Thursday, March 22nd, 9 a. m.
Henglong Group Main Meeting Room.
2018 Second Board Meeting will be held on time.
Zhao Chen is sitting in the middle, on the left are Su Wantang and Zhang Qingxue, and on the right are Chen Xi and Liu Mingyu.
Long Table is lined up on both sides - Shen Jue is sitting opposite Zhao Chen, wearing a dark blue suit jacket with a calm expression.
Three people Independent Director Wu Hongyuan, Sun Zhengping, and Xu Yong sit on both sides.
Song Zhongping, Chen Wei, Chen Qiming sit in order.
Chen Wei and Su Wantang were present, and none of the nine directors were absent.
Liu Mingyu looked around, confirmed that all participants were present, and then spoke:
"Henglong Group 2018 Second Temporary Board Meeting, starting now.
There are three main items on today's agenda.
The first item is the first quarter operating report of Yunnan Agriculture Group and Bubble Mary.
The second item is the ratification of Bubble Mart Existing Share Acquisition.
The third item is the investment discussion on Shunxin Agriculture."
He paused and glanced at Zhao Chen,
"The order of the agenda has been adjusted. The first item was originally the second item. Zhao Zong suggests listening to the management report first."
Shen Jue glanced at Zhao Chen but said nothing.
The three Independent Director exchanged glances without saying anything.
Zhao Chen leaned on the back of the chair, his voice was not loud but very clear:
"Dear directors, before discussing the procedural issues of the acquisition of Bubble Mary, I would like to let you see whether the money is worth it."
He looked at Chen Xi.
Chen Xi stood up, walked to Projection Screen, and opened the laptop.
The first slide is the Sows of Breeding Age inventory trend chart of Yunnan Agriculture Group.
From the first quarter of 2017 to the first quarter of 2018, a red line went all the way up from the bottom, rising from the position in the first quarter of 2018.
"Dear directors, let me first report on the situation of Yunnan Agriculture Group."
Chen Xi's voice is very stable, "Yunnan Agriculture Group has accelerated the pace of production capacity expansion after receiving investment from Henglong.
In the first quarter of 2018, the inventory of Sows of Breeding Age doubled compared with the same period last year.
The total slaughter volume in 2018 is expected to increase from 1 million last year to more than 1.8 million."
She switched to the second slide, which was a trend chart of Pig Cycle.
"The influence of African Swine Fever continues, small and medium-sized farmers are accelerating their exit, and industry concentration is rapidly increasing.
Yunnan Agriculture, as a regional leader, is using its financial advantages to expand against the trend.
The growth rate of Sows of Breeding Age in the first quarter far exceeded the industry average."
Shen Jue asked, "Sows of Breeding Age doubles, what is the corresponding capital expenditure? Is the money enough?"
Chen Xi looked at Zhao Chen.
Zhao Chen nodded and motioned for her to continue.
Chen Xi Switch to the third slide, which is a cash flow forecast table.
"Yunnan Agriculture's capital expenditure in the first quarter was approximately 320 million, mainly used for new pig farms and Breeding Stock Expansion.
All funds come from Henglong's investment. Currently, the cash flow is sufficient and no additional financing is required."
Shen Jue nodded and did not ask any more questions.
Chen Xi switched to the fourth slide, the screen changed, and the logo of Bubble Mart appeared on the screen.
"The following is the situation of Bubble Mary."
The people in Meeting Room sit up a little straighter.
Bubble Mary is Henglong's most controversial investment recently--
Bypassing the authorization of Board of Directors and acquiring Existing Shares at a premium, the total cost was 360 million. However, the company's profit last year was only more than 1 million.
Everyone is waiting to see the number of Chen Xi.
"Bubble Mary accelerated Supply Chain's renovation and store expansion after receiving funds from Henglong.
In the first quarter of 2018, sales are expected to increase by more than 200% year-on-year."
Chen Xi's voice did not change, but the number she spoke made Meeting Room quiet for a moment.
She switched to the fifth slide, which was a sales growth chart.
"In the first quarter of last year, Bubble Mart sales were approximately 25 million.
In the first quarter of this year, sales are expected to be between 75 million and 80 million."
Song Zhongping frowned:
"Growth so fast? Last year it was only 150 million, and half of last year's work was done in the first quarter?"
Chen Xi nodded. "There are mainly two reasons.
First, the sales of Mololoy Blind Boxes exploded around Spring Festival, and demand exceeded supply after the launch of the second-generation series.
Second, the number of stores has increased from 30 at the end of last year to 45, and Robot Shops has increased from 50 to 120 units.
The store expansion rate is twice as fast as originally planned."
She switched to the sixth slide, which was the profit forecast table of Bubble Mary.
"More importantly, Bubble Mary is expected to achieve profitability in the first quarter of this year."
Meeting Room is quiet.
Everyone knows that Bubble Mary has never made a profit in the first quarter since its establishment.
The Designer Toys industry has obvious seasonality - it is the off-season around Spring Festival because of logistics outages and factory holidays.
Bubble Mary has suffered losses in the first quarter of the past few years. The worst year was a loss of 8 million in the first quarter.
Chen Xi said, "According to the Finance Department's forecast, Bubble Mart's first quarter net profit is expected to be between 5 million and 6 million.
This is the first time in history that Bubble Mart has achieved profitability in the first quarter.
There are three main reasons - first, sales growth dilutes fixed costs;
Second, after Supply Chain was transformed, Gross Margin increased from 45% to 52%;
Third, the secondary sales of the old model Blind Boxes have almost no marginal cost and extremely high profit margins."
Zhang Qingxue opened the folder beside him and added:
"These data come from Bubble Mary's internal financial forecasts and have been reviewed by the Finance Department.
Although the first quarter is not over yet, the actual data in the first two months are basically consistent with the forecast."
Zhao Chen looked around Meeting Room.
"Dear directors, this is why I want to report on the operating situation first."
His voice was not loud, but every word was clear,
"Yunnan Agriculture and Bubble Mary are both accelerating their growth after receiving funds from Henglong.
Yunnan Agriculture's Sows of Breeding Age's sales doubled, Bubble Mary's sales quadrupled, making profits in the first quarter for the first time.
These are not future expectations, they are facts that are happening now."
Zhao Chen looked around, his voice was not loud, but every word was clear.
"Yunnan Agriculture is expanding against the trend, and Bubble Mary is making profits in the off-season.
This shows two things - first, our investment direction is right.
Second, we voted for the right people."
He paused, and there was a hint of certainty in his tone.
"Designer Toys Many people don't understand this track. They think it is just something for children to play and cannot sustain a big business.
But I don't think so. What Mololoy sells is not toys, but emotions. It's companionship, it's self-pleasure, it's something that young people are willing to pay for with emotional value.
This track has just begun. Bubble Mary now sells more than 100 million a year.
In the next ten years, this number will increase a hundred times. Not because I believe in numbers, but because I believe in Wang An.
The person who started from a small shop and didn't give up after losing money for three years can accomplish this.
Henglong currently holds 26.3% of the shares of Bubble Mary, with a cost of 360 million.
How much will these shares be worth in five years? I don't know. But I believe it will be a lot more than it is now."
Zhao Chen looked at Liu Mingyu and nodded.
Liu Mingyu cleared his throat and opened the agenda book in front of him.
"The following is the second agenda item - the ratification of Bubble Mary Existing Share Acquisition.
All directors are requested to review the documents on the table, including the timing of the acquisition, counterparty, shareholding ratio, total cost, as well as a description of the premium and total amount exceeding the original Board of Directors authorization."
Meeting Room heard the sound of turning paper.
Everyone is looking down at the document - Private Placement 5%, Existing Share Acquisition 21.3%, totaling 26.3%, with a total cost of 360 million.
The original authorization is the total amount of 1.2 Billion Valuation and Two Hundred Million.
In the actual acquisition, the valuation was increased to 1.3 to 1.4 billion, and the total amount was increased to 360 million.
Both are beyond the scope of the original authorization.
Liu Mingyu waited for a few seconds and then said, "Please Zhao Zong explain the situation."