news

「core tips」

can wang zhenhua, who advocates radical playing style, take over the "kingdom" left by his son?

author | zhan fangge

editor | xing yun

september,sunac china holdingsthe news of the return of former chairman wang zhenhua gradually spread. first, a veteran who had worked at sunac china for nearly 30 years was dismissed and sent to justice. then, an insider said that as early as early july, wang zhenhua had already started to visit the region and familiarize himself with the company's business. obviously, the 62-year-old founder of the real estate company wanted to return.

in 2019, wang zhenhua was sentenced to five years in prison for molesting a girl. the share prices of his listed companies also plummeted in a short period of time, and the company's reputation was severely damaged. although the company has cut ties with wang zhenhua to a certain extent after his son wang xiaosong took over as chairman, the real estate environment has been deteriorating.

now that wang zhenhua has returned, will the impact of the child molestation case continue to affect his three listed companies?what kind of changes will this radical leader, who has been working in the shunfeng bureau for 30 years, bring to the new city that has been "maintaining the status quo" for five years?

1. return quickly

according to the calculation of the prison term, wang zhenhua will be released from prison in early july. since july, the share prices of listed companies under new town have all seen a small increase, with the largest increase in early july. obviously, capital has not forgotten the founder of the real estate company and has taken a welcoming attitude.

at that time, many market voices were speculating whether he, as the actual controller and founder of new town holdings, would return immediately.

the real big move happened two months later: on september 11, sunac china holdings issued an internal notice that vice president ni lianzhong, who was regarded as a company veteran, was removed from his position as vice president and transferred to the judicial authorities. market sources said that this waswang zhenhuathe reason for the decision was that ni lianzhong was suspected of corruption, and the amount was not small.

public data shows that sunac china holdings was founded in 1993. two years later, ni lianzhong joined the company and worked his way up from engineer to project general manager and then vice president. by the time of the incident, the real estate veteran had worked at sunac china holdings for nearly 30 years.

although in the five years since wang zhenhua was imprisoned, new town holdings andnew town developmentthe person at the helm has always been wang zhenhua's son wang xiaosong, but perhaps precisely because of ni lianzhong's status as a veteran official, it is more appropriate for wang zhenhua to decide the outcome.

in fact, wang zhenhua's return may be earlier than the outside world imagines. previously, "one real estate" reported that after wang zhenhua was released from prison, he attended the semi-annual work meeting of new town, and then began to understand the business of each region. official information from new town holdings shows that the semi-annual work meeting will be held from july 8 to 10, 2024. in other words, wang zhenhua has almost started to understand the company's affairs as soon as he was released from prison.

it is reported that xincheng group owns three listed companies, namely xincheng holdings, xincheng development and xincheng yue. among them, xincheng yue is a property management company, and xincheng development, listed on the hong kong stock market, is the parent company of xincheng holdings, which is listed on the a-share market.

when wang zhenhua molested a girl in 2019, sunac china holdings' stock price fell to the limit. sunac china holdings' stock price fell from more than hk$10 per share to hk$5.327 per share in one month. after several ups and downs, it still could not get rid of the downturn in the real estate market and has continued to fall to this day.

faced with the downward trend of the stock price, wang zhenhua, the actual controller of the company, continued to increase his holdings while serving his sentence. information from the hong kong stock exchange shows that after 2020, wang zhenhua's account increased his holdings in new town development as many as 10 times.

it is worth noting that in december 2022, sunac china holdings issued 560 million additional shares. based on the allotment price of hk$3.5, the amount of funds raised reached hk$1.9 billion. this additional issuance was paid for by wang zhenhua.the money was used to redeem overseas bonds and replenish operating capital.

currently, wang zhenhua and his spouse hold a total of 64.76% of sunac china holdings’ shares. after tracing back, they hold a total of 43.52% of sunac china holdings’ shares. although wang zhenhua has not held any position in the company so far,as the actual controller, he still has strong control over the company.

2. things are different now

judging from the current signs, wang zhenhua's return is almost a foregone conclusion. so what kind of complex environment is this aggressive man, once called a "barbarian" by the outside world, facing now?

first, the real estate market is still in a period of deep adjustment, and the trend of new homes being difficult to sell is getting worse. it is said that september is the golden month and october is the silver month, but the sales during this year's mid-autumn festival holiday were the worst in the past five years, and the decline was not small compared to last year.

data from the china index academy shows that the average daily transaction area of ​​new homes in 25 representative cities during the mid-autumn festival this year was 129,000 square meters, a decrease of 29% from 2023. during the mid-autumn festival in 2019, when wang zhenhua was just imprisoned, the average daily transaction area reached 285,000 square meters, but now it has been halved.

looking at the company itself, the august operating report just released by sunac china holdings shows that in the first eight months of this year, the company achieved a cumulative contract sales amount of 29.542 billion yuan, a decrease of 45.75% from the same period last year. in comparison, in the same period of 2019, the company achieved a cumulative contract sales amount of 171.466 billion yuan.

if we compare horizontally, sunac china holdings is indeed a real estate company with better performance in the industry.there has been no debt default so far.its debt and revenue situation are not only at the forefront among private enterprises, but are even better than those of many real estate companies with state-owned backgrounds.

but even so, the 2023 annual report of new town holdings was actually issued with a non-standard opinion. the accounting firm stated in the annual report that as of the end of 2023, the company's current liabilities reached 17.793 billion yuan, exceedingcurrent assets, and the balance of interest-bearing liabilities, including short-term loans and current liabilities due within one year, reached 21.237 billion yuan. however, the unrestricted monetary funds of new town holdings were only 12.822 billion yuan, which could not cover the interest-bearing liabilities.

in 2024, sunac china holdings' debts did decrease to a certain extent. for example, compared with the end of 2023, the company's non-current liabilities due within one year decreased by 20.53%, and short-term loans decreased by 28.49%. however, the company's unrestricted monetary funds also decreased to 11.625 billion yuan.

in response to the non-standard opinions of the previous year, the company only made a relatively macro response in 2024: work hard to operate and continue to maintain positive operating cash flow; make full use of policy support to achieve a narrowing of net cash flow outflows from financing activities in the first half of the year, and effectively adjust the structure of current liabilities and non-current liabilities, ensure full and timely repayment in the open market, guarantee the credit of the entity, etc.

wang zhenhua, who came from a humble background and advocated radical tactics,having seen the rapid development of the real estate market, how should we face the current almost bottomless downturn?

when people talk about sunac china, they always think of the dark horse period from 2017 to 2018, when wang zhenhua was at the helm. at the beginning of 2017, sunac china holdings proposed a sales target of 85 billion yuan, which was not only completed ahead of schedule, but also exceeded the 100 billion yuan mark, with cumulative contract sales reaching 126.472 billion yuan, a year-on-year increase of 94%. in 2018, its sales doubled again to 221.1 billion yuan.

although the debt also doubled, the company's debt-to-asset ratio after deducting prepayments was still generally stable in those years, and even showed a steady decline.

now it seems that the aggressive approach at the top of the cycle is not wrong. it's just that the times are different now.the biggest difference is demand - that was an era when everyone wanted to buy a house。

3. "big and small kings"

shortly after wang zhenhua was imprisoned for molesting a girl, real estate policies tightened significantly. in august 2020, the "three red lines" were introduced, namely, the debt-to-asset ratio after deducting prepayments must not be greater than 70%, the net debt ratio must not be greater than 100%, and the cash-to-short-term debt ratio must not be less than 1. at that time, such standards were almost equivalent to a tight ring for real estate companies.

after two years of rectification, some well-known real estate developers, such as sunac, sino-ocean, and r&f, are still on all three lines. the outside world was surprised to find that sunac, as a private enterprise, has become one of the few real estate developers with "all three lines green".

andthe turning point for xincheng from radicalism to caution was after wang zhenhua was imprisoned.at that time, wang zhenhua's son wang xiaosong took over as the manager of xincheng. his style was more stable than his father's.

wind data shows that after wang xiaosong took over, xincheng's debt-to-asset ratio after deducting prepayments dropped from 75.48% to the current 67.33%.

between 2020 and 2023, the number of land acquisitions by sunac china holdings can almost be described as a sharp drop. in 2020, 120 plots of land; in 2021, 77 plots; in 2022, two plots; in 2023, no new land was acquired throughout the year. at the shareholders' meeting held at the end of may this year, when asked about the concerns about the shrinking scale, wang xiaosong replied: "there is no need to make up for the scale."

at that shareholders' meeting, wang xiaosong also gave the market a reassurance: the company's public market "explosion" is unlikely to happen. so far, new town has zero defaults in the public market, which is not an easy task even for a "three-tier all-green" real estate company.

public data shows that by the end of 2022, the real estate companies with “three-line all-green” status include zhongjun group,jinhui holdings、longfor group, vanke group and more than ten other real estate companies. up to now, zhongjun and jinhui have been deeply in debt default, and vanke is also on the verge of default. only longfor and xincheng are still holding on, becoming the alternatives among private real estate companies.

radical and conservative, breakthrough and preservation,the styles of wang zhenhua and wang xiaosong are almost antonyms.in the management of the new city, the father and son had ups and downs.

in march 2015, wang xiaosong became the president of sunac china holdings. his term was supposed to end in march 2018, but in october of the following year, he resigned for personal reasons, and the position of president fell back to wang zhenhua. in august 2018, wang zhenhua resigned as president and wang xiaosong took over. in july 2019, wang zhenhua was imprisoned, and wang xiaosong, as president, took over the position of chairman.

the board records at the time showed that wang xiaosong was elected chairman with 8 votes in favor, 0 votes against, and 0 abstentions. at the end of may this year, wang xiaosong was re-elected as president and chairman, and his term will end in may 2027.

although public data shows that wang zhenhua currently does not hold any management position, he is still the largest shareholder, while wang xiaosong's shareholding in new town holdings is quite low, only 500,000 shares, accounting for about 0.21%. in addition, wang zhenhua's series of actions after his release from prison may mean that new town holdings will still belong to "old wang" rather than "little wang".

however, can wang zhenhua, who is used to having smooth sailing, take over the empire that his son has defended in adversity?