The Secret Of "AMC Entry" Of Private Listed Companies: 100% Gross Profit Margin Seduces A Capital Reverse Cycle.

"Yes, some companies do not open for one or two years, but they eat for three years. Once they encounter big projects, the rate of return will be very high, so people feel that this is a relatively high profit industry, but there are also some small items, but they can only survive." An organization in Beijing said when interviewed.

At present, the disposal industry of non-performing assets has quickly become the arena of all kinds of capital. The original four big AMC monopoly is evolving into a diversified pattern of "4+2+N+ banking system".

Among them, "4" refers to four major Asset Management Co of China Huarong, China XinDa, Oriental capital management and the Great Wall management. "2" refers to the gradual exposure of local non-performing assets. Each province can set up two state assets AMC, and the "banking department" is the AMC institution established by the bank. "N" refers to a large number of private licensed or unlicensed AMC.

On the one hand, the scale of non-performing loans is rising and local debts are gradually increasing. On the other hand, a large number of state-owned AMC institutions will transfer their bad assets packages to foreign countries, so that many private AMC institutions are springing up like mushrooms.

According to the twenty-first Century economic report survey, some claims were transferred to the private sector in just a few months after being acquired by AMC institutions, and there was a huge contrast with the handling period of 3 to 4 years in practice.

These vultures, who feed from the carrion, dig out the rich nutrition by disposing of the bad assets and revitalizing the stock assets. This industry chain is gradually clear.

Among them, more and more A share companies are emerging.

Although the private AMC company is small in scale, it has a flexible approach, a high degree of marketization, and obvious advantages of professional characteristics. It has become an effective supplement to the licensed institutions such as the four major banks and local state-owned AMC. In November 15th, an investor from a private equity firm in Southern China said that it had been interviewed.

Rush to capital market

There are many private AMC leading enterprises in the industry, and many listed companies are also involved in this kind of business.

According to incomplete statistics of twenty-first Century economic report reporters, there are up to 13 listed companies in the A share market, which are related to the disposal of non-performing assets or their stake. Among these enterprises, there are many companies involved in asset management, such as Yuexiu gold control, and many other companies that have been involved in business transformation, acquisition and reorganization.

Among them, Hyde shares, Ji AI technology and Moen electric and other companies transformation is the most typical.

Hyde shares were originally a real estate developer. Due to the sluggish real estate business, Hyde shares have been compressing the real estate business since the second half of 2014, seeking transformation. In 2015, Hyde shares set up Hyde Asset Management Co., Ltd. (short for "Hyde assets"), with a capital volume of 1 billion yuan, which determined the business scope of non-performing assets acquisition, trustee management and disposal.

In January 2018, following the increase of 3 billion 800 million yuan in Hyde's assets, Hyde shares officially changed its main business from real estate development to non-performing assets management business.

The main sources of earnings of Hyde are the acquisition, management and disposal of non-performing assets with its own funds, and the management fees for the third party when the third party funds are used to operate the non-performing assets; and the Commission for the Commission of bad assets.

As of June 30, 2019, Hyde shares carried out (including disposal) non-performing assets business 9 billion 549 million yuan, the scale of the assets of the stock project 3 billion 944 million yuan. In the first half of 2019, the company achieved an income of 184 million 775 thousand and 600 yuan in asset management business.

Another industry leader, Jai technology, chose to invest 1 billion yuan in the end of 2016 to set up Xinjiang Jichuang Asset Management Co., Ltd., seeking to transform AMC business.

Up to now, the traditional oil service sector of Ji AI technology has been continuously stripped by the company due to its huge losses.

The AMC business segment has become the main source of company performance, accounting for 97% of total revenue.

The AMC business of Ji AI technology mainly includes the management, evaluation, acquisition, disposal and management of special opportunities assets, restructuring services of troubled enterprises, debt to equity swap Services and so on. According to the different ways of service, the company mainly divides AMC business into three major categories: management services, reorganization services and acquisition and disposal.

As at 2019, according to the statistics stated in the contract, the total assets of the financial special assets held and managed by the company's AMC business totaled 38 billion 670 million yuan (of which the total assets of self-supporting assets amounted to 17 billion 838 million yuan, and the total assets of management services were 20 billion 832 million yuan).

By the end of 6 in 2019, the scale of the assets that had been effectively resolved and disposed by Ji AI technology had been accumulated to 8 billion 101 million yuan, and the remaining self-supporting assets totaled 15 billion 38 million yuan, and the total assets of the management services category amounted to 15 billion 530 million yuan.

Moen electric mainly invested in the collection and disposal of bad assets through its investment in moan. It only accounted for a relatively small amount. In the first half of 2019, Moen Electric's bad assets disposal service revenue was only 792 thousand and 400 yuan, accounting for 0.45% of the total revenue.

The rise and fall of folk AMC

As early as 1999, the State Council established China Huarong, China XinDa, Oriental capital management and the Great Wall information management (hereinafter referred to as the "four largest") to solve the problem of non-performing loans among the four state-owned banks of industry, agriculture, China and construction.

Since then, a trillion level market has begun.

According to public data, the initial statistics on disposal of non-performing assets in 2018 were as high as 2 trillion, of which 988 billion yuan was written off, and about 420 billion yuan was transferred through packaging, and hundreds of billions of dollars were disposed of through debt to equity swap. According to the data of the CIRC, the balance of non-performing loans of commercial banks was 2 trillion and 370 billion yuan as at the end of the three quarter of 2019.

With the change of industry policy environment, macroeconomic growth and downlink, trade friction and other factors, the scale of non-performing assets has increased, and the scale of private AMC institutions has been growing, attracting many capital inflows.

"Now the ecological circle of non-performing assets disposal has been continuously improved, and a mature industrial chain has been formed, including the business of early stage adjustment, assessment, third party services, capital allocation and so on, and the specialization degree is higher and higher." In November 14th, a Beijing law firm and a bad Asset Management Co employee were interviewed.

At present, around the non-performing assets industry, the whole industry chain supporting suppliers including law firms, clearing teams, property operation companies, Real Estate Company, investment banks and funds have been realized.

"Now the independent third party service providers in the market are very mature. In addition to their own projects, after the open of the non-performing assets package, they can help the four or other AMC to go to the scene to stay in the spot, do surveys and make full reports. In the later resale process, the service providers can also help the upstream licensees to promote." The above Beijing practitioners said.

Specifically, the type of business of private AMC institutions is mainly through the agreement transfer or market bidding way to undertake non-performing assets package, including bonds, equity, physical objects and so on.

For creditor's rights assets, the usual disposal methods include asset replacement, debt collection, sale of creditor's rights, etc., and can also be converted into the equity of the target enterprise through debt to equity swap.

For equity assets, the general exit methods include buyback, auction, equity replacement and so on. For physical assets, income can be generated through direct transfer, lease or direct operation.

"At present, the most common operation in the market is to resell, excavate the clues of the debtors' property, and get excess returns through asymmetric information, especially the local information asymmetry is the most obvious, so the regional characteristics of the private AMC institutions are very obvious." The above Beijing practitioners pointed out.

"Generally speaking, the assets of the first tier cities such as the north, Guangzhou and Shenzhen are very well handled. After penetrating, it is nothing more than land, factories and so on. The liquidity is very good. These banks or four big companies have done their own, and the bad assets packages that are usually transferred out are mainly the assets of the three or four line cities, with poor liquidity, so the local AMC institutions will have more advantages." It further adds.

Complementing each other with regional characteristics, in the different regions, the more developed private economy, the more active non licensed AMC institutions, and the most frequently traded non-performing assets in southeast coastal provinces such as Guangdong, Jiangsu, Zhejiang and Shandong.

"This is actually very well understood. In the developed areas of private economy, lending activities are most active, and the number of small and medium-sized enterprises is large. Such assets are disposed of with strong liquidity, because whether there are sites, factories or equipment, there are a large number of enterprises of the same type to purchase, which is very good to revitalize." The above Beijing practitioners said.

Gross margin reached 100%

It is worth mentioning that the AMC industry has gained such a high degree of market concern, leaving no impression on the outside world that "huge profits" and "market prospects can be expected".

From the above listed companies, it is easy to see that the gross profit margin of AMC business is relatively high. Among them, Haide stock and Moen electric, the gross profit margin of disposal of bad assets in the first half of 2019 is 100%. In the first half of this year, Ji Yi technology is still in the initial stage of disposal because of some acquisition and disposal projects, and its gross profit margin has fallen by more than 8.6 percentage points over the same period last year, but the gross profit margin is still 54.03%.

However, from the perspective of current industry participants, the survival status of the industry is not as optimistic as the outside imagination. Instead, it faces many challenges.

"It is true that some companies do not open for one or two years, but when they open for three years, once they encounter big projects, the rate of return will be very high, so people feel that this is a relatively high profit industry, but there are also some small items that can only survive. Each organization has a lot of differences in its style and the ability to take projects, and assets are pushed back to the bottom. The core problem is to transfer this thing out, someone has to pick up it and test the company's ability to integrate. The above Beijing practitioners pointed out.

In fact, in recent years, with the downturn in the real estate industry and macroeconomic reasons, many non-performing assets industry has seen growth stall.

In 1-9 months of 2019, Ji AI's net profit dropped by more than 30% compared to the same period, of which the net profit in the third quarter decreased by 77.34%.

Ji AI technology pointed out that the reasons for the decline in performance include: "compared with the same period last year, the increase in bank loans during the reporting period and the decrease in the transfer of equity transfer resulted in a decrease in the surplus income generated during the reporting period compared with the same period last year, which led to an increase in financial costs. Under the influence of the big environment, the disposal schedule of the sub division projects was lower than expected, resulting in a larger increase in the impairment preparation than the same period last year".

In August of last year, the East Rong Group, which manages assets of over 6 billion yuan, was faced with the predicament of liquidity exhaustion. The arrears were as high as 7 billion 600 million yuan. The founder, Ye Zhen, issued an open letter urgently, saying that he would never take the road to pay his debts.

Behind all these crises, there are many irrational factors in the bad assets industry, which came into being with the capital crazily pouring into -2017 in 2015. Subsequently, many AMC organizations took up thirty percent off of the assets and took up the "high price", which led to the "price war" intensive competition.

"2017, 2018, the price of non-performing assets has been fired up too high. We bought the asset package at a price of 70 percent off, which is a normal level. But you are more than forty percent off, thirty percent off or even higher, and there is little profit space, especially now that the economic downturn has reached a consensus. The rate of real estate racket is very high. You have bought a pile of assets and have no way to cash in, and the financing period has arrived, so there is a lot of losses." A lawyer with bad assets in Southern China said.

Sun Jinju, a securities analyst at new era, points out that with the policy dividend subsiding and the spread of interest in the disposal phase of non-performing assets is shrinking, the comprehensive disposal efficiency of non-performing assets will replace the carrying capacity in the future under the full market competition environment. That is to say, how to deal with the premium with reasonable low price acquisition and efficient means will become the core competitiveness of the industry company.

The above Beijing practitioners also added that in recent years, as asset information becomes more transparent and market competition is becoming more and more intense, relying on traditional information asymmetry, profit margins are becoming smaller and smaller. We must rely on professional integration services such as assessment and processing to transform and revitalize assets in order to get more excess returns.