After the official agenda of Board of Directors at the end of the year, Zhao Chen did not leave Meeting Room first as usual.
"Please stay here for a moment."
He raised his eyes and glanced at the people on both sides of Long Table,
"Board of Directors's official agenda is over, I want to say a few more things.
It doesn't count as a vote or a resolution, it's just part of the year-end summary.
Chen Xi, turn on the projection of Investment Decision Committee."
Chen Xi stood up, closed the curtains, and turned on the projector.
Zhao Chen stood up and walked to Projection Screen cloth and picked up a marker pen from the table.
"Henglong's 2019 annual report will be officially disclosed in March next year, and the final audit draft is still being worked on.
Today I won't talk about the audit numbers, I'll just talk about one thing – how much is the real net worth of Henglong System."
He used a marker pen to write a line in the upper left corner of the curtain:
"Net book assets: approximately 21 billion RMB."
"This is the number compiled by Chen Qiming based on the preliminary report of full-year operating data.
Total assets are approximately 24 billion, total liabilities are approximately 3 billion, and net assets are approximately 21 billion.
The debt ratio is about 12.5%, which is nearly five points lower than the 17.3% at the beginning of the year.
These figures are real and there won't be much deviation after the final audit is released."
He turned around and looked at the people present,
"But among the net book assets of 21 billion, several assets are measured according to the cost method.
In other words, their true value is severely underestimated."
He drew a line on the curtain with a marker and wrote the first line below the line:
"A-share position floating profit: about 11 billion."
"This 11 billion floating profit is included in other comprehensive income and has been reflected in the book net assets of 21 billion.
According to accounting standards, as long as we do not sell these stocks, this part of the floating profit will not be entered into the income statement.
But its value is real - the total holding cost of Five A-shares is about 11 billion, and the current market value is about 22 billion.
Bidiya's position has a market value of approximately 11.5 billion, contributing the bulk of the floating profit;
The market value of Wuliangye's position is about 3.1 billion, and the investment that hit the limit last year has more than doubled now;
The total floating profit of Fenjiu, Pianzaihuang, and Tongce Medical is about over 2 billion."
He drew a circle on "11 billion" with a marker pen,
"These floating profits are the result of time, not trading."
He underlined the first line and wrote the second line:
"Bubble Mary's stock holdings have a market value of approximately 9.2 billion. The book value is only approximately 650 million."
"After Bubble Mary is listed, the 31.2% shares held by Henglong are approximately 9.2 billion people RMB based on the current market price.
But on the balance sheet of Henglong, this equity is still measured according to the cost method, and the book value is only about 650 million of our initial investment.
The difference in the middle - about 8.5 billion - is not reflected in the net worth figure at all.
This is a hidden asset. The market has not fully priced this asset into the stock price of Henglong."
He continued:
"Green Energy Technology's stock holdings have a market value of approximately 11 billion. The book value is only approximately 200 million."
"Green Energy Technology Series C's pre-investment valuation is 5 billion US Dollar. Henglong holds 32% of the shares, corresponding to Fair Value's approximately 1.6 billion US Dollar, which is equivalent to approximately 11 billion RMB.
But on the books, this equity is only 200 million invested by Series A. The difference is about 10.8 billion.
This is Henglong System's largest hidden asset at present."
His marker pen clicked hard twice next to the line Green Energy Technology.
The last stroke:
"Yunnan Agriculture Group 20% equity. The book value is about 390 million. According to the listing estimate, it is about 4-5.6 billion."
"The listing application materials for Yunnan Agriculture have been submitted, and the valuation range given by the sponsor is between 20 billion and 28 billion.
Based on this range, the 20% equity held by Henglong corresponds to 4.0 to 5.6 billion people RMB.
This asset is only 390 million on the books. The difference is between 3.6 and 5.2 billion.
Cheng Jiaxun called me yesterday and said that their annual sales of Live Pigs increased by more than 20% year-on-year.
Sows of Breeding Age's inventory data is one of the fastest to recover in the industry."
He took a step back and circled the four-line summary column on the curtain with a marker.
"A-share floating profit of 11 billion - reflected in the books.
Bubble Mary's hidden assets are approximately 8.5 billion - not reflected.
Green Energy Technology's hidden assets are approximately 10.8 billion - not reflected.
Yunnan Agriculture's hidden assets are approximately 4 billion - not reflected.
Taken together, these three hidden assets amount to more than 23 billion people RMB."
He turned around and looked at the people present,
"Henglong's book net assets are 21 billion. Adding these 23 billion hidden assets, the real net assets are close to 45 billion RMB."
He wrote this number at the bottom of the curtain. Meeting Room was so quiet that only the low sound of the projector fan could be heard.
"Today's closing, Henglong's stock price was just over 108 Hong Kong Dollar, with a total share capital of 560 million shares and a market value of approximately 60 billion Hong Kong Dollar, equivalent to approximately 55 billion RMB."
He put down the marker and wiped his fingers with a wet towel.
"The gap between the market price for Henglong and Henglong's true net worth is only about a few billion.
In other words, the market only reflects the book value of Henglong plus a portion of the premium on hidden assets, and has not yet fully priced it.
Bubble Mary has only been listed for half a month, the valuation of Green Energy Technology Series C has not been fully digested by the market, and the listing of Yunnan Agriculture is still in the review process.
Each of these three catalysts will be released in the next few months to a year.
By then, the stock price of Henglong will not be where it is now."
He walked back to his seat, picked up the tea cup and took a sip.
"I spread these numbers on the table today not to prove how valuable Henglong is.
This is to tell you what we have done in the past few years -
Buy the bottom on Baijiu at the lowest limit, and take a heavy position when BYD is at its lowest.
When Bubble Mary was not on the market, we locked Mololoy and Labobo's Copyright.
I voted for Two Hundred Million when Green Energy Technology only had laboratory data--
The value of these decisions is being proven one by one by time.
Henglong's assets are not speculated, but planted."
He put down the teacup and slowly scanned everyone's face.
"So, the best time to plant a tree was ten years ago, followed by now.
We have planted enough trees at the right time, the next thing to do is-
Give them sunlight, give them water, and wait patiently."
Wu Hongyuan took off his glasses and wiped them, put them on again and pushed the calculator aside.
He wrote on the paper for a long time, and what finally fell on the paper was not a formula.
It's a sentence from Buffett's letter to shareholders that he hand-copied, written in English.
He tore off the page and pushed it in front of Zhao Chen--
"Someone's sitting in the shade today because someone planted a tree a long time ago.'"
Xu Yong glanced from the side and translated this sentence into Chinese for those present:
"The person sitting under the shade of the tree today was someone who planted that tree a long time ago."
Zhao Chen took the page, glanced at it, then folded the paper and put it in his breast pocket.
"Teacher Wu, it's not just me who is planting trees, but everyone here.
Each of you has loosened a piece of ground for the foundation of Henglong."
After the meeting, Zhao Chen was the last one to leave Meeting Room.
He went to the window and stood for a moment.
The night Two Rivers Confluence outside the window has been completely shrouded,
Chaotianmen Bridge's steel cable was outlined by the light in two beautiful arcs, reflected on the river surface, broken and then gathered together.
He took the paper with the Buffett quotation out of his pocket and read it again.
Then he folded it and put it back in his pocket, turned off the last light of Meeting Room, opened the door and walked out.