Reporter |
On June 27, the jewelry brand "Liuliufu" submitted a prospectus to the Hong Kong Stock Exchange, with CICC and China Securities as the joint sponsors.
After failing to break through the main board of the Shenzhen Stock Exchange three times, Liuliufu chose to switch to the Hong Kong stock market. However, the road to listing has not been smooth, with frequent sponsor changes and a business model that relies heavily on franchisees adding uncertainty to its successful listing.
As for the reason, Liuliufu said that considering the local and overseas capital market conditions and the company's future development strategy, the company voluntarily withdrew the second round of A-share listing application in November 2023. Taking into account the possibility of obtaining foreign capital and access to overseas markets after an IPO on the Stock Exchange, as well as making the company more widely accepted by the market, it was decided to seek an IPO on the Stock Exchange.
In this IPO, Liufu plans to strengthen the sales network; Increase the market awareness of the brand; Improving product offerings and strengthening product design and development capabilities, as well as working capital and general corporate purposes.
Frequent changes of sponsors
It is reported that before breaking through the Hong Kong Stock Exchange, Saturday Fu had been terminated three times.
In April 2019, Liuliufu submitted the initial listing application documents to the China Securities Regulatory Commission for the first time, breaking through the main board of the Shenzhen Stock Exchange.
On May 9, 2019, Genzon Pearl River was investigated by the China Securities Regulatory Commission for suspected audit bias in the "Kangmei Pharmaceutical 30 billion disappeared" case, and a number of IPO companies, including Liuliufu, were "suspended" for review, and Liuliufu was finally rejected by the Issuance Examination Committee in October 2019, and the IPO failed for the first time.
After a year, Liuliufu made a comeback again, and updated the listing application materials to the CSRC again in September 2020, and the sponsor at this time was replaced by Minsheng Securities Co., Ltd., but Liuliufu has not yet passed the review of the Issuance Examination Committee.
The questions raised by the Issuance Examination Committee meeting mainly include the reasons and reasonableness of the substantial increase in the main business income of Liuliufu compared with the same industry companies, the proportion of franchise model revenue of about 80%, and the average sales of new franchised stores being much higher than the average sales of existing stores.
Two years later, in July 2022, Liuliufu pre-disclosed the prospectus for the third time, applying for listing on the main board of the Shenzhen Stock Exchange, and the sponsor was replaced by China Securities Construction Investment, which experienced the implementation of a comprehensive registration system, and the IPO review of Liuliufu on February 28, 2023 was transferred from the CSRC to the Shenzhen Stock Exchange, and then stayed in the inquiry stage for more than 9 months, and finally withdrew the listing application on November 17, 2023.
After a round of inquiries, the inquiry letter inquired about a total of 10 aspects such as the company's previous declaration, trademark ownership, business model, internal control system, franchise model, and e-commerce model.
In this IPO, in addition to China Securities Securities, the sponsor of Liuliufu added CICC.
Dependence on franchisees
Founded in 2004, it was a relatively late establishment compared to Chow Tai Fook, which was founded in 1929. It relies on the brand naming strategy of "Zhou Zi surname" and stands out among many jewelry brands. However, it is worth noting that although the founders of jewelry brands with the surname "Zhou" such as Chow Tai Fook, Chow Sang Sang, and Chow Tai Sang in the jewelry brand circle do have the surname Chow, the founder of Chow Fook is actually surnamed "Lee".
According to the prospectus, the history of the establishment of Liuliufu can be traced back to April 2004, when Li Weipeng and Chen Chuangjin (an independent third party and an acquaintance of Li Weipeng) jointly established the predecessor of Liuliufu - Shenzhen Zhoutianfu Jewelry Co., Ltd. (hereinafter referred to as "Shenzhen Zhoutianfu"), with a registered capital of 1 million yuan.
In April 2005, Li Weipeng's younger brother Li Weizhu acquired a 50% stake in Shenzhen Zhou Tianfu Jewelry Co., Ltd. from Chen Chuangjin for 500,000 yuan. After the transaction, the shareholding structure of Shenzhen Zhou Tianfu was changed to 50.00% owned by Li Weizhu and Li Weipeng.
In March 2012, Shenzhen Zhou Tianfu changed its name to Shenzhen Liuliufu Jewelry Co., Ltd. In November 2018, Shenzhen Liuliufu Jewelry Co., Ltd. carried out a shareholding reform, restructured into a joint stock limited company, and changed its name to Liuliufu Jewelry Co., Ltd. at the same time.
As a jewelry company, the business model of Liuliufu integrates jewelry product development and design, procurement and supply, franchise, and brand operation, and the total number of offline sales network stores has reached 4,383 (including franchised stores and self-operated stores), covering 31 provinces and 301 prefecture-level cities and administrative regions.
According to Frost & Sullivan, in 2023, in terms of the number of stores in China, Liufu will rank fourth among Chinese jewelry brands and third in the number of offline stores in the southern region.
The company is highly dependent on franchisees, with 98% of the 4,383 stores in 2023 being franchised stores and only 95 self-operated stores, and in 2023, 804 new franchised stores will be opened, 490 will be closed, and 314 net new stores will be added. From 2021 to 2023 (reporting period), Liuliufu's revenue was 2.783 billion yuan, 3.102 billion yuan and 5.150 billion yuan, and its net profit was 425 million yuan, 575 million yuan and 660 million yuan, respectively.
Liuliufu's revenue from the franchise model comes from the sale of products to franchisees and the collection of service fees from franchisees. From 2021 to 2023, the revenue from the sale of products to franchisees will be 1.075 billion yuan, 843 million yuan and 2.020 billion yuan respectively, and the income from collecting service fees will be 592 million yuan, 798 million yuan and 833 million yuan respectively. Revenue from the franchise model contributed 59.9%, 52.9% and 55.4% of the total revenue.
It is worth noting that at the review meeting of the Issuance Examination Committee in 2020, the revenue of Liuliufu under the franchise model accounted for more than 80%, and many trademark disputes, accounts receivable and large inventory balances were all subject to key inquiries by the Issuance Examination Committee. In contrast, the revenue contribution of the franchise model of Liuliufu has decreased significantly compared with before.
Under the franchise model, the gross profit margin of the service fee charged by Liuliufu is above 93%, reaching 95.8% in 2023. This means that the revenue and operating results of Liufu are significantly affected by the performance of these franchisees.
Ongoing cash dividends
According to the prospectus for the previous termination of A-share IPO, in 2020 and 2021, Liuliufu will continue to pay large cash dividends, with an amount of 300 million yuan and 150 million yuan respectively, of which the amount of cash dividends in 2020 will account for 85% of the net profit attributable to the parent company of 354 million yuan after deducting non-profits in the current period.
At that time, Liuliufu also planned to raise 1.400 billion yuan for marketing network expansion projects, e-commerce platform upgrade projects, brand marketing and store comprehensive capacity improvement projects, and replenishment of working capital.
In 2023, Liuliufu will once again declare a large dividend of 300 million yuan, and in March and May 2024, Liuliufu will declare dividends of 348 million yuan and 297 million yuan respectively, totaling 645 million yuan.
In this IPO, Liufu plans to strengthen the sales network; Increase the market awareness of the brand; Improving product offerings and strengthening product design and development capabilities, as well as working capital and general corporate purposes.