After the SAIC Group's overall listing, the domestic auto giants are expected to make a sound market as a whole, but the FAW Group has slowed down. What led to the car group known as "The Republic's Firstborn"? Can FAW Group bear to lag behind SAIC and Dongfeng Motor Group in the capital market? Is FAW Group ready for the overall listing?
In the interview, the Shanghai Securities News found that due to the complicated relationship between layers, the overall listing of FAW Group is difficult. But Yan Yanfeng, general manager of FAW Group, will continue to list as an important goal. Confined to its own conditions, FAW Group hopes to achieve the listing of most of its core assets within two years.
The assets of FAW Group are scattered throughout the region: from the hinterland of Northeast China along the Dalian Bay, Bohai Bay, Jiaodong Bay, Yangtze River Delta, Hainan Island, Guangxi, Yunnan, and Sichuan. The S-shaped layout that this FAW Group takes great pride also buried the trouble. Zhang Dawei's drawing
The overall listing of domestic auto groups has come one after another, or in the Mainland or in Hong Kong. At this moment, FAW Group has been extremely quiet. There is even no news of investment bank drafts. However, in silence, the volcano is erupting.
FA Yan Yanfeng, general manager of FAW Group, said that the FAW Group has plans to go public and the group is also preparing various plans for listing, but there is still some distance from the approval stage of the competent department.
Although the tight winds did not disclose the progress of the overall listing of the FAW Group, the Shanghai Securities News was still informed from other sources. The “distance†mentioned by Yan Yanfeng was mainly twofold: one is whether the overall listing plan or the listing plan is undecided; the other is FAW. The group also needs to reach an agreement with the joint venture.
The largest two joint venture partners of FAW Group are Volkswagen and Toyota. In an interview with Volkswagen China senior officials, Shanghai Securities News learned that FAW Group has conducted pre-listing negotiations with Volkswagen China.
The reporter asked Su Weiming, vice president of Volkswagen China: “Is it heard about the overall listing of FAW Group? Does Volkswagen Group support the placement of the Chinese equity of FAW-Volkswagen into (a proposed) listed company?†“About the placement of FAW-Volkswagen assets held by FAW Group. The issue of future listed companies has not yet been discussed at the board level, said Su Weiming, general manager of Volkswagen China, who told the Shanghai Securities News that "the finance department is discussing the matter."
Overall VS spin-off
In addition, although FAW Group has not yet determined how to go public or how to go public, several investment banks have already had frequent contact with FAW Group. At present, several agencies have provided different asset listing plans to FAW Group, and the controversy over the plans is also quite substantial: there are rumors of the plan for the overall listing of the borrower's shells similar to that of SAIC Group; there are also innovative models ————— The asset securitization rate measures and divides several core businesses of FAW Group into different subsidiaries.
Among them, the idea of ​​the overall listing plan is to put the core assets of FAW Group into one of its subsidiaries; at the same time, it will absorb the shares of another subsidiary of the company. However, this scheme has not even been recognized within the organization. Because the equity transfer plan is not common, it is also difficult for the competent authorities to approve. Therefore, it is more likely to hit a wall.
“Why must we follow the example of SAIC? FAW Group can take another form of listing.†People close to the top of FAW Group stated that “the overall listing is what the market said. From the perspective of SASAC, important state-owned asset securities Rate, not simply the overall listing."
According to this idea, FAW Group and its consulting agencies once discussed another proposal: splitting the assets of FAW Group and placing different types of assets into 3 subsidiaries, eventually forming three major subsidiaries with division of labor in the main business.
Shanghai Securities News has obtained the spin-off plan for spin-off listing: The listed assets of FAW Group are composed of three platforms: passenger car platform, commercial vehicle platform, and parts platform. In the future, the assets of passenger vehicles may be injected into two vehicle subsidiaries, respectively, and parts and components may be injected into FAW Fourth Ring.
“If it is more subdivided or made improvements, FAW Sihuan can also be adjusted to a financial platform.†People close to the top of FAW Group stated that “the financial company of FAW Group is currently doing auto finance business. According to international trends, auto finance is profitable. Capability is higher than whole vehicles and parts."
Chen Zhiwu Weapons
“FAW Group could consider injecting different businesses into different companies according to the nature of its fixed assets, and eventually realize overall listing.†Recently, Chen Zhiwu, professor of financial economics at Yale University, told the Shanghai Securities News, “but the preconditions are: banking and securities markets. Ability to make a reasonable valuation of assets of different nature."
Chen Zhiwu pointed out that in the circumstances where the market is effective, ROE and ROA will be used to judge the company's value. Firms with high efficiency in the use of fixed assets tend to get higher prices, such as marketing companies like Coca-Cola.
Therefore, Chen Zhiwu proposed a plan: FAW Group could be split into a company that produces auto parts and vehicles, a company that is responsible for sales and research and development, and even a real estate or property company. For these three types of companies, the valuations given by the capital markets based on price-earnings ratios are quite different. Taking into account China's national conditions, banks have different types of loans for the three types of assets.
Among the three types of assets, companies that produce auto parts and vehicles have a good degree of preference in the capital market (the market-to-earnings ratio in the international market is basically 15 to 18 times), and the banking system has the best degree of preference. Because Chinese banks only recognize real mortgage loans, and such enterprises have more productive fixed assets, the annual earnings are relatively stable. Given that the compound annual investment return rate can basically exceed the bank loan interest rate, Chen Zhiwu suggested that low-cost loans can be used to achieve rapid development of the company. This is also a reasonable "arbitrage" behavior.
As for real estate or property companies, they usually have 13x to 14x P/E ratios. Therefore, they are listed for spin-off, aiming to obtain bank loans or real estate funds, and even financing through listed companies issuing bonds to obtain such companies. Development funds.
Chen Zhiwu is most optimistic about the company responsible for sales and research and development.
"Companies that are responsible for sales and R&D are cash flow-based companies. Their balance sheets will be pretty pretty, and the pricing may be more like Focus Media or America's Coca-Cola." Chen Zhiwu said, "The price-earnings ratio for capital markets for such companies can be as high as 60 to 100 times."
The reason is: Such companies occupies less fixed assets, and even office space can be leased, but the sales service link is currently the main source of profit for automobile manufacturers, and its profit rate is higher than that of vehicle production. The rate is also higher than the vehicle manufacturing. In addition, once R & D companies have strong capabilities, they can develop products for FAW's entire vehicle companies or other companies, and their return on capital is also considerable.
"The spin-off is only a best practice in an effective market like the United States. Because the current A-share market has a high level of price-to-earnings ratio, if FAW Group does not have an A-share listed company, FAW Group can obtain a higher level without splitting its listing. Valuation." Chen Zhiwu also stressed that, "For the FAW Group (in particular), because it has four listed companies, in the case of increasing shell resource value, if you give up any shell resources, it seems there is some waste."
How many times will it take?
Before FAW Group goes public, how many roads can it take? This is the most troublesome thing for FAW Group. It is also an investment bank can not bypass when designing a listing plan.
The first hurdle is a foreign partner. As FAW Group's most profitable companies are joint ventures, such as FAW-Volkswagen in the vehicle sector, Tianjin Toyota; FAW Toyota Motor Corporation in the spare parts sector, Tianjin Toyota Motor Company.
According to Shanghai Securities News, the exclusive information obtained shows: In 2006, FAW-Volkswagen’s net profit was nearly 1.7 billion yuan, Tianjin Toyota’s profit was nearly 1.56 billion yuan, and Sichuan Toyota’s profit was 560 million yuan. The FAW Group’s net profit in 2006 was 3.49 billion yuan. Considering that the shares of several joint ventures held by FAW Group are basically around 50%, it can be seen that the four joint ventures have contributed almost half of the profits of FAW Group.
"If you do not put all the Chinese equity of these joint ventures into listed assets, the value of the overall listing of FAW Group will not be reflected," said Huang Zherui, an analyst at CSM.
However, the difficulty faced by FAW Group is that without the approval of Volkswagen and Toyota, FAW Group cannot change the owner who owns Chinese equity. In the interview, the reporter learned that Volkswagen began to consider changing the Chinese equity holders. At another important joint venture partner Toyota Motors, the reporter did not know the corresponding information.
"I haven't heard about the overall listing of FAW-Toyota shares that FAW Group will hold." Wang Fachang, executive deputy general manager of FAW Toyota, told the Shanghai Securities News.
The rapidly developing FAW Toyota is crucial to the overall listing of FAW Group.
Ping An Securities analyst Yao Hongguang pointed out that at present, Tianjin Toyota has three factories: In 2006, Tianjin FAW Toyota’s sales revenue was 32 billion yuan, and the profit was 1.5 billion yuan; the second plant was put into production in 2005, and its profits will be up until 2007. Significant growth; the third plant was put into operation in May 2007. According to the normal laws of FAW Toyota, its profit will be reflected in 2008.
The third factory that produces Corolla, the tenth-generation Corolla, will become an important profit growth point for Tianjin Toyota in the future. Tianjin Toyota, which had high hopes for Corolla, started a marketing tour throughout the country. Shanghai's 13 Corolla dealers launched an overwhelming promotional campaign from June 18th to July 8th. At the beginning of the listing of the Corolla, it attracted the attention of mid-level sedan consumers, resulting in a large number of cars waiting in the queue and waiting in line.
Du Haiyang, Sales Director of FAW Toyota East China Division, said: “The new COROLLA and COROLLA EX (Corolla) sales targets in 2007 were 60,000 units and 24,000 units, respectively, to ensure 2007 total sales of FAW Toyota reached 270,000 units. ."
If Corolla can sell according to plan, then, under the joint promotion of other brands, by 2010, FAW Toyota's annual sales volume is expected to reach 500,000, with a sales income of 90 billion yuan and a net profit of 7 billion yuan. By then, FAW Group, which has a 51% stake in FAW Toyota, will also receive more than 3.5 billion yuan in profits.
The second hurdle is how to balance the interests of the various local governments.
The assets of FAW Group are scattered throughout the region: from the hinterland of Northeast China along the Dalian Bay, Bohai Bay, Jiaodong Bay, Yangtze River Delta, Hainan Island, Guangxi, Yunnan, and Sichuan. This FAW Group's proud S-shaped layout has also laid down the trouble: FAW Xiali is located in Tianjin, and the other two companies are located in the headquarters in Changchun, if they put the assets of the listed companies in Tianjin into the listed companies in Changchun (FAW Xiali Holdings). 30% of Tianjin Toyota's equity may cause dissonance from the competent authorities in Tianjin and the competent authorities of the listed companies.
SAIC Group, which had previously achieved overall listing, had no such problems. SAIC Motor's two major joint-venture vehicle companies, Shanghai Volkswagen and Shanghai GM, are Shanghai companies. The assets transferred from SAIC to Shanghai Automotive are still within the jurisdiction of the competent authority in Shanghai.
The third hurdle is how to separate the main and auxiliary businesses.
FAW Group is currently the heaviest domestic auto group in history. Once the overall listing of FAW Group, how to strip the main business and auxiliary business? How to arrange for assistants? All become difficult problems. Therefore, before this major issue is resolved, FAW Group’s overall listing plan will be difficult to finalize.
-Observed
The capital market "squeaks" pain
Compared with its position in the domestic automobile industry, FAW Group is far behind the SAIC Group and Dongfeng Group in the pace of the capital market. The “Firstborn Republic Motor Carâ€, which has occupied the top spot for China’s automobile sales for several years, is obviously a bit flawed—the “leg†of the product market is long, and the “legs†of the capital market are short.
"In the three major automotive groups in the country, SAIC and Dongfeng Group have all been listed on the market. Naturally, everyone is targeting the FAW Group. After all, internationally renowned companies are walking on both legs of the capital market and the product market." The manager Yan Yanfeng said, "FAW Group cannot possibly ignore this issue, but the timetable has not yet been determined."
In the capital market, FAW Group has been left behind by SAIC and Dongfeng Motor. This can't help but delay the hurry.
In 2005, Dongfeng Motor Group achieved an overall IPO in Hong Kong; in 2006, SAIC Motors relied on Shanghai Auto (600104) for overall listing. Although FAW Group has four A-share listed companies, the asset securitization rate is not high.
Calculated on the closing price of June 20, 2007, the market value of FAW Group in the capital market was 51.01 billion yuan. In 2005, the total assets of FAW Group were approximately 107.4 billion yuan. Given that the assets of FAW Group are in a value-added process, the asset securitization rate of FAW Group is still less than 50%.
Yan Yanfeng is well aware of the sequelae of the “sacrifice†in the capital market. But bearing the “Northeast Power†(Ji Yanfeng said: FAW Group is a Northeast, large-scale, state-owned company, this statement also revealed that FAW Group's heavy burden and complex relationship) this name, FAW Group's overall listing will be an hour and a half will not rush.
The FAC Group had to go through too many hurdles to go public, so that Yan Yanfeng could not help but said that he hopes that FAW Group will be able to achieve a listing within 2 years.
A grim reality is placed in front of the FAW Group. Judging from international trends and domestic situations, joint mergers and acquisitions are the future development trend of auto companies, but all this requires money, and FAW Group is precisely lacking money.
On the policy front, the national competent authority supports joint mergers and acquisitions of enterprises. On December 18, 2006, the State Council’s General Office forwarded the SASAC's “Guiding Opinions on Promoting State-owned Capital Adjustment and Restructuring of State-owned Enterprises†(referred to as “guidanceâ€). In the guidance, the SASAC has for the first time listed cars as one of the industries that need to maintain the control of the state-owned economy. He also pointed out that: State-owned capital should be concentrated in the areas related to national security and the lifeline of the national economy, and the control of the state-owned economy should be strengthened; the diversification of property rights of state-owned enterprises and the vitality of enterprises should be achieved through joint-stock system reform, introduction of strategic investors, and re-listing. Competitiveness.
The guidance refers to the reorganization that has long been a concern in the automotive industry. The guiding opinions point out that by 2008, the long-term accumulation of a group of insolvent and hopeless state-owned enterprises with policy-based bankruptcy reduction tasks will basically be completed; by 2010, the SASAC's performance of the investor's role will be adjusted and restructured to 80 to 100. Family. It is understood that at present thousands of auto companies in China have annual sales of less than 1,000 people, and these will all be eliminated or merged.
“In the “Eleventh Five-Year Plan†period, auto companies will speed up reorganization,†said Zhang Xingye, deputy director of the China Automobile Industry Advisory Committee. “Automotive companies will grow faster and more competitive, and companies will inevitably move toward alliances or mergers.â€
However, the reorganization required money, and FAW Group just cashed in. In 2006, the total assets of FAW Group were 109.851 billion yuan, current assets were 60.616 billion yuan, and current liabilities were 75.643 billion yuan. According to this calculation, the debt ratio of FAW Group is 68.8%, which is much higher than the average level of 50% of the manufacturing industry; the current ratio is 87%, which is far below the level of the industry's current ratio. The low liquidity ratio and excessive debt ratio of FAW Group reflect that FAW Group has some degree of financial difficulties. It is precisely because of this, under the trend of large restructuring, FAW Group's mergers and acquisitions in the capital market are much less powerful than SAIC.
FAW Group once had the idea of ​​participating in the acquisition of Chrysler’s assets. However, under the circumstance of a miraculous woman, she can only choose to give up. The relatively cash-rich SAIC Group purchased MG Rover’s core intellectual property after acquiring a majority stake in South Korea’s Ssangyong, thereby gaining a sales channel for the international product market and an independent R&D platform for core products.
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