Caifinance News, November 7th (Reporter Zhao Xinrui): Within the year, the first refinancing enterprise whose review was canceled before the meeting was welcomed. Xiamen C&D Inc., a Shanghai main board listed company scheduled for review on November 5, voluntarily withdrew the application documents on November 3. The listing committee ultimately decided to cancel the review and also terminate the company's refinancing audit.

On October 29th, the Shanghai Stock Exchange announced that the 27th listing review committee meeting will be held on November 5 to review the refinancing enterprise Xiamen C&D Inc., sponsored by Xingye Securities. Just before the meeting, the company issued an announcement to terminate the issuance of shares to original shareholders and withdraw the application documents, also disclosing the reasons. Due to changes in internal and external environments, combined with the company's internal actual situation and development plans, and after full discussions and careful consideration by relevant parties, the final decision was to voluntarily withdraw the application.

Looking at the timeline, after the issuer's refinancing application was accepted by the Shanghai Stock Exchange on June 15, 2023, it went through 2 rounds of inquiries. It is worth noting that the issuer adjusted the total amount of funds raised through rights issue twice: from not exceeding 8.5 billion yuan as originally stated in the prospectus, to a revision on August 8, 2023, to not exceeding 7.788 billion yuan. Then again on April 22, 2024, the fundraising total was further reduced to not exceeding 4.98 billion yuan.

In response, in the first round of inquiries on June 29, 2023, the regulator asked about the necessity and rationality of the 8.5 billion yuan rights issue financing. Xiamen C&D Inc. only replied to the inquiry after the first adjustment of the amount, stating that the rights issue financing would be used for supplementing working capital and repaying bank loans for the company's supply chain operation business after deducting issuance expenses.

From the perspective of the issuance purpose, the company stated that on the one hand, it is to further enhance the competitive advantage of the company's supply chain operation business, and on the other hand, to optimize the capital structure, enhance the overall competitiveness and risk resistance of the company. From the rights issue financing amount originally not exceeding 8.5 billion yuan to 4.98 billion yuan, what are the underlying issues behind the nearly 40% reduction that are worth pondering?

Significant decline in performance in recent years has raised regulatory doubts.

Xiamen C&D Inc. is a modern service-oriented enterprise with supply chain operation and real estate development as its dual main businesses, backed by the Xiamen State-owned Assets Supervision and Administration Commission. It successfully listed on the Shanghai main board on June 16, 1998. According to Tianyancha, as of now, Xiamen C&D Group holds 46.03% of the company's shares, making it the controlling shareholder. The Xiamen State-owned Assets Supervision and Administration Commission is the actual controlling entity of the issuer as it holds 100% equity of Xiamen C&D Group.

How has the performance of listed companies with background in state-owned assets been in recent years? According to the prospectus, the company's revenue from 2020 to 2022 was 432.949 billion yuan, 707.844 billion yuan, and 832.812 billion yuan, with net income of 8.182 billion yuan, 11.122 billion yuan, and 11.267 billion yuan respectively. The financial reports of Xiamen C&D Inc. in the past two years show that in the first three quarters of 2023 and 2024, the revenue was 763.678 billion yuan and 502.136 billion yuan, with net income of 13.104 billion yuan and 2.058 billion yuan, respectively. Combined, Xiamen C&D Inc.'s performance has been declining since 2022, with a 16.13% and 83.43% decrease in revenue and net income in the first three quarters of 2024 compared to the same period last year. Regulators have questioned the reasons and rationality behind the significant drop in the latest period's net income during the first round of inquiries.

In response to the first round of inquiries about the decline in the latest period's performance, the company attributed it mainly to the temporary decrease in revenue and profit from the real estate business in the current period, as well as the use of hedging instruments and accounting treatment, resulting in a year-on-year decline that was mainly due to the impact of the settlement characteristics of the real estate business. Due to the company's correlation with the real estate industry, both the company's supply chain operation performance and real estate business operation performance are also influenced by various factors such as macroeconomic cycles, industry-related policies, industry competition, and the company's operational situation.

Performance drag is accompanied by a relatively high debt ratio being maintained.

The decrease in revenue from the real estate business is one aspect, but the decline in performance over the past two years may be more strongly related to the merger and integration matters of Xiamen C&D Inc.

In the prospectus, Xiamen C&D Inc. has disclosed the ongoing acquisition of 29.95% of Red Star Macalline Group Corporation's shares. Based on this year's third-quarter report, the company has already consolidated its financial statements with Red Star Macalline. Data shows that the net profit for the same period in the first three quarters of this year has dropped significantly by 83.43%. The company stated that after excluding the impact of the restructuring benefits from Red Star Macalline, the net profit for the first three quarters dropped by 29.76% year-on-year, which is nearly three times less compared to the previous decline data. This illustrates the extent of Red Star Macalline's impact on the company's performance. However, even with the impact of the restructuring benefits, the significant drop in Xiamen C&D Inc.'s net profit after exclusion is an undeniable fact.

Despite Xiamen C&D Inc. having experience in mergers and acquisitions, the integration with Red Star Macalline or the differences with the company's expected operational situation have also contributed to a certain drag on the overall company's performance.

Apart from the lack of contribution from the merger and integration matters, the company's asset-liability ratio remains at a relatively high level. Data shows that from 2020 to March 2023, the asset-liability ratio (consolidated) of the company was 77.77%, 77.27%, 75.13%, and 78.71%, indicating a high-operating state. The company has also made relevant risk disclosures in this regard.

On the one hand, a high level of assets to liabilities ratio brings certain debt repayment pressure to the company, while on the other hand, as the company's production and operation scale continues to expand, the continuous increase in funding needs also brings certain pressure to the company's new debt financing. At the same time, it also restricts the speed of the company's business development.

Considering the various factors mentioned above to further explore the potential reasons for Xiamen C&D Inc. lowering the financing amount for the second time, the company's performance has declined in recent years, which will also affect the company's debt repayment ability. To a certain extent, the reduction in financing amount may alleviate the pressure of new debt financing; if the refinancing application is eventually approved, the debt repayment pressure can also be similarly relieved.

Even though the financing amount was reduced, ultimately the decision was made to withdraw the order. What are Xiamen C&D Inc.'s plans next? According to the latest developments, Xiamen C&D Inc. is actively expanding cooperation and exploring new business models. Recently, Xiamen C&D Inc. and Xingtong Group officially signed a strategic cooperation framework agreement, while the company and Xiamen C&D Supply Chain Logistics Technology signed a joint venture contract to jointly explore a new model for international liquid hazardous goods supply chain logistics.

In addition, on November 5th, Xiamen C&D Inc., Red Star Macalline Group Corporation, and H World Group reached a strategic cooperation agreement, with all three parties fully leveraging their respective industry advantages and resource strengths to deepen cooperation in supply chain services, commercial project resources synergies, and other areas. Whether the future performance can be successfully reversed is also worth further observation.