cryptoonlinegames| Huarong Holdings '"dilemma": the company has suffered losses for years, is short of funds on its accounts, and has suffered repeated defeats in cross-border battles

Source: titanium media

It lasted nearly a year.CryptoonlinegamesHuarong Holdings (600421)Cryptoonlinegames.SH) Cross-border acquisition was terminated.

On May 10, Huarong Holdings announced the termination of the acquisition of 100% equity in Nanjing Development Optoelectronics Technology Co., Ltd. (hereinafter referred to as Development Optoelectronics). In view of the fact that the target company was affected by the overall market environment and the recovery of end-market demand was lower than expected, the company decided to terminate the transaction. In fact, this is the company's third cross-border acquisition in recent years, but all ended in failure.

At the same time, Huarong Holdings also announced that the company will hold an investor briefing to terminate the major asset restructuring through online interaction on May 30 to answer questions of investor concern within the limits permitted by Xindi.

It should be noted that Huarong Holdings is located in the prefabricated construction industry affected by the real estate market, the company's existing main business continues to be under pressure, revenue slightly exceeded 100 million yuan for four consecutive years, and the company fell into losses for three consecutive years. The company had planned to gradually improve the company's business through the acquisition of the target company to expand into the optoelectronic devices, sensitive components and sensor manufacturing industry, but failed in the end.

The funds on the account are less than 5 million, but the target "blood transfusion" is 15 million.

Huarong Holdings's restructuring dates back to June 2023, when the company announced that it was planning to buy a 100% stake in optoelectronics by issuing shares and paying cash.

Although Huarong Holdings planned the restructuring since June last year, the price of the deal was uncertain until the restructuring was halted. Titanium media APP noted that Huarong Holdings had made a "risk of a significant increase in the valuation of the underlying assets in the short term", saying that the audit and evaluation work involved in this transaction had not yet been completed, the valuation of the underlying assets had not yet been determined, and the overall valuation was expected to be no more than 600 million yuan, compared with the post-investment valuation of 190 million yuan raised by the underlying company in July 2022. The main reason is that after the financing in July 2022, the operation of optoelectronics has improved significantly, the business has expanded rapidly, and the amount of contracts, operating income and operating profits have increased significantly.

It is reported that the development of optoelectronics was established in 2016, the company is mainly engaged in optical fiber sensitive ring components, energy optical fiber devices, optical fiber sensors and other special optical fiber devices, sensor components and systems development, production and technical services.

In 2021, the underlying company did not achieve operating income. From January to June in 2022 and 2023, the operating income of the company was 80, 000 yuan and 12.2699 million yuan respectively, and the net profit was-9.3792 million yuan and-9.3526 million yuan respectively. As for the reasons for the low operating income and sustained loss in performance of optoelectronics, Huarong Holdings explained that the target company is in the stage of business development and the scale of production and marketing is small. At the same time, fixed expenses such as amortization of decoration expenses, personnel expenses and R & D expenses are invested more, which has a greater impact on net profit.

In addition, the target company has the risk that a single customer accounts for a high proportion of sales. From January to June in 2022 and 2023, the proportion of the production preparation agreement signed by the target company to A1 customers under the Arms Industry Group is 88.98% and 45.46% respectively, and the target company is expected to have a high proportion of this customer's revenue in 2023.

It is worth noting that before the restructuring plan was actually promoted, Huarong Holdings wanted to provide financial assistance to Development Optoelectronics, and in the case of the low scale of the company's own funds, the company's monetary fund balance was only 4.6742 million yuan at that time.

Huarong Holdings' move was questioned by the Shanghai Stock Exchange, asking the company to explain the source of financial assistance to Optoelectronics Development. At that time, the company said that the financial assistance provided to Development Optoelectronics came from its own funds, loans from indirect controlling shareholders, and so on.

As of May 10, 2024, the company has provided a cumulative loan of 15 million yuan to Development Optoelectronics, and the last loan is due on August 31st, 2024. In view of the termination of this reorganization, after negotiation between the company and Development Optoelectronics, Development Optoelectronics agreed to repay the principal and interest on time in accordance with the loan agreement with the Company.

Under the pressure of performance, the company failed three times across the border.

In recent years, the company has made many attempts to acquire assets across the border, but all of them have failed.

As early as July 2021, Huarong Holdings issued a major asset restructuring plan to acquire 80% of Wuxi Shenrui Biological products Co., Ltd. (hereinafter referred to as Shenrui Biology), a biotechnology company. Two months later, due to differences in valuation and other reasons, the company decided to terminate the acquisition of Shenrui Bio.

In December of the same year, Huarong Holdings announced the acquisition of a 100% stake in another biotechnology company, Shanghai Core Super Biotechnology Co., Ltd. (hereinafter referred to as Core Super Biology). Less than a month later, the restructuring was terminated because of a lack of agreement on performance commitments and compensation.

In 2023, the company plans to acquire the target company in the optoelectronic industry again, but eventually terminated due to the lower-than-expected recovery of end-market demand.

In fact, whether it is the biotechnology industry or the optoelectronics industry, there is no synergy with Huarong Holdings' current main business. The reason for the company's repeated cross-border asset acquisitions is mainly related to the current pressure on the main business.

According to public information, Huarong Holdings' main business is the processing and manufacture of PC (Precast Concrete concrete preform) moulds, formwork tables and truss bars, and the products are mainly used in the construction field of the real estate industry.

In recent years, under the influence of related industries, the company is under great pressure. From 2021 to 2023, the operating income of Huarong Holdings was 130 million yuan, 125 million yuan and 122 million yuan respectively, and the net profit was-8.8637 million yuan,-6.4871 million yuan and-8.2795 million yuan respectively. It can be seen that the company's revenue scale is relatively small, and it has been in a state of loss for three consecutive years.

At the same time, the company's asset-liability ratio is rising year by year. At the end of each period from 2021 to 2023, the company's asset-liability ratio was 56.8%, 63.65% and 72.75%.

In the first quarter of this year, the company's performance remained in the doldrums, with a net profit of-582700 yuan. At the end of the reporting period, the asset-liability ratio of the company rose to 73.28%, the capital on the company's account was less than 4 million yuan, and the net asset was only 40 million yuan. (this article's first titanium media APP, author | Li Ruoyi)

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