National Day On the first trading day after the holiday, Henglong Group took the lead in announcing the third quarter of 2018 Financial Report.
This Financial Report caused quite a shock in the investment circle.
The net profit of the main real estate business is indeed declining - the net profit contributed by Real Estate Sector in the first three quarters was approximately 300 million yuan, a year-on-year decrease of more than 40%.
Some investors posted questions on Snowball:
"Henglong has transformed so much that it no longer even needs its main business? Real estate profits have been cut in half. Is this still Henglong?"
Someone in the comment area retorted:
"You only saw the decline in real estate profits, but you didn't see that Henglong's asset-liability ratio dropped from 49% to less than 25%. The winter of the industry is coming, and surviving is more important than living well."
Similar debates have arisen one after another in major investment communities. Those who are bearish point to profits, while those who are bullish point to balance sheets.
But what really caused the market to explode was not the decline in profits from the main real estate industry, but investment income.
Shunxin Agriculture--the company Henglong held as a long-term equity investment in its semi-annual report--was completely liquidated in the third quarter.
Financial Report shows that this investment lasted less than four months from the establishment of the position to the liquidation, and contributed 648 million yuan in investment income.
648 million.
When this number came out, someone on Snowball directly posted his previous prediction post--
The title is "Henglong made at least 500 million on Shunxin Agriculture", and there are dozens of replies below.
Some people are exclaiming. "In less than four months, I made 648 million yuan. What kind of magic operation is this?"
Someone is settling accounts. "The average price of Shunxin Agriculture in the first quarter was about 18 yuan, and the average price in the third quarter was about 35 yuan. Henglong holds 4.99% of the shares.
648 million, indicating that Henglong stepped on it extremely accurately and almost captured the entire increase from the bottom to the top."
Someone also cut out K-line Chart from Shunxin Agriculture,
The time interval for opening and closing positions in Henglong is marked with a red box. The stock price trend in the box is almost a perfect rising curve. The last person wrote:
"Zhao Chen's investment seems to have secured a position before the stock price takes off."
Financial Media also followed up immediately.
The title of First Finance is "Henglong Group In the third quarter Financial Report: Real estate profits cut in half, investment income becomes the biggest highlight", the article reads:
"Henglong Group is undergoing a transformation from a real estate company to an investment platform.
An investment of Shunxin Agriculture contributed 648 million yuan in net profit, more than twice the profit of the main real estate business in the first three quarters.
Zhao Chen's investment vision is verified by the numbers of real gold Silver for the first time in the capital market."
The title of 21st Century Business Herald is more direct. "Henglong Q3 Report's Secret: The Investment Logic Behind 648 Million".
The article details the operation timeline of Henglong on Shunxin Agriculture, and finally writes:
"The market has been speculating on how much money Henglong made on Shunxin Agriculture.
Most of the guesses were conservative with the figure of 648 million, which really shocked the market."
But what really made the market explode was the number in the "Fair Value Variable Profit and Loss" column in Financial Report.
What really makes investors stunned is the Fair Value changes in the three A-share stocks held by Henglong Capital--
These floating profits are actually written into the income statement of Financial Report, rather than hidden in other comprehensive income.
According to the note to Financial Report, Tongce Medical, Pianzaihuang and Bidiya held by Henglong Capital are all classified as "financial assets measured at Fair Value with changes included in current profits and losses".
This means that the floating profit caused by the rise in stock prices is directly included in the current profit.
As of the end of the third quarter (September 30), the changes in the Fair Value position of Henglong Capital are as follows:
Tongce Medical: holds 22.3 million shares, accounting for 4.99% of the total share capital. The holding cost is 44.97 yuan,
The closing price at the end of the third quarter was 52.8 yuan, floating earnings per share was 7.83 yuan, and Fair Value's change income was 174.5 million yuan.
Pianzaihuang: Holds 16 million shares, accounting for 2.65% of the total share capital. The holding cost is 93.56 yuan.
The closing price at the end of the third quarter was 103.5 yuan, floating earnings per share was 9.94 yuan, and Fair Value's change income was 159 million yuan.
Bidiya: Holds 65 million shares, accounting for 2.38% of the total share capital. The holding cost is 38.5 yuan.
The closing price at the end of the third quarter was 46.2 yuan, floating earnings per share was 7.7 yuan, and Fair Value's change income was 500.5 million yuan.
The total of the three stocks, Fair Value's change income is approximately 834 million yuan.
This floating profit was fully included in the current profit of Q3 Report in the form of Fair Value variable profit and loss.
Coupled with the investment income of 648 million yuan pocketed by Shunxin Agriculture, Henglong Capital was established less than half a year ago.
Investment income alone contributed nearly 1.5 billion yuan in net profit, more than half of which was pocketed cash income, and more than 800 million yuan was floating profit.
Financial Report shows that Henglong Group's total net profit in the first three quarters was approximately 1.78 billion yuan.
Among them, the main real estate business contributed about 300 million yuan, and investment income contributed about 1.48 billion yuan--
Shunxin Agriculture 648 million pocket gain, Tongce Medical 174.5 million Fair Value change, Pianzaihuang 159 million Fair Value change, Bidiya 500.5 million Fair Value change, totaling approximately 1.482 billion yuan.
As soon as this number came out, the market completely exploded.
On Snowball, user "Veteran Industry Researcher" posted a long post:
"Henglong Group's net profit in the first three quarters was 1.78 billion, of which investment income was 1.48 billion. The main real estate business was only 300 million.
Henglong is no longer a real estate company. It is an investment platform with real estate as its basic business and investment as its core growth engine.
Zhao Chen spent one year turning a high-debt real estate company into a Platform Company with abundant cash flow and proven investment capabilities.
This transformation speed is rarely seen in the history of A-share."
Financial Report also announced Henglong's other external investments:
Bubble Mary, holding 26.3% of the shares, was included in assets based on the purchase price of 360 million yuan.
Yunnan Agriculture Group, holding 20% of the shares, was included in assets at the purchase price of 390 million yuan.
These two investments have not yet been listed on the market, and are measured according to the cost method, and the changes in Fair Value are not included.
The note to Financial Report states. "Fair Value of the above unlisted equity is difficult to reliably measure and is temporarily accounted for using the cost method."
After the market closed that day, a securities firm released a review report on Henglong Group Q3 Report overnight.
The report pointed out that Henglong Group's main real estate business is actively shrinking, but the profitability of the investment business has far exceeded that of the main real estate business.
The market's valuation logic for Henglong should switch from a real estate company to an investment platform.
The report card Zhao Chen handed over in the first year of Henglong's transformation was much better than most people expected.
Even "Henglong Concept Stocks" has become the hottest topic among investors.
Many long-term investors have started copying operations.