With the accelerated pace of reform and opening up, my country’s market consumption demand has grown rapidly, and information technology and technological level have developed rapidly. my country continues to promote the in-depth development of “mass entrepreneurship and innovation”. With the formation and improvement of the entrepreneurial mechanism, various small enterprises will spring up like mushrooms and become an important part of my country’s economic development.
However, although small and medium-sized enterprises have the advantages of flexible mechanism and large development space, due to unfavorable factors such as entrepreneurs’ funds, experience, and management, employees feel that there are many risks and unpredictable factors. As a result, the huge market demand has also spawned an active industry: business consulting and business services.
On January 18, TOP KINGWIN LTD (hereinafter referred to as “Tiancheng Jinhui”), the holding company of Guangdong Tiancheng Jinhui Enterprise Development Co., Ltd. Dak listed. The company plans to issue 3 million shares of Class A common stock at an offering price of $4 to $5.
Business service provider, turn from profit to loss
Zhitong Finance APP learned that Tiancheng Jinhui was established on October 25, 2018. At the beginning of its establishment, its main business focus was to provide high-quality content focused on the equity investment industry to improve customers’ understanding and professional knowledge of the capital market . Later, in 2019, it began to operate as an enterprise consulting company, providing personal/management enterprise business training and enterprise consulting services for small and medium-sized enterprises in China.
For the Chinese capital market with a development history of more than 40 years, Tiancheng Jinhui, which was established less than five years ago, can be described as an out-and-out “new player”. It is understood that Tiancheng Jinhui provides business services for emerging enterprises in China, including business training services, mainly around capital market knowledge and new perspectives; corporate consulting services, mainly focusing on financing at various stages; and consulting and transaction services.
Financial data shows that from 2020 to 2021, the revenue of Tiancheng Jinhui will be US$1.33 million and US$6.3 million respectively, and the corresponding net profits during the period will be US$340,000 and US$2.31 million respectively. However, as of the first three quarters of 2022, the company’s revenue was US$2.802 million, a year-on-year decrease of 15%; the net loss was US$108,000, compared with a net profit of US$1.21 million in the same period last year.
In terms of business structure, in the first three quarters of 2022, the company’s corporate business training, corporate consulting, and consulting and transaction services accounted for approximately 7%, 23%, and 70% of the company’s business, respectively.
It is worth noting that the company’s business seems to have suffered a severe setback in 2022. A closer look at its revenue structure shows that its consulting and transaction services business, which accounts for 70% of its total revenue, has revenue of about US$1.9458 million, a year-on-year increase of Approximately US$1.9041 million achieved a slight increase, while the number of customers in this segment decreased from 8 in the first three quarters of 2021 to 6 in the first three quarters of 2022.
However, the revenue from corporate business training services has dropped by about 80% compared with the same period in the same period. In this regard, the company explained that in the first three quarters of 2022, the epidemic caused the negative impact of isolation, travel restrictions, social or public gathering restrictions, and business establishments across China. and facilities are temporarily closed, some business training courses originally booked by the company have been canceled or delayed, and fewer set-up services and corporate seminars are provided to new partners, affecting business expansion.
However, Tiancheng Jinhui’s corporate consulting service revenue increased by 101% year-on-year from US$323,700 in the first nine months of 2021 to approximately US$650,500 in the first three quarters of 2022. However, due to the significant decrease in revenue from corporate business training services and other services, This part of the revenue growth was partially offset, and the overall revenue still showed a decline, almost losing money.
From the perspective of cash flow, the cash provided by Tiancheng Jinhui’s operating activities in the first nine months of 2022 has decreased significantly compared with the same period in 2021, from US$2.22 million in the first nine months of 21 to -122 million in the first nine months of 22 The quality of the company’s earnings has declined. At the same time, the company’s net cash and restricted cash in the first nine months of 2022 has decreased by US$1.34 million, and funding is slightly tight, which may be one of the reasons for its listing in the United States.
The “danger” and “opportunity” of Tiancheng Jinhui
In fact, supported by China’s rapid economic growth and friendly business policies, from 2016 to 2021, the number of small and medium-sized enterprises in China has increased significantly. According to Frost & Sullivan, an independent market research firm, from 2016 to 2021, the number of SMEs in China increased from 13.9 million to 26.8 million, representing a CAGR of 14.0%. Frost & Sullivan predicts that from 2021 to 2026, the number of small and medium-sized enterprises in China will grow steadily at a compound annual growth rate of 9.8%.
As the number of companies entering the Chinese market increases, competition in most industries in China is becoming more intense. At the same time, the Chinese economy is shifting from traditional real estate investment and manufacturing to new economic industries such as Internet-driven or technology-driven.
Therefore, Tiancheng Jinhui anchors to new fields and provides a number of important business services for young and emerging companies in China, including corporate business training services, which mainly focus on advanced knowledge and new perspectives in the capital market, and corporate consulting services, which mainly focus on financing. In all aspects, as well as consulting and transaction services, the main clients are entrepreneurs and executives of small and medium-sized enterprises (ie SMEs) in China. It can be seen that more and more small and medium-sized enterprises will lay the foundation for Tiancheng Jinhui’s future business development in the future.
In the risk factors section of the prospectus, Tiancheng Jinhui stated the current crises it is facing one by one. The main points are as follows:
The first is that market competition tends to be fierce. It is understood that China’s equity investment service industry, which Tiancheng Jinhui is engaged in, is highly fragmented and highly competitive. In this highly fragmented industry, the company’s ability to grow and differentiate itself among its peers and competitors depends on many factors, including the company’s willingness to expand its geographic coverage in China, improve its offline service offerings, and enhance online and offline synergies. ability. It can be seen that the increasingly fierce competition in the industry may affect the company’s business prospects.
Second, commercial services have low barriers to entry, and the company faces many competitors, many of whom have been in business longer than the company, while the entry of new players also affects the company’s market share. And if competing companies may have greater financial and other resources than Tiancheng Jinhui, and may provide services that are more attractive to potential customers; increased competition will negatively affect its revenue and profit margins.
Third, how to retain and attract talents seems to be the top priority of business consulting companies. If Tiancheng Jinhui loses the services of any key executive officers and other key employees, or fails to retain, recruit and hire experienced staff, the company’s ability to effectively manage and execute operations and achieve its strategic objectives may be impaired.
On the other hand, a large portion of the company’s revenue comes from several major clients: Chongqing Longjinyun Enterprise Management Partnership (Limited Partnership) and Qingdao Yingmanli Enterprise Management Partnership (Limited Partnership) as of the first three quarters of 2022. Customers accounted for 23% and 22% of the company’s revenue, respectively. However, the contracts signed with the above two customers are both for one year, and will expire at the end of August and February this year respectively.
Looking back to the first three quarters of 2021, Guangzhou Tiancheng Capital Management Group Co., Ltd. and Jiangmen Jiahong Environmental Protection Technology Co., Ltd. accounted for 26% and 18% of the company’s revenue respectively. The term of the above-mentioned contract is also one year, and the contract expires in 2022 respectively.
To sum up, it can be seen that most of the company’s customer contracts are short-term contracts as short as one year. For consulting companies, long-term contracts are more stable and can reduce business risks to a certain extent. The signing of short-term contracts also means that the company is under increased pressure to seek new customers, and the bargaining power in the industry is not outstanding.
In addition, Chongqing Longjinyun Enterprise Management Partnership (Limited Partnership), the company’s main client, accounted for 87% of the company’s accounts receivable as of September 30, 2022. In 2021, two customers of Zhangjiajie Zhengxing Business Association (Limited Partnership) and Guangzhou Bohua Enterprise Management Consulting Co., Ltd. accounted for 37% and 27% of the company’s accounts receivable, respectively. It can be seen that a large part of the total revenue is concentrated in the hands of a limited number of customers, and there are still some inherent risks.
To the extent that the Company cannot predict the level of future demand for the Company’s services by these customers, nor the future demand for the Company’s services by these customers in the marketplace. If any of these customers decline the Company’s services due to market, economic or competitive conditions, it could adversely affect the Company’s profitability and financial condition, and could negatively affect the Company’s revenues and results of operations.
Judging from the signals reflected in the prospectus, Tiancheng Jinhui is still “sober in the world” in terms of risks. From this, it is not difficult to understand why the company builds an online platform for future online courses by cultivating talents, recruiting talents, and improving the system. , Improving brand awareness through multi-channel marketing and conducting mergers and acquisitions in the industry are listed as the focus of work after listing on the US stock market.