It's all collectedHuayi、Tencent、AliSuch as heavyweight shareholders, the company has not had a blockbuster movie in the past 4 years, and there may still be no film to show in the next year.
Source: market capitalization Fengyun
Author | Guan'er
Process Editor | Rookie
The two "boss" signs, "Huayi Brothers" and "Tencent", must have been known to most people.
If they appear in the name of a company at the same time, how many people know about this "combination of strong and powerful" companies?
Fengyunjun will now reveal the answer to the riddle. Today, let's decrypt this company called Huayi Tencent Entertainment Co., Ltd. (00419.HK, hereinafter referred to as "Huayi Tencent Entertainment", listed companies or companies listed in Hong Kong
(Huayi Tencent part of the movie source: company website)
First, the history of development? Shell selling history?
Since we want to talk about listed companies, we should start by understanding its "past life and present life".
Different from other companies with a certain history of development since its establishment, the development history of Huayi Tencent Entertainment, a listed company, can be called a "shell selling history".
Fengyun first pick up a cigarette butt, let's squat in a corner and start from the beginning.
The first buyer was Gao Zhenshun, who is known as the "shell king" of Hong Kong. He took a fancy to 00419.HK, a subsidiary of the gambling king Stanley Ho Jiawei Group, and became chairman of the board through investment. During this period, Youli Telecom changed its name to Youli Holdings Limited (hereinafter referred to as "Youli HoldingsOwns an associate, Tiandi Digital (Holdings) Limited (00500.HK, hereinafter referred to as "Heaven and earth digital”）。
In March 2005, Youli Holdings spent HK $550 million to acquire a 100% stake in Anglo Alliance Co., Ltd, indirectly holding a 50% interest in Poly Huayi Media Culture Limited (hereinafter referred to as "Poly Huayi") into the travel satellite TV and advertising business. Dong Ping, then chairman of Poly Huayi, became chairman of Youli Holdings through a series of capital operations.
In May 2006, Youli Holdings spun off the former joint venture Tiandi Digital Company, and changed the name of the listed company to Huayi New Media (Group) Co., Ltd., referred to as "Huayi New Media".
In January 2008, Tian Suning, founder of CBC Fund (China Broadband Capital Fund) and former Netcom CEO, formally took over as chairman of the board of directors. With the exception of Yuan Jian, an independent director, all other former board members, including former board chairmen Dong Ping and Gao Zhenshun, have stepped down. In November of the same year, the company changed its name to Huayi Media Co., Ltd., referred to as "Huayi Media".
Prior to this, Dong Ping successfully cashed out after transferring a total of 1.7 billion shares to CBC Fund subsidiaries Speedy Swift and Garjuna at a price of HK $221 million.
In August 2010, Yuan Haibo, a former senior vice president of Bluebird at Peking University, took over from Tian Suning as chairman of the board. Subsequently, listed companies loaded property, 500 million of high-end golf resort "North Lake 9 Club" and 900 million of land.
In March 2013, Huayi Media said it would shift its focus from the media industry to the elderly, medical and health business, changing the name of the listed company to China No. 9 Health Industry Co., Ltd., referred to as "China No. 9 Health". In October 2015, the development and management rights of "North Lake 9 Club" and its adjacent land were sold for HK $1.65 billion, and the club continued to operate in the form of lease.
In March 2016, 300027.SZ, through its wholly-owned subsidiary Huayi Brothers International Co., Ltd. (Huayi International), subscribed for 18.17% of China No. 9 Health for HK $196 million, while Tencent related party Mount Qinling Investment Limited subscribed for 15.68% for HK $169 million.
Ma Yun's Confidex Key Limited (a wholly owned subsidiary of Yunfeng Fund II, L.P, hereinafter referred to as "Confidex") also subscribed for a 5.12% stake. That month, the listed company changed its name to Huayi Tencent Entertainment.
So far, the company has gathered three star signboards of "Huayi", "Tencent" and "BABA", ranking first, second and fourth largest shareholders respectively.
The shell road has come to an end for the time being, starting a new journey.
Second, the sale of shells ends and mergers and acquisitions begin
Wang Zhongjun, chairman of Huayi Brothers, made it clear in 2016 that it was much easier to buy a shell in Hong Kong than in A-share IPO. Huayi Tencent Entertainment is a platform built by Huayi Brothers to face international financing, integrate mergers and acquisitions, and grasp content.
As far as this positioning is concerned, the end of Huayi Tencent entertainment shell sale only means the beginning of mergers and acquisitions.
1. Acquire some shares of HB in South Korea
On March 23, 2016, Huayi Tencent Entertainment invested about HK $278 million to acquire a 30 per cent stake in HB Entertainment Co., Ltd. (hereinafter referred to as "HB") in two batches in the form of old shares and new shares, in order to further obtain high-quality entertainment resources in South Korea, strengthen the deep cooperation between Huayi Brothers and South Korea in the field of entertainment, and thus generate a goodwill of HK $165 million.
According to the investment agreement, HB and its former major shareholders promised Huayi Tencent Entertainment that the audited net profit after tax completed in 2016 and 2017 would not be less than 12.872 billion won (about HK $84 million).
After spending a lot of money on mergers and acquisitions, what about the projects to be invested?
Affected by the "THAAD incident" and Korean restrictions in 2016, South Korea's import of movies and TV dramas into China dropped sharply in the fourth quarter of 2016. In 2016, Huayi Tencent Entertainment only confirmed a revenue of HK $1.624 million from HB.
The situation was even more depressed in 2017, when HB was cautious about distribution, with no new film and television projects released that year and negative profits.
In response, Huayi Tencent Entertainment recorded a goodwill impairment of 12.97 million yuan against HB in 2017.
This situation continued until the end of 2018. At the end of 2018, the South Korean drama "Sky City" produced and broadcast by HB was very popular. Affected by this, Huayi Tencent Entertainment finally made a positive return on investment in the first half of 2019.
This is a far cry from the good idea at the time of the acquisition, not to mention the original performance bet. I don't know why, under the premise that HB obviously failed to fulfill its performance commitment, Huayi Tencent Entertainment did not ask HB for performance compensation, at least Fengyunjun did not find the relevant words in the annual report and announcement.
We don't know, and we're afraid to ask.
2. Set up a fund in conjunction with Warner Brothers in Korea
In April 2017, Huayi Tencent Entertainment, Warner Bros. Korea Inc. (hereinafter referred to as "Warner Brothers") and Huayi Investment Inc. (Warner Brothers subsidiary) signed a partnership agreement to jointly establish Huayi Warner Cultural and Creative Fund (hereinafter referred to as "Huayi Warner Fund"), of which Huayi Tencent Entertainment contributed 1 billion won (about 7 million Hong Kong dollars), accounting for 10%.
The funds and investments of the cultural and creative fund can only be used for film projects produced and distributed by Warner Brothers.
However, the project situation of Huayi Warner Fund is not optimistic.
As it is still in the early stages of investment, according to the announcement, so far, there is only one film "V."I.P "(also known as" superior rights ") is shown in South Korea. It will not be until 2020 that four funded films will be available, but the exact timing has not been disclosed.
In other words, there may be no new film released in the coming year, Huayi Warner Fund and its investment projects will not be able to bring a huge cash return to the company in the short term.
Third, practice the way of "health" in the name of entertainment
From the above description of the shell-for-shell business, it can be seen that every time the predecessor of Huayi Tencent Entertainment changes a buyer or chairman of the board of directors, it is simply a gorgeous "history of twists and turns".
Because of this, since 2005, except for 2006, 2009, 2014 and 2018, the company's net profit is basically negative.
Even if we do not continue to "diversify" our business, it is enough for listed companies to deal with the mess left by their predecessors.
When Huayi Brothers took over, the company had not only entertainment media business, but also offline and online health care services left behind by its predecessor, China Health 9.
Although Huayi Tencent Entertainment has always wanted to focus on the main entertainment media business, according to the above revenue structure table, more than 70% or 90% of the company's revenue is health care services. entertainment and media business continued to shrink after substantial growth in 2017, accounting for only 0.94% of total revenue from January to June 2019.
In terms of the overall trend, revenue from not only the entertainment media business, but also health and health care services has declined at an annual rate of 6.6% in the past three years, even by 16% in the first half of 2019.
Putting aside the former, the decline in revenue of the latter is "intentional" by Huayi Tencent Entertainment.
Huayi Tencent Entertainment spun off the online health service left over from China Health 9, the predecessor of the listed company, for three consecutive years in 2016.
Haoyou Media has been losing money since 2014 and has no income since 2016. It is expected that the cash flow will continue to deteriorate and play a smaller and smaller supporting role in the offline health care service business. As a result, the revenue of offline health care services has dropped slightly.
Why buy back the equity of a loss-making subsidiary? It's very simple, in order to pack it together and sell it at a good price.
Sihai Commerce and Trade is mainly responsible for operating a health hall in Chaoyang District, which mainly faces end customers and contributes most of the offline rental income, and the offline health care service is further reduced after disposal.
According to the latest semi-annual report, Huayi Tencent Entertainment does not rule out the possibility that it will further weaken or even divest the health and health care services business in order to feed the core entertainment and media business.
Fourth, more input, less output, huge impairment to reduce profits
If we focus on the last three years, we can find that the trends between Huayi Tencent Entertainment's operating income and gross profit, operating income and net profit deviate somewhat, which is very abnormal.
1. Erratic gross profit
As can be seen from the chart, revenue increased in 2017, but the company's gross margin declined that year.
Gross profit is closely related to operating costs. In terms of business, operating costs are specifically divided into:
The main operating costs of the entertainment media business, which is based on the revenue generated by the film launch, are the fees for obtaining the film license and the impairment and amortization of the film copyright in the corresponding revenue period.
On the other hand, the operating costs of health care services are mainly the rental of the venue of "North Lake No. 9 Club" and the fixed depreciation of self-owned health hall equipment.
What is the real operating cost? Fengyunjun sorted out the operating costs of the company since its backdoor listing:
In 2016, Huayi Tencent Entertainment invested HK $574 million of shareholders' subscription funds in 10 films and animation projects in cooperation with Huashi Entertainment. However, due to the fact that the copyright of the distributed film fell short of expectations, Huayi Tencent Entertainment made provision for impairment of the copyright of the film project being produced in 2016 and 2017 and included the cost of sales. Among them, more provision for impairment was made in 2017, resulting in a decline in gross profit.
With the sale of Sihai commerce and trade in 2018, the fixed depreciation of self-owned health hall equipment decreased, resulting in a significant reduction in operating costs in 2018 and a relative increase in gross profit.
2. Net profit fluctuating with impairment
In terms of net profit, in addition to the cost of sales, there are many projects that have a significant impact on net profit.
The first is the distribution cost, which has soared in 2017 due to the release of only one 3D animation "Rock and Roll Tibetan Mastiff" in 2017 in three years.
The second is administrative expenses, including the impairment of film projects that have been prepaid, the impairment of projects in production that have not been completed for a long time, the intermediary fees for subscription and distribution, and so on.
In line with changes in the cost of sales, there was only one "Rock and Roll Tibetan Mastiff", two comedy films starring top Chinese and American movie stars and originally scheduled to be released worldwide in 2018, which invested a lot of money in 2016-2017. "Kill Me"Now) and "Italian noodles with ramen" (Spaghetti VS. Noodle), so far there has been no following.
The only "Rock Tibetan Mastiff" is expected, which reportedly cost $50 million (about 334 million yuan) to build in six years and was released in China on July 8, 2016.
However, "Rock and Roll Tibetan Mastiff" was hit by "Big Fish Begonia", and the total domestic box office was only 39.54 million yuan. The total domestic box office of "Big Fish and Begonia" is 565 million yuan, leaving "Rock and Roll Tibetan Mastiff" far behind.
In February 2017, "Rock and Roll Tibetan Mastiff" was released in North America, hoping to make a comeback in foreign markets. Unfortunately, the same period of small horror film "Escape from Kill Town" won the championship with a cost of $4.5 million at the box office of $200m, and the freshness of rotten tomatoes was 98%, achieving a good harvest at the box office.
(source: rotten Tomato net)
In its foil, the "rock Tibetan mastiff" appears dim. Not only are rotten tomatoes only 46% fresh, but also only $9.42 million at the box office, causing serious losses.
(source: rotten Tomato net)
(source:BoxOffice)
In 2018, there was still no film released, but because there was no blood loss like "Rock and Roll Tibetan Mastiff", only a total impairment of less than HK $10 million was included that year. In the end, Huayi Tencent Entertainment rigidly turned its net profit back into profit by selling its subsidiary Haoyou Media with a net income of HK $141 million.
Excluding the 141 million asset disposal gain of that year, Huayi Tencent Entertainment's net profit in 2018 is still a loss of-66.2 million Hong Kong dollars, only a little less.
Excluding operating costs, period expenses and some non-recurring profits and losses have a great impact on the company's net profit, but in the final analysis, it is the lack of strong products and services that leads to the rise and fall of gross profit and net profit, unable to maintain at a normal level.
5. Huayi Brothers, a major shareholder, is in financial distress and has recently experienced a sharp increase in interest-bearing liabilities.
Since the profitability is so poor, how on earth does Huayi Tencent Entertainment make money?
In addition to the special current table items caused by subscriptions in 2016, Huayi Tencent Entertainment has basically made money from business activities and investment activities in the past two years. Among them, the latter is mainly obtained by selling business or subsidiaries.
In the first half of 2019, Huayi Tencent Entertainment reported a net cash outflow from loans for the first time in its normal operation.
From 2016 to 2018, Huayi Tencent Entertainment had no interest-bearing liabilities until June 2019, when a loan of HK $318 million appeared in the statement, which significantly increased the company's asset-liability ratio at the end of June 2019.
Why does Huayi Tencent Entertainment, which can barely "support" itself by normal operation and disposal of assets, have to bear foreign debts in 2019? It starts with Huayi Brothers.
In 2018, by the "four Heavenly Kings of Di Renjie", "Yunnan insect Valley", "can I return my brother?" "the box office of the film did not meet the expected impact. Huayi Brothers, which has been wayward buying and engaging in mergers and acquisitions, has experienced a sharp decline in income, an impairment of goodwill, and a high proportion of stock pledge, and suffered its first loss since its listing, with a net profit of-1.093 billion yuan.
Chairman Wang Zhongjun even said publicly that he had sold a batch of works of art to save the company and "can sell anything for the company."
In December 2018, Huayi Tencent Entertainment and Huayi Brothers signed an agreement of HK $41.594 million for the joint distribution of four films in China, and made the first contract payment of HK $9.87 million by the end of June 2019.
For Huayi Tencent Entertainment, which has not released a new film for a year and has no source of income in the first half of the year, this figure is not small. In order to maintain its business and continue to invest in "money-burning" film production, Huayi Tencent Entertainment can only break the limit of no debt and borrow money.
Before the release of a new blockbuster movie, Feng Yunjun estimated that Huayi Tencent Entertainment still needs to maintain a loan life for some time.
6. Where to go?
It is not difficult to make a backdoor listing. The difficulty is that after three and a half years, the main business can only sustain losses, there is no core product income for a year, statements that still look like shell companies and stock prices that have fallen all the way.
When can you "take off" a borrowed shell without a blockbuster movie? Where will Huayi Tencent Entertainment, as the international film platform of Huayi Brothers, go in the future?
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Responsible editor: Chen Zhijie