HP downgrades Macalline Red Star debt cycle?

2022-06-08 0 By

There are new changes in capital markets every day, which can bring opportunities or undercurrents.Red Star Macalline (601828.SH) as the country’s first household enterprises listed in “A shares +H shares” at the same time, but also left their own legendary stories, such as founder Che Jianxin started from scratch with 600 yuan borrowed, such as Red Star Macalline International Furniture Plaza has done the world’s largest commercial Mall, and market value has been nearly 100 billion……As a leading home furnishing retail enterprise in China, Che Jianxin has spent more than 30 years to build “Red Galaxy”, and its asset scale once exceeded 200 billion yuan.As of mid-2021, Red Star Macalline was the largest national home decor and furniture mall operator in China in terms of square footage, number of stores and geographic coverage, according to Frost Sullivan.Now, however, the massive Red Star Macalline has to face the sword of Damocles called “debt” hanging over its head.According to previous media reports, on April 7, 2020, Red Star transferred its core commercial brand Aegean Shopping center for the first time.On March 28, 2021, Sino-Ocean Capital, a subsidiary of Sino-Ocean Group, signed a cooperation agreement with Red Star macalline, under which the two sides carried out strategic cooperation with Chongqing Red Star Macalline Enterprise Development Co., LTD and its subordinate Red Star Real Estate sector (excluding red Star Real Estate sector).Sino-ocean Capital strategic shares in Red Star enterprise development at the price of 1.03 billion yuan, 18% of the equity.At the beginning of June 2021, Red Star Macalline and Sino-Ocean Capital reached a cooperation framework Agreement again, planning to sell its 7 logistics subsidiaries to Sino-Ocean Capital for 2.312 billion yuan.At the same time, all loans were transferred to Tianjin Yuanchuan Investment Co., LTD., a subsidiary of Sino-Ocean Capital, with consideration of about 2.312 billion yuan.Finally, cosco issued a statement saying that coSCO, Cosco Capital and Red Star Holdings formally signed an agreement to acquire 70% of red Star Real estate for 4 billion yuan.On June 18, 2021, Chongqing Sunac Real Estate Co., LTD., a subsidiary of Sunac China, invested in Shanghai Xingshuang Real Estate Co., LTD., a subsidiary of Shanghai Aegean Real Estate, with an investment ratio of 47.16%.Red Star Macalline has exposed its financial crisis by frequently “cutting flesh”.From 2017 to 2020, its asset-liability ratio was 54.72%, 59.14%, 59.95% and 61.16%, respectively, according to the financial report.By the end of 2020, the company’s available monetary fund is 6.511 billion yuan, and its liabilities are up to 80.450 billion yuan, among which its current liabilities are 31.639 billion yuan.Does heavy asset scale expansion go nowhere?It is reported that Red Star Macalline is a leading operator of home decoration and furniture shopping malls and a provider of pan-home furnishing business platform in China. It mainly provides comprehensive services for merchants, consumers and partners through the operation and management of self-operated shopping malls, authorized shopping malls, franchised shopping malls and strategic cooperative shopping malls.To put it simply, under the accelerated expansion of Red Star Macalline, it has purchased a large number of land parcels to build its own shopping malls, and has cooperated with local real estate owners or developers to build shopping malls, and entrusted the shopping malls through commercial operations.For now, The majority of Red Star macalline’s revenue still comes from home furnishing business services, which means that red Star macalline has to bear the “cost” if its authorized stores do not achieve expected revenue.According to the financial report of the third quarter of 2021, Red Star macalline’s operating revenue was 6.245 billion yuan and its gross margin was 77%, 0.7 percentage points lower than that of the same period in 2020.The main reason was that the gross margin of the “asset-light” commissioned mall business continued to decline, falling 4.1 percentage points to 32% in the first three quarters of the year.By the end of the third quarter of 2021, Red Star macalline has 94 self-operated stores, 273 entrusted stores, and 11 home furnishing stores under strategic cooperative operation.In addition, the company has 20 self-run stores in preparation.Red Star Macalline talked about becoming “asset-light”, but last year it closed nine commissioned stores.In terms of self-operation, in the first three quarters of 2021, the company’s self-operated shopping malls achieved a revenue of 6.25 billion yuan, with an increase of 24.9% and a year-on-year increase of 17.1%, indicating that the company’s re-operation strategy has achieved significant results.As of the first half of 2021, macalline’s investment real estate value was 93.5 billion yuan, second only to China Merchants Shekou and China State Construction Engineering, and even larger than Real estate companies such as Vanke A, according to public data.But the debt side of the problem also followed, in its large-scale expansion at the same time, the asset-liability ratio soared.By the end of the third quarter of 2021, red Star Macalline’s asset-liability ratio was 59.38%, with total liabilities reaching 79.487 billion yuan.Of this amount, current liabilities were 36.09 billion yuan and short-term loans 2.884 billion yuan.Ratings downgrade On March 14, Fitch confirmed red Star macalline’s long-term foreign currency Issuer default Rating (IDR), senior unsecured rating and its $300 million senior note due 2022 at BB.Look negative.Specifically, Fitch believes that Red Star macalline holdings’ adjusted consolidated statement position is now comparable to that of ‘BB -‘ Real estate related issuers in the Asia Pacific region, but the company remains constrained by poor liquidity.If access to capital for Red Star macalline Holdings (excluding Red Star macalline) is limited by current market volatility, its liquidity may remain tight.Red Star macalline has 6.6 billion yuan of bonds maturing in 2022.For its size, Red Star macalline holdings has a higher debt maturity in the capital markets, with a Rmb2.5bn bond maturing in May 2022 and a total of Rmb3.5bn that can be sold back in November 2022.Source: Dahua Observer