal Co., Ltd., as the appraisal institution for Shenzhen Guohua Network Security Technology Co.Ltd(000004) merger and acquisition of Beijing Zhiyou Wangan Technology Co., Ltd. to form the recoverable value of goodwill asset group and Shenzhen Guohua Network Security Technology Co.Ltd(000004) plans to conduct impairment test on the value of all shareholders’ equity of Beijing Zhiyou Wangan Technology Co., Ltd. after the expiration of performance commitment, Reply to the inquiry letter of the company’s annual report No. [ China Vanke Co.Ltd(000002) 20201 on the assets involved in the annual report of the company.
Question 3 (2) The specific relationship between the appraisal report no. 40047 and the appraisal report no. 40048, the specific relationship and difference between Zhiyou Wangan asset group and the value of all shareholders’ equity included in the appraisal scope, the specific situation, difference and rationality of the appraisal methods, data, parameters, calculation process and results adopted in the two reports, and the specific impact on the company’s financial statements.
reply:
1、 Appraisal report no. 40047 on the relationship between appraisal and specific differences
The appraisal report no. 40047 is used for the impairment test of goodwill in the preparation of the consolidated financial statements on December 31, 2021. The appraisal report no. 40048 is used to test the market value of Beijing Zhiyou Wangan Technology Co., Ltd. after the expiration of performance commitment. The evaluation purposes of the two are inconsistent.
The appraisal object of the appraisal report no. 40047 is the recoverable value of the asset group of Beijing Zhiyou Wangan Technology Co., Ltd. including goodwill involved in the goodwill impairment test. The appraisal object of the appraisal report no. 40048 is the value of all shareholders’ equity of Beijing Zhiyou Wangan Technology Co., Ltd. The evaluation objects of the two are inconsistent.
The appraisal scope of the appraisal report no. 40047 is the asset group of Beijing Zhiyou Wangan Technology Co., Ltd. involved in the goodwill impairment test. The assets involved include the long-term assets and goodwill of Zhiyou Wangan on the benchmark date. The appraisal scope of the appraisal report no. 40048 covers all the assets and liabilities of Beijing Zhiyou Wangan Technology Co., Ltd. on the benchmark date. The evaluation scope of the two is inconsistent.
Zhiyou Wangan asset group is the long-term assets and goodwill related to the asset group in the Shenzhen Guohua Network Security Technology Co.Ltd(000004) consolidated report:
The specific composition of the asset group is as follows:
Monetary unit: RMB
Account Name: book value reflected in the amortization balance of Shenzhen Guohua Network Security Technology Co.Ltd(000004) consolidated statement book value (consolidated caliber) evaluated and added value on the purchase date of zhiyou.com
Fixed assets 184739234184739234
Intangible assets 251429720312176250003731922203
The asset portfolio excluding goodwill is 269903643712176250003916661437
Original value of goodwill – 98740364775
Less: provision for impairment of goodwill -——
Assets portfolio including goodwill – 102657026212
The asset group is mainly composed of three parts. The first part is the book value of fixed assets and intangible assets held by Beijing Zhiyou Wangan Technology Co., Ltd. on the benchmark date (consolidated basis); The second part is the amortization balance of intangible assets evaluated and added value on the purchase date; The third part is the net value of goodwill.
The appraisal scope of the total equity value of the shareholders of Beijing Zhiyou Wangan Technology Co., Ltd. is Beijing
All assets and related assets owned by Zhiyou Wangan Technology Co., Ltd. on the benchmark date of December 31, 2021
Related liabilities.
Monetary unit: RMB
No. value range of total equity of project shareholders
1. Current assets 30478616143
2. Non current assets 3415542913
3. Including: long-term equity investment 2000000000
5. Fixed assets 80925410
7. Intangible assets 553993297
8. Right to use assets 206795675
9. Deferred income tax assets 573828531
10. Total assets 33894159056
11. Current liabilities 7042241878
12 non current liabilities 33064364
No. value range of total equity of project shareholders
13 total liabilities 7075306242
14. Net assets 26818852814
Among them, long-term equity investment includes 2 subsidiaries, 4 secondary subsidiaries and 1 tertiary subsidiary.
The book value of fixed assets and intangible assets under the consolidated criteria is consistent with the book value of fixed assets and intangible assets held by Beijing Zhiyou Wangan Technology Co., Ltd. on the benchmark date (consolidated criteria) in the goodwill impairment assessment report no. 40047.
2、 On the appraisal methods and differences between the appraisal report no. 40047 and the appraisal report no. 40048:
(I) Zhongfeng pingbao Zi (2022) No. 40047. The specific evaluation method is as follows:
The present value of the estimated future cash flow is estimated. The prediction of future income is entirely based on the current situation of the holders of the asset group, the way, strength and ability to use the asset group, that is, the predicted income that can be obtained by using the asset group according to the current state, use and management level is calculated by the income approach method.
The income approach refers to the evaluation method to capitalize or discount the expected income and determine the value of the test object. The expected future cash flow of the asset group is the cash flow belonging to the asset group, the corresponding discount rate is the weighted average cost of capital before tax, and the evaluation connotation is the value of the asset group.
The expected future cash flow model of the asset group can be divided into cash flow before (income) tax and cash flow after (income) tax. The pre tax cash flow discount model is selected for this appraisal. The basic calculation model is:
Benchmark date of recoverable assets: P
RI: expected pre tax free cash flow in the I year after the benchmark date
A: Expected pre tax free cash flow in the perpetuity period
r: Pre tax discount rate
n: Forecast period
The parameters are determined as follows:
1. Determination of free cash flow RI in year I
RI = ebitdai – increase in working capital I – capital expenditure I
2. The discount rate r adopts the weighted average capital cost RBT before (income) tax, and the formula is as follows:
（ ）
r
Where: Ke: cost of equity capital
Kd: capital cost of negative interest debt
T: Income tax rate
The cost of equity capital re is calculated using the capital asset pricing model (CAPM), and the formula is as follows:
Including: Ke: cost of equity capital
RF: risk free rate of return
β ： Equity system risk coefficient
MRP: market risk premium
ε ： Specific risk adjustment coefficient of the assessment object
3. Determination of income period and forecast period
After investigation and analysis, the appraisers communicated with the management of the enterprise. According to the operating conditions of the holders of the asset group and the types and characteristics of the assets of the asset group, there are no factors affecting the continuous operation of the holders of the asset group and the current appraisal object and the limited service life of the assets of the asset group. Therefore, the income period is considered to be sustainable.
According to the current operating conditions, business characteristics, market supply and demand of the holders of the asset group, the forecast provided by the holders of the asset group, and comprehensively considering the relevant requirements of the accounting standards for Business Enterprises No. 8 – asset impairment, the forecast period is determined as five years, i.e. 20222026.
(II) Zhongfeng pingbao Zi (2022) No. 40048. The specific evaluation method is as follows:
According to the professional standards for asset appraisal – enterprise value, the discounted cash flow method is a method to evaluate the value of assets by converting the expected future net cash flow of the enterprise into the present value. The basic idea is to obtain the appraisal value by estimating the expected net cash flow of the asset in the future and converting it into the current value at an appropriate discount rate. The basic conditions for its application are that the enterprise has the basis and conditions for sustainable operation, there is a relatively stable corresponding relationship between operation and income, and the future income and risk can be predicted and quantified. The biggest difficulty of using discounted cash flow method lies in the prediction of future expected cash flow, as well as the objectivity and reliability of data collection and processing. When the prediction of future expected cash flow is more objective and fair and the selection of discount rate is more reasonable, the valuation results are more objective.
1. Assessment ideas
According to the due diligence of this appraisal and the asset composition and business characteristics of the enterprise, the basic idea of this appraisal is to estimate the value of all shareholders’ equity (net assets) based on the audited financial statements of the appraised entity. That is, first, the discounted cash flow method (DCF) is adopted according to the income path to estimate the value of the operating assets of the appraised unit, add the value of other assets and subtract the value of other liabilities to obtain the value of all shareholders’ equity of the appraised unit.
That is to indirectly obtain the value of all shareholders’ equity through the evaluation of the overall value of the enterprise.
2. Calculation model
The basic calculation model of this appraisal is:
E \uf03d B \uf02d D
E: Value of all shareholders’ equity of the appraisal object
B: Overall enterprise value of the appraisal object
B \uf03d P \uf02b \uf0e5 C i \uf02b Q
Where: P: the value of operating assets of the appraisal object
Σ CI: value of surplus assets and non operating assets (liabilities)
Q: Long term equity investment value of the appraised object
D: Value of interest paying debt of the appraisal object
(1) Value of operating assets
Operating assets refer to the assets and liabilities related to the production and operation of the appraised entity and involved in the prediction of the enterprise’s own cash flow after the base date. According to the historical operation status and future development trend of the appraisal object, combined with the development situation of the industry, the free cash flow in the future operation period is estimated. Discount and add the free cash flow in the future operation period to obtain the operating asset value of the enterprise. The calculation formula of the value of operating assets is as follows:
（ ）
Where: RI: free cash flow of the enterprise in year I
RN: free cash flow of the enterprise in the nth year of the forecast period
r: Discount rate
g: Growth rate of sustainability
n: Forecast income period
① Enterprise free cash flow
The calculation formula of enterprise free cash flow is:
R = net profit after tax + depreciation and amortization + debt interest after tax interest payment – capital expenditure – increase in working capital
② Discount rate
The discount rate is determined by the weighted average cost of capital model (WACC). r
Of which:
r: Discount rate
E: Market value of equity
D: Market value of debt
