news

한어Русский языкEnglishFrançaisIndonesianSanskrit日本語DeutschPortuguêsΕλληνικάespañolItalianoSuomalainenLatina

When the Hong Kong stock market opened on July 26, the share price of Oriental Selection (1797.HK) plummeted by 15%. As of press time, the share price was HK$10.5, down 15.32%.

On the 25th, Dongfang Zhenxuan announced that Dong Yuhui had resigned, and Dongfang Zhenxuan's wholly-owned subsidiary Yuhui Tongxing officially became independent from Dongfang Zhenxuan, with Dong Yuhui personally holding 100% of its shares. Dong Yuhui (buyer), Beijing New Oriental Xuncheng Network Technology Co., Ltd. (seller) and Yuhui Tongxing (Beijing) Technology Co., Ltd. (target company) entered into a sales agreement, with the seller agreeing to sell and the buyer agreeing to acquire 100% of the target company's shares for RMB 76.5855 million.

An Oriental Select shareholder said: The core assets of a listed company were 100% divested at a price far below the market fair value. Yu Minhong emphasized that "I arranged the money for Yuhui to buy the company, and the company was given to Yuhui." Then "Do you dare to release the small shareholders' messages?"

According to the announcement of Oriental Selection, the independent valuer Jones Lang LaSalle Corporate Valuation and Consulting Co., Ltd. (hereinafter referred to as the valuer) has conducted an independent valuation of the target company and believes that the market value of 100% of the target company's equity on the valuation date can be reasonably assessed as RMB 76,585,460. The industry generally believes that this price is far below its actual value. If 0.77 billion is divided by the total market value at yesterday's closing, Huitongxing accounts for 0.6%; if divided by Oriental Selection's total assets of 4.74 billion yuan, it accounts for 1.6%.

In addition, according to the announcement, Yuhui Tongxing Company was established on December 22, 2023, and the company's net profit was 141 million yuan from December 22, 2023 to June 30, 2024. In other words, if the progress goes smoothly and there is no overlap between the equity purchase amount and Yuhui Tongxing's net profit, in order to complete this "cut", Yu Minhong needs to pay a total of 218 million "breakup fee" to Dong Yuhui on behalf of the investors behind him.

According to Article 135 of my country's "Company Law", if a listed company purchases or sells major assets or provides guarantees to others in an amount exceeding 30% of the company's total assets within one year, a resolution shall be made by the shareholders' meeting and passed by more than two-thirds of the voting rights held by shareholders attending the meeting.

According to the unaudited financial statements in the 2024 interim report of Oriental Selection (1797.HK), the total assets are 474,305,800 yuan. Now Dong Yuhui has acquired 100% of the equity of "Traveling with Hui" for 76,585,500 yuan. From a numerical point of view, this transaction does not require a special resolution of the shareholders' meeting.

Appraiser Jones Lang LaSalle Corporate Valuation and Advisory Limited also took into account the intangible assets involved in "Walking with Hui" such as the target company's registered trademarks, copyrights and related brand names (intellectual property rights) and contracts related to such intellectual property rights, and believed that they had no significant value. Most of these intellectual property rights are closely related to Dong Yuhui's name and likeness, and according to the sale agreement, Oriental Selection has no intention to use such intellectual property rights. Pursuant to the standard terms and conditions of the agency agreement of "Walking with Hui", Oriental Selection has entered into certain revenue contracts that generate commissions based on the sales of products promoted on platforms related to intellectual property rights. After the termination of the employment contract with Dong Yuhui, these revenue contracts are not expected to generate revenue for Oriental Selection.

It is also worth noting the valuation method of "Traveling with Hui".

The valuation of the equity this time adopted the cost method rather than the market method or income method. The market method usually relies on the value of comparable companies or transactions in the market to measure the valuation, but because "Traveling with Hui" is heavily dependent on Dong Yuhui (as a sales anchor), his departure will bring uncertainty to the future operation and profitability of "Traveling with Hui", so it was not adopted. The income method requires detailed operating information and long-term financial forecasts of the target company, but it was abandoned by the appraiser because it was unable to obtain such information and substantial objective supporting data.

A partner of a law firm that focuses on listed companies told reporters that the separation between Dongfang Zhenxuan and Dong Yuhui was based on the purpose of protecting the market. Recently, Dongfang Zhenxuan has suffered losses in terms of stock price, brand, business, etc., and the helmsman needs to make timely adjustments. This "breakup" may be the best solution made by Yu Minhong after comprehensive consideration. However, the damage to the interests of small and medium-sized shareholders is obviously not within his consideration at present.

"Traveling with Hui" has registered many trademarks of "Traveling with Yu Hui". The "Yu" here may be a metaphor for Yu Minhong, the founder of New Oriental, and "Hui" undoubtedly refers to Dong Yuhui. The two people's side-by-side battle was once the most solid backing for New Oriental and even Oriental Selection. Small and medium-sized shareholders originally hoped that the cooperation of these two leaders would lead the company to a more glorious future. However, reality dealt them a heavy blow, forcing them to face the cruel reality of plummeting stock prices and shrinking assets. The board of directors agreed, but it seemed that "a world where only small and medium-sized shareholders were hurt" had been achieved.

Yu Minhong's "market protection" action this time may not achieve the ideal state. Bocom International believes that if the commission income of the live broadcast room of Youhui Tongxing is excluded from the forecast, and the strategy of Dongfang Zhenxuan's self-operated products and other matrix accounts remains unchanged, the GMV/revenue/profit in fiscal year 2025 is expected to be reduced by 34%/9%/20%+. The sale of Youhui Tongxing will have an impact on the company's short-term financial performance, but the risk of public opinion may be reduced. After stabilization, the management can focus on developing self-operated strategies and multi-platform development, or achieve stable operations in the long term.

(Yang Jiao, a reporter from China Business Network, also contributed to this article)