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Yangtze Business Daily News● Yangtze Business Daily reporter Xu Jia

Less than four months after the withdrawal of its IPO on the Shanghai Stock Exchange’s main board, Beijing Kunlun Unicom Technology Development Co., Ltd. (hereinafter referred to as “Kunlun Unicom”) switched to the Beijing Stock Exchange.

In this IPO, Kunlun Unicom cancelled the working capital supplement project and the fundraising scale was reduced from 538 million yuan to 458 million yuan.

The reporter of Yangtze Business Daily noticed that the other core fundraising projects that remained unchanged involved the purchase of commercial real estate. Under the asset-light operation model, Kunlun Unicom does not own any real estate. Therefore, in the two IPO attempts, the rationality of the company's use of raised funds to purchase commercial real estate became the focus of regulatory authorities.

From the performance point of view, from 2021 to 2023, Kunlun Unicom's performance showed an upward trend due to the substantial increase in customer unit price year by year, but the number of the company's customers decreased from 4582 to 4191, an overall decrease of 391 in two years. In the first quarter of this year, Kunlun Unicom's revenue and net profit both fell due to budget adjustments of some customers.

It is worth mentioning that Kunlun Unicom's R&D investment is decreasing. During the reporting period, the company's R&D expense rate was 1.88%, 1.71% and 1.6% respectively, all of which were much lower than the average R&D expense rate of comparable listed companies in the same industry.

IPO fundraising for purchasing office space was questioned

According to the data, Kunlun Unicom was established in 1988. In December 2015, Kunlun Unicom completed the shareholding system reform and was listed on the New Third Board in November of the following year. In March 2021, Kunlun Unicom was delisted from the New Third Board. At the end of June 2023, the Shanghai Stock Exchange officially accepted Kunlun Unicom's main board initial public offering application.

After the company completed the first round of inquiry responses, on March 1 this year, the Shanghai Stock Exchange terminated its listing review because Kunlun Unicom and its sponsor withdrew their listing application.

Only three months after the withdrawal of the Shanghai Stock Exchange Main Board IPO, Kunlun Unicom was re-listed on the New Third Board on June 20 this year. A few days later, the Beijing Stock Exchange’s official website disclosed that it had officially accepted Kunlun Unicom’s initial public offering application.

A reporter from the Yangtze Business Daily noticed that unlike the previous IPO, this time Kunlun Unicom planned to IPO on the Beijing Stock Exchange, and it cancelled the "supplementary working capital" project in the fundraising and investment projects, and the scale of fundraising also shrunk accordingly.

The prospectus shows that Kunlun Unicom originally planned to issue no more than 24 million new shares to the public and be listed on the Shanghai Stock Exchange's main board, with a total amount of funds raised not exceeding 538 million yuan, which would be invested in business expansion and service system construction projects, intelligent operation and maintenance platform upgrade projects, R&D center construction projects, and supplementary working capital projects.

Kunlun Unicom plans to publicly issue no more than 24 million new shares and list them on the Beijing Stock Exchange, with a total amount of funds raised not exceeding 458 million yuan. Among them, the 80 million yuan supplementary working capital project was cancelled, and the investment scale of the other three major fundraising projects remained unchanged, with plans to invest 272 million yuan, 100 million yuan, and 86 million yuan of the raised funds respectively.

It should be noted that as an IT service company, Kunlun Unicom adopts a light asset operation model. It does not own any real estate, and all production and operation sites are leased. As of the end of 2023, Kunlun Unicom's fixed assets include electronic equipment, transportation vehicles, office and other equipment, with a book value of RMB 2.1651 million.

However, Kunlun Unicom’s core fundraising and investment projects, business expansion and service system construction projects, and intelligent operation and maintenance platform upgrade projects all involve the purchase of commercial properties.

Among them, the implementation method of the business expansion and service system construction project is that Kunlun Unicom will establish the East China Operation Service Headquarters in Shanghai through purchase, establish the South China Operation Service Headquarters in Shenzhen through leasing, and establish regional operation service offices in 7 cities including Hangzhou and Nanjing. For the intelligent operation and maintenance platform upgrade project, it is planned to purchase a site in the Hongqiao Business District, Minhang District, Shanghai (the specific location is to be determined) for software development, testing, personnel office and other activities, with a total construction area of ​​1,230 square meters.

Previously, the Shanghai Stock Exchange had focused on inquiring about the rationality, necessity and relevance of Kunlun Unicom's plan to use the funds raised to purchase commercial real estate to its main business, and questioned whether it had engaged in disguised real estate investment.

In the first round of inquiry letters issued by the Beijing Stock Exchange to Kunlun Unicom recently, the regulatory authorities once again asked whether the company's fundraising and investment project is essentially the construction of office space and whether it is reasonable.

First quarter performance fell sharply

From the Shanghai Stock Exchange's main board to the Beijing Stock Exchange's IPO, Kunlun Unicom's performance stability and R&D capabilities still need to be improved.

As an IT infrastructure solution provider, Kunlun Unicom is Microsoft's enterprise-level service partner.

From 2021 to 2023, Kunlun Unicom achieved operating income of RMB 1.651 billion, RMB 2.067 billion and RMB 2.135 billion, respectively, and net profit attributable to the parent company's owners (hereinafter referred to as "net profit") of RMB 78.2583 million, RMB 89.8694 million and RMB 102 million, respectively, and net profit after deducting non-recurring gains and losses (hereinafter referred to as "net profit after deducting non-recurring gains and losses") of RMB 75.0279 million, RMB 84.9266 million and RMB 95.1922 million, all showing an upward trend.

The reporter of Yangtze Business Daily noticed that Kunlun Unicom's performance growth mainly depends on the substantial increase in customer unit price year by year. During the above reporting period, the company's average sales were 360,300 yuan/household, 482,600 yuan/household, and 509,300 yuan/household respectively. But at the same time, the number of customers of the company in each period was 4582, 4283, and 4191 respectively, a decrease of 391 in two years, mainly due to the decrease in the number of customers with a customer unit price of less than 2 million yuan, which were 4421, 4103, and 3992 in each period respectively.

In the first quarter of this year, Kunlun Unicom achieved operating income of 344 million yuan, a year-on-year decrease of 22.07%. Net profit and non-net profit were 12.3713 million yuan and 12.083 million yuan respectively, a year-on-year decrease of 47.81% and 46.73%. The company said that the change in revenue was mainly due to budget adjustments of some customers.

In the inquiry letter, the Beijing Stock Exchange asked Kunlun Unicom to explain the rationality of the overall substantial increase in customer unit price and the reasons for the substantial decrease in the number of small and medium-sized customers. It also asked the company to explain in detail the reasons for the sharp decline in performance in the first quarter and whether the company would meet the listing conditions in 2024.

In addition, although Kunlun Unicom claims that it "will take improving its R&D level as an important cornerstone of its own development", in fact the company's R&D investment is decreasing.

Based on the data from the two versions of the prospectus, from 2020 to 2023, Kunlun Unicom's R&D expenses were RMB 23.6311 million, RMB 31.0659 million, RMB 35.2802 million, and RMB 34.2315 million, respectively, and the R&D expense rates were 1.78%, 1.88%, 1.71%, and 1.6%, respectively, showing a downward trend.

During the same period, the average R&D expense ratios of comparable listed companies in the same industry, including Shenzhou Information and China Electronics Technology Group Corporation, were 4.13%, 4.59%, 5.09% and 5.16%, respectively, showing an increasing trend year by year, and were significantly higher than Kunlun Unicom.

In this regard, Kunlun Unicom explained that on the one hand, the company's R&D field is different from that of comparable companies in the same industry, and on the other hand, the company's development stage is also different from that of listed companies in the same industry. Comparable companies in the same industry are all listed companies, and their capital strength and R&D talent appeal are relatively stronger.