There are some very popular company stocks on the major stock investment forums. These stocks are under the banner of "value investment". In fact, the stock price falls year after year, or many investors keep buying with the idea that "value investment should fall and buy more and more". It seems that the greater the loss in the account, the more you can prove that you are a "value investor." In fact, I forget the essence of coming to the market: investing is to make money.

A good investment requires not only that the company can make money, but also that it is willing to give you money. However, some companies look good and fit the definition of value investment: business is good and valuations are not high. In fact, it fell into a "value trap".

Typical examples of value traps are:Although the enterprise makes a lot of money, it has nothing to do with the shareholders that the major shareholders think, especially the minority shareholders, especially the retail investors.

As far as the value trap is concerned, Beijing Holdings on Hong Kong stocks is a very typical case, because "investing in Beijing Holdings and enjoying value investment" is just a wonderful story.

First, the company can make money, this is the most beautiful trap

Ordinary investors like to look at the company's net profit. Beijing Holdings, as the controller of monopoly business, has good revenue and profit growth, which is also the biggest factor leading many investors to fall into the "value trap." the main sources of income of Beijing Holdings from the annual report are:

1. Natural gas. Distribution and sale of pipeline natural gas and related business in Beijing

2. Beer. Production, distribution and sale of beer in Beijing and other provinces of China (Yanjing Beer)

3. Environmental protection business. Mainly through the subsidiary "North Control Environment".
   

In addition to the poor development of environmental protection business due to the macro situation in recent years, the monopoly business of pipeline gas sales is the most preferred business by investors, and the beer business also has the attribute of consumption. also enjoy high valuations in the capital market, as gas business and beer business gradually increase prices, and the market space also expands, income and profits also increase steadily, and the return on net assets is stable all the year round. Except for the expansion period, the cash inflow from operating activities is much larger than capital expenditure, and everything is so good:

Then the question arises: how much does the company make money and minority shareholders have something to do with it? the most direct reflection lies in the "dividend". Unfortunately, although the net profit of Beijing Holdings is basically increasing year after year, the proportion of dividends paid to shareholders (that is, the dividend payment rate) has decreased year after year. The dividend amount has increased from 340 million yuan in 2006 to the current 7.215 billion yuan, while the dividend payment rate has dropped from 55.14% to 17.86%. Is the company out of money? Or did you do it on purpose?

But what's even more painful is that it's not that the company doesn't have the money to give you a share, but that the cash on the account has increased year after year since 2013, and by 2019, there is nearly 20 billion cash on the account. You say it's not angry, and you don't share the money.

Why the management dare to do so, we need to start with the hard wound of corporate governance.

Second, the management has little to do with your minority shareholders

Management is also profit-seeking, sometimes management is not a major shareholder, or does not hold shares at all, for this kind of management, they will consider how to keep their jobs and seek more bonuses from the perspective of KPI. At this time, the interest tendency of management is to please the major shareholders (the board of directors) rather than to take care of the interests of minority shareholders, so the management will not care too much about the stock price. Let alone push the company to pay more dividends.

Not only that, what is interesting is that on March 2, 2016, Zhongjin formally completed the acquisition of 100% equity interest in EEW, but reported a profit of less than HK $70 million in mid-2019. The income that can be brought by the acquisition of EEW is not even as good as that of bank financial management, which has an interest return of hundreds of millions of yuan, while the advantage of Beijing Holdings lies in gas processing, beer operation and hasty cross-border border. And the scale of the transaction is huge, which is too aggressive from the point of view of shareholders.

As for why the company made these actions, in essence, before the reform of state-owned enterprises, the management of most state-owned enterprises assessed the scale of assets and less profits, but the purpose of shareholders in doing business was to make money. In this way, the interests of management and shareholders conflict.

It is a pity that the management of Beijing Holdings did not take many shares, but the salary is very high. Even independent non-executive directors have very high salaries. As minority shareholders, I believe they can't see it. Then the question arises. Can the management be replaced?

Third, the major shareholder is absolutely in control. You can't liquidate him.

In some companies, there are a large number of high-quality assets on the account, but the management does not give power and will not explore its own value, but the major shareholders hold more than 50% of the shares. According to the definition of the controlling shareholder in the Company Law, absolute holding refers to the control over the company by shareholders whose capital contribution accounts for more than 50% of the total capital of the limited liability company or whose shares account for more than 50% of the total share capital of the joint stock limited company.

Unfortunately, the major shareholders of Beijing Holdings hold more than 50% of the shares, of which the Beijing Control Group and other state-owned assets hold a total of 61.96%, which belongs to absolute holding, although you know that his business is very good and there is a lot of money on his account. but you can't liquidate the management and act according to your own will.

At this point, you can find that some companies look good, and their operating income and profits are growing year after year, but they have little to do with minority shareholders. Management does not own shares, which is inconsistent with the interests of minority shareholders, and you cannot reorganize the board of directors and management. Unless the dividend rate is very high, it can be tolerated that the management does not care much about their own interests, however. At present, when the annual dividend yield of Beijing Holdings is less than 4%, it is empty talk that "bottoming out of Beijing Holdings is a value investment." I'm afraid it's not falling into a "value trap."