Restructuring Update.  On July 4, the Company entered into a MOU with Great Manners Enterprises Limited to arrange for funding and introducing a restructuring advisor to Differ.  The MOU is exclusive for a period of three months.  As a result, Differ withdrew its Cayman request to appoint a restructuring officer.  On August 30, Differ announced it retained RSM Corporate Advisory as its restructuring advisor, and expects a restructuring plan to be available in the next two months.  On August 23, the winding up petition that was filed in June against Differ was adjourned to September 20.  The petition was filed by Ms. Peng Yulan regarding HK$6,030,000 of principal and accrued interest outstanding.   

Operational Update.  The weak economy and property market are impairing Differ similar to other property developers. However, whereas other developers continue to develop new projects Differ had been looking to exit property development and use the cash to shift its focus to Auto O2O.  The Company was previously forecasting the projects to sell over the next few years and now expects the sales and deliveries to occur through 2030.  This leaves more debt outstanding, and at longer than previously expected durations, and less cash coming in as planned to invest in the Auto business.  Differ is still looking to move into the Auto space, but may now focus solely on superstores and less on the online portion, however all of this will depend on the restructuring plan noted above.  Other than continuing its money lending business, we do not expect Differ to move back into any of its other financial service offerings.

AGM Voting.  Shareholders voted to pass all the items at the AGM on June 28, which included normal matters as well as the ability to issue shares and amend the Articles of Incorporation to deal with voting shares rather than just ordinary shares.  Given the current state of the Company, it is highly likely new shares of some sort will be issued in the future. 

H1:23 Results.  Differ reports first half results of RMB 1.02 billion, of which RMB 953.8 million was from the sale of properties and carried a strong gross margin.  Financial-related income continued to fall, to RMB 53.7 million, nearly all of which was from its money lending business, which was well below the year ago period.  Guarantee income went to zero as its largest guaranteed loan went into default during the period, resulting in an expected liability of RMB 149.8 million to Differ.  The Auto O2O business effectively evaporated in the period, despite the passenger car market in China increasing over 9% from the prior year, and the Company is looking to pivot away from its previous roll-up strategy and focus on the offline portion of the business.  One-time expenses in the period included RMB 11.0 million from a provision for financial guarantees and RMB 245.9 million from an impairment on account and other receivables. Differ also took a RMB 23.9 million fair value loss on its investment properties in the period due to the aforementioned market weakness.  Finance costs surged to RMB 63.1 million on higher bank borrowings outstanding.  Net Loss for the period was RMB 137.3 million.

No Rating & Target Price. 
The Company is still in a state of uncertainty as it goes through the restructuring process and comes up with a plan to fix the Balance Sheet and reevaluate its operations going forward.  We also note that Honorary Chairman Hong Mingxian has all of his 1.3 billion shares pledged to Tianjin Binhai Rural Commercial Bank, and it was the forced sale of Chairman Ng’s pledged shares that started the current slide for Differ and its stock. These factors, coupled with a property market facing significant challenges, result in us not reinstating a rating or target price on Differ at this time.