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On the evening of March 28, Seazen Holdings (601155. SH) disclosed its 2023 annual report, during the reporting period, the company's revenue increased by 3.22% year-on-year, and the net profit attributable to the parent company fell by 47.12% on the basis of the sharp decline in 2022, hitting a new low since listing. Among them, Q4 reversed the profit trend in the first three quarters, with a substantial loss of 1.741 billion yuan.
Under the dual-driven model of real estate development and commercial management, Seazen Holdings' property leasing and management business has shown double-digit growth with the rapid expansion of Wuyue Plaza. However, the industry is in a trough period, and there are constantly "thunderstorms" of real estate companies, and the sales of commercial housing of Seazen Holdings are hardly optimistic.
On the other hand, due to doubts about the ability to continue operations, the auditor issued an unqualified opinion with an emphasis paragraph on the annual report of Seazen Holdings, which is behind the heavy debt pressure faced by the company.
In the secondary market, the share price of Seazen Holdings has corrected today. As of the closing price of 9.49 yuan, down 3.16%, the current total market value is 21.4 billion yuan.
In 2023, the revenue will increase and reduce profits, and large impairments will eat into profits
Seazen Holdings is located in the real estate industry, and its main business is real estate development and sales, and its business model is mainly independent development and sales. The Company's real estate development business includes residential real estate development business and commercial real estate development business. During the reporting period, the company adhered to the two-wheel drive operation mode of "residential + commercial", with Shanghai as the center and the Yangtze River Delta as the core, and has basically completed the layout of key urban agglomerations and key cities across the country. As of the end of the reporting period, Seazen Holdings has entered 147 cities across the country.
According to the annual report data, in 2023, Seazen Holdings' revenue will stop falling and rebound, achieving operating income of 119.174 billion yuan, a year-on-year increase of 3.22%.
In contrast to revenue, Seazen Holdings' profit side is under pressure. In 2023, Seazen Holdings will achieve a net profit attributable to the parent company of 737 million yuan, a year-on-year decrease of 47.12%, and a net profit of 307 million yuan after deducting non-profits in the same period, a decrease of 57.73%.
Seazen Holdings said that there are two main factors for the decline in net profit compared with the same period in 2022, on the one hand, due to the overall market environment and the structural changes of carry-over projects, the gross profit amount of the company's real estate projects carried forward during the reporting period decreased compared with the same period last year;
In recent years, the real estate market has been deeply adjusted, and the entire industry is dynamically clearing. In 2021, under the mechanism of "housing for living, not for speculation", the industry will gradually return to residential attributes. This has also led to a significant decline in the scale of land transactions, with the scale of commercial residential transactions in 2022 falling by nearly 30% year-on-year. As a result, real estate crises are frequent, and large-scale real estate enterprises have entered the stage of shrinking their balance sheets and clearing their balance sheets, survival of the fittest, and their business has continued to shrink.
In the above context, the performance of Seazen Holdings has retreated again and again. In 2021 and 2022, its revenue will be 168.232 billion yuan and 115.457 billion yuan respectively, with a growth rate of 15.64% and -31.37%, and the corresponding net profit attributable to the parent company will be 12.598 billion yuan and 1.394 billion yuan, with a decrease of 17.42% and 88.94% respectively. Although the profit level in 2023 is still above 100 million yuan, it has fallen to a historical low, leaving only a fraction of the profit in 2021.
It should not be overlooked that large impairments "eat" into annual profits. In 2023, Seazen Holdings will make a total of 6.355 billion yuan of impairment provisions for various assets, including a total of 791 million yuan for bad debts and financial guarantees, and a total of 5.563 billion yuan for inventory decline, both of which are at historical highs.
On a quarterly basis, Q4 performance dragged down the annual profitability. From Q1 to Q3, Seazen Holdings recorded revenue of 16.252 billion yuan, 25.516 billion yuan and 29.511 billion yuan respectively, and the corresponding net profit attributable to the parent company was 658 million yuan, 1.62 billion yuan and 199 million yuan. Q4 revenue was 47.895 billion yuan, a new high in a single quarter of the year, but the net profit attributable to the parent company was 1.741 billion yuan.
Weak sales
Among the main business income, Seazen Holdings' real estate development and sales achieved operating income of 107.336 billion yuan in the current period, a year-on-year increase of 2.34% over 2022, and the company's property leasing and management achieved operating income of 10.631 billion yuan, a year-on-year increase of 15.26%, mainly due to the increase in the number of Wuyue Plazas opened.
As of the end of the Reporting Period, Seazen Holdings had 198 Wuyue Plazas in 135 cities across the country, with 161 of them in operation and entrusted management, with an opening area of 14,991,100 square meters and an occupancy rate of 96.48%, ranking first among listed companies in mainland China in terms of the number of shopping malls opened. In 2023, Seazen Holdings will achieve a total income of 11.324 billion yuan from commercial operations, including tax, rental income, a year-on-year increase of 13.17%. The company plans to achieve a total revenue of 12.5 billion yuan from commercial operations in 2024, with the newly opened Wuyue Plaza and 12 projects entrusted to manage.
However, in the context of major changes in the relationship between real estate supply and demand, the real estate industry is experiencing an unprecedented deep adjustment cycle. The sales amount and sales area of commercial housing across the country continued to decline, the pressure of destocking continued to rise, the land market operated at a low level, and development investment further contracted.
In 2023, the sales amount and sales area of commercial housing across the country will continue to decline, but the decline will be narrowed, of which the sales amount of commercial housing will be 11.7 trillion yuan, down 6.5% year-on-year, a new low in the past eight years, and the sales area of commercial housing will be 1.12 billion square meters, down 8.5% year-on-year.
In 2023, Seazen Holdings will achieve a contracted sales area of 9,687,800 square meters, a year-on-year decrease of 18.69%, and a contracted sales amount of 75.983 billion yuan, a year-on-year decrease of 34.52%. In 2022, Seazen Holdings will achieve contracted sales of 116.049 billion yuan and a sales area of 11.9152 million square meters, a sharp decrease of 50.36% and 49.4% respectively.
The sluggish sales situation has not improved so far. From January to February this year, the cumulative contracted sales amount of Seazen Holdings was about 7.711 billion yuan, a year-on-year decrease of 43.24%, and the cumulative sales area was about 1.0823 million square meters, a year-on-year decrease of 32.37%.
Xincheng Holdings said that the real estate industry is still in the risk clearance period, although the favorable policies continue to release a certain positive effect, but the transmission of the policy still takes time, the confidence of buyers and the repair of industry expectations will take time, it is expected that the sales downturn will be difficult to reverse in the short term, and the sales of real estate enterprises will continue to be under pressure.
Sales proceeds are the most important source of supplementary funds for real estate companies, but the sharp decline in contracted sales amount means that the sales proceeds of Seazen Holdings have also decreased. Financial data show that in 2023, the accounts receivable of Seazen Holdings will reach a new high, reaching 666 million yuan, a year-on-year increase of 31.77%.
Debt is under pressure, and the annual report is "non-standard"
The auditor, PricewaterhouseCoopers Zhongtian, issued an unqualified opinion on the 2023 financial statements of Seazen Holdings that contains a paragraph of material uncertainty related to continuing operations.
PricewaterhouseCoopers Zhongtian pointed out in the audit report that due to the impact of the downturn in the domestic real estate market, the sales collection and pre-sale performance of Seazen Holdings' real estate properties declined year-on-year. By the end of 2023, Seazen's current liabilities exceeded current assets by RMB17.793 billion, and the balance of interest-bearing liabilities related to short-term borrowings, non-current liabilities due within one year and other current liabilities totaled RMB21.237 billion. During the same period, the balance of monetary funds was 18.971 billion yuan, including 6.15 billion yuan of restricted funds. The above matters indicate that there are significant uncertainties that may give rise to significant doubts as to Seazen's ability to continue as a going concern.
In order to alleviate the financial pressure, Seazen Holdings has carried out several financings last year. For example, Seazen Global, an overseas subsidiary, completed the issuance of US$100 million in unsecured fixed-rate bonds, 1.1 billion yuan of corporate bonds and two 850 million yuan medium-term notes, and also issued a green CMBS with a scale of 1.316 billion yuan. Through Wuyue Plaza as collateral, Seazen Holdings also obtained operating property loans and other financing of about 14 billion yuan.
On March 27, the board of directors of Seazen Holdings deliberated and approved the "Proposal on Borrowing from Related Parties", which intends to apply for a total loan amount of no more than 15 billion yuan from the indirect controlling shareholder Seazen Development and its related parties, with an annual interest rate of no more than 8%. As of the end of February 2024, Seazen Holdings has used the balance of outstanding borrowings of 6.743 billion yuan.
Seazen Holdings said that in view of the fact that the real estate development industry is a capital-intensive industry, in the current environment of overall pressure on the industry, sufficient funds are conducive to ensuring the long-term sustainable development of the company.
As of the end of 2023, Seazen's distributable profit at the end of the period was 7.61 billion yuan. However, the company has not yet opted for dividends. Seazen Holdings said that this move is to protect the company's operating ability and solvency and reduce financial risks. The retained undistributed profits will be used for daily operations, debt repayment, liquidity replenishment and other purposes in accordance with the company's development strategy and annual work plan. This is also the third consecutive year that Seazen Holdings has not paid dividends since 2021.
Real estate leader Vanke A (000002.SZ) will also break the 31-year dividend practice in 2023. At the performance promotion meeting held today, the secretary of the board of directors of Vanke said that Vanke has paid dividends of 103 billion yuan for 31 consecutive years, with a historical average dividend rate of 33.3%, which is also 2.8 times of Vanke's equity financing over the years, which is also something we have always been proud of. Based on this background, it was really difficult for the board of directors to consider canceling the 2023 dividend. (This article was first published in Titanium Media APP, author: Lu Wenyan)