Li Ning also has a real estate dream

Mondo Sports Updated on 2024-01-29

Since last year, in the process of the Hang Seng Index constantly refreshing the lower limit, regardless of market capitalization, we have been fortunate to witness two catering companies fantasize about becoming real estate tycoons, one is Jiumaojiu, who buys commercial office buildings, and the other is Haidilao, which buys Japanese hotels as resortsBoth of them fell by more than 30% in stock prices after buying the property.

Today, there is one more consumer company in Hong Kong to join the real estate dream team.

On December 10, Li Ning announced that the company intends to take 22HK$0.8 billion acquisition of Henderson Land, located in Harbour East, North Point Property, as the Hong Kong headquarters, involving a property area of about 1440,000 sq. ft. The commercial tower consists of 22 floors of commercial office space and 2 floors of retail spaceThe revenue in 2021 was 35.13 million yuan, and the revenue in 2022 was 49.54 million yuan.

Interestingly, the current Hong Kong market has raised interest rates several times due to the Federal Reserve's repeated interest rate hikes, and the annualized cost of funds is as high as 5-6%. According to the financial data in 2022, Li Ning's annual income from 2.2 billion ** properties is only 224%, which is a textbook loss-making transaction.

Of course, we can also think that Li Ning is betting on Hong Kong's future property prices, and the 2.2 billion may be just the beginning. It's just that the Hong Kong market lacks sentimental investors and can't understand this investment from a long-term perspective. Today, Li Ning was pressed against the floor at the opening and fell 14 throughout the day29%, and the market value fell by more than 8 billion.

At the end of October, Li Ningcai lowered its revenue growth guidance from 15% to single digits, causing the stock price to plummet by 20% on the same day, behind which the company's management problems led to the phenomenon of verified goods fleeing in downstream dealer channels.

Only a month and a half later, investors paid for the decision-making of Li Ning's management. Since Li Ning lowered its performance and announced the purchase of a house, the stock price has fallen by nearly 40%, and has fallen by more than 70% this year, and the valuation system has successfully switched to real estate stocks.

The reason for Li Ning's purchase of the building is that the acquisition of this building as the Group's Hong Kong headquarters can demonstrate the Group's confidence in the prospects of Hong Kong's business and mark the implementation of the plan to strengthen its international business development.

This is the same reason as Jiumaojiu to buy a building, which is to say that the acquisition of the building can enhance the business capacity or show the company's confidence in the future. But on the other hand, if you have confidence in the future, why not use the money on the core business, or simply buy back your own in the market, which is a simpler and cruder way.

Moreover, Li Ning has already bought a house in Shanghai in 2021. According to the announcement at the time, Li Ning Company was connected to a wholly-owned subsidiary of about 10RMB3.4 billion for the acquisition of 8 office floors and 128 parking spaces in Kaiqiao Cultural Plaza, 28 Neighborhood, Huayang Road Street, Changning District, Shanghai, China.

According to the explanation at the time, the company would establish its Yangtze River Delta global business headquarters in Changning District, Shanghai, and the property acquisition was in line with the strategic plan. But in the rearview mirror, the acquisition of the property in 2021 did not bring substantial changes to the company's business, and the company's stock price has fallen by as much as 80% from then to now, and there have been various strange management problems in the process.

Theoretically, it is possible for the company to sell commercial buildings in the future, but investors are buying consumer stocks, not real estate stocks, and the management must know better than everyone how much the purchase of real estate can contribute to the main business.

However, in the final analysis, Li Ning is still a big business, because of the sufficient financial strength on the books, the investment of 2.2 billion yuan does not need the approval of the general meeting of shareholdersIn October last year, Jiumaojiu had planned to spend a third of its cash flow to buy an office building, but was forced to abandon the deal due to shareholder pressure.

Looking ahead, Li Ning is likely to continue to pay a high price for this investment in the capital market, and the successive decision-making problems have left a psychological shadow on most investors. Even if we don't discuss valuation for the time being, from the perspective of fundamentals, Li Ning is far from bottoming out, and the seemingly extremely cheap static valuation is likely to fall more and more expensive due to the downward revision of subsequent performance.

On October 27, the second day after Li Ning lowered its performance guidance, we reminded on Knowledge Planet that when the brand power of consumer goods begins to decline, this is likely to be continuous, and only after all the tricks are used up in the end, the management will really admit defeat, and then it may usher in greater discounts to clear inventory, or even large-scale store closures.

The reason is simple, from sportswear brands experiencing inventory problems, whether it is Nike or Putian, discounting** has proven to be the easiest and most efficient way. But in the short term, large-scale discounts** are bound to put more pressure on profits.

Therefore, the same is true for Li Ning, if the subsequent entry into the store closure cycle, taking into account a series of impairment provisions such as rent and inventory, it can be said that Li Ning's future profits are untenable.

From the perspective of common sense, enterprises naturally have various business cycle problems. But in the hardest time, it takes a good management to lead the company through the cycle. As for whether the current management of Li Ning can lead Li Ning back to the top, I believe that most investors already have the answer in their hearts.

Of course, the most hurtful thing about Li Ning's investment is the ecology of the Hong Kong market. Since the launch of the Hong Kong Stock Connect in 2015, we have witnessed countless times when southbound funds want to cross the Hong Kong River to win pricing power, but each time it is a high position. On the one hand, although there are differences in the valuation systems between the two markets, we cannot require the valuation level of the Hong Kong market to be immediately on par with that of A-shares. But on the other hand, for the Hong Kong market, where low valuations have become normalized, if there is a lack of limited moral and legal constraints on major shareholders, the competition for pricing power will most likely only be wishful thinking on the part of leeks. You must know that the Hong Kong stock routine is much more brutal than that of A shares, and a large amount of ** is a matter of one night.

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