The market value shrank from 100 billion to 10 billion, and the shareholders and management of OCT "slapped the table" on the spot

凤凰WEEKLY

2024-06-22 14:18Posted on the official account of Beijing Phoenix WEEKLY

Perhaps because his eyes are a little presbyopia, Zhang Zhengao, the 62-year-old chairman of OCT Group, always picks up the glasses on the table and puts them on when he looks at the documents in his hand, and puts them down when he doesn't look at them.

On June 19, on the 5th floor of the OCT Building in Shenzhen, the head of the state-owned enterprise was attending the third shareholders' meeting of OCT Co., Ltd. (hereinafter referred to as "OCT A") since his transfer in April 2022. Shareholders are more likely to recognize the new chairman's diligence, compared to the previous president's several absences from the shareholders' meeting.

Many shareholders sighed that this is the largest number of management participants in a general meeting of shareholders in recent years, sitting behind the management of real estate, hotels, business management, enterprise management and other lines of the person in charge, sitting in a full three rows with shareholders face to face, "full of sincerity".

However, the satisfaction of shareholders may be limited to that.

Just after Zhang Zhengao took over, OCT A began to suffer continuous losses (from 2022 onwards). At the same time, the stock price continued to fall, and the current stock price has been close to 2 yuan / share, falling to the lowest value in nearly 17 years, and the market value has shrunk from nearly 100 billion at the peak (2007) to 16.5 billion today.

On June 19, on the 5th floor of the OCT Building in Shenzhen, at the ongoing OCT A2023 annual shareholders' meeting, the management wanted to end the meeting twice, but was stopped by the shareholders on the scene in unison. Some of these shareholders have held shares for more than ten years and suffered heavy losses, and some have been deeply trapped because they are optimistic about the tourism industry after the epidemic ends.

"OCT is sorry for everyone!"

"OCT has cheap land, financial advantages and brand advantages, why should it lose so much more than others?"

"Why is OCT more unconfident than a pure real estate company?"

"Will the company be ST? Will it be delisted? ”

"Stocks can't go down and down, so people's hearts will be scattered!"

Agitated shareholders vented their frustrations, worries, and anger for extended periods of time, and the final meeting lasted a full three hours, ending as the sun was about to set.

Large accruals cause panic among shareholders

In the first year of Zhang Zhengao's helm, that is, in 2022, OCT A suffered its first loss since its listing, with a net profit loss of 10.95 billion yuan attributable to the parent company, a year-on-year decrease of 387%. Horizontally, the decline in operating income is only 25%, and the key reason for the sudden decline in the book is the sudden increase in provisions.

Compared with 2021, OCT A's asset impairment provision in 2022 increased by 505%, rising rapidly from 2.1 billion yuan to 12.7 billion yuan. The reason for this is that OCT A said in its financial report that it was because the sales flow rate slowed down further in the second half of 2022 considering the decline in the new home market.

OCT A's drastic accrual style was relatively rare among real estate companies back then. At that time, Guosheng Securities statistics showed that in 2022, the proportion of asset impairment provisions accrued by state-owned enterprises to net profit rose to 10.3%, and net profit could still remain positive.

Such an exaggerated provision scale will continue until 2023, and in 2023, OCT A will make a provision of 3.6 billion yuan, of which the provision for inventory decline will be 3.4 billion yuan, and the company will have a net loss again.

Some shareholders made a comparison between Gemdale Group and OCT A at the scene. "In the four years from 2020 to 2023, we have made a provision of 19.5 billion yuan in OCT, and Gemdale has only made a provision of 6 billion yuan in these four years." He said.

Another private equity practitioner who attended the meeting on behalf of shareholders also raised the same doubts at the scene, saying: "We can't figure out such a large provision, although you have answered each item separately, this one is 500 million, and the other is 300 million." However, the cost of acquiring land in OCT is cheaper than others, and the cost of capital and brand have advantages, what is the reason why it is so much more than others? Also, we have no opinion on the loss accrual to travel lightly, the question is whether there will be a continuation of the accrual later? Is there an infinite number of black holes behind it? ”

Liu Fengxi, vice chairman of OCT A, answered the question of accrual. He said: "The same real estate is the main business, we compared with the benchmark leading companies, we have repeatedly summarized internally, the difference is fundamentally in the product structure. OCT originally did 'tourism + real estate', and an inevitable result is that real estate projects should be suitable for tourism, and tourism is not suitable in the core area of the city. For example, our projects in Zhongshan and Shunde are not in the core areas of these cities. Therefore, in the real estate downturn, such as the periphery of Shenzhen, its housing prices have dropped dramatically. ”

Since most of OCT's inventory is in non-core areas, it can only be reduced by drastically reducing prices. Then, in the practice of accounting treatment, the difference after the price reduction becomes the impairment amount of inventory.

"According to accounting standards, if you sell a house, you have to calculate the value of the project based on the price of the house. For example, if we want to sell a project for 20,000 yuan, but the market price may only be 12,000 yuan, and if we want to realize it, the difference of 8,000 yuan will have to be accrued. If it is not sold, and there is still goods in hand, the amount that needs to be withdrawn is 8,000 yuan. ”

Liu Fengxi emphasized: "It's the same 180 billion goods, but everyone's things are different. ”

Regarding whether shareholders will continue to make provision in the future, Liu Fengxi said: "There is no way to judge whether there is still a need to carry out in the future, and it has to be based on the evolution of the market." If it falls further, no one can guarantee it. ”

Denial of the past

Like the anxiety of shareholders, Liu Fengxi admits that the inventory problem is also the biggest confusion facing the management at present. And the emergence of this problem can be traced back to the previous team, that is, the era of Duan Xiannian in OCT.

Duan Xiannian arrived in 2014, and he has the same political experience and bold style of reform as Ren Kelei, the veteran of OCT. At that time, the expansion of OCT tourism + real estate model was weak, and the revenue scale of OCT A was stuck at the scale of one or two tens of billions for five consecutive years, which was opened up by Vanke, a "friend" of Shenzhen established at the same time, and the annual sales were only at the level of Vanke for one month.

In order to overtake in the corner, Duan Xiannian added nearly 20 sub-groups and established a "theater system control", which focused on the expansion of Xi'an and Yunnan, with OCT's planned investment in Xi'an as high as 200 billion yuan, and a planned investment of more than 100 billion yuan in Yunnan, and participated in the reform of state-owned enterprises in Yunnan Province by investing in Yunnan tourism.

Obviously, Duan Xiannian wants to recreate the "Qujiang model" in OCT.

To put it simply, the "Qujiang model" is a "city-building" with a cultural tourism shell. A big city is built out of thin air in a non-core area, and then the price of land and housing rises. This series of reforms has indeed paid off. In 2020, OCT A exceeded 100 billion yuan in revenue, and the total assets of OCT Group also increased from 115.266 billion yuan at the end of 2015 to 698 billion yuan in 2020.

But OCT is not the "lucky one" in the real estate industry, and it has fallen into a scale trap similar to some of the more aggressive private enterprises of the same period. Hiding in the shadow of "wealth on paper" is the decline in the net profit and liquidity problems of OCT A.

The net profit attributable to OCT A increased by only 173% from 2015 to 2020, and the core indicator of profitability, "net profit margin attributable to the parent company", increased slightly from 14.4% in 2015 to 15.49% in 2020. Since the beginning of 2021, the downward trend of the property market has been transmitted from the third and fourth lines to the second and first lines, and the profits of OCT A, whose inventories are basically in these areas, have begun to fall off a cliff, and the net profit margin attributable to the parent company has fallen to 3.7% in 2021, and it will continue to lose money in 2022.

In the nine years from 2015 to 2023, only 2016, 2020, 2021, and 2023 were positive for the "cash flow debt ratio," which represents the ability to repay short-term liabilities. Excluding 2023 after Duan Xiannian's retirement, that is to say, during his tenure, OCT A has 6 of the 9 years, and the operating cash flow cannot cover the short-term debt.

In fact, the hidden dangers of Duan Xiannian's model can be seen from a failed acquisition in 2018. In May 2018, the acquisition of Qujiang Cultural Tourism by OCT, which lasted for 7 months and involved 11.3 billion yuan, was officially terminated.

In order to speed up the return of cash and improve the overall asset turnover efficiency, OCT began to intensively sell its Yunnan subsidiaries in 2019. An industry insider close to OCT told Phoenix Weekly Real Estate: "The transfer of the Yunnan project has been reported too much, and the Yunnan government is not very happy. ”

In the first half of 2021, OCT started an investment turn, turning to the first and second tier land acquisitions to reduce the number of land acquisitions.

"In the past two years, we have repeatedly emphasized that we should focus on the core areas of the core cities, tourism and real estate, we will have to develop professionally in the future, not because we want to do tourism, in the tourist place to get residential land, nor because we want to develop residential here, we go with tourism." Liu Fengxi said at the shareholders' meeting.

As far as Liu Fengxi expressed, OCT can now be said to have denied the investment ideas of the previous team to a certain extent. However, the inventory of 180 billion yuan is really a bit difficult to return, and by 2023, the land reserve of OCT A in the third and fourth lines will still account for as much as 6%.

By May this year, OCT A's sales continued to decline. "It's true that the market has been much weaker this year than we expected at the beginning of the year, so our contracted sales have dropped a lot," said one of the executives who attended the meeting. The tourism business is also very different from our expectations, and this year's consumption habits have changed to overseas travel and natural scenic spots. This year's business pressure is relatively huge. ”

In order to speed up the destocking, Liu Fengxi said: "We are really trying to do everything we can to destock, and we have no hesitation to reduce the price." In addition, we will publicly list asset transfers on the exchange as long as it is appropriate. In fact, it is to ensure that the company can survive healthily. As long as it survives, there will be opportunities in the future. ”

The level of market value management is questioned

OCT has gone through two terms of chairman from politics to business, Zhang Zhengao was transferred from Poly Group, doctor of economics, and served as the chief accountant of Poly Group. At a time when profits and cash flow are under great pressure, a chairman with a financial background undoubtedly gives shareholders a good signal.

At the shareholders' meeting, several shareholders mentioned Zhang's professional background. For shareholders, the only thing they care about most is the share price.

The above-mentioned private equity practitioner said at the scene that he made a simple statistics. "OCT's first listing and financing are not counted, and the second convertible bond financing is not counted, these are all small financings. After the listing of OCT, there were two large financings, one was the issuance of 7.5 billion yuan on November 4, 09, and the second was a fixed increase of 5.8 billion yuan in cash in January 16, adding up to more than 13 billion. ”

Before these two private placement financings, OCT A had reached a market value of hundreds of billions. Now it has fallen to more than 16 billion. According to the calculation of this private equity officer, if the more than 13 billion yuan of the two fixed increases is deleted, the actual market value of OCT A is only more than 3 billion today.

"Then it's a typical money-making business." He said at the shareholders' meeting, "According to my statistics, OCT A is the enterprise with the longest investment time and the most losses in the social security fund. ”

Another long-time holder of OCT A shares was even more agitated, as he printed out a two-page proposal and was still revising it with his pen before he spoke.

"I think we have reached a critical moment, we must use thunder means in extraordinary times, and now we have 2 prefixes, if we enter 1 prefixes, it will be a defensive war." The long-term investor said, "First of all, the company has to see profits, and it can't be very good, and first, it is a loss, which is too scary." We are patient with long-term capital, and you have to operate and do a good job of the company. ”

The shareholder believes that OCT urgently needs to solve the problem of how to consolidate the overly scattered business in order to make the listed company bigger and stronger. Then some shareholders asked to what extent OCT's current professional integration has been carried out.

The general manager of the enterprise management department of OCT Group introduced at the scene that professional integration is one of the important tasks of OCT in the past two years. "Originally, we had more than 50 different business formats, including theme parks, scenic spots, culture, hotels, commerce, etc., and these business formats are now handled by professional companies, so that professional people can do professional things."

"It is unsustainable for the businesses, services, and hotels derived from real estate development to survive independently, rather than relying on the feedback of the real estate industry to support them." Liu Fengxi said.

At the entire shareholders' meeting, in addition to the summary of the meeting, Zhang Zhengao did not speak much, and only responded as the chairman of OCT Group when answering the support of the parent company. "In terms of support for OCT shares, OCT Group is going all out in terms of re-borrowing and guarantee of financing."

This senior accountant has passed the retirement age of 60 ordinary workers, and according to the practice of retiring at the age of 63 for the "top leader" of the central state-owned enterprises, there is still one year, and if you refer to Duan Xiannian's retirement age, he still has two years.

There is not much time left for Zhang Zhengao to turn the tide.

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