"In the current market environment, we have increased demand, which is real." Ganglong Real Estate, a real estate enterprise in Jiangsu, disclosed its listing plan.

On October 23, Ganglong China Real Estate Group Co., Ltd. (hereinafter referred to as "Ganglong Real Estate") submitted the prospectus to the Hong Kong Stock Exchange, with Huagao Hesheng Financial Advisory Co., Ltd. as the sole sponsor. It is reported that the company plans to raise funds for land purchase and pay the construction costs of its five projects.

According to the prospectus, the proceeds from the sale of Dragon Real Estate in 2016-2018 were 490 million yuan, 430 million yuan and 1.66 billion yuan, respectively, with a compound annual addition rate of 87.5%. In 2018, on the Top 100 list of Chinese real estate (512200) enterprises released by Kerui, Hong Kong Dragon Real Estate ranked 89th in full caliber sales with 14.36 billion yuan. Two years ago, Hong Kong Dragon Real Estate did not enter the top 200 list.

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However, with the sharp increase of income in 2018, many cost data of Hong Kong Dragon Real Estate also increased significantly, during which the general and administrative expenses increased from 29.9 million yuan in 2017 to 90.1 million yuan in 2018; Sales and marketing expenses increased from 18.3 million yuan in 2017 to 23.4% to 61 million yuan in 2018.

Together, Hong Kong Dragon Real Estate is also facing huge debt pressure. The total liabilities increased from 4.95 billion yuan at the end of 2017 to 8.74 billion yuan at the end of 2018. By June 31, 2019, the total liabilities increased to 11.662 billion yuan, and the asset liability ratio increased from 17% in 2016 to 122.1% in 2018. By June 30, 2019, the target had reached 153.9%, an increase of 805% in three years.

In addition, as a typical Doushi enterprise, by the end of August this year, the first development projects of Ganglong Real Estate had gathered in Jiangsu, Zhejiang, Henan, Guizhou and other provinces, with a total land reserve of only 4.71 million square meters; In terms of sales planning, the sales revenue in the first half of this year was only 590 million yuan, which is not even comparable to the sales of single projects in first tier cities.

On November 1, a reporter from Changjiang Business Daily sent an interview letter to Ganglong Real Estate, but the other party did not reply before the press release.

Marketing expenses increased by 234% year on year

The prospectus shows that the company intends to use the funds obtained to provide funds for land purchase costs and potential development projects; It is used to pay the construction cost of existing projects such as Jiangnan Taoyuan, Shanshui Shijian, Ziyu Mansion, Qiushi Chenyue and a new project in Shaoxing.

In the prospectus, the reporter of Changjiang Business Daily saw that during the record period, the company's income came from the development and sale of 9 projects in four cities. In 2016-2018 and the first six months of 2019 (hereinafter referred to as the "Statement Period"), the property development and sale income of Dragon Real Estate was 472 million yuan, 434 million yuan, 1.66 billion yuan and 590 million yuan respectively, the operating profit was 72 million yuan, 94 million yuan, 436 million yuan and 174 million yuan respectively, and the gross profit margin was 21.3%, 21.9%, 30.8% and 42.9% respectively.

In the meantime, according to the type of property, the company's revenue consists of three parts: residence, retail and commerce, parking lot and garage/storage equipment. During the statement period, the sales income of Ganglong Real Estate's residential properties accounted for a large proportion of the total revenue, 77.5%, 71.8%, 92.0% and 97.1% respectively.

In addition, the reporter noticed that the capital of Ganglong Real Estate was also increasing significantly in 2018, when its income soared. Its sales and marketing expenses increased by 234% from 18.25 million yuan in 2017 to 60.97 million yuan in 2018; General and administrative expenses increased from 29.87 million yuan in 2017 to 90.07 million yuan in 2018 by 201.5%; The net financing capital increased by 702% from 4.317 million yuan in 2017 to 34.63 million yuan.

According to the enterprise survey data, as the listed entity, Ganglong China Real Estate Group Co., Ltd. is a new company registered and established on January 23 of this year, with a registered capital of 1 billion yuan. It is a wholly-owned subsidiary of Ganglong Development Group Co., Ltd. The legal representative and chairman of the board are Lv Yonghuai. Jiangsu Ganglong Real Estate Group Co., Ltd. is 51% owned by Ganglong Real Estate and 49% owned by Ganglong Development Group.

It is reported that the former headquarters of Ganglong Real Estate was located in Changzhou City, Jiangsu Province. In July of this year, the headquarters was moved to Shanghai, aiming to comprehensively promote the company's strategic plan of "deep cultivation in the Yangtze River Delta and layout of the whole country".

In the prospectus, the reporter also saw the "history of prosperity" of Ganglong Real Estate.

In August 2007, several members of the Lv clan, including Lv Yonghuai, jointly established Jiangsu Ganglong Real Estate (512200) Development Co., Ltd. in Changzhou and obtained two plots. In 2012, Ganglong Real Estate expanded to other cities in the Yangtze River Delta, mostly third tier cities such as Changshu, Yancheng and Jiaxing; In 2018, Ganglong Real Estate entered Shanghai and extended its map to Henan and Guizhou.

By the end of August this year, Ganglong Real Estate had 56 development projects in 20 cities, with a total soil storage area of 4.175 million square meters. It is worth mentioning that 54 projects are located in the Yangtze River Delta region, where soil reserves are highly concentrated. In the future, Ganglong Real Estate plans to deeply cultivate the Yangtze River Delta region and rely on the existing regional coverage in the Yangtze River Delta region to enter other new markets outside the region, such as Central China.

In response, Yan Yuejin, a financial commentator, said in an interview with a reporter from the Changjiang Business Daily, "although Ganglong Real Estate has 56 development projects, its sales revenue in the first half of this year and before only came from the development and sales of nine projects in four cities, which means that most of the company's projects have not yet reached the pre-sale conditions, perhaps without pre-sale certificates, which is due to the problem of development rhythm. On the other hand, if there is still too little project sales data in the future, it will certainly have an impact on the company's performance. "

Asset liability ratio increased 8 times in 3 years

Despite the rapid changes in income and profitability of Dragon Real Estate last year, the company is also facing severe debt pressure, with total liabilities increasing from 4.95 billion yuan at the end of 2017 to 8.74 billion yuan at the end of 2018. By June 31, 2019, the total liabilities had increased to 11.662 billion yuan.

In addition, in 2017 and 2018, the company's asset liability ratio also rose rapidly, from 17% in 2016 to 98.8% and 122.1%. By June 30, 2019, the asset liability ratio of Ganglong Real Estate was up to 153.9%. It can be seen that in three years, the asset liability ratio of Ganglong Real Estate has soared 8 times. In addition, according to the prospectus, in 2017, 2018 and the first half of 2019, the net debt equity ratio of Ganglong Real Estate was 37.7%, 2.0% and 67.4% respectively.

The reporter noticed that by December 31, 2016, 2017 and 2018, June 30, 2019 and August 31, 2019, the total amount of outstanding loans (including bank and other loans) of Dragon Real Estate was RMB 50.4 million, 317.5 million, 856.1 million, 1436.3 million and 1.939 billion, respectively.

According to the prospectus, the external financing of Dragon Real Estate mainly comes from bank loans, trust financing and other financing. By August 31, 2019, its trust financing and other financing organizations accounted for 35.1% of the total loans, with 680 million yuan outstanding.

In addition, from the end of 2016 to August 31, 2019, the weighted average interest rate of Ganglong Real Estate loan increased by 74.5% to 8.9%, during which the bank loan interest rate was 7.7%, and other loan interest rates were 11%. In terms of the detailed debt structure, all of its loans are short and medium term debt of less than 5 years. As of August 31, 2019, short-term debt accounted for 17.4%, and loans of less than 2 years accounted for 72.8%.

In terms of cash flow, the reporter noticed that at the end of 2017, Hong Kong Dragon Real Estate had 75.88 million yuan of operating cash flow, but at the end of 2018, it turned from positive to negative, which was - 630 million yuan. The contributory cash flow was negative for three consecutive years, which was - 520 million yuan at the end of 2018. As long as there was positive inflow from financing activities, it was 1.61 billion yuan. It can be seen that all cash flows of the company are supported by financing activities.

In fact, the borrowing in the market is tight, the real estate (512200) regulation policy and leverage reduction are also continuing, and the financing difficulty of real estate enterprises is accumulating day by day. In such an environment, the survival environment of Zhongdoushi enterprises is becoming more and more difficult. Under the superposition of various factors, since this year, many small real estate enterprises have launched a sprint to Hong Kong stock IPO, such as Sanson Group, Aoshan Holdings, etc.

However, according to the latest statistics of Zhongtai Securities, by October 21, 2019, 378 small and medium-sized real estate enterprises had gone bankrupt nationwide, among which Guangdong Province accounted for the highest proportion, 60, followed by Zhejiang, Jiangsu and Henan. The severity of the situation can be seen.

In this regard, Yan Yuejin said to the reporter of the Changjiang Business Daily, "There is nothing wrong with going public in Hong Kong. Regardless of the size of the enterprise's planning, it can be better carried out by going public, which is also a better way for regional real estate enterprises. However, it is still a question mark in the current environment whether it is possible to achieve rapid expansion through listing. As far as Ganglong Real Estate is concerned, the pressure of too much debt in the business development is the resistance to the future development of the company, which is also the need for Zhongdou Room enterprises to pay careful attention to. "