On the night of December 9, 2019, all the activities on the first day of the Quanlian Real Estate Chamber of Commerce Annual Meeting were about to end, but everyone did not leave. They were still waiting for the performance of "Leopard Brother" Shan Weibao at the dinner.
That night, Shan Weibao sang two songs, one by Zhou Shen's "Big Fish" and the other by Hu Xia's "Knowing If You Know". The song was sung exquisitely and softly, with a soft and harmonious voice. There are always attentive people who can hear the superficial emotions in Shan Wei's leopard song, but can't tell what it is. Of course, more people didn't listen at all-it was just when the drinking war was going on, how could there be kung fu to sigh with emotion?
On April 14, 2020, Road King (01098.HK) issued an announcement that Shan Weibao will resign as the company’s executive director, which will take effect on January 1, 2021. Saying goodbye to the ups and downs in the real estate circle, "Brother Leopard" chose to return to the garden to live in the garden, "Choosing the chrysanthemum under the eastern fence, and seeing Nanshan leisurely".
It turned out that the emotion was sorrow.
But looking at the industry as a whole, only some "old road people" will feel sad. The property market is war, time is money, and Lu Jin’s self-pity style is already a strange existence. Now that the industry is so difficult, everyone is dying and finding their way. Is there any hope for swallowing it this way? After all, this is a place that only believes in the kingship of the winner.
If you look at it this way, if you want to survive, you have to be like the group of "combatants" patrolling the wine table at the dinner a year ago. While the real estate company leaders have not left, it is more realistic to use the wine table as a negotiating table, talk about cooperation, talk about acquisitions, and talk about bidding and listing? It's just sing, dance, and it doesn't make much sense.
Perhaps Shan Weibao's "honest person" style has not adapted to this era, and it is time to say goodbye.
Land bank dried up
On May 7, 2007, after Road King’s annual general meeting ended, looking at reporters who were still reluctant to leave and wanted to bring back some "breaking news", Shan Weibao said one more thing.
"Road King develops real estate properties in the Mainland through Sunco, and it is expected that real estate and highways will each account for half of the turnover next year."
After that day, Shan Weibao no longer concealed the idea of renovating Road King: Although the financial report showed that in 2006, Road King’s net assets were 6.8 billion Hong Kong dollars, and the income was mainly distributed in 8 provinces in China with a total length of 1,060 kilometers of toll roads, but he firmly believed in property. The development prospects are broader, and that is the ultimate direction of Road King.
Otherwise, who wants to take over Sunco's assets? You know, according to the statistics of the Road King team at that time, Sunco had a total debt of more than 6.6 billion yuan, and the transaction was a loss; S&P and Moody's have publicly stated that after the completion of the acquisition, the debt ratio of Road King will immediately exceed 70 from 50%. %,Tremendous stress.
Since it is a transformation, don't think too much. As a result, Road King’s 1.8 billion yuan dragged Sunco's land bank of more than 6 million square meters, as well as various debts and risks-Shan Weibao could not manage that much. He knew that if Lu Jin wanted to continue to grow, he had to resolutely open up the growth point beyond the toll road.
"Looking back, today I think it is very worthwhile." At that time, Shan Weibao would cheer himself up over and over again.
Today, nearly 15 years have passed. Shan Weibao began to become silent, avoiding media tracking as much as possible. He became less and less talking, never saying a word, after all, the reality was a bit embarrassing.
According to the statistics in 2007, the total land reserve of Road King is about 7.5 million square meters. But looking through the financial report data of Road King in the past three years, it can be seen that the company's land bank is still so large. At the end of June 2018, it was finally raised to 8.48 million square meters, but by the end of June 2020, it fell to 7.01 million square meters. For so many years, the land bank of Road King has been standing still.
I have talked about increasing land reserves for so many years, but in fact, Road King only made a decisive move once. Is this a company that is in urgent need of transformation? It's not like it. The acquisition of Sunco was supposed to be the starting point for the rapid growth of Road King's real estate sector, but all this did not happen.
If you can't run, don't blame your competitors for leaving. Fantasia Holdings (01777.HK) and Guorui Real Estate (02329.HK), which are similar to the total scale of Road King, have been maintaining a delicate balance between total assets and debt-to-asset ratio, and ensuring ample land reserves by appropriately increasing leverage.
Although strict control of leverage is the main theme of the industry, real estate companies need to grow, and appropriate leverage is needed to bring growth vitality. "Power generation with love" is not feasible.
At present, Road King’s debt ratio is 69.2%. I don’t experience the aggressive debt red line pressure. It can run with low inventory for a long time. There will always be a day when the "pool bottoms". Where is the way out?
Of course, Lu Jin was also afraid that there would be no grain in the warehouse, so he controlled the speed of land development. Financial report data shows that Road King has dropped from the million square meters level in mid-2019 to 900,000 square meters.
With such a "small water and long flow" development model, a land bank of more than 7 million square meters can be developed for a while. However, according to this logic, there is neither a land bank nor the motivation to digest the land bank. How does Road King grow in the industry? The real estate business lacks growth, so what kind of transformation is there to talk about?
As a company that accounts for more than 90% of its real estate revenue, it lacks land reserves and no enthusiasm for development. Is it okay to rely on compression and digestion to maintain operations? Of course not. The space for the growth of the main business is so small, not to mention that it will gradually lose its competitiveness in the industry. How can investors in Road King see hope for the future?
Looking at Shan Weibao's silence again, it is not that he actively "does not want to say", but passively "cannot say" and "there is nothing to say".
Where is the back road?
"There is no century-old company that is not reborn by suicide." Many years ago, the management master Drucker predicted that the transformation of a company needs to be tough on oneself, and don't leave yourself too much.
Perhaps Mr. De's theory partly explains why Shan Weibao is determined to embrace real estate, but Road Jin still walks slowly. Perhaps Lu Jin does have a "back road", and there is more than one, so naturally he will not choose "suicide and rebirth."
"The first and second cultural tourism projects both have a 10% return on investment, which is good in the commercial sector." In an earlier interview with the media, Shan Weibao once said that the cultural tourism business is One of the businesses that Road King focuses on. When it comes to the pursuit of IP culture, the real estate industry is unmatched.
At present, this business, together with real estate funds, entertainment and content development, and real estate development, is jointly under the industrial investment and asset management sector.
When the net profit of many real estate companies generally maintains at 7%-8%, even in order to accelerate the turnover, when the profit margin is compressed to 5%, industrial investment and asset management may be the "back road" of Road King.
Here, not only can continue to explore the opportunities for property development, but also explore the growth space of cultural and tourism projects, and even invest part of the funds in fields other than real estate, and bear some unprecedented fruits.
However, under the influence of the new crown epidemic and financial market volatility, this business segment of Road King has encountered an unprecedented crisis: in the first half of 2020, real estate funds did not have any new investment, entertainment and content development remained stagnant for most of the time, Wuxi The development progress of the two cultural tourism business projects in Meili Town and Zhengzhou Xinmi has also been delayed.
This is not a small loss. Road King only mentioned one sentence in the financial report-"the fair value of the investment property during the period was therefore reduced." As for the amount of early-stage project income, how much is the fairness reduction today, there is no relevant data on the Internet. "Yiandian Caijing" asked Road King's official about this, but it has never been answered.
In the end, only real estate development can provide an income of 774 million yuan, serving as a fig leaf for the entire sector-this is not like a "back road" should look like.
As for the other, it's the old way of charging.
Recall that in 1996, Lu Jin entered the mainland market with the construction of toll roads as a starting point. That was the beginning of Road King's glory. In more than 20 years, the total mileage of Road King toll roads has reached 500 kilometers, and the business has expanded to Indonesia.
Although the revenue from toll roads is not high, compared to traditional property development projects, this is a business form that can generate stable cash flow. Compared with the risks brought by the "high leverage + high turnover" of property development, toll roads are obviously safer.
It's just that the toll road is too "safe", and it has already touched the "ceiling". Since 2018, the revenue contribution of the toll road business has been maintained at about 3 billion yuan per year, and there has been no significant growth. Instead, the revenue in the first half of 2020 has suddenly fallen to 837 million yuan.
In the financial report, Road King attributed the decline to "the free toll period extended by the epidemic", but looking back at the data in 2019, the highway project revenue accounted for less than 10%. Toll roads can increase the asset scale of Road King, but it is difficult to become the main force of performance contribution, which is not like a "back road" should look like.
In this way, Lu Jin does have a way out, but they are too narrow and too remote, and they can only make Lu Jin go astray. It doesn't make much sense to walk on such a road.
Under the dangerous wall
For entrepreneurs, failure is not terrible, but despair is terrible. For Shan Weibao, this experience is already profound.
"I think the real estate industry will be a good year in the next 20 years." At the end of 2018, the real estate industry began to adjust. Shan Weibao firmly believes that moving forward is still the only choice.
However, after taking a step forward, there is still much left: Sun Hongbin, who once stood on a dangerous wall, led Sunac China (01918.HK) to become a giant with a market value of 136.1 billion Hong Kong dollars; "high leverage + high turnover" operation The model has been cut off by the sharp sword of the "three red lines"; the real estate industry that was once regarded as a spring and snow has become a "gray rhino" in the eyes of the regulatory authorities, carrying financial risks...
In 2020, all assumptions have become empty talk. Where are the "good years" of 20 years? The market environment is deteriorating day by day, and the pressure on business operations is increasing. This is a reality. The good days of the real estate industry are now passing the "shelf life".
Shan Weibao also tried to stand up. After all, Road King has not stepped on the "three red lines", and still has the conditions to increase leverage and continue to compete for land; after all, land reserves are relatively abundant, with land reserves of more than 7 million square meters, the Yangtze River Delta, Bohai Bay and Guangdong-Hong Kong-Macao Greater Bay Area. The low proportion reached 97%.
But so what? Who doesn't know that the Yangtze River Delta, Bohai Bay, and Guangdong-Hong Kong-Macao Greater Bay Area are gold mines? With so many land reserves, Lu Jin are all competing in the fiercest place of artillery fire-Time China seizes the Guangdong-Hong Kong-Macao Greater Bay Area, Mingfa seizes the Yangtze River Delta, which one is not ten million square meters? There are bites that kill red eyes, not suitable for Shan Weibao who is about to release Mananshan.
As for increasing leverage, save it. In the rising stage of the industry with abundant funds, when cases of rapid growth relying on high leverage abound, Shan Weibao did not dare to move forward; nowadays, high-pressure control, how dare to touch the scales of supervision, radical increase of leverage may be difficult to increase. ?
It's not an advance, nor is it a retreat, Lu Jin is in an awkward situation. Behind the embarrassment is deep despair, the despair that never keeps up with the times no matter how you change.
In terms of performance, Road King's revenue and net profit have long lost its growth rate, and growth has stalled. There is still a phased increase in revenue, but it is difficult for profits to have an upward trend, and the bottleneck of "increasing revenue without increasing profits" is encountered. Lu Jin doesn't even have a decent trump card in his hand, how can he win?
Road Jin, ranked 40th and 50th in total assets in the industry, has only 2.9 times P/E ratio and 0.41 times P/B ratio, hovering between 80 and 90, which proves that food is tasteless, and it is a pity to discard Road Jin, making it increasingly difficult to obtain capital. Positive feedback from the market. Lack of explosive power, and even less imagination, Lu Jin needs to turn the tide in a heroic story, and it needs a strong man to pull it off. This is something conservative Shan Weibao cannot give.
Fortunately, he is not greedy for power and he also knows that he can't change the way, so retreating may be the best choice.
Conclusion
Looking back at Lu Jin's journey along the way, no one was wrong.
When the company encountered a problem, Shan Weibao realized that he could not turn things around, so he was willing to give up the halo of the savior; Shan Weibiao's experience and Shan Songxi's perseverance are the elements that Lu Jin needs most now. This company has not stopped developing in a favorable direction, and is rapidly adjusting to meet the needs of the times.
Just being in the right direction does not mean success. At present, the rise and fall of real estate companies are accelerating, and the market is changing rapidly, and there is not enough time for companies to change. Road King needs to change, it needs to step into a new track as soon as possible, and find growth points, but is it still too late? It is difficult for Road King.
What you do is right, but it does not mean that you will not be eliminated by the times. This is reality.