Posts: 1,348
Threads: 42
Joined: Mar 2011
Reputation:
87
Hopefluent is a real estate broker in China whose key market is in the Guangzhou region, with smaller presence in the other provinces and major cities. It also has a small segment in providing financing to developers and home buyers.
The company has a long record of listing, growth, profitability, cash flow, and dividend distribution. It is also trading near its 10-year lows, near net cash level, and if previous year's dividend distribution is maintained, will be yielding 6.6%. These characteristics make Hopefluent attractive. But is it any good?
Its present cheapness is a result of weak property sales, and slow collection of receivables from developers, which means possible credit losses. The slowing economy and tight credit conditions in China also expose its financing segment to more credit losses.
Hopefluent also recently merged through a share swap with Poly Consulting -- a competing broker from the Poly Real Estate Group -- which resulted in large minority ownership on its financial statements. Through the deal, Hopefluent will gain exclusive rights to market developments from Poly Real Estate. But whether the merger will prove economically beneficial to Hopefluent shareholders in the long-term is not certain, since past and present financial results of Poly Consulting -- the merging entity -- does not seem to be available.
If Hopefluent is able to improve on its collection of receivables, and maintain/increase profit/dividends in the coming years or so, its present cheapness will likely reverse, all else being the same. For now, it looks like the market is pricing in an expectation of heavy credit losses.
Posts: 49
Threads: 1
Joined: May 2011
Reputation:
0
(05-01-2020, 12:05 PM)karlmarx Wrote: Hopefluent is a real estate broker in China whose key market is in the Guangzhou region, with smaller presence in the other provinces and major cities. It also has a small segment in providing financing to developers and home buyers.
The company has a long record of listing, growth, profitability, cash flow, and dividend distribution. It is also trading near its 10-year lows, near net cash level, and if previous year's dividend distribution is maintained, will be yielding 6.6%. These characteristics make Hopefluent attractive. But is it any good?
Its present cheapness is a result of weak property sales, and slow collection of receivables from developers, which means possible credit losses. The slowing economy and tight credit conditions in China also expose its financing segment to more credit losses.
Hopefluent also recently merged through a share swap with Poly Consulting -- a competing broker from the Poly Real Estate Group -- which resulted in large minority ownership on its financial statements. Through the deal, Hopefluent will gain exclusive rights to market developments from Poly Real Estate. But whether the merger will prove economically beneficial to Hopefluent shareholders in the long-term is not certain, since past and present financial results of Poly Consulting -- the merging entity -- does not seem to be available.
If Hopefluent is able to improve on its collection of receivables, and maintain/increase profit/dividends in the coming years or so, its present cheapness will likely reverse, all else being the same. For now, it looks like the market is pricing in an expectation of heavy credit losses. It is a classic net net situation (Ben Graham ) and cash levels have gone up further as they have exited property management business. Yes working capital is a concern but most of receivables pertain to property developers which company claims to be large and state owned ( including Poly) where default risk is unlikely. It trades at 1/3rd of book.
Posts: 1,348
Threads: 42
Joined: Mar 2011
Reputation:
87
Their sale of the property management business does not look like a good move. It is an easy business which is recurring, light on capital requirement, and growing. The sale price also looks a little too cheap at a p/e of about 10, and that includes certain performance targets being met. Although the stated reason for the disposal is to allow the company to focus on the agency and financing businesses, the cheap sale price tells me that the company may be more concerned about quickly building up its cash balance. Perhaps in anticipation of credit losses. The only cheer for shareholders is that about a third of the proceeds will be used to fund "future dividends."
https://www1.hkexnews.hk/listedco/listco...710157.pdf
Hopefluent moves property for developers at a commission of about 1% or so, depending on the size of the development. Although most of the customers are so-called large and state-owned, the fact that the developers are taking longer than usual to pay just 1% of a property's sale price to Hopefluent says a lot about the developers' present financial situation.
As part of the Hopefluent-Poly Consulting merger, Poly Real Estate (the developer) is paying Poly Consulting (the agency) the agency fees over a 3 year period. Why do they need to take years to settle payments?
See extracts from the merger announcement:
As at 30 June 2018, the total amount due from the Poly Real Estate Group to the Poly Consultancy Group was approximately RMB723.35 million.
The parties have agreed that upon completion of the Cooperation Restructuring, the Poly Real Estate Group would settle the abovementioned outstanding amount by instalments. It was further agreed that by 31 December 2018, the total amount due from the Poly Real Estate Group would not exceed RMB320.00 million; by 31 December 2019, the said total amount due from the Poly Real Estate Group would not exceed RMB120.00 million and by 31 December 2020, the said total amount due from the Poly Real Estate Group would be fully settled
https://www1.hkexnews.hk/listedco/listco...727906.pdf
Assuming that the Chinese property market does not crash, property buyers do not lose their jobs/income, and property developers do not face liquidity/solvency issues, then concerns about Hopefluent's credit losses are probably moot.
If there are no large credit losses, then yes, its share price is unreasonably cheap. And more so if the longer-term growth of the Chinese property market -- assuming Hopefluent is able to grow together with it -- is considered.
Posts: 49
Threads: 1
Joined: May 2011
Reputation:
0
(06-01-2020, 10:57 AM)karlmarx Wrote: Their sale of the property management business does not look like a good move. It is an easy business which is recurring, light on capital requirement, and growing. The sale price also looks a little too cheap at a p/e of about 10, and that includes certain performance targets being met. Although the stated reason for the disposal is to allow the company to focus on the agency and financing businesses, the cheap sale price tells me that the company may be more concerned about quickly building up its cash balance. Perhaps in anticipation of credit losses. The only cheer for shareholders is that about a third of the proceeds will be used to fund "future dividends."
https://www1.hkexnews.hk/listedco/listco...710157.pdf
Hopefluent moves property for developers at a commission of about 1% or so, depending on the size of the development. Although most of the customers are so-called large and state-owned, the fact that the developers are taking longer than usual to pay just 1% of a property's sale price to Hopefluent says a lot about the developers' present financial situation.
As part of the Hopefluent-Poly Consulting merger, Poly Real Estate (the developer) is paying Poly Consulting (the agency) the agency fees over a 3 year period. Why do they need to take years to settle payments?
See extracts from the merger announcement:
As at 30 June 2018, the total amount due from the Poly Real Estate Group to the Poly Consultancy Group was approximately RMB723.35 million.
The parties have agreed that upon completion of the Cooperation Restructuring, the Poly Real Estate Group would settle the abovementioned outstanding amount by instalments. It was further agreed that by 31 December 2018, the total amount due from the Poly Real Estate Group would not exceed RMB320.00 million; by 31 December 2019, the said total amount due from the Poly Real Estate Group would not exceed RMB120.00 million and by 31 December 2020, the said total amount due from the Poly Real Estate Group would be fully settled
https://www1.hkexnews.hk/listedco/listco...727906.pdf
Assuming that the Chinese property market does not crash, property buyers do not lose their jobs/income, and property developers do not face liquidity/solvency issues, then concerns about Hopefluent's credit losses are probably moot.
If there are no large credit losses, then yes, its share price is unreasonably cheap. And more so if the longer-term growth of the Chinese property market -- assuming Hopefluent is able to grow together with it -- is considered.
1) proceeds for dividend does not mean much as there is no special dividend. it can be used to pay regular dividend. 2) yes there is cash and receivable in books & stock price is reflecting that there are major defaults coming which i doubt the case given their customer size. people dont like the fact that they have debt and cash on books. Disclosure : I am vested
Posts: 888
Threads: 29
Joined: Feb 2013
Reputation:
16
The co's reason for the disposal of the property mgmt bizness is to focus on the other 2 core bizness - real estate agency business and financial services business. I think this cld be the mgmt's strategy to mitigate the less favourable economic and property mkt conditions in China(as compared to the previous stellar growth period).
From 2015 to 2017, the property mgmt segment's revenue ranged from $350m to $520m, whereas profit varied from $50m to $67m. However, in 2018, profit was just $38m on a revenue of $544m. The property mgmt business seems to be getting less attractive and anyway not as profitable as the other 2 segments.
As for its very profitable financial services segment, it was stated that “As at 31st December, 2018, the carrying amounts of loan receivables of HK$423 million were receivable in more than one year. The loans bear fixed interest rates ranging from 1% to 24% per annum." I wonder abt the risk profile of loan receivables warranting an interest rate north of 15%. Also, the effective interest rates on bank/other borrowings of up to 14.4% seems rather high to me.
In any case, Hopefluent's amt of trade receivables past 180 days seems to be very high compared agst our local Propnex and APAC Realty. However, I am not sure whether this is due to the different country "property business practices" or it is just super competitive business environment in China.
Though Hopefluent is trading at a much cheaper valuation than our 2 listed property agents, I think one has to consider the usual forex, custody fees, SGX lending fees, economic conditions in China.
Posts: 1,348
Threads: 42
Joined: Mar 2011
Reputation:
87
After two weeks of trading halt, 12% block of shares changed hands at HK$1.50 per share, triggering a MGO. Certainly a disappointing deal for opmi.
https://www1.hkexnews.hk/listedco/listco...803209.pdf
The low transacted price between the parties may perhaps be suggestive of the intrinsic value of Hopefluent, or the liquidity needs of the sellers.
The market is currently telling Fu and his concert parties that they will have to increase their offer, if they wish to privatise the company.
Posts: 888
Threads: 29
Joined: Feb 2013
Reputation:
16
06-05-2020, 07:24 PM
(This post was last modified: 06-05-2020, 07:27 PM by dreamybear.)
I am at a loss for words after reading the announcement. Why wld the vendors sell shares to Fu / parties at HK$1.50 ?
The company is profitable, trading at 0.4x PB, 2.4x PE, HK$2.46 net cash per share($2163m-$428m-$33m/670m).
Does this even make sense ???  Surely the vendors wld get a much better price selling in the mkt by waiting a while longer when economies gradually open(since premium was only +-10% previous price) or searching for other buyers.
Is there more to the company than meets the eye or something that opmi are unaware of ?
After reading various short sellers' reports on other companies, I am very apprehensive abt uncovered related parties/transactions. 
On the other hand, I guess from the pt of Fu, at this low price, it is probably the best time to increase his stake in the company to prevent any hostile takeover attempts since the company is grossly undervalued.
https://www1.hkexnews.hk/listedco/listco...003053.pdf [FY2019 Results]
https://www1.hkexnews.hk/listedco/listco...301234.pdf [AR 2019]
Posts: 1,348
Threads: 42
Joined: Mar 2011
Reputation:
87
It is possible that the vendors need liquidity to perhaps rescue their other investments. The low average daily traded volume of the stock will mean that the vendors will take too long, or depress the price too much, if they sold on the open market.
It is also possible that the vendors are getting out because they are seeing something that is 'wrong' in the company. Apart from the risks already mentioned in this thread, it does not seem likely that the company will engage in nefarious activities. But one can never tell.
Posts: 49
Threads: 1
Joined: May 2011
Reputation:
0
(06-05-2020, 07:48 PM)karlmarx Wrote: It is possible that the vendors need liquidity to perhaps rescue their other investments. The low average daily traded volume of the stock will mean that the vendors will take too long, or depress the price too much, if they sold on the open market.
It is also possible that the vendors are getting out because they are seeing something that is 'wrong' in the company. Apart from the risks already mentioned in this thread, it does not seem likely that the company will engage in nefarious activities. But one can never tell.
Cash is real if you go back and look at cash flow statements - Lot of it came from Poly ( investment) , Fang Holdings Investment & from sale of Property Management Business. Also I think from this year mainland Chinese investors have to pay tax on their Hong Kong investment so some of them want to repatriate back RMB (not Hopefluent specific). Liquidity has become an issue across the markets so seller may want to their raise cash levels.
Posts: 888
Threads: 29
Joined: Feb 2013
Reputation:
16
17-06-2020, 07:24 PM
(This post was last modified: 17-06-2020, 10:29 PM by dreamybear.)
Results of the unconditional Cash Offer : 23,784,002 shares or abt 3.53% of the total issued share capital accepted; 221,894,557 shares or abt 32.91% of the total issued share capital, are held by the public and satisfies the minimum public float requirement.
https://www1.hkexnews.hk/listedco/listco...700814.pdf
Sigh, why can't such documents be put in plain english ? I have to read at least 3 times to understand whether it is delisted or not. The document shd just put "Delisting - Succeed/Fail" or something like that for retail investor. The rest are secondary information. I wonder if there is a course teaching such jargons or understanding legal documents.
Any suggestions from buddies here ?
On the bright side, to my utter relief, I do not have to hug a teddy bear and cry thru'out the night. Yay.
The valuation is very cheap to me, and also I wld think the real estate mkt in China will recover quickly*, as property has always been very popular with the chinese(and singaporeans too !). As it is, so far, there's no profit warning yet. *fingers crossed*
* https://www.scmp.com/business/article/30...ies-triple
==============
"....While the COVID-19 outbreak has hindered the economy and the property market, as the international community has continued to strengthen measures to deal with the outbreak, the Group believes that the impact of the outbreak would not be long lasting. We also believe that the Chinese Central Government has the capacity to control and combat the virus and will launch initiatives such as the RMB25 trillion infrastructure investment to stimulate the economy which will be beneficial to the long-term development of the overall market. Moreover, the resumption of work and production in mainland and Hong Kong is in good progress, and we believe that the overall economy and the local residential property market will be slowly getting back on track after the outbreak..."
[ Midland Hldgs(1200.HK) AR2019 ] https://www1.hkexnews.hk/listedco/listco...701098.pdf
"....Since the beginning of 2020, the Novel Coronavirus epidemic has spread globally and presented severe challenges to all industries. the Group’s businesses were inevitably affected. Nonetheless, the Chinese economy has maintained a long-term upward trend. While the epidemic has affected the property market in the short-term, given that the epidemic will eventually come under control, the market will improve accordingly..."
[Hopefluent AR2019] https://www1.hkexnews.hk/listedco/listco...301234.pdf
|
Homepage
PR Newswire
