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The author | Lin Leshi
Editor-in-chief | Guyue
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Five months ago, Fangyuan Real Estate experienced a huge earthquake in the board of directors - founder Fang Ming was suddenly appointed as the new chairman of the group. Fangyuan Real Estate has been playing a role behind the scenes for more than 20 years since its establishment, is it because he can't sit still because he sees the rapid changes in the market environment and is forced to go down personally? 13 years ago, Fangyuan Group also faced a similar dilemma, but at that time, Fang Ming spent 5 years to find the direction of the solution. So what about this time?
In the past two days, Guangzhou has cooled down a lot, the cold air has "driven straight down", and the south has entered the late autumn overnight. But for many small and medium-sized housing enterprises, the "cold winter" of Xiao Ser has long begun.
Five months ago, on May 11, Fangyuan Real Estate experienced a huge earthquake in the board of directors and personnel - the company issued an announcement: Han Shuguang stepped down as chairman and legal representative, Fang Ming took up the new chairman, and Xu Jun was the new legal representative.
Fang Ming is the founder of Fangyuan Real Estate. Perhaps with his "low-key wealth seeking" fashionable businessman temperament, in the more than 20 years since the company's founding, Fang Ming mainly played the role behind the supervision of operations; in front of the media, he rarely appeared.
Now, the founder who has been dormant for many years has suddenly stepped forward to take the stage and re-assumed the chairman of the group, which is difficult not to think about.
Behind the storm of changing coaches
In general, changes in company personnel, especially at the top of the company, are more common at the beginning of each year. This is the peak period for enterprises to formulate a new round of development strategies and adjust their organizational structure. From this point of view, the change of coach of Fangyuan Real Estate in the middle of the year is not a routine operation.
But from the perspective of the industry, this change is insignificant. According to incomplete statistics, domestic housing enterprises have more than 600 core executive changes in 2020, and this wave of departures will continue until 2021. According to statistics, in the first half of 2021, nearly 160 senior executives underwent job changes.
Behind the frequent earthquakes in the high-level personnel of housing enterprises, it more or less reflects the negative growth, strategic transfer and shrinkage of the front line of housing enterprises under the cold winter of the property market. Yan Yuejin, a well-known real estate analyst, pointed out: "When the market pressure is high, it is natural to have better control and steering. ”
In the eyes of many people, Fang Ming should also be "forced" to go down.
On the one hand, after the introduction of the "three red lines" in August last year, the growth rate of domestic loans has dropped significantly. For banks, of course, they are more willing to issue limited loan amounts to leading industries with strong qualifications.
The result of this is that the echelon pattern of the real estate industry is seriously differentiated: although the debt ratio of leading housing enterprises is high, the financing channels are relatively smooth, the funds are relatively abundant, and the room for maneuver is larger; however, the situation of non-listed medium-sized housing enterprises such as Fangyuan Real Estate is not very optimistic.
At the end of last year, moody's, an internationally renowned rating agency, only gave Abibody ratings to Fangyuan Real Estate as B2 business families. The report mentions that the rating takes into account its position as a private enterprise. In contrast, the transparency of information disclosure and corporate governance is not as good as that of listed real estate developers. In order to attract investors and achieve the purpose of fundraising, the squeezed small and medium-sized housing enterprises have to give a higher rate of return.
Cai Entropy found that since the fourth quarter of last year, Fangyuan Real Estate has publicly issued bonds twice:
On December 3 last year, Fangyuan Group successfully issued small public bonds with an amount of RMB918 million, and on January 28 this year, Fangyuan Group successfully issued a US$340 million premium bond with a total principal amount of US$340 million matured in 2023 on the Singapore Exchange.
The funds raised in both times amounted to about 3.1 billion yuan. However, the proceeds of the offering are not for operational purposes – judging from the prospectus, all the funds raised from the two bond offerings are used for the repayment or refinancing of old bonds.
After this bond issuance, the debt repayment pressure of Fangyuan Real Estate in the short term has indeed been lifted. According to the semi-annual report of the company's bonds, as of June 31, the scale of corporate credit bonds that Fangyuan Real Estate needs to repay within one year has been cleared.
However, the price of this move is not small, and the coupon rates of the two bonds are 10% and 13.6% respectively, which is much higher than the average coupon rate of 7.34% in the industry at the time of issuance. This means that the company will continue to pay high interest rates for the next 2-3 years.
This has already been shown in its semi-annual report on corporate debt. According to the income statement, as of the end of June this year, the interest and interest expenses payable by Fangyuan Real Estate surged by 147% and 28% respectively.
In addition, from the income statement disclosed in the interim report of corporate bonds, it can be seen that the performance of Fangyuan Real Estate in the first half of this year has experienced a serious decline year-on-year: operating profit, total profit and net profit have declined by more than 70%. Although there is no major change in revenue year-on-year, the growing interest expenses, sales and management expenses are driving up the cost of business operations and frantically eroding profits.
Of course, Fang Ming, the 56-year-old chairman, should know better than anyone in the company what the company is currently facing. Because of a similar degree of real estate winter, he also suffered in 2008.
Abandon the "scale route", but the increment is limited
Many people believe that the low-key temperament of Fangyuan Real Estate is "brought" out by the calm and introverted Fang Zong. After all, China Evergrande (03333. HK), China Aoyuan (03883. HK), Kaisa Group (01638. HK), Times China (01233. HK), learned early on to use the leverage of the capital market to leverage the company's market value. But so far, Fang Yuan has not embarked on this road.
Many twists in fate often stem from an accident. For Fangyuan Real Estate, the financial turmoil of 2008 may be the reason for its other way.
Or the beginning of the story.
Before 2006, Fangyuan Group carried the banner of "cultural real estate" and killed its own blood road. But clear-eyed people understand that "cultural real estate" is only a concept, and Fang Yuan urgently needs to prove his value. The first thought in Fang Ming's mind was: listing.
To this end, Fangyuan Real Estate has made a lot of preparations, such as trying to step out of the comfort zone and go to the whole country. The company has successively settled in Changzhou, Kunshan, Suzhou, Chengdu, Hainan and other places. Because of the "unsatisfactory water and soil", although the sales of the project are good, Xu Jun, executive president of Fangyuan Group, said in an interview that "it is still relatively hard to do".
At that time, Fangyuan Real Estate's IPO application had passed the hearing and was preparing for the roadshow, but unexpectedly encountered the financial storm in 2008, and the property market took a sharp turn for the worse. Due to the impact on the credit market, domestic housing enterprises "blood flowed into a river"...
In 2008, Fangyuan Real Estate, which almost realized its dream of listing, finally shelved its IPO plan due to the unsatisfactory financing environment. But thanks to this failure, Boss Fang found that the expansion of the listing was not as important as expected.
In the following years, some media constantly asked Fangyuan executives: When will the listing plan be restarted? All that was given was a vague answer: "Wait for the right time."
It was not until 2013 that Fangyuan began to adjust its corporate strategy, that is, to converge on the front and focus on Guangdong Province. After the Guangdong-Hong Kong-Macao Greater Bay Area was elevated to a national strategy in 2017, Fangyuan Real Estate has become more determined to deepen the road of the Greater Bay Area.
Boss Fang's abacus is also very simple: the fertile land of the Pearl River Delta itself has a real estate output value of more than 2 trillion yuan, and the deep ploughing of the Pearl River Delta can also achieve 50 billion, "The bottom of the family is so thick, why do you still run out to toss?" "At this point, no one has mentioned the re-listing.
After putting "expansion" in a secondary position, Fang Yuan devoted himself to making products, and his reputation in the Guangdong-Hong Kong-Macao Greater Bay Area was further developed. Yan Yuejin commented: "Fangyuan attaches great importance to oriental culture and spirit, from this point of view, its product creation has a relatively clear logical line and cultural pillar, indicating that its understanding of the concept of residence is relatively fully in place." ”
It is true that the "scale route" is not suitable for every enterprise, and many housing enterprises that blindly pursued scale in previous years have been hurt the most in this real estate winter.
Zhuhai Real Estate "One Brother" Huafa Shares (600325. SH), sales in 2015 for the first time broke through the threshold of 10 billion, ranking slightly higher than Fangyuan Real Estate, sales in 2020 rushed to 100 billion, achieving a legend of eight times in 5 years. But the price of the run is an alarming debt burden — the company's debt will exceed $200 billion in 2020.
There are many similar examples. Under the supervision of the "three red lines", those housing enterprises that are aggressively leveraged in the market are currently experiencing the severe pain of "deleveraging", and some have even gone bankrupt.
Although it abandons the scale route and is determined to be a regional housing enterprise, there is no too urgent debt problem at present, but it has inadvertently limited its own increment - taking "50 billion" as the sprint goal, in fact, it has nailed its own ceiling to this level.
In 2018, at that time, many housing companies proposed the goal of rushing 100 billion, but the square circle only needed 50 billion. Xu Jun said in an interview with the media that Fangyuan "sprints to achieve a sales target of 50 billion yuan in 2020". In 2019, the sales target has not changed, but quietly changed the standard year to "2022".
Since the second half of 2020, the property market has cooled sharply, and it is estimated that Fangyuan will continue to impact this goal. According to the latest statistics on the sales performance of housing enterprises in the Middle Finger Research Institute, Fangyuan's sales from January to September this year were 30.92 billion yuan, an increase of 46.3% year-on-year, but there are less than 3 months left from the end of this year, and there is still enough room for 20 billion yuan from the target.
And the country garden (02007. HK), very early to extend the territory to the whole country, "50 billion", just its sales level in the first month of 3 years ago.
The "deep ploughing" track is crowded
Of course, founder Fang Ming may not have longed for Country Garden's model at all.
"Shangshan Ruoshui Ren Fangyuan", which is a real estate enterprise that integrates Lao Tzu's "Fangyuan" philosophical ideas into the brand concept; it may also resonate with Lao tzu's "contentment" thinking - an annunciation and stability from the 2 trillion big cake to 1/40, and the annual sales of 50 billion yuan are enough to exceed half of China's top 500 enterprises.
But as mentioned above, this 1/40 is not easy to take. At the end of the day, the problem is that the track that Fangyuan has picked is already very crowded.
At present, the Greater Bay Area market has formed three forces - Guangdong national housing enterprises, Guangdong deep-ploughing housing enterprises and foreign housing enterprises:
Named after Country Garden, Evergrande, Vanke (000002. SZ) as the representative of the Guangdong national real estate enterprises "rich and powerful", and the brand, product style has long occupied people's minds, in Guangdong this base camp can continue to play the advantages of funds, contacts and so on;
In the name of Sunac China (01918. HK), Shimao Group (00813. HK), Longhu Real Estate (00960. HK) and other housing enterprises as the representative of foreign housing enterprises are menacing, opening the way of "attacking the city".
As for the number of Guangdong deep-ploughing housing enterprises similar to Fangyuan Real Estate, there are also many. According to the statistics of Kerui, Shenzhen Industry Group (00604.HK), Times China, Zhongzhou Holdings (000042. S) and other real estate enterprises in the Guangdong-Hong Kong-Macao Greater Bay Area performance has reached more than 70%.
In this way, Fang Yuan's life will not be better.
Battle the Greater Bay Area.
Yan Yuejin said that for the Greater Bay Area market, all kinds of housing enterprises enter, to really win, the key is still the need to have a better business model and investment strategy. At the right time, we should also pay attention to brand promotion, so that buyers and other buyers can further increase their awareness of such enterprises.
From this point of view, compared with the foreign real estate enterprises that have entered the Greater Bay Area, Fangyuan Real Estate still has brand advantages as a local enterprise, and local resources and experience are more abundant. This is particularly reflected in the old renovation projects in the Greater Bay Area.
Public information shows that since 2010, Fangyuan has begun to enter the blue ocean of urban renewal, and in the past 3 years, Fangyuan has become more ambitious in the old renovation project. Following the 2019 collaboration with KWG Taifu (01813. HK) signed a strategic cooperation framework agreement for urban renewal projects in the Guangdong-Hong Kong-Macao Greater Bay Area, and in april 2020, Fangyuan spent more than 9 billion yuan to win two projects in Guangzhou, Tangmei Village and Nansha Dajing Village.
According to nandu real estate statistics, Fangyuan has won 6 urban village renovation projects in the past three years, second only to Thang Long Group, Times China and R&F Real Estate (02777. HK）。
However, from the overall soil storage data, the competitiveness of Fangyuan Real Estate in the Greater Bay Area market is still relatively general.
Cai Entropy calculates according to the data of China Chengxin, Fangyuan Real Estate has a full-caliber land reserve of about 2.84 million square meters in Guangdong Province in 2020, accounting for 63.7% of the total soil reserve scale.
This figure is almost impossible to reach even the fraction of Poly (38.8875 million square meters) and Country Garden (21.7116 million square meters), nor is it comparable to many deep-ploughing real estate enterprises, such as Longguang Group (03380.HK), Hopson Chuangzhan (00754. HK), Pearl River Investment, they have a rich land reserve in the early stage, and the current scale of soil reserves in Guangdong Province is more than 10 million square meters.
Today's soil reserves are tomorrow's market share. From the overall data, Fangyuan Real Estate seems to have fallen.
Specific to the distribution of soil reserves, cai entropy found that Fang Yuan's land acquisition strategy also deviated. According to data from CCXIC, a large amount of land storage in Fangyuan is distributed in the third- and fourth-tier cities in the Greater Bay Area, which are mainly single-scale projects.
Once, due to policy dividends such as shed reform, the third- and fourth-tier cities in the Greater Bay Area were the "Red Sea" market where housing enterprises actively grabbed the beach, but in the environment of the downturn in the first half of the year, the sales of third- and fourth-tier cities faced greater pressure. The data of Yicai also shows that in the first half of the year, the third- and fourth-tier markets as a whole have significantly underperformed the first- and second-tier markets, and the loan funding ratio of the former is generally higher than that of the latter.
The former "fragrant food" has become "hot potato".
The only "room for imagination": profit performance is not as good as expected
After giving up the scale, the growth rate is slow, and the deep cultivation of the Greater Bay Area is facing a "pinch attack", for Fangyuan Group, the only imaginary space at present seems to be only Fangyuan Life Service (09978. HK, hereinafter referred to as "Fangyuan Service"), which is also the only listed company under Fangyuan Group.
When the IPO bell rang in Hong Kong in 2017, Fangyuan Services, whose main business was real estate agency, intermediary and terminal services, was the successor to Hefu Real Estate (00733. HK), E-House (02048. HK), World Union Bank (002285. SZ), the fourth listed company of the same type in China and the second in Hong Kong from the mainland.
Intermediary is a key part of the real estate sales link, and the significance of Fangyuan service for the parent company is obvious - efficient agency and intermediary services will help developers accelerate sales; they can also share resources with the parent company to achieve synergy, "better than traditional Party A understands marketing and sales, and knows more about development and service than traditional Party B." ”
Four months ago, Han Shuguang, the former chairman and legal representative of Fangyuan Group, was suddenly "dismissed", and the announcement given by the group was "due to work reasons". Coincidentally, a month later, its Fangyuan service issued an announcement: Han Shuguang was appointed as the new director and legal representative.
On the surface, this is a blatant high-level "exile", but in fact, Fang Ming transferred the "Kai Dynasty Elder" to this listed enterprise, which may be to carry out some group-level guidance work.
Such speculation is not empty.
First, at the end of last year, Fangyuan Services announced the acquisition of Fangyuan Modern Life, a subsidiary of the parent company, which is equivalent to merging the group's property division into Fangyuan Services' business. For Fangyuan Services, the goodwill benefits of this acquisition are enormous – by rubbing into the hot spot of "property stocks", it may regain the favor of the capital market.
In March this year, the company even announced that it would directly change its name from "Fangyuan Real Estate Service Company" to "Fangyuan Life Service Group Co., Ltd."
Subsequently, in April, the annual general meeting of shareholders of Fangyuan Service proposed to re-elect Fang Ming as a non-executive director, indicating that Fang Ming had entered the board of directors one step ahead of Han Shuguang. As of June 31, Fang Ming held 216 million shares of Fangyuan Housing Services, accounting for about 54% of the issued shares.
Judging from all indications, Boss Fang's hopes for fangyuan services are indeed not small.
According to the interim report data released at the end of August, the total revenue of Fangyuan Services in the current period was 264 million, an increase of 103% year-on-year. However, the report also mentions that behind the increase is mainly the contribution of the acquired Fangyuan Modern.
Specifically, although agency and intermediary services are still the core business of Fangyuan Services, accounting for about 50% of the total revenue in the first half of the year, in fact, this part of the revenue did not record significant growth in the first half of the year. Instead, property management service revenue surged to 85.55 million yuan, accounting for 30% of the total revenue.
Moreover, from the past data, the performance of Fangyuan Service has great uncertainty, and the company's net profit margins in 2017-2020 are: -3.99%, 13.16%, 8.65%, 3.94% and 2.12%, respectively. It seems that since the central government set the tone for the real estate market in 2018, the profit growth of Fangyuan Services has also ushered in an inflection point.
Compared with its peers, the results of Fangyuan's service are only barely qualified. Cai Entropy found that although Fangyuan Service is the earliest real estate intermediary in the industry, Hehefu and Midland Group (01200. HK), Fuyang (00352. HK) and other 6 competitors compared to the after-tax profit of Fangyuan Service only ranked in the middle of the position.
Fangyuan Service admitted the dilemma it faced in the interim report: "The real estate industry as a whole is being highly regulated, and the potential for the company's business expansion may be limited", "The competition between estate agencies and property businesses is fierce and highly fragmented"...
From all indications, the imagination space left for Fang Yuan in the short term seems to be very limited.
In any case, after many years of Fang Ming coming to the stage from behind the scenes, the mood should not be relaxed - the industry is facing a big turmoil similar to 13 years ago.
For the company, the good news is that the "severe winter" of this property market seems to have finally ushered in a warm "spring wind". Yan Yuejin said: "At present, there have been subtle changes in commercial bank loans, which objectively have a good supporting effect on housing enterprises. ”
However, how long can the temperature of this "spring wind" last, and will there be new positive supplements in the future? These are unknowns.
A "severe winter" may bring a major reshuffle to the industry, and inadvertently provide opportunities for real estate companies like Fangyuan to confront the industry leaders: who has a better foundation, who is calm enough and patient, who has stronger problem solving and adaptability, who has more outstanding execution, who is more likely to be proud of the next decade.
13 years ago, after the setback of the listing, Fangyuan Group spent a full 5 years to explore the direction of solving the problem. So this time, is Fang Ming capable of turning the tide?