Vanke Hit by Stock and Bond Sell-off: Reasons for Market "Sniping"
In the past two days, Vanke has once again experienced a "double kill" in both stocks and bonds, and the abandonment by funds may be related to a rumor about the refusal of a billion-yuan debt extension. Vanke, which first called out the "Black Iron Age" and actively sold assets to save itself, can it smoothly reduce its balance sheet and get through the debt storm?
What's wrong with Vanke?
On March 4th, several domestic bonds of Vanke fell. As of the close, "22 Vanke 06" fell by 36.10% to 50.10 yuan, "21 Vanke 04" fell by 19.19% to 65.05 yuan, and "20 Vanke 08" fell by 9.39% to 65.46 yuan, all hitting historical lows. At the same time, the overseas corporate bond of Vanke due on June 7th this year has a maturity yield as high as a terrifying 40.876%.
In addition to bond prices, Vanke's stock situation is also not optimistic. As of today's close, Vanke A, listed on the A-share market, fell by more than 4.65%, while Vanke Enterprises, listed on the Hong Kong stock market, fell by more than 7.13%.
Recently, there was market news that Yu Liang, the chairman of the board of directors of Vanke Group, took the leaders of relevant departments in Shenzhen to Beijing to negotiate with loan institutions mainly led by insurance companies on the extension of non-standard debt, but was ultimately rejected. Among them, there was an investment of 10 billion yuan involving New China Asset Management Co., Ltd. (hereinafter referred to as "New China Assets").
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Although New China Assets quickly came forward to refute the rumors, Vanke's frequent sale of high-quality assets since last year has also become one of the factors that the market worries about its liquidity.
In the fall of 2018, the industry leader Vanke took the lead in shouting the slogan "survive", shocking the real estate industry. With the significant cooling of real estate market sales and the continued adjustment period of the real estate industry, how is Vanke, who is prepared for the rainy day, doing now?
New China Assets urgently refutes rumors
On March 3rd, New China Asset Management Co., Ltd. issued a public statement stating that recently, the company has noticed some false information about it and Vanke Enterprises. Vanke Enterprises is a leading enterprise in China's real estate industry and has always maintained normal business cooperation with New China Assets. As a professional and responsible asset management company, New China Assets is full of confidence in China's economic development, resolutely serves the overall situation of the country's strategic development, and supports the healthy development of China's real estate industry.
According to public information, the total investment assets of New China Insurance amount to 1.26 trillion yuan, of which New China Assets is entrusted with the third-party asset management scale of 62.4 billion yuan.However, as of the time of writing, Vanke, which has suffered significant losses in both stock and bond prices, has not commented on the aforementioned "rumors."
Although Xinhua Assets has stated that the news is false, it cannot be denied that Xinhua Assets and its controlling shareholder, Xinhua Insurance, do have many connections with Vanke.
Looking at the creditor relationships, as of the end of 2022, among Vanke's non-traditional financing channels, Xinhua Assets had a total of seven loans, with a cumulative amount of 9.782 billion yuan. The earliest repayment will be due on December 25, 2024, amounting to 2.625 billion yuan.
According to the semi-annual report for 2023 released by Xinhua Insurance, the parent company of Xinhua Assets, Xinhua Insurance participated in three phases of Vanke's debt plan, with a total amount of approximately 5.203 billion yuan.
In addition to the loan relationship, Xinhua Insurance's dividend products are also among the top ten shareholders of Vanke. As of the end of September 2023, Xinhua Insurance held 120 million shares of Vanke A-shares through its dividend insurance accounts, accounting for 1.01% of its total share capital, making it the tenth largest shareholder of Vanke.
Interestingly, since the second half of 2022, Xinhua Insurance has been reducing its holdings in Vanke, especially in the third quarter of 2023, when the reduction reached 43.52 million shares.
In terms of personnel, Kang Dian, the former chairman and executive director of Xinhua Insurance, is currently an independent director of Vanke.
It is worth mentioning that, in addition to Xinhua Assets and Xinhua Insurance, Vanke has also obtained about 4.6 billion yuan in loans from Taikang Assets, a subsidiary of Taikang Life Insurance, and has signed an agreement with Huatai Assets, a subsidiary of Huatai Insurance, to apply for up to 4 billion yuan in financing through the establishment of a debt investment plan, with a financing term of up to 10 years.
Behind the Sale of High-Quality Assets
Recently, Vanke Group has been frequently selling high-quality assets.In February 2024, Vanke sold the remaining 50% stake in Shanghai Qibao Vanke Plaza to Hong Kong's Link REIT for 2.384 billion yuan, with a discount of 26.3%, and the unit price was about 18.6% lower than the transaction price three years ago. After the acquisition is completed, the latter will fully own the project, and Vanke will completely exit.
For Vanke, Shanghai Qibao Vanke Plaza is undoubtedly the company's "cash cow", with a rental rate of over 93%, ranking first among all projects, but it was eventually sold at a 30% discount.
Public data shows that from 2020 to 2022, Qibao Vanke Plaza achieved a total operating income of 1.218 billion yuan, ranking first among Vanke's commercial projects. In the first half of 2023, Qibao Vanke Plaza once again topped the group with an operating income of 213 million yuan.
Only one week after selling Qibao Plaza, the market once again reported that Vanke is planning to sell part of the equity in its long-term rental apartment company "Bo Yu".
At present, the Bo Yu business has been deployed in 32 cities across the country, managing and operating 236,000 units, with about 180,000 units opened. Among the national centralized apartments, Bo Yu's scale and operational efficiency both rank first in the industry. In 2020, Vanke Chairman Yu Liang revealed that in order to do a good job in "Bo Yu", Vanke lost about 9 billion yuan in five years.
However, in October last year, the general manager of Bo Yu revealed at Vanke's media sharing meeting that Bo Yu has achieved a positive single-month profit since June 2023, and achieved a cumulative equity net profit in September. It is expected to achieve overall profitability within 2024, and at this time when the long-term rental apartment "harvest", Vanke, which has invested a lot of effort, wants to leave.
In addition, at the end of last year, Vanke also sold some hotel assets at a discount.
On December 8, 2023, the buyer Banyan Tree Holdings announced that it would buy the equity of three subsidiaries including Banyan Tree Services (China) held by Vanke for 480 million yuan, while Vanke's expenditure that year was more than 500 million yuan.
On the other hand, the frequent sale of assets is that Vanke's existing property sales are not good.
From Vanke's operating data, in 2022, the company's contracted sales amount decreased by 33.6% year-on-year. In 2023, Vanke achieved a contract sales amount of 376.12 billion yuan, a year-on-year decrease of 9.8%; in January 2024, the sales amount was 19.45 billion yuan, a year-on-year decrease of about 32%.Vanke is accelerating its "inventory reduction". As of the end of September last year, Vanke's inventory balance was 814.7 billion yuan, which significantly decreased compared to 2022 and 2021. According to the statistics from the China Index Academy, in the first two months of 2024, Vanke sold a total of 33.4 billion yuan. Compared to the leading Poly, Vanke's selling price decreased by 6.4% year-on-year and also decreased by 6.2% month-on-month, with a larger price reduction.
However, price reduction also has "side effects". Annually, Vanke's net profit plummeted by nearly half in 2021, and although it maintained this level in 2022, in the first three quarters of 2023, Vanke Group's net profit attributable to the parent company was 13.62 billion yuan, still a year-on-year decrease of more than 20%.
To cope with the "sluggish" sales, since 2022, Vanke has been continuously "reducing its balance sheet", advancing synchronously on the asset and liability sides.
The most obvious is to slow down land acquisition and reduce cash consumption. According to the land acquisition ranking of CRIC, Vanke did not enter the top ten in land acquisition in 2024. In the first two months, Vanke only ranked 23rd, with a land acquisition amount of 4.89 billion yuan.
In January of this year, Vanke added a total of 3 real estate projects, with land acquisition projects in Yinchuan, Kunming, and Guiyang; according to the data calculated by securities firms, Vanke's land investment intensity in that month was 9%, and the average land acquisition price was about 5,080 yuan per square meter.
At the same time, there have been significant changes in Vanke's debt structure. Among them, the interest-bearing debt due within one year was 47.49 billion yuan, a decrease of nearly 16.5 billion yuan compared to 63.92 billion yuan at the end of the previous year. Correspondingly, Vanke's long-term loans at the same period increased by 35 billion yuan compared to the end of the previous year.
In terms of new financing, on March 1, 2024, Vanke announced that it would issue REITs to raise funds of 1.159 billion yuan, with the underlying assets being three of its logistics parks.
Vanke in the storm
Since 2024, the recovery of the real estate market in sales and financing has been slow, and the actual implementation effect of the whitelist projects of leading real estate companies such as Vanke is still a matter of market concern.
On the sales side, Beijing, Shanghai, Guangzhou, and Shenzhen have all introduced new policies to relax housing purchase restrictions this year; on the financing side, the Financial Management Bureau held a meeting to call for the real estate financing coordination mechanism to "ride the momentum", and to establish a local coordination mechanism according to the principle of "build as much as possible" before March 15, to promote financing to land as soon as possible.