Jinyi Group, a Fujian real estate company, is getting more and more sad in 2021.

On March 9, Jinyi Holdings (0565-HK), the group's Hong Kong-listed company, announced its interim results for fiscal year 2020.

The company recorded a profit of HK $92 million in the first half of the fiscal year ended December 31, 2020, an increase of 3.4% over the same period last year. However, due to the spread of COVID-19 's epidemic throughout the country since the first half of 2020, the fair value of Jiachao Shopping Mall, the company's main "cash cow", has been significantly reduced by HK $403 million, which has dragged down the company's loss of HK $289 million during the period. Turn profit into loss (the company generated a profit of HK $14.89 million in the first half of 2019).

Prior to the announcement, Jinyi Holdings issued an earnings warning on February 9, mentioning that the fair value of Jiachao Shopping Mall is expected to be reduced by HK $120 million. It was not until the publication of the announcement that the market found that the impact of the original epidemic on Jinyi Holdings was far greater than it had imagined.

In the Hong Kong stock market, Jinyi Holdings, which has been reduced to "fairy shares", has long been in a state of no one's interest. The company's share price hovered below HK $0.3 for a long time in 2021. At the close of trading on March 11, Jinyi Holdings was trading at HK $0.26, with a daily turnover of only HK $2600 and a market capitalization of less than HK $700m.

Such an inconspicuous Jinyi Holdings should not be worth writing about. However, the Jinyi Group behind Jinyi Holdings integrates multiple businesses such as education, cultural travel, recreation, property, new materials, real estate, commerce and so on. Among them, the group's real estate business (Jinyi Real Estate) and the commercial housing industry engaged in by Jinyi Holdings are stagnant.

Following the performance that Jinyi Holdings substantially turned profit into loss in the second half of 2020, what can be seen is the struggle and hesitation of Jinyi Real Estate, a small and medium-sized real estate enterprise in Fujian Province in 2020.

1. From the textile king to the real estate, Jinyi's multi-service commercial network has just begun.

Chen Jinyan, the real controller of Jinyi Holdings (the report of Jinyi Holdings is listed as "Chen Jinyan", hereinafter collectively referred to as "Chen Jinyan") is originally from Changle, Fujian Province, and comes from a textile family. In the 1990s, Chen Jinyan founded Fuzhou Huaguan Knitwear and Textile Co., Ltd with the support of his family. The factory covers an area of 90,000 square meters and employs thousands of people. In 1994, Chen Jinyan registered and established Hong Kong Jinyi Group Co., Ltd., and listed it on the Hong Kong main board to expand overseas markets.

In 2006, Jinyi Group made great efforts to reorganize Henan state-owned enterprises Zhengzhou National Cotton Factory, No. 2 Factory and No. 6 Plant, and moved them to Xinzheng Longhu District, where Zhengzhou Textile Division, one of the largest textile enterprises in the country, was established. The group invested 5 billion yuan to build and put into production Zhengzhou first Textile Co., Ltd., Zhengzhou Hongye Textile Co., Ltd. And Zhengzhou Ruilong Textile Co., Ltd.

In addition to restructuring several former large state-owned textile factories in Zhengzhou, Chen Jinyan also promised to assume their historical debts, resettled the workers of the original factory, and became a "sentimental" person in the eyes of the people of Zhengzhou.

Talking about the reasons for investing in Henan, Chen Jinyan said that it is because the Central Plains region can play a strong radiation effect on the surrounding cities. If you take Henan as the center of the circle, you can draw a complete circle. He thought that Henan would be a hot place for investment in the next decade, so he decided to "take the lead."

In the same year, the Zhengzhou municipal government carried out urban reform. The original three state-owned textile mills acquired by Jinyi are located in the city center and cover an area of thousands of mu. The government wants to develop the above industrial land commercially, so it entrusts the task to Jinyi. At that time, Jinyi Group, which was appointed in the face of danger, set up a real estate division and began to shift its business focus to real estate.

In this old industrial area, Jinyi developed a residential project Jinyi International Huadu, the project supporting primary schools. Each of the three original factory sites is equipped with a box business-Jinyi City Shopping Mall.

As a result, Jinyi International Huadu has become a model of the old reform in Zhengzhou. Open the well-known Jinyi and then famous Zheng Xi with the Jinyi City project, then develop the Dragon Lake Jinyi City in the Nanlong Lake land, make Jinyi Jinshui Bay in Jinshui North, and launch Jinyi four Seasons City in Huiji District. Jinyi's residential project focuses on the selling points such as "household area", "supporting school district" and "supporting business". Commercial and school districts go hand in hand, and finally successfully open the real estate market in the Central Plains of Henan Province.

In 2010, Jinyi signed a project in Xinzheng City with more than 10 billion yuan, and the investment scale is higher than that of the Group's headquarters in Fujian. In February of the same year, Jinyi simply announced that it would move its headquarters to Zhengzhou.

Jinyi Group, which has taken root in Zhengzhou, has also derived more other businesses, including real estate, commerce, new materials, Internet, finance, education, property, and so on.

Among them, Jinyi Holdings, a listed company in Hong Kong, undertakes the group's commercial real estate business. As of the latest, the company's business includes the rental of your four-story Jiachao Shopping Mall with an area of 125200 square meters in Zhengzhou and another 5-story integrated commercial mall (called "Shopping Center area C") adjacent to Jiachao Shopping Mall. By the end of December 2020, Chen Jinyan and his brother Chen Jindong held 22.21% and 13.73% of the company's shares, respectively.

The group's real estate business is undertaken by Jinyi Real Estate.

In 2019, Jinyi Real Estate put forward the "two south and one corner" strategy, with Henan, southwest and Yangtze River Delta as the strategic center, focusing on the Yangtze River Delta and areas with developed economy and high growth potential along the Yangtze River Basin. The company plans to increase its performance by 30% to 50% a year, exceeding 50 billion yuan in the next three years.

In the same year, Jinyi Real Estate moved its headquarters from Zhengzhou to Shanghai in order to "facilitate financing" and "attract talent".

After moving to Shanghai, under the influence of COVID-19 epidemic and industry red line policy in 2020, Jinyi Group not only failed to raise capital, but also lost a lot of talent.

2. 2020, the darkest year of Jinyi.

Three months after the headquarters moved to Shanghai, Jinyi Real Estate reported layoffs. At the beginning of 2020, the media revealed that Jinyi Real Estate headquarters had nearly 180 employees, and the company plans to reduce the number to 120. After the outbreak, the target of layoffs was further increased to 80, while the company retained only 100.

Jinyi Group later responded that there were more than 160 people in the group's real estate sector, while there were still more than 150 people in Shanghai at that time, and the employees who left were "normal mobility".

However, after that, Jinyi Real Estate continued to pledge the equity of its subsidiaries to raise funds from financial institutions such as Zhengzhou Bank, Tianjin Trust, China Resources Shenzhen Investment Trust and so on. The paper can't contain the fire in the end. Obviously, Jinyi home ownership has encountered difficulties in the capital chain.

Due to the small scale of operation and unlisted, the financing channel of Jinyi Real Estate is relatively simple. It is impossible to issue corporate bonds, but there is no corresponding channel for financing from the public, and financing from financial institutions through equity of proton companies has become one of the few "life-saving" means of the company.

In June of that year, it was reported that Jinyi Real Estate was seeking an acquisition from Rongxin. After the completion of the acquisition, Rongxin only does not manipulate the market and will not interfere with the marketing of the original project of Jinyi Real Estate. Rongxin hopes to expand the scale of contract sales and help it issue bonds. However, the news of "huddling together to keep warm" between small and medium-sized housing enterprises was later denied by both sides.

However, more evidence points to the shortage of funds for Jinyi home ownership in 2020.

In February, March and October 2019, the company wantonly acquired land at a high premium in the market. In February, the Chenggong plot in Kunming, Yunnan Province, was acquired by the company for 1.23 billion yuan, with a premium rate of 84%. In March and October, the company won the Taian plot in Shandong Province and the Changzhou site in Jiangsu Province, both with a premium rate of more than 40%.

By 2020, although Jinyi Real Estate also participated in soil racquets in third-and fourth-tier cities such as Xuchang, Jiangyin and Nanyang, they did not win in the end. Industry insiders believe that the performance of Jinyi Real Estate has been eclipsed in the local auction market, probably because the epidemic has led to a tight cash flow of the company, limited by the scale of operation, and limited access to financing, so it is difficult to acquire land at a high premium in competition with other head real estate companies.

The shortage of funds of Jinyi Group can also be found in the listed company Jinyi Holdings. According to the company's mid-fiscal year 2020 report, by the end of the year, the total loan financing line of Jinyi Holdings was HK $864 million, which has been fully utilized. In addition, the company has arranged bonds with four independent third parties totaling about HK $34.34 million. The company's investment properties with a total face value of about HK $1.06 billion have been mortgaged to banks to obtain bank financing.

Although Jinyi Holdings has HK $352 million in cash and bank deposits and a liquidity ratio of 227.3%, it is clear that Jinyi Group has used most of the feasible means of financing and managed to scrape together enough cash to meet its operating needs. If the company's business continues to deteriorate, liquidity mainly comes from the borrowing of Jinyi Holdings, which will be difficult to sustain after all.

It is worth noting that at the end of June 2019, Jinyi Holdings sold its entire stake in Zhengzhou Jiacong property Services Co., Ltd. to a third party in exchange for HK $241 million in cash. The main property of Zhengzhou Jiacong property is 164 shops in Zhengzhou large-scale theme shopping mall. According to the person in charge, before the property was sold, the annual loss of the property was about 20 million yuan.

Up to now, the remaining assets of Jinyi Holdings are Jiachao Shopping Mall and the cannabinol production line in Yunnan, which has not yet been put into production. If the company really needs to cash in assets, the latter can not be sold, the former can not be sold-Jinyi Holdings is actually in a difficult situation.

In addition to Jinyi Holdings, Jinyi Group is also selling other business rebates. On January 29 this year, Chen Jinyan and Chen Jindong brothers withdrew from the shareholders of Zhengzhou Jinyi Education and Technology Co., Ltd., Pingtan Jinjun Investment Partnership (limited partnership) and Chen Zhe Chao Xinjin and held 99% and 1% respectively.

Chen Zhe-Chao owns 98% of Pingtan Jinjun Investment Partnership. At present, in addition to Zhengzhou Jinyi Education, Pingtan Jinjun Investment Partnership also holds 60% of Luoyang Jinyi Excellence Enterprise Management Consulting and 99% of Sichuan Pujiang Jinxiu Culture and Tourism Development Company. The two companies completed the equity change and withdrew on February 7 and February 2 respectively.Zhengzhou Jinsong Real Estate Group Co., Ltd.And ZhengzhouJinzu industrial co., Ltd.Respectively byJinyi Real Estate Group Co., Ltd.And Chen Jindong are wholly owned.

Apart from the family, the Jinyi Group, which is selling all kinds of assets, has reached the most difficult time.

3. mistakenly entered the real estate sector for 15 years.

Unlike other Fujian real estate enterprises whose sales exceeded 100 billion yuan in 2018, such as Shimao Real Estate, Xuhui Group, Sunshine City, Rongxin China, Zhenrong Real Estate, Taihe Group and so on, Jinyi Real Estate has just exceeded 20 million square meters of development area and just over 10 billion yuan of sales in 2018.

But Jinyi Group may be wrong because its operating scale is too small and its business is too fragmented, resulting in limited access to financing and slow leverage expansion. When the industry financing regulation is tighter, the small housing enterprise Jinyi home finally bear the brunt.

To make matters worse, Jinyi had problems in the later stage of the Henan project between 2018 and 2019, which caused local people to lose their affection for Chen Jinyan, which may affect the sales of Jinyi's future projects.

In February 2018, only three days after the opening of the Jinyi Jinshuiwan Guanzhenyuan project, the "measures for the Administration of Construction permits" was publicly revoked by the Urban and Rural Construction Commission of Zhengzhou City. In September, Jinyi Jinshuiwan Phase III delayed delivery, suspected of fraudulent owners.

In April of the following year, Jinyi Jinshuiwan Phase III was interviewed by Zhengzhou Housing Administration on suspicion of false propaganda and illegal sales.

All this makes potential home buyers wonder whether Chen Jinyan is still the "good old man" who took the initiative to assume the debts of the textile mill and relocate his original factory workers.

A reporter once interviewed Chen Jinyan. At that time, he did not have much interest in real estate, but he had a deep love for textiles. Chen Jinyan, who loves the textile industry, came to Zhengzhou, an important textile city, and everything seemed like a beautiful encounter. Later, by mistake, real estate development, Jinyi tossed around for a full 15 years.

For the Jinyi Group, which has a wide range of business, perhaps the clearance of small and medium-sized enterprises in the real estate industry is not a bad thing. Perhaps, this is also a kind of relief.

Author: orange soda