Ou Zonghong, chairman of the board of directors of Rongxin China (03301.HK), is somewhat similar to Jin Wengong in the Spring and Autumn Period.
He doesn't like exposure, and he lives in the simplest form. It is difficult to find high-quality interview clips on the Internet. The information related to him is nothing more than the early entrepreneurial story of the "Three Brothers of Ou Clan" 20 years ago, as well as a fabled real estate industry in Fujian that seems to exist only in the media, and nothing more.
It is such a quiet boss who handed out an explosive news not long ago: Rongxin wants to sell its shares in the Shanghai headquarters office building located in the Hongqiao World Center, and rushes to the Rongxin·Shangkun Center, which is not so central. Counting the move to Hongqiao Vanke Center from Fuzhou in February 2016, and the relocation of the Hongqiao core business district in 2018, this is already the third move.
They all say "Cunning Rabbit Three Caves", but if nothing happens, who wants to move the boat? Perhaps it is the overall situation of "maintaining stability". Rongxin soon released its 2020 performance morning report: contracted sales reached 155.173 billion yuan, with a construction area of 7.25 million square meters, and the set goals were easily achieved.
Since it is so stable, why sell the headquarters? Giving up the high-end office location advantages that are counted in Shanghai and exchanging a lot of banknotes, is Ou Zonghong just to enjoy the pleasure of being surrounded by money?
The world's most famous "money fan", written in Balzac's novel, is named Eugenie Grandet. Everyone knows that he is wealthy and wealthy, but he lives in a dark and dilapidated old house all day long.
So the question is: if Ou Zonghong is studying Eugenie, does Rongxin become that old house?
King of the earth
In real estate bidding, auctions, applause will generally sound when the hammer falls, but on August 17, 2016, the tradition has changed.
In order to photograph the land of Zhongxing Community in Jing'an, Shanghai, Yanlord Group raised a plaque of 10 billion yuan, and the price of the national land king was refreshed. As competitors, representatives of Zhongliang Holdings (02772.HK), Sunac China (01918.HK), CIFI Holdings Group (0884.HK) and Vanke A (000002.SZ) stood up and applauded, indicating that this is bound to win The courage is really scary.
Of course, the result of the story is that after more than 400 rounds of quotations, the land has a new home-Rongxin has become a new home with a total price of 11.01 billion yuan, a premium rate of 139.3%, and a floor price of 143,000 yuan per square meter. The king of the land.
The big guys suddenly realized that the times have changed. Looking at the past of Rongxin, it is actually not brilliant: in early 2016, Ou Zonghong moved the headquarters of Rongxin to Shanghai; during the same period, he was listed on the Hong Kong Stock Exchange and only received 2.7% subscription; compared to the hundreds of billions of scale Real estate giant, Rongxin had annual sales of only 20 billion yuan at the time.
However, it was such a company that shot a cold arrow beautifully and hurt everyone.
"The price of the company's land acquisition is not high." Looking back on the experience of the land grabbing king, Ou Zonghong was very calm. After all, Rongxin was already familiar with the matter of grabbing land with big money. Although the Hong Kong Stock Exchange's IPO was not considered a success, Ou Zonghong was not discouraged, and immediately issued two corporate bonds totaling 3.5 billion yuan, successively seizing many popular land plots in Shanghai, Hangzhou, and Fuzhou.
Taking advantage of Shanghai's land king, Rongxin continued to expand its territory. In 2017, it purchased 78 projects with a total construction area of 14,815,300 square meters. You know, in 2016, Rongxin's total land bank was only 10.6 million square meters. Such a rapid expansion rate is the land king of the new era.
What kind of princes will Xiangning? It takes courage to live in this era. As long as you dare to borrow and spend money, it is not difficult to lay out for national development. Public information shows that Rongxin resources are widely distributed in nine urban agglomerations including the Yangtze River Delta, the west coast of the Taiwan Strait, the Greater Bay Area, and the Beijing-Tianjin-Hebei. In cities with high land prices such as Hangzhou, Nanjing, Fuzhou, and Shanghai, their contracted sales have already accounted for Reached 65.64%.
Rongxin has not fallen in these areas of land and gold, so its average contract price is stable in the leading position of the entire industry. Public data shows that when the average contract price of many real estate companies in 2020 just broke 10,000, Rongxin has not let the data fall below 20,000 yuan/square meter since 2018.
Based on the data of Yihan Think Tank, the average inventory turnover rate of TOP100 real estate companies in the real estate industry in 2017 was 0.35. Rongxin developed projects with an efficiency of 0.4 and maintained a high turnover strategy. From Rongxin, we can see the style of adhering to "high leverage + high turnover" and aggressive expansion style of real estate enterprises.
The difference is that the prey in Ou Zonghong's eyes is very clear: the same is a high-turnover strategy, Rongxin wants to make money from the rich, and use a set of "high-definition" strategy to occupy the target market.
Regardless of the results, Rongxin has at least achieved great momentum.
High-end business that is not profitable
Who is making money from the rich? LV, Ferrari, Moutai, need an extra credit? What a glorious thing this is. However, only Ou Zonghong knew how much pressure he had to endure.
Fujian can't compare to Shanghai. After all, there are more financing channels here, and banks and financial institutions are more sensitive to financial pressures. As long as the real estate company is determined to spend money, there will always be a huge amount of funds to meet the demand.
The first few years when I first came to Shanghai was the most urgent period for Rongxin to spend money. In order to grow into a single-sided giant as soon as possible, Ou Zonghong ate a lot of plots in popular areas across the country, and at the same time inflated the company's debt limit. Financial report data shows that Rongxin's liabilities in 2015 were less than 30 billion yuan, and went straight to 150 billion yuan two years later.
People always have a misunderstanding: they think that real estate companies have high debts and risks come. In fact, this is not entirely true. Looking around the leading real estate companies-Country Garden (02007.HK), Poly Real Estate (600048.SH), Longfor Group (0960.HK), which one is not easy to have debts of hundreds of billions? In the end, it was singing, singing, dancing, and dancing.
It's not terrible to be in debt, but the terrible thing is that you can't make Country Garden, Poly and Longhu.
Right now, the 100-billion-yuan financing has already carried nearly 200 billion in debt, but its growth is not satisfactory. Crane data shows that after rapid growth in 2017, Rongxin’s new land bank scale and total land bank did not grow rapidly; after the sales area reached its peak in 2018, it also lost its growth rate.
No matter how high the profit margin is, or the amount of support needed, growth with only "high leverage" and without "high turnover" will not last long. The key to the "double high" model is to sacrifice profits in exchange for scale. Once the balance is out of balance, capital investment cannot be exchanged for scale growth, and the scale has not been large enough, it is time to test the patience of capital.
Countless facts have proved that the patience of capital cannot stand the test the most.
Ou Zonghong's solution is to continue to increase his bargaining chips. In March and April 2020, Rongxin issued 1.29 billion yuan and 1.106 billion yuan of asset-backed securities (ABS) at an annual interest rate of 5.9%, respectively; from June to July, interest rates ranging from 6.75% to 7.35% Level, issued 610 million US dollars of bonds.
Third-party statistics show that in 2020, the average coupon rate of domestic credit bonds issued by domestic real estate development companies is 4.91%; when USD bonds are issued in the same period, Times China and Country Garden cost only 6.0% and 5.4% respectively. The money you borrowed is much lower than that of Rongxin.
"With the local affairs Qin, I still hold the salary to fight the fire, the salary is endless, and the fire is not extinguished." About 1,000 years ago, Su Xun discussed the fundamental reason for the unification of the world in "Six Kingdoms": in a troubled world, everyone wants to live; you can work hard, but you can't bet your fate.
Since scale growth cannot be achieved, it cannot continue to burn money for saving, and the cost is too high. CIFI, Kaisa Group (01638.HK), and Midea Land (03990.HK), which are close to the revenue of Rongxin, have net profits much higher than those of Rongxin. In Rongxin’s game, “salary” is too easy to burn. Judging from Ou Zonghong's actions, he still wants to continue taking risks.
What hope can a company that produces high-end products show to capital when product prices continue to rise, but profits continue to decline?
There is no tomorrow for adventurers?
Entering 2021, a turning point has occurred.
Rongxin China issued an announcement predicting that as of December 31, 2020, its annual profit attributable to owners will decline by 20%-30% year-on-year. On January 4, it was announced that it would achieve the 150 billion yuan annual goal, and a month later (February 25), it was stubborn.
The stock price of the company, which had just struggled upwards, sank again, and was still unable to bottom out. Perhaps in the minds of investors, it is not uncommon for Rongxin's profits to decline, and they are all psychologically prepared. Investors just want to hear the official statement, whether Rongxin's game should continue to follow.
"Currently, the external environment is still relatively complicated. Rongxin China will still pursue quality development in the next three years, and is confident that it will guarantee an annual growth of about 10%-12%." Talking about future vision, Yu Lijuan, president of Rongxin China, said. Speeding risk is too high, Rongxin began to seek stability.
Such a statement is obviously contrary to the character of Ou Zonghong in the past. In 2020, I borrowed a lot of money, and after 2021, it continuously issued US$300 million in senior debt with a cost of 7.1% and US$1.318 billion in corporate bonds with a cost of 6.5%. This is obviously a posture to fight for a big fight, and suddenly it becomes a quest for stability, which is somewhat unacceptable.
However, based on the current industry trends, it is better to calm down.
In August 2020, the "three red lines" policy for housing companies that has been brewing for many years was released. Although Rongxin only stepped on the “red line” of the debt-to-asset ratio (net debt ratio 91%, cash short-term debt ratio 1.7) after excluding advance receipts at 73.8%, the continuous decline in net profit brought about by operations proved that Rongxin passed itself There is limited room for hematopoietic ability to drop.
To block the eye of the funds, we still have to rely on borrowings and demolish the east wall to make up the west wall. This obviously does not meet the requirements of the regulatory authorities.
By 2021, the rumors of the "two concentrations" of land execution announcements and land transfers in 22 key cities will be on the scene. If the rumors come true, the real estate company will go to a pool to grab resources. During the period of transformation and development of the real estate industry, everyone knows that first- and second-tier cities are the most ideal safe havens. When they all start to grab business, can Rongxin's life still be easy?
According to data from the Zhongzhi Research Institute, driven by huge competitive pressures, the cost of land purchase by real estate companies will increase substantially in 2020. CIFI, which focuses on land in first- and second-tier cities, has an average land acquisition cost of RMB 7612 per square meter, an increase of 56.5. %.
For Rongxin with the same attributes, the land acquisition cost in the first half of 2020 has reached 8550 yuan per square meter, and it is inevitable that subsequent cost pressure will continue to increase.
You can't make a lot of money from selling a house, and you have to invest more money in acquiring land. Ou Zonghong is facing such an endgame. In such a passive situation, it is better to slow development to avoid risks. Stabilize the existing soil storage capacity to prepare for the year of hunger; fill up your wallet as much as possible to deal with emergencies, and two-handed preparation is also a smart move.
Looking back at the Rongxin headquarters that Ou Zonghong has sold, an era has passed, but it's actually that simple.
Conclusion
Looking at the current Rongxin, it will make people feel a little bit embarrassed.
After all, he is the "Adventure King" who has been the king of the country, and Ou Zonghong's courage and courage are already unparalleled. With the rapid growth of the "high leverage + high turnover" model, Rongxin once rode on the back of the fire bull. In the racing era of "to die for the courageous, starve to death for the timid", glory is written on the face of every Rongxin person.
However, such rapid growth is not a long-term solution, and the development of the industry cannot be expected to stay at the top of the roller coaster track forever. The industry has entered the stage of transformation, and "demining" has become the main theme of the industry. After all, real estate companies must rely on profits and rely on the ability to develop independently. Rongxin is no exception.
It's time to start again.