A shares are "frozen", Hong Kong shares are "snow floating"
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2020 may be a real winter for real estate companies that are waiting to go public.
According to 36 krypton incomplete statistics, this year it was successfully listed on the main board of the Hong Kong stock market. Its main business is real estate development, and there are only two real estate companies that are not property services and agent construction, namely Huijing Holdings and Dragonair China.
In 2019, there were 6 real estate companies that successfully landed on the Hong Kong Stock Exchange: DXN China, Yincheng Holdings, Zhongliang Holdings, China Tianbao, Xinli Holdings, and Jingye Mingbang . In 2018, there were also 6 real estate companies.
This year, the number of real estate companies that successfully "landed" has plummeted, and the industry generally believes that the window period for real estate companies to go public on the Hong Kong stock market has passed.
But opening the list of companies waiting for the hearing on the Hong Kong Stock Exchange found that there are still 11 real estate companies struggling to line up.
After the first application version "failed", Territory Holdings and Shangkun Real Estate made persistent efforts to supplement relevant financial data and fight for IPO. It is already the fourth time that Wanchuang International has failed its IPO. Heilenberg Real Estate and Orsun Holdings have also failed in two attacks.
A-shares have "frozen" real estate stocks, and Hong Kong stocks have gradually tightened their listing clearance, and the capital market has left little room for small and medium-sized real estate companies.
And even if you seize the opportunity, the "lucky person" who successfully landed does not mean that they will live well.
Difficult to list small and medium real estate companies
Listing in Hong Kong is roughly divided into six processes: form submission, hearing, roadshow, IPO, announcement of placement results, and listing. The time from form submission to hearing is 3-6 months. When this time limit is exceeded, it needs to be resubmitted. table.
The hearing is to conduct a comprehensive evaluation of the company that is about to go public before going public, and wait for the relevant experts to assess whether it passes the listing.
Can't wait for a hearing is now the norm for real estate companies queuing for IPO.
On October 9, the version of Territory Holdings’ listing application on the Hong Kong Stock Exchange was changed to “invalid”, which means that the company failed to pass the hearing within half a year.
Before Territory Holdings, Xingsheng Commercial Management, Songdu Service, Pengrun Holdings , Jinhui Holdings, and Shangkun Real Estate all had similar situations.
Dragonair China, which was successfully listed this year, also suffered a failure in its delivery in 2019.
Known as "the last listed 100 billion real estate company", Zhongliang Holdings also experienced an invalidation of application materials before going public in July 2019. Afterwards, Zhongliang added the 2018 annual financial data and 2019 performance details. Forty days later, it finally passed the Hong Kong Stock Exchange hearing.
Territory Holdings submitted the application again the day after the expiration.
The new version of the prospectus mainly added the financial data of the company in the first five months of this year and the corresponding financial data of the same period last year. From the perspective of sales settlement revenue and profitability, the first five months have seen significant growth. The revenue is about 3.028 billion yuan, corresponding to a gross profit of 975 million yuan, both achieving a year-on-year "double" increase.
But debt has also increased. As of the end of May, the Territory’s net debt ratio was 150%, an increase of 10% from 140% at the end of last year.
According to industry insiders, real estate companies have been inquired by the Hong Kong Stock Exchange for too long, possibly because of multiple issues: Is the financing structure safe? Is the land reserve reasonable? Are the financial data detailed? Is the valuation judgment reasonable? These need to be taken into consideration.
From the perspective of real estate companies that have applied for listing in recent years, most of them are small and medium-sized real estate companies with limited scale, with high regional limitations, few projects, and high debts.
Wanchuang International, which failed four IPOs, has attracted attention because of its debt ratio of more than 1000%; Sansun Group's asset-liability ratio in 2019 is also as high as 204%.
In the process of IPO, "burden reduction" has become a highlight. Huijing Holdings, which was successfully listed at the beginning of this year, had a net debt ratio of 375.4%, 277.2%, and 242.7% from 2016 to 2018, and by 2019, it had dropped to 82.6%.
Zhongliang Holdings also experienced this process. In 2015 and 2016, the net debt ratio was 1335% and 1790%, respectively. However, in 2017, Zhongliang's net debt ratio plummeted to 339%, and it was even lower in 2018. 58%.
But it's not that "falling the negative" will pass the hearing.
In 2018, Wanchuang International’s gearing ratio plummeted from 1218% to 180.4%, but at the end of last year, Wanchuang International’s fourth IPO still failed.
Dragon China, another real estate company that successfully went public this year, did not suppress the debt ratio. Its asset-liability ratios in 2017, 2018 and 2019 were 98.8%, 122.1% and 172.6%, respectively. In the first quarter of this year, this value further soared to 287%.
Compared with most of the real estate companies that are queuing up, Dragonair's advantage may be its relatively large scale and wider layout. As of 2019, its total land bank of 53 projects in 21 cities in China is 5,444,400 square meters. While the sales exceeded 20 billion, the gross profit rate also reached 42.7%.
It can be seen that the Hong Kong Stock Exchange has a very multi-dimensional approach to assessing the listing of real estate companies, and its attitude is becoming more and more cautious and conservative.
And this situation may be even worse in the future.
Can listing solve the debt problem?
Even if they have successfully "landed", the "assuming" of small and medium-sized real estate companies to negotiate with the capital market is not sufficient.
Two real estate companies that successfully went public this year were under-subscribed before they went public.
Dragonair China plans to sell 400 million shares globally, including 40 million shares in Hong Kong and 360 million shares internationally. However, 2479 valid applications for the Hong Kong public offering were received in the end, subscribing for 11.113 million shares, equivalent to 28% of the Hong Kong offering shares.
This shows that the Hong Kong stock market is not very enthusiastic about them.
From the perspective of financing costs, the financing costs of "landing" real estate companies in the past three years have also remained high.
On September 1, Huijing Holdings issued a high-yield US dollar bond of up to 12.5%, which aroused market attention.
The issuance of high-interest bonds is related to the tight capital chain caused by the company's short-term debt repayment pressure. As of June 30 this year, Huijing Holdings had short-term loans of 1.212 billion yuan, book cash and cash equivalents of 721 million yuan, restricted deposits and cash of 394 million yuan, nearly half of the funds on the book were restricted, and the total cash was difficult to recover. debt.
Zhengrong Group, which was successfully listed in 2018, issued a senior note with an annual interest rate of 8.35% in May this year;
In June, Zhongliang Holdings issued bonds overseas for the fourth time since its listing, with an annualized interest rate of 8.75%;
Hongyang Properties completed an issuance of US$155 million senior notes in July with a coupon rate of 9.7%.
According to Crane data, as of September 2020, real estate companies’ new bond financing cost was 6.09%, and overseas bond financing cost was 7.97%.
The financing costs of several companies are higher than the industry average.
Different companies have large gaps in the funds raised. Zhengrong Group, which was listed in 2018, raised the highest amount of funds that year, at 4.481 billion Hong Kong dollars; while the lowest, Wancheng Holdings, raised only 225 million Hong Kong dollars.
Among the real estate companies that went public in 2019, DXN China raised HK$1.372 billion in listing, and Yincheng International raised only HK$770 million. The 100 billion real estate company Zhongliang Holdings raised only HK$2.773 billion, which has not reached the level of Zhengrong.
"If there is a choice, I will return to A shares."
It can be said that even if it goes public, small and medium real estate companies may not be living well. But if it fails to go public, it will be even more difficult for most small and medium-sized real estate companies.
Beginning in 2018, in order to prevent debt risks in the real estate industry, the state has successively introduced a number of policies, making the financing environment of real estate companies continue to tighten and capital pressure.
This year, the information released by the "three red lines" shows that in the future, even large real estate companies will have a much higher threshold for "increasing interest." Small and medium-sized real estate companies that have been struggling to survive in the cracks will find it more difficult to raise funds.
For small and medium-sized real estate companies, it is necessary to open up financing channels first, and then have the opportunity to improve the financial structure of the company by replacing short-term debt with long-term debt and issuing ABS.
In terms of valuation, overseas institutional investors are not keen on investing in the real estate sector, and therefore the sector is not highly valued in the Hong Kong stock market. In contrast, the valuation of A shares is higher, and more retail investors follow suit. But A shares did not give real estate companies a choice.
According to the research report of Minsheng Securities , in 2010, the “Eleven National Articles” were promulgated. The China Securities Regulatory Commission required that real estate companies IPO and refinancing should seek the opinions of the Ministry of Land and Resources. Equity financing, real estate IPOs have also basically stopped.
Since 2010, only two real estate companies , China Merchants Shekou and Xinchengkong , have been listed on the A-share market.
In A shares, many large real estate companies have to queue up all year round.
R&F Properties started its "Back to A" plan in 2007 and waited for 13 years. It has been launched 5 times, and once became the "biggest nail household" on the A-share road. But in July this year, R&F Properties disappeared from the "waiting list".
Also in line is Wanda, who has been waiting for 4 years. In order to successfully land in A shares, Wanda Group announced at the beginning of this year that by the end of 2019, Wanda Commercial Management Group had completed the divestiture of its real estate business.
This year, Wanda Commercial Management fully implemented the "asset-light" strategy. As of the end of September, 53 "asset-light" projects had been signed during the year. Starting from 2021, Wanda Commercial Management will no longer develop "asset-heavy", that is, no longer invest in Wanda Plaza properties.
But to this day, Wanda is still lining up in the A-share IPO list.
In recent days, "asset-light" means that companies no longer invest funds in project construction, and only gain benefits through brand export, responsibility, and project design, construction, and operation.
Switching to Hong Kong stocks is one of the few options for real estate companies. After queuing for A shares for 4 years without results, Jinhui Holdings officially went to Hong Kong for IPO in March this year.
According to the "China Real Estate Enterprise Sales Ranking List for the First Half of 2020" released by Crane, Jinhui Holdings ranks 43rd in full scale and 34th in terms of equity.
It was previously reported that it had accepted the hearing in September. According to Reuters IFR, Jinhui Holdings will launch a pre-IPO roadshow on October 6, with a goal of raising US$300 million to US$400 million.
If the news is true, Jinhui Holdings may soon become another large-scale listed real estate company after Zhongliang Holdings, which is expected to impact the scale of 100 billion yuan.
Compared with the indefinite line of A-shares, Hong Kong stocks may still have a "first line of vitality", but this "first line" is becoming shorter and narrower.