Original Eagle Seeking Jun Eagle Seeking Real Estate 2024-03-04 10:43 Shaanxi.
Author information: author introduction
He has been working in the brokerage industry for eight years, and is a certified investment consulting analyst.
Ten years of experience in finance and economics, senior reporter.
After becoming the "No. 1 Real Estate Brother" in 2004, Hopson Development took the initiative to give up the pursuit of scale and chose the slow turnover model of Hong Kong real estate developers. For more than ten years, the company has not had any idol baggage, guarding a huge amount of land in the core area with a heinous low cost, and allowing others to sneer at it.
Beginning in the second half of 2021, private real estate companies began to line up to explode, and Hopson looked calm and calm, envying the private counterparts who have entered the barbecue mode one after another. It wasn't until May 2023 that the company was unable to repay a $100 million private placement bond on time and it was a substantial explosion, and everyone saw some of Hopson's family background. Before the 2024 Lunar New Year, Luo Zhenyu, a business tycoon who spared no expense, resigned gloomily, less than three years before and after, which added a touch of ominous atmosphere to Hopson in the stormy weather.
The fact is that Hopson has only learned some "scratches" of Hong Kong businessmen. For Hong Kong property developers, land hoarding and slow turnover are just external forms, and their core trait is financial conservatism. Hong Kong companies rarely raise funds, and some businesses do not even borrow a penny, and their operations rely entirely on their own accumulation. Although Hopson's turnover is slow, it has always been hungry for financing. At the end of 2022, Hopson's real cash-to-short-debt ratio was only 035 times, this proportion is common in the previous use of Pon's financing to rush the scale of real estate companies.
On the whole, Hopson has never enjoyed the dividends of scale for many years, and in the end there is a big problem with liquidity, and there is always something different in the middle of this.
Hopson has been hesitating on a scale of 10 billion yuan for more than ten years, and behind the calm is the Zhu family's vertical and horizontal industrial kingdom, which traverses real estate, power investment, energy development, e-sports, road and bridge investment, traditional Chinese medicine industry, new energy vehicles, equity investment, life insurance and overseas investment. In contrast, Xu Jiayin, who puts all the industries on the table, is much simpler. If all the properties of the Zhu family are compared to a pearl necklace, then Hopson is one of the most shining beads. Because it is irreplaceable, the sparkle on the surface is more like the fulfillment of some kind of mission.
(a).
In 2023, the former No. 8 Xiaoyun Road and today's Manhe Beijing will once again sit on the top coffee position in Beijing with an average price of 45 million, which is 14 million higher than the second place. Among Hopson's many projects, luxury residential products occupy the main position, which makes its average price per square meter reach 40,000 yuan in 2023. Under this heading, Vanke is 1460,000 yuan, Poly 220,000 yuan, Greentown 340,000 yuan. To talk about **, almost all real estate companies can only hope to be on the back.
Due to the low cost of land and the high price of land, Hopson's profitability is beyond imagination. In recent years, while the gross profit margin of peers has fallen off a cliff, Hopson's indicator has topped the industry all year round. From 2018 to 2022, the company's gross profit margin was % and 30%, respectively, and it rebounded to 36% in the first half of 2023.
Compared with its peers, Hopson started with a good hand, and the surface performance data seems to be impeccable, but if you look closely, in some respects, Hopson does not seem to be able to justify itself. For example, in terms of cash flow management for sales returns, Hopson has a puzzle to solve.
Real estate companies generally have two important funds, one is financing from financial institutions, and the other is the funds withdrawn from sales, the latter is more important than the former, because only smooth sales can gain the trust of financial institutions. In the financial report, the funds recovered from the pre-sale in the current year can be calculated through a data, that is, the contract liabilities in the balance sheet.
The problem with Hopson was that the repatriated sales funds could not match the officially announced contracted sales. Yingmijun extracted relevant data from the financial reports of previous years and compiled them into a **:
Drafting: Eagle Seeker.
Since Hopson's officially announced contracted sales are presented in RMB and its financial reports are presented in Hong Kong dollars every year, for comparability, Eagle Seeking Jun converts the contracted sales into Hong Kong dollars at the foreign exchange exchange rate at the beginning of the year. This figure is not an exact amount, but because the exchange rate fluctuates relatively little during the year, it basically does not affect the analysis and comparison.
Hopson rarely cooperates with peers to develop projects, and even if it cooperates sporadically, Hopson mostly dominates, so in the case of consolidation, the amount of contracted sales is roughly the amount of cash flow. However, from the above data, it can be seen that there is a certain gap between the actual sales funds received each year and the announced contract sales.
It is not objective to say that these two data are completely comparable, because there is actually a difference between the receivables at the beginning and end of each year, but under normal circumstances, there should not be much difference between the two. Judging from the comparison of these two sets of data in the past five years, there is a large gap in most periods.
Taking 2020 as an example, Hopson's officially announced contracted sales were 35.8 billion yuan, or about 39.3 billion Hong Kong dollars, but the collection calculated from the contract liabilities of that year was only 25.5 billion Hong Kong dollars, a difference of about 13.8 billion Hong Kong dollars. This is not a small number, if it is only a one-year mismatch, it may be some kind of accidental variable, but over a five-year period, this mismatch shows that it is the norm, and the statistics are as follows:
Drafting: Eagle Seeker.
It can be seen that from 2020 onwards, the degree of mismatch has deepened. This year happened to be the year when Zhu Jurong ** began to rush to scale. For real estate companies, the repatriation of sales cash is the basis for reproduction, debt repayment and credit accumulation, and if there are flaws in this pass, it will also plant the seeds of risk for the road ahead.
(b).
In recent years, Hopson has rarely acquired land from the open market, except for sporadic bidding for land in the past three years. However, every year, the company will have land converted from the old direction. In the first half of 2023, 17,000 square meters of land will be released from the old reform.
Intra-family related party transactions are also a way to increase land reserves. In 2022, Hopson will start with 7For a cash consideration of 900 million yuan, it acquired land from Shanghai Pearl River Investment and plans to develop 40 new Chinese-style villas. The actual controller of this company is Zhu Weihang, who is Zhu Jurong's second brother.
7.The acquisition consideration of 900 million yuan does not seem to be expensive for a high-end project, in fact, as long as it is a public related party transaction, Hopson almost always demonstrates the principle of fairness and justice. According to the data of the 2022 annual report, the transaction volume of Hopson to affiliated companies is 13HK$500 million, and the amount of related party transactions of affiliated companies to Hopson is 13400 million Hong Kong dollars, the two are quite impeccable, but a careful analysis of the details of the transaction shows that there are still some unusual places.
In 2018, Hopson signed a series of related-party transaction framework agreements with companies controlled by Zhu's, one of which was for Hopson to provide construction services to Zhu's enterprises, that is, to act as Party A and Party B of each other's construction. I don't know why such an agreement was made in the first place, because Hopson itself owns the infrastructure sector. In 2022, the segment achieved revenue of HK$3.4 billion and an operating profit of HK$700 million, and in 2021, it generated an operating profit of HK$2.1 billion.
Such a large-scale business did not prevent Zhu's from providing construction services to Hopson in the opposite direction. Hopson's approach of seeking the near and far has cost the company HK$500 million in 2022 and HK$800 million in 2021. Among all the related party transactions, Hopson and Zhu's Company served each other, and only this transaction was the most substantial. In contrast, in the past two years, Zhu's company paid only one-third of the construction service fee to Hopson.
Pictured above** in the Company's 2022 Annual Report.
The disparity occurred in a special year 2022. This year, Hopson's cash flow was extremely tight, and it would be a sad thing if all these related payments, including the above-mentioned construction money, were finally paid. In the public information, Hopson has never given the necessity of having to generate these related party transactions.
Even if these superficial related-party transactions are fair and just, there are some intriguing related-party transactions behind them
In the financial report, the scale of related party transactions can be best reflected in advance payments and other receivables. In the case of Hopson, the amount receivable from the joint venture was small because the company rarely cooperated with its peers in developing projects, but its advance payments and receivables were unusually high. The total amount of these payments of the company in 2022 is as high as HK$48.2 billion, accounting for 16% of the total assets of HK$2,987 (14% in the first half of 2023). There were a number of related party transactions, including HK$4.2 billion in relation to Manhe Beijing.
Pictured above** in the Company's 2022 Annual Report.
Over the years, Hopson's related-party transactions have been criticized by the outside world, and various ** have been reported at length, but the company does not care at all. What kind of interest flow is behind these related-party transactions has been a blind spot in regulatory and market information for many years.
(c).
Evergrande collapsed overnight, and one of Xu Jiayin's biggest culpables was that he took 50 billion cash from the company through Pond's dividends. Xu Jiayin and his ex-wife Ding Yumei, as major shareholders, have an absolute advantage in shareholding, and at the same time, they are supplemented by repurchase means from time to time, so they hold more than 70% of Evergrande's shares for a long time. Under this shareholding structure, they are the main beneficiaries of the company's dividends.
The so-called Ponzi dividend means that the cash obtained by shareholders from dividends is mainly borrowed funds, rather than real operating income. After the collapse of Evergrande, old accounts were turned over one by one, and a lot of evidence pointed to the authenticity of annual profits - on the one hand, inflated sales and revenues, and on the other hand, the performance was pieced together through the revaluation income of the bottom merchants and garages that did not bring any cash flow.
Over the years, Evergrande's performance has largely been false, but Xu Jiayin and Ding Yumei have really shared 50 billion dividends. How much of this comes from loans from financial institutions, I believe the truth will be revealed soon. Auditor PricewaterhouseCoopers is now rumored to be sued by Evergrande's creditors.
It is not Evergrande's patent for major shareholders to have ultra-high shareholding ratios, and Hopson also has a similar shareholding structure. Zhu Mengyi, as the actual controller, has maintained a long-term share ratio of about 70% with his eldest son Zhu Yihang for many years. Starting in 2020, Hopson began to repurchase shares, spending 1.2 billion yuan to repurchase 19 million shares and cancel them in two years. In addition to increasing the market value of the company, the role of repurchasing shares is to increase or maintain the proportion of major shareholders.
A few years before Evergrande's listing, Xu Jiayin made a large-scale repurchase through listed companies, prompting him and his ex-wife to return to more than 70% of the shares. The beauty of this is that the listed company spends money to buy back, but the dividends can fall into the personal pockets of the major shareholders.
Like Evergrande, Hopson is also a dividend enthusiast, and the financial report data shows that in the five years from 2018 to 2022, the company has paid a total of 7.4 billion Hong Kong dollars in dividends, and Zhu Mengyi and Zhu Yihang have shared a total of about 5.2 billion Hong Kong dollars before tax. Coincidentally, in 2020 and 2021, when the buyback was launched, Hopson suddenly increased its dividend payout, reaching 2 billion in 2020 and 3.5 billion in 2021, while it never exceeded 1 billion in other years.
Dividends are real cash, while profits are not. Coincidentally, Hopson, like Evergrande, boosts profits through commercial revaluation. From the perspective of the accounting profession, the benefits of commercial revaluation generally have a strong subjective will of management, usually as a means of adjusting performance, and do not bring a penny of cash flow.
In the past few years, Hopson's business has been in a state of stagnation for some reason, although investment property assets have been growing, but rents have basically stagnated. According to the financial report data, the rental income in the five years from 2018 to 2022 is: 2.3 billion, 3.2 billion, 3.6 billion, 4.2 billion, and 4 billion Hong Kong dollars; In the first half of 2023, it will be HK$2.1 billion, which is also not a big improvement. This may be the background of Luo Zhenyu's resignation.
Although the wealth accumulation effect of business is not obvious, it does not affect the income of business revaluation at all. According to the financial report data, in the five years from 2018 to 2022, Hopson's commercial revaluation income was 4.7 billion, 8.2 billion, 800 million, 10.5 billion and 10.1 billion Hong Kong dollars respectively; In the first half of 2023, it is HK$3 billion. In 2021 and 2022, which were also the two years with the strictest epidemic control, the physical retail industry across the country was struggling, and Hopson's commercial revaluation income actually rose to the scale of 10 billion, and then became an important part of the net profit attributable to the parent company.
Pictured above** in the Company's 2022 Annual Report.
If the commercial revaluation income after tax deduction is excluded from the annual net profit attributable to the parent company, the company's net profit attributable to the parent company in the five years from 2018 to 2022 will be HK $2.3 billion, 3.5 billion, 13.1 billion, 2.4 billion and HK $1.5 billion respectively, and HK $1.6 billion in the first half of 2023, returning to the pre-liberation period overnight.
In order to compare the impact of commercial revaluation value on net profit attributable to the parent company, Yingmijun has summarized the following**:
Drafting: Eagle Seeker.
It is worth noting that in 2021, the company's net profit attributable to the parent company after deducting the after-tax commercial revaluation income will only be 2.4 billion, while the dividend that year will be as high as 3.5 billion.
Theoretically speaking, dividends should be based on the company's real profitability and real cash flow, and while Hopson has shown not solid performance, the performance of cash flow is also indescribable.
Over the past five years, Hopson's operating cash flow has performed reasonably well at first glance, with the exception of -HK$23.4 billion in 2020, which has remained positive for the rest of the four years, reaching HK$18 billion in 2022 and HK$8.2 billion in the first half of 2023, but a closer look at its three cash flow statements reveals that some categories are treated in a different way.
Under normal circumstances, real estate enterprises record the receivables with the joint venture project companies in the cash flow statement of operating activities; At the same time, if the advance is not charged interest, it should also be recorded in the cash flow of operating activities. However, Hopson recorded both of these in the cash flow statement of investing activities.
Above** in the company's 2022 annual report.
In addition, in the cash flow from financing activities, there was a record of "additional interests in the acquisition of subsidiaries", which amounted to HK$12.4 billion. Combined with the notes to the financial report, this part of the funds reflects the acquisition of the equity of the cooperative development of financial institutions, which is the investment behavior of the relevant subsidiaries and should have been recorded in the cash flow of investment activities. I can't figure out what the company's original intention is in doing this, and it is reflected in the flow table of financing activities, which basically confirms that the company has carried out the operation of clear shares and real debts in violation of regulations.
Above** in the company's 2022 annual report.
Over the years, these three cash flow statements have not truly reflected the company's cash flow situation, at least not in the industry, but these statements have become the basis for financial institutions to lend to them. Before 2022, Hopson's auditor was PricewaterhouseCoopers, which has served Hopson for 18 years.
Evergrande's Ponzi dividends are mainly based on borrowed funds. The gold content in Hopson's net profit is thin, and there are problems to be discussed in the cash flow statement, so what about the company's annual dividends?
In 2022, the company's dividend will only be 3HK$600 million, a five-year low. In the first half of 2023, the company only raised HK$3.7 billion, compared with HK$10.7 billion in the same period of 2022. At the same time, the shareholding ratio of Zhu Mengyi and his son has rarely dropped to 60%, and the shareholding of the two is still as high as 72% at the end of 2022.
The picture above is on Oriental Fortune Network.
If Hopson had really studied Hong Kong enterprises in a down-to-earth manner at the beginning, it would have become as small and beautiful as Binjiang today, and it would have been calm when big waves hit. However, the most incompatible thing in the real world is "if", whether the company's thunderstorm and the movement over the years constitute a pair of causal relationships, this may be a topic of opinion, but according to the current trend, listed companies are likely to lose the opportunity to turn around forever.
Zhu Mengyi has been able to save the day every time he encounters disasters over the years, and now the future of Hesheng, the brightest pearl in the Zhu Kingdom, is uncertain, and when the clouds are thick, perhaps a greater difficulty has just begun.