Will China Fortune Land Development go bankrupt?

Written by Ye Shuli

Is this question a question? Isn't it a question?

Perhaps this is a question that is not a question.

China Fortune Land Development encounters the challenge of “unhappiness”

Frankly speaking, this is an expected problem. After all, the pressure on its home base of the Beijing property market and the high debt level of China Fortune Land Development itself The business model determines this. However, unexpectedly, the "three red lines" policy introduced by the central government at the end of 2020 has exacerbated China Fortune Land Development's level of unhappiness.

From the perspective of a scholar, the current China Fortune Land Development is indeed not very happy from top to bottom.

A. Since 2017, China Fortune Land Development’s share price has dropped by nearly 80%.

As a listed company, to a certain extent, the stock price is indeed the epitome of the survival status of a listed company.

In the past four years from January 1, 2017 to now, the highest point of China Fortune Land Development’s stock price was 48.3 yuan on April 12, 2017. Today, January 26, 2021, its stock price has It fell to 10.05 yuan, a drop of as much as 80%.

It is worth noting that as of February 2, 2018, its stock price has still maintained a high of 46.88 yuan. In other words, China Fortune Land Development’s stock price has plummeted like mercury in the past three years. of.

B. Under the "three red lines", all three lines were stepped on, and no one was left out.

On August 20, 2020, the People's Bank of China and the Ministry of Housing and Urban-Rural Development announced the "three red lines" to control the capital chain of real estate companies, which requires all domestic real estate companies to exclude advance receipts. The asset-liability ratio shall not be greater than 70, the net debt ratio shall not be greater than 100, and the "cash short-term debt ratio" shall be less than 1.

A research report from Guosheng Securities shows that at the end of the third quarter of 2020, China Fortune Land Development hit all three of the "three red lines": the company's asset-liability ratio after excluding advance receipts was 76.5, more than three The "three red lines" requirement "should not be greater than 70"; the net debt ratio is 190.4, seriously exceeding the "three red lines" requirement "not greater than 100"; the cash short-term debt ratio is 0.41, seriously lower than the "three red lines" requirement " Less than 1".

According to the "Three Red Lines" regulations, if a real estate company touches the three red lines, then the real estate company will not be allowed to add new interest-bearing liabilities, which will affect China Fortune Land Development's future financing. It will bring extremely serious negative impacts: financing scope is limited, and financing costs will inevitably rise.

C. There is a default on the commercial bill.

Recently, it has been reported at the market level that China Fortune Land Development-related commercial bills have overdue defaults.

The general news is this: The commercial note issued by Langfang Peacock Lake Real Estate Development Co., Ltd., a subsidiary of China Fortune Land Development Co., Ltd., has an expiration date of January 15, but after the expiration of that date , the ticket holder has been refused payment after being prompted for payment.

Later, the news was confirmed that China Fortune Land Development-related commercial bills had indeed expired and defaulted.

D. Debt pressure.

According to China Fortune Land Development’s 2020 third quarter financial report information, as of the end of September 2020, China Fortune Land Development had a total of 222.6 billion yuan of interest-bearing liabilities on its books, of which 117.7 billion yuan was due within one year. . It can be said that the debt is overwhelming and I am panting. The pressure to repay debt in 2021 is huge.

E. Performance confrontation may fail.

Due to financial pressure, on July 10, 2018, China Fortune Land Development’s controlling shareholder China Holdings had to commit to transfer 19.70 shares to Ping An Asset Management, a subsidiary of Ping An, at a transfer price of 23.655 yuan/share. The total price is 13.77 billion yuan. This equity transfer agreement contains a performance gambling agreement: China Holdings promises that based on China Fortune Land Development’s 2017 net profit of 8.781 billion yuan attributable to shareholders of the listed company, the net profit in 2018, 2019 and 2020 will be The profit growth rates are not less than 30, 65, and 105 respectively, that is, not less than 11.415 billion yuan, 14.488 billion yuan, and 18 billion yuan respectively. Otherwise, China Holdings will compensate Ping An Asset Management in cash.

Now it’s time to cash in on this gambling agreement, but unfortunately the result is not a happy one.

According to public financial data, China Fortune Land Development’s net profit in 2018 was 11.746 billion yuan, and its net profit in 2019 was 14.612 billion yuan, which just exceeded the 11.415 billion yuan and 14.488 billion yuan required by the gambling agreement. However, in 2020 The net profit achieved by China Fortune Land Development in the first three quarters was only 7.28 billion, which is equivalent to approximately 4.044 of the 18 billion yuan required by the gambling agreement. Therefore, the possibility of China Fortune Land Development completing the net profit required by the gambling agreement in 2020 is close to zero.

This is undoubtedly adding insult to injury for China Fortune Land Development, which is already in the oil pan.

Will China Fortune Land Development go bankrupt?

Under the heavy pressure of debt, if you are Wang Wexue, there are four main roads in front of you:

A. Expand financing coverage and intensity. , to resolve the immediate crisis.

In fact, China Fortune Land Development has already begun to take action in this regard.

Since December 2020, China Fortune Land Development has conducted at least two large-scale financings to alleviate cash flow pressure.

In addition, China Fortune Land Development recently received a commitment from the Hebei Provincial Government to provide it with conditional financial support of up to 9.5 billion yuan.

B. Sell property in exchange for cash flow.

There is a prerequisite for selling property in exchange for cash flow, and that is having valuable property on hand.

In this regard, objectively speaking, China Fortune Land Development owns a large number of high-quality real estate in urban areas such as Beijing-Tianjin-Hebei and the Yangtze River Delta. If it sells it, it will basically not worry about takeovers, such as Gu'an and Dachang. , Xianghe, Yongqing, Bazhou, Jiashan and other places.

In fact, in 2018, China Fortune Land Development packaged and sold some land parcels in Zhuozhou, Dachang, Langfang, Bazhou and other places to Vanke in exchange for cash flow, which was the first step forward.

It has been done before, and if it is a last resort, it can be done this time. The most important thing is that China Fortune Land Development has the ability to do so, because it already has a lot of land assets on hand, and many of them It is still a high-quality asset, so there is no need to worry about not being able to sell it.

C. Selling equity in exchange for cash flow.

After 2018, China Fortune Land Development sold equity to Ping An in two installments in exchange for cash flow and strategic financing resources. Ping An is currently the second largest shareholder of China Fortune Land Development.

On January 24, China Fortune Land Development revealed that in response to the current difficulties in refinancing in the open market, its controlling shareholder China Fortune Land Development Holdings Co., Ltd. and its second largest shareholder Ping An of China are discussing plans. It is expected that It can be disclosed around the Spring Festival, but currently, as listed companies need to comply with regulatory requirements, no more information can be disclosed until it is finalized.

In other words, will Ping An, who is not short of money, watch China Fortune Land Development die? Impossible, so if nothing unexpected happens, China Fortune Land Development and Ping An may continue to play equity trading games in the future.

D, died with a huge family fortune in bankruptcy.

There is also the worst outcome: Wang Wenxu holds on to huge assets and neither sells valuable property nor equity. He just continues to struggle in the financing game, and then holds on to a huge amount of property while struggling. , died a heroic death in order to sacrifice the property market regulation. How likely is this? Close to zero.

So, will China Fortune Land Development die in bankruptcy? The probability is really low. The most likely scenario is: expand financing, sell off assets, sell equity, and then survive surrounded by public opinion.

Do you still remember the example of Wanda Wang Jianlin? If there are enough high-quality assets in hand, the worst result is to sell more assets, and then Wang Jianlin and others will move down the list of China's richest people.