Investor Network Ge Fanmei

As a well-known anchor for former Eastbuy Holdings Limited (1797.HK), Dong Yuhui's relationship with Eastbuy Holdings has been a focus of the market's attention. The untangling of the relationship between Dong Yuhui and Eastbuy Holdings has once again caused a great stir in the market. On the evening of July 25, Eastbuy Holdings announced on the Hong Kong Stock Exchange that Dong Yuhui had decided to resign as an employee of the company and a senior management member of one of the company's combined affiliated entities, effective July 25.

Possibly influenced by this news, on July 26, Eastbuy Holdings' share price fell more than 25% at the opening, closing at HKD 9.5 per share, down 23.39% for the day, with a total market value of HKD 9.797 billion.

At the same time, Eastbuy Holdings sold its stake in Heaton Ventures to Dong Yuhui. After the completion of the transaction, Eastbuy Holdings will not hold any shares in Heaton Ventures. It is expected that the sale of Heaton Ventures will affect more than 20% of Eastbuy Holdings' profits for the 2025 fiscal year, according to research institutions. To boost market confidence, Eastbuy Holdings also announced that it will repurchase no more than CNY 0.5 billion in shares within the next year, as authorized by its shareholders' meeting.

According to the announcement, Dong Yuhui has resigned from Eastbuy Holdings, and Eastbuy Holdings will pay promised benefits and compensation and seek the approval of the board of directors and the compensation committee to award all net profit from Heaton Ventures to Yuhui. The net profit from Heaton Ventures in the first half of 2024 was CNY 0.14 billion. At the same time, Eastbuy Holdings' wholly-owned subsidiary Heaton Ventures will be officially separated from Eastbuy Holdings and held 100% by Dong Yuhui after the sale, which will be completed within six months from the agreement date, i.e. July 25. After the completion, the financial performance of Heaton Ventures will no longer be merged with the company's consolidated financial statements. Yuhui's departure from Eastbuy Holdings has caused a great stir on the internet.

Heaton Ventures, which was wholly owned by Eastbuy Holdings, and whose account income was included in the company's financial report, will be held 100% by Dong Yuhui after the sale, which cost CNY 76.59 million, the same as Heaton Ventures' net assets, and therefore does not result in profit or loss.

To ensure the normal operation of Heaton Ventures, Eastbuy Holdings has agreed to transfer the developed information system to Heaton Ventures free of charge with the consent of the board of directors.

The departure of Dong Yuhui from Eastbuy Holdings was announced on July 25, causing a great stir on the Internet.

Promised benefits and compensation will be paid to Dong Yuhui, and the board of directors and compensation committee will be asked to approve the award of all net profits from Heaton Ventures to Yuhui. The net profit from Heaton Ventures in the first half of 2024 was CNY 0.14 billion. Meanwhile, Eastbuy Holdings' wholly-owned subsidiary Heaton Ventures will be officially separated from Eastbuy Holdings and held 100% by Dong Yuhui after the sale.

According to public data, Dong Yuhui joined Eastbuy Holdings in 2019 and has been with Eastbuy Holdings since 2021, when the company transformed from an online education provider to a self-operated product and live e-commerce platform. Yuhui was given attractive guaranteed income (cash + equity) after Heaton Ventures was established. In addition to receiving all guaranteed income, he can continue to receive half of the net profit from Heaton Ventures if there is any income.

After the registration of Heaton Ventures, Eastbuy Holdings provided more than a thousand square meters of office space and a mature team of about 60 people, as well as sales system, cargo supply, and a large number of equipment and facilities support.

To ensure the normal operation of Heaton Ventures, Eastbuy Holdings, with the consent of the board of directors, will transfer the developed information system to Heaton Ventures free of charge.

Heaton Ventures' registered trademarks, copyrights, and brand names and other related intellectual property rights are deemed to have no significant value after Yuhui leaves Eastbuy Holdings, as they are not expected to bring any economic benefits to Eastbuy Holdings.

Eastbuy Holdings believes that this brand is closely linked to Dong Yuhui's personal intellectual property rights and will be difficult to continue operating after Dong Yuhui leaves. Therefore, its sale is in the best interests of the company and its shareholders.

On the afternoon of July 26, Eastbuy Holdings held a shareholder conference call. New Oriental founder Yu Minhong said at the shareholder communication meeting that Eastbuy Holdings had provided full support in the development of Heaton Ventures. After Yuhui's departure, Heaton Ventures will be able to develop independently, and I believe Dong Yuhui will do well.

Yu Minhong said that in this way, the two companies have fewer complications, the internal and external contradictions of the company can be reconciled, and the internal and external forces can be solved once and for all, without having to worry about the pressure and pain brought by external public opinion.

Core assets lost? According to the disclosed financial data, from January to June 30, 2024, Heaton Ventures' GMV was about CNY 3.5 billion. Based on a commission rate of 13%, the revenue contribution was about CNY 0.41 billion, with a profit of CNY 0.14 billion and a profit margin of 33%.

According to an open letter to shareholders of Dongfang Zhenxuan released by Yu Minhong on the evening of July 25th, before Huwitong was established, Dong Yuhui was given an attractive guaranteed income (cash + equity). In addition to receiving all the guaranteed income, if Huwitong has profit, Dong Yuhui can continue to receive half of the net income distribution of Huwitong.

After the registration of Huwitong, Dongfang Zhenxuan vacated an office space of more than 1,000 square meters for Huwitong, reorganized a mature team of about 60 people, and provided sales systems, cargo supply and a large number of equipment and facility support.

According to disclosed financial data, from January 2024 to June 30th, the GMV of Huwitong is about 3.5 billion yuan, with a commission rate of 13%, contributing about 0.41 billion yuan in revenue and 0.14 billion yuan in net income, with a profit margin of 33%.

After selling with Hui Tong, East Buy stated that it will reallocate resources, strengthen its own brand building, expand its self-operated products and live-streaming e-commerce business, in order to better meet consumer demand.

Yu Minhong stated that Dong Yuhui's influence is enormous, and establishing an independent platform is an inevitable choice. There will be no more cases of broadcasters independently establishing platforms in the future.

Yu Minhong also stated that in the future, East Buy will provide good treatment to its broadcasters and turn them into an excellent team, providing guidance and support for their development. After this round of fluctuations, the existing broadcasters have matured, and recently arranged for them to participate in a series of activities to showcase their talent and ability, personally guiding them, and discovering more outstanding broadcasters to promote the company's development in the future.

On July 26, in the Dongfang Buy live broadcast room on Douyin platform, the number of fans was 29.845 million; the number of fans with Hui Tong has reached 21.734 million.

At present, competition among live streaming e-commerce companies is fierce. According to the data from Qichacha, there are 1.7886 million live streaming-related companies in China. In the past decade, the live streaming industry has been developing rapidly, and the number of registered companies has grown steadily from 0.0083 million in 2014 to 0.0321 million in 2019, with a growth rate fluctuating around 35%.

Yu Minhong said that although cooperation with Douyin is beautiful, it is not a stable structure. He revealed that Dongfang Buy now has its own APP, with more than 200,000 members, and will continue to expand its influence in the future.

In addition, according to Yu Minhong, East Buy is exploring the model of combining online and offline, relying on New Oriental's 800 teaching points to open ground stores, such as member stores.

Regarding the impact of selling with Hui Tong on East Buy, Bocom International believes that after deducting the commission income of Hui Tong's live broadcast room, under the condition that the strategy of East Buy's self-operated products and other matrix accounts remains unchanged, it is expected that the GMV, revenue, and profit reduction in the 2025 fiscal year will reach more than 34%, 9%, and 20%, respectively. The sale of with Hui Tong will have an impact on the company's short-term financial performance, but the public opinion risk may be reduced, and after stability is achieved, the management can focus on developing self-operated strategies and multi-platform development for long-term stable operation. (Produced by Thought Finance)