Shulou(Shulou.com)06/01 Report--

The last two years are Shimao real estate highlights two years, the main business, sales performance ushered in the outbreak, revenue and profits continue to grow, a number of financial indicators firmly in the forefront of the industry; capital operation, fierce attack, 2019 with 20 billion funds have acquired more than 20 real estate projects. In 2020, it will split the property sector and promote its independent listing on the Hong Kong Stock Exchange.

Shimao Group, which stands at the age of 30, has the same scenery.

A few years ago, however, Shimao Group was a different story.

During the three years from 2015 to 2017, Shimao's performance remained in the doldrums, falling out of the top 10 of China's housing companies at one point.

From the downturn to the highlight, Shimao has experienced a change in the old and new leaders.

In 2019, Xu Shitan, the second-generation successor, formally succeeded to the throne. Xu Shitan is bold and aggressive, and his style is reflected in Shimao's intensive M & An operation. A series of acquisitions launched by Shimao in 2019 is the operation after Xu Shitan took over.

Under the background of speed control and stability of many real estate enterprises, Shimao's accelerated overtaking has aroused public concern about its destocking and M & A risks.

Intensive mergers and acquisitions refer to soil reserves

According to the 2019 Shimao Group Financial report:

Shimao Group achieved revenue of 111.517 billion yuan, an increase of 30.4% over the same period last year.

The company realized a net profit of 10.898 billion yuan, an increase of 23.35% over the same period last year.

The gross profit was 34.131 billion yuan, an increase of 26.6% over the same period last year.

It is worth mentioning that the real estate contract value of Shimao Group in 2019 was 260.066 billion yuan, an increase of 47.6% over the same period last year and 124% of the annual sales target.

Shimao, which overfulfilled its sales plan in 2019, shouted out the sales target of "impact 300 billion yuan in 2020" at the performance conference.

In addition to outstanding performance, Shimao has also shown some ability in the land reserve.

In 2019, Shimao Group increased its land reserve by 30.92 million square meters, an increase of more than 300% over the same period last year. The saleable value of the new land reserve was about 500 billion yuan, of which 65% was collected by mergers and acquisitions.

At this point, Shimao Group's capital operation in 2019 showed a foothold, intensive mergers and acquisitions, all for the land reserve.

Anyone who knows the character of the new boss Xu Shitan will be no stranger to his behavior.

Mr Xu prefers to expand through acquisitions.

He once said bluntly that the way to acquire land by auction is too expensive, and that acquiring land through acquisition is also a familiar logic for real estate companies.

However, in terms of projects, Shimao is generally screened, and only projects developed to a certain extent can be included in Shimao's list of mergers and acquisitions.

According to incomplete statistics of the Beijing Business Daily, since March 2019, Shimao Group has acquired a number of projects in Taihe, Mingfa, Wantong and Yuetai through its two listed platforms Shimao Holdings and Shimao Real Estate. Among them, the number of projects involving Taihe reached 12, with a total investment of more than 20 billion yuan.

By the end of 2019, Shimao had settled in 120 cities across the country, with 349 projects.

Under a large number of mergers and acquisitions, the total amount of Shimao real estate land reserve has increased significantly.

The increase in land reserves in the first half of 2019 alone exceeded the level of 2018 for the whole year, and the land reserve owned for the whole year increased by 7.48 million over 2017.

It is worth mentioning that the land reserve for real estate enterprises is a "double-edged sword", as a whole to match the development and sales capacity.

The land reserve is too small, the follow-up development capacity is insufficient; the land reserve is too large, the digestion cycle is too long, and the pressure of destocking is great.

At a time when the real estate market is relatively depressed, many leading real estate enterprises, such as country Garden, Evergrande, Vanke and so on, have put "high turnover" in a secondary position and take "speed reduction and quality improvement" as a strategic choice. the speed of land acquisition has been significantly slowed down.

Under the slow pace of many real estate enterprises, Shimao's accelerated running is more or less in violation of the law, who can step on the rhythm of the market?

Time will reveal the answer.

Behind the listing of spin-off properties

In 2020, Shimao not only has the "acceleration" of performance, but also ushered in the good news of the split listing of its property sector.

On April 21 this year, Shimao Group announced that it was considering spin-off of the Group's property management services and related value-added services business on the Stock Exchange.

On May 14, Shimao Group announced that Sequoia Capital and Tencent had invested US $130 million and US $114 million respectively in Shimao Service.

As soon as this signal appears, the market knows that Shimao service is just a step away from listing.

As expected, Shimao Services formally submitted its prospectus to the Hong Kong Stock Exchange on June 29, and the third listed company of Shimao Group is about to be born.

The prospectus reveals:

In 2017, the operating income of Shimao Service reached 2.489 billion yuan, with a compound annual growth rate of 54.5% from 2019 to 2019.

The net profit reached 385 million yuan, with a compound annual growth rate of 88% from 2017 to 2019.

Why Shimao Group chose to split the property sector listed, there are environmental reasons, but also have their own reasons.

Under the general environment, the listing of the spin-off of real estate enterprises in the mainland has become a common practice.

Since 2019, the property companies of Blu-ray, Poly, Times, Baolong, Jianye and other real estate companies have been listed, and most of these companies have chosen the Hong Kong stock market.

Everyone is scrambling to go to Hong Kong for IPO. Shimao should not miss this trend.

Their own reasons are more straightforward, two words: for money.

Although it looks deep-pocketed, Shimao, a capital-intensive real estate company, also needs more money to operate.

Among the many financing channels, listing is undoubtedly the best choice.

For Shimao, whether the property sector is listed or not makes a big difference. From the media view of finance and economics, if the property sector is not split, then in Shimao Group, enjoy a rolling price-to-earnings ratio of less than 10 times.

But once spun off and listed, Shimao service is expected to reach a market capitalization of more than 20 billion, referring to the 55-fold growth since the listing of country Garden service.

However, the listing of spin-off properties is not profitable, and the pressure and risks behind it can not be avoided.

The listing of Shimao service itself is mixed with a hint of "big gamble". While getting strategic investment from Sequoia and Tencent, Shimao Service also "reaped" a bet agreement.

According to the prospectus, if the net profit of Shimao service is less than 1.17 billion yuan (up 203.90% from the same period last year) and the comprehensive income is less than 8.1 billion yuan (up 313.82% from the same period last year) by the end of 2021, Sequoia Capital and Tencent have the right to ask Shimao Group to transfer additional shares or pay compensation to it.

From this point of view, the pressure on Shimao service is not as great.

In addition, the business of Shimao Services is highly dependent on Shimao Group.

Data show that most of Shimao's income over the past three years comes from the support of Shimao Group, which accounts for more than 80% of property development.

At the same time, Shimao service business structure is relatively simple, accounting for 96% of residential property management area and 89.7% of revenue in 2019.

On the whole, the independent ability and diversified development ability of Shimao service have been tested.

I am afraid the road to listing Shimao service is not smooth.

Controversy over the acquisition of Fusheng

With both intensive mergers and acquisitions and split sectors listed, Shimao Group does not have a small appetite, but being able to eat is sometimes not all a blessing and is likely to cause "indigestion".

Shimao was involved in a recent alarm by Citic Capital's fund against Fusheng Group.

In order to acquire and develop two real estate projects in Fuzhou, Fusheng Group introduced Citic Capital's fund products in the form of Ming shares and real debt, and quickly raised a total of 300 million yuan from 127. of which 250 million yuan was invested in a commercial and residential project called Qian Longao Sports City, which is the subject of the fund.

After the maturity of this private equity product, investors have not been repaid and are still in the process of "debt collection".

At the end of 2019, under great financial pressure, Fusheng Group introduced the acquisition of Shimao Group. Shimao took over Fusheng's assets, including more than 100 billion yuan of marketable resources, 300 billion yuan of old goods value, and so on.

In January 2020, the two sides established a cooperation platform "Shimao Fusheng".

In theory, after the acquisition of Fusheng, Shimao will receive all its assets and liabilities, but it is clear that Shimao has its own plans.

Shimao has a clear plan for this: merge high-quality assets with clear debt into listed companies to make a big performance; second-best assets with unclear debt are put on Shimao Fusheng platform, clean up and then sold to listed companies or debt restructuring.

When it comes to internally raised debt, directly throw out the "house for debt" card, "house" is the above-mentioned project property, that is, the target of Citic Capital Private Equity Fund.

As soon as this "divine operation" came out, Citic Capital and investors were completely infuriated and chose to call the police. Many investors went directly to Shimao headquarters to ask for an explanation.

The dissatisfaction of investors is beyond reproach.

In the merger and acquisition of Fusheng, Shimao played the role of "rescuing soldiers", but automatically turned into a "pot-throwing man" after entering the venue.

The performance of "picking fat and picking thin" has been criticized, and we still want to take off the responsibility for the debt.

According to industry insiders, Citic Capital, Shimao and Fusheng reached a solution in mid-early May on how to repay the debt, but when it was implemented in late May, Shimao overturned the previous plan and went back to the beginning.

There is no doubt that investors will suffer the most no matter how the dispute ends.

How Shimao should explain to investors, the point of view of finance and economics will continue to pay attention.

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