“Finance” New Media Song Jinyu/Wen Shu Zhijuan/Editor
On the way to “returning blood” to self-help, Evergrande has made new moves. On November 18, China Evergrande (03333.HK) and Hengteng Network (00136.HK) simultaneously announced that Evergrande will liquidate all Hengteng shares held at a total price of HK$2.127 billion. On November 4 and November 11, Evergrande sold 72 million shares of Jiakai City and the motor business company of Evergrande Motor for 170 million yuan and 14.52 million yuan respectively.
However, it is worth noting that the transaction price is 1.28 Hong Kong dollars per share, which is about 24.26% discount to the closing price of Hengteng Network on November 17. A person close to Evergrande told the new media reporter of Caijing that Evergrande’s discounted clearance of Hengteng Networks depends on the situation of the company and the price given by the acquirer. The ultimate reason is that the company urgently needs to supplement its cash flow.
Hengteng Network used to be an important part of the “New Evergrande” map outlined by Xu Jiayin, chairman of the board of directors of Evergrande. The reporter noticed that Hengteng Network was formerly known as Masco Group Co., Ltd., which was mainly engaged in investment and financing, securities trading, and property investment. In June 2015, Evergrande and Tencent became major shareholders of Masge and obtained control. Subsequently, the company changed its name to Hengteng Network and adjusted its main business to serve the Internet community.
After acquiring Ruyi Films in October last year, its business expanded to content production, online streaming, and Internet home and materials businesses. In the first half of this year, the films produced by Ruyi Pictures mainly included “Send You A Little Red Flower” and “Hello, Li Huanying”. The latter ranked second in the box office of Chinese film history.
Evergrande has such a promising prospect for discounted clearance of Hengteng shares. Does this move mean that Evergrande has given up its transformation as an Internet technology company? The above-mentioned person stated that at present, the main strategic goals of Evergrande Group are to “guarantee the property” and “confirm payment”, and it is uncertain whether to continue to develop the technology business in the future.
The fact is that although Hengteng Networks business has improved, it is still at a loss. According to the performance report for the first half of 2021 released by Hengteng Network, Hengteng Network’s revenue in the first half of this year was 1.395 billion yuan, a year-on-year increase of 950%, but its net profit was -2,448 million yuan, compared with a profit of 7.18 million yuan in the same period last year.
According to Yan Yuejin, a real estate analyst, the purpose of Evergrande’s liquidation of Hengteng Network is to withdraw funds. The discounted liquidation also shows that it is not the core asset of Evergrande in a special period. Judging from the current situation, Evergrande’s move to accelerate the sale of assets is to adapt to changes in the situation, strive to solve the debt problem, and respond to the transformation of the industry.
According to the financial report disclosed by Evergrande, as of the middle of this year, Evergrande’s total liabilities are 1.97 trillion yuan, with a debt-to-asset ratio of 82.71%. In the same period, the company’s cash and cash equivalents decreased by 71.895 billion yuan from the end of last year to 86.772 billion yuan. It is precisely because of the pressure on debt and the tightening of liquidity that the company started a “sell, sell, sell” model.
According to reporter statistics, since June this year, China Evergrande has successively reduced its holdings in Hengteng Networks by means of transfer or secondary market sales. So far, the cumulative sale of Hengteng’s shares has exceeded 10 billion Hong Kong dollars. In addition to the sale of Hengteng Network shares, Jiakaicheng shares and Electric Motor Company, Evergrande has also reduced its holdings in Shengjing Bank, Gaoxin Investment Group and Evergrande Bingquan Group since this year, and realized a total of more than 32 billion yuan.
However, for Evergrande’s core assets, the equity sale of Evergrande Property and Evergrande Automobile has not yet made new progress. Earlier, there was news that Evergrande intends to sell the controlling stake in Evergrande Property to Hopson Development for a consideration of HK$20.04 billion. According to the above-mentioned person close to Evergrande, Evergrande has been looking for buyers of its assets, and there is currently no latest progress in asset sales.
From the perspective of the capital market, affected by the clearance of Evergrande, the stock price of Hengteng Network rose sharply on November 18, and closed at 2.11 Hong Kong dollars per share on the same day, up 24.85%. China Evergrande plunged, closing price at 2.64 Hong Kong dollars per share, down 5.71%.
Zhang Jian, an expert in real estate investment, financing and strategy, said that Evergrande now urgently needs to sell its assets to alleviate its urgent need. Since the beginning of this year, Hengda has taken measures to raise funds. However, due to excessive debt, the real estate market has been in a downturn for several months, and next year’s sales and housing prices are full of uncertainties. In the future, more actions are needed to reduce debt pressure and supplement cash flow.
Yan Yuejin pointed out that given Evergrande’s active fundraising efforts, on the one hand, investors need to give Evergrande support and understanding. On the other hand, Evergrande also needs to do a good job of communication with external investors to ensure the stability of the backbone of the company, lock in the main business, and accelerate sales to promote payment.Return to Sohu to see more
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