* data shows that as of the end of 2019, the total goodwill of A-share listed companies has reached 1.26 trillion yuan. A total of 504 listed companies have added goodwill in 2019, and 4 companies have added goodwill of more than 5 billion yuan; *More than 700 listed companies have made provision for goodwill impairment losses, with the total impairment loss reaching 129.4 billion yuan. Among them, 30 listed companies have goodwill impairment losses of more than 1 billion yuan; *The top three industries with the largest goodwill scale are medicine and biology, media, and computers, reaching 134.8 billion yuan, 124 billion yuan, and 105.7 billion yuan respectively; *For investors, how to identify the goodwill risk of listed companies and avoid "black swan" events in advance
"Investor Network" Cao Lu
For investors, the goodwill explosion incident has become a lingering problem of haze.
In recent years, with the rapid development of listed companies, more and more listed companies have chosen to expand their business territories through extended mergers and acquisitions. M&A and reorganization activities have been booming. However, behind the crazy mergers and acquisitions of listed companies, huge amounts of business have been difficult to deal with. The crisis brought about by reputation also looms. A large amount of goodwill is like a hanging sword to a listed company. Once a "goodwill explosion" occurs, it will not only have a significant impact on the company's net profit, but investors will also suffer heavy losses.
After the annual report season comes to an end, "Investor Network" specially launched the "Annual A-share Goodwill Alarm Bell List" special topic, which will sort out the changes in goodwill, industry distribution, etc. in recent years, and analyze the A-share listed companies. The absolute scale, increment, proportion of net assets, impairment losses and other aspects of goodwill are interpreted one by one to help investors identify the goodwill risks of listed companies and guard against goodwill becoming "damaged".
The total scale of goodwill is still at a high level
"Investor Network" According to Wind data statistics, judging from the listed companies that have released performance data in their 2019 annual reports, A-share goodwill is showing an overall growth trend. At the end of 2016, the total goodwill of A-share listed companies exceeded the trillion mark, reaching 1.05 trillion yuan; at the end of 2019, this number had reached 1.26 trillion yuan.
At the same time, the threshold for entering the top 100 of listed companies' goodwill list is also gradually increasing, rising from 1.431 billion yuan in 2015 to 2.347 billion yuan in 2019, while the threshold for the top ten has increased from 6.271 billion yuan in 2015. It rose to 13.992 billion yuan, more than doubling, which to a certain extent also shows that there are more and more large-scale mergers and acquisitions.
Although the total scale of goodwill is still at a high level and the threshold is increasing year by year, the overall growth rate has slowed down. Judging from the situation in the past five years, the growth rate of goodwill from 2015 to 2016 was relatively high, 95.51% and 61.00% respectively. However, judging from the overall trend, the overall growth rate has been declining year by year, and the growth rate even fell to -3.8% in 2019.
The medical and biological industry ranks first in goodwill
In terms of industry distribution, wind data shows that according to Shenwan's first-level industry classification, the top three industries with the largest goodwill scale are medical and biological, media, and computers, each reaching 1,348 billion, 124 billion yuan, and 105.7 billion yuan, accounting for 10.71%, 9.86%, and 8.40% of the total goodwill of A shares. It is worth mentioning that the goodwill scale of the three major industries exceeded 100 billion yuan at the end of 2016, and has since then stabilized in the top three.
In addition, industries with goodwill values exceeding 70 billion yuan include electronics, chemicals, non-bank finance, automobiles and other industries, with goodwill values of 86.8 billion yuan, 82.8 billion yuan, 78.6 billion yuan, and 77.4 billion yuan respectively.
Specifically, the total goodwill of the pharmaceutical and biological industry at the end of 2014 was only 38.9 billion yuan. After accelerating the mergers, acquisitions and reorganizations of many listed companies in the pharmaceutical sector, the total goodwill in the industry is also growing. This number has more than tripled in 2019, accounting for more than one-tenth of the total goodwill of A-share listed companies.
market analysis believes that the overall goodwill of pharmaceutical companies is at the forefront of the entire industry. This is related to the high valuation (high price-to-earnings ratio) of the pharmaceutical company industry and the need for mergers and acquisitions for expansion in large-scale industries such as pharmaceutical distribution, physical examination, and pharmacies. Through acquisitions, the price-to-earnings ratio is low. For enterprises, the company's growth rate and return on net assets will be significantly improved, showing higher growth.
As for the media industry where goodwill is high, since 2014, benefiting from relevant policy support and changes in media technology, the media sector has been favored by capital, and asset-light media companies have regarded "mergers, acquisitions and reorganizations" as a means of capitalization. One of the important channels, which also brings a lot of goodwill. . Wind data shows that the goodwill of the media sector exceeded 100 billion yuan at the end of 2015 and reached its peak in 2017 at 186.2 billion yuan.
For the computer industry, with the continuous evolution of the mobile Internet wave, mergers and acquisitions have become an important driver of industry development. Listed companies can quickly expand their market share through mergers, acquisitions and reorganizations, and enhance their competitiveness in R&D and branding. Data show that the total goodwill of the computer industry rose from 22.9 billion yuan at the end of 2014 to 105.7 billion yuan in 2019.
Chief Economist of Qianhai Open Source Fund Yang Delong previously wrote that media, pharmaceutical biology and computer industries are mostly small and medium-sized enterprises, so there are more mergers and acquisitions and reorganizations. Investors must carefully identify the risk of goodwill impairment, especially small and medium-sized start-up companies that may suffer significant impairment of goodwill, and must remain vigilant.
15 shares of goodwill exceeded 10 billion yuan
Judging from the absolute scale of goodwill in 2019, wind data shows that in 2019, 20 listed companies had goodwill of more than 5 billion yuan; 15 of them exceeded 10 billion yuan, and 6 of them exceeded 10 billion yuan. 20 billion yuan. The number of the two companies has not changed much compared with 38, 14 and 5 companies in 2018. Among the companies with more than 10 billion in goodwill, there are 13 companies listed on the main board and 2 companies listed on the small and medium-sized board.
Specifically, PetroChina's goodwill has firmly occupied the top spot in the past five years, with an absolute scale of more than 40 billion yuan, and goodwill in 2019 was 42.8 billion yuan; Weichai Power , Ping An of China, Guanghui Automobile The goodwill of three listed companies including has also remained among the top ten in the past five years, with 23.8 billion yuan, 20.9 billion yuan, and 18.9 billion yuan respectively in 2019; in addition, Midea Group , Haier Smart Home, HNA Technology, Tsinghua Unigroup has been in the top ten of the list for three consecutive years, with goodwill exceeding 13 billion yuan.
The two listed companies that have been shortlisted for the top ten for the first time in the past five years are the leading chip concept stock Wingtech and the media giant Century Huatong . The goodwill of the two at the end of 2019 was 22.7 billion yuan, respectively. 15.7 billion yuan, rankings rose by 219 and 13 places respectively. In addition, the goodwill of listed companies such as Jifeng Co., Ltd. and China Tianying has soared significantly, with their rankings jumping from the top 1,000 at the end of 2018 to the top 100 in 2019.
Wingtech Technology ranks first with an increase of 21.4 billion yuan in goodwill
"No acquisition, no goodwill", goodwill is not generated out of thin air. So, which companies are driving goodwill growth? According to
data, a total of 504 listed companies added new goodwill in 2019, totaling 126.5 billion yuan; 24 companies had new goodwill of more than 1 billion yuan, and 4 companies had new goodwill of more than 5 billion yuan. As far as industries are concerned, the increase in goodwill mainly comes from the electronics, chemical industry, public utilities and media industries. In the past year, the new goodwill has exceeded 10 billion yuan.
Among them, the stock with the highest increase in goodwill is Wingtech Technology , which was listed in 1996. In order to seize the development opportunities in emerging markets such as Internet of Vehicles and 5G, and achieve synergy in technology, customers and products, Wingtech acquired the world-renowned semiconductor IDM company Anshi Holdings in 2019, adding new goodwill 21.4 billion yuan.
Due to the acquisition and consolidation of Nexperia Group, Wingtech 's revenue and net profit increased significantly in 2019. Financial report data shows that the company's revenue in 2019 was 41.578 billion yuan, a year-on-year increase of 139.85%; the net profit attributable to shareholders of the listed company was 1.254 billion yuan, a year-on-year increase of 1954.37%.
Today, when the semiconductor industry has attracted much attention from the market, Wingtech Technology has leveraged this "expensive" acquisition and transformed into a semiconductor concept stock. It has also been favored by capital, and its stock price has been rising. It rose from 20 yuan per share at the beginning of 2019 to 171.88 yuan per share at the end of February 2020; since May 2020, the company's stock price has remained stable at around 100 yuan, with a market value of more than 120 billion yuan. Unlike
and Wingtech Technology , which "holds back a big move" in one fell swoop, Century Huatong, which ranks second in terms of growth, is a "major M&A player".In recent years, Century Huatong has quickly established its leading position in the gaming industry by acquiring a number of online gaming companies, completing the transformation from an auto parts giant to a gaming giant. But this series of operations also allowed the company to accumulate a huge goodwill of 15.3 billion yuan.
Industry insiders said that media industries such as games are asset-light companies, with a low proportion of physical assets. Huge assets are mainly concentrated in goodwill, but excessive goodwill can easily lead to the possibility of impairment. Data shows that Century Huatong’s owners’ equity in 2019 was 24.9 billion yuan, and goodwill accounted for more than 60%.
In addition, companies whose goodwill increased by more than 5 billion yuan include China Tianying and Suning.com, which increased by 5.204 billion yuan and 5.066 billion yuan respectively compared with the same period last year, both of which were caused by the implementation of mergers and acquisitions. The former completed the acquisition of 100% of the equity of Jiangsu Dezhan, thus achieving control of 100% of the equity of Spanish Urbaser, a leading overseas environmental protection company. The latter further improved its retail format through the acquisition of Carrefour China and Wanda Department Store.
18 shares of goodwill super net assets
Although goodwill is an inevitable product of listed companies' promotion of mergers and acquisitions, if a listed company suddenly accrues a large amount of goodwill, resulting in huge performance losses, investors will ultimately foot the bill. So, how should investors identify the goodwill risks of listed companies to avoid "black swan" events in advance?
In fact, the essence of goodwill impairment is investment losses caused by mergers and acquisitions completed at overvalued prices due to the performance of the invested target falling short of expectations. It can also be found from the annual report that the reasons for goodwill impairment are mostly "performance losses of the merger and acquisition target" or "performance commitments of the merger and acquisition target did not meet expectations."
For listed companies, the higher the ratio of goodwill to net assets (based on owner's equity, the same below), the greater the impact. In other words, a large absolute size of goodwill does not mean a high risk of goodwill impairment. For example, although PetroChina's goodwill scale is as high as 42.8 billion yuan, it only accounts for 2.96% of its net assets.
However, there are also many stocks where the ratio of goodwill to net assets remains high. "Investor Network" compiled data and found that in 2019, there were 95 companies with goodwill accounting for more than 50% of net assets, mainly concentrated in the media, medicine, computer and other industries, with 24, 15, and 12 companies respectively. Among the top 20 companies with goodwill ratios, 18 listed companies have goodwill that exceeds their net assets, and 6 companies have goodwill that is even more than four times their net assets.
Among them, Ziguang, the K12 education target, ranks first in the proportion of goodwill among A-shares. According to public information, Ziguang University’s predecessor was Xueda Education, which was once regarded as a benchmark case for China’s concept stocks to return to A shares. In 2016, it returned to A shares through Yinrun Investment (000526.SZ). Of course, this operation also required a lot of investment. It cost a lot of money. According to data from the
annual report, the book amount of goodwill of Ziguang University in 2019 was 1.528 billion yuan, of which the university education accounted for nearly 100%, while the company’s net assets were only 91 million yuan, and the goodwill was a full 16% of its net assets. twice as much. Its current net profit attributable to the parent company is only 14 million yuan. Once all or part of the goodwill impairment losses are accrued, it will undoubtedly be an unbearable burden.
An investment banker said that the relative size of goodwill can better reflect the potential risks to the company when goodwill is impaired. If the proportion of goodwill to net assets is too high, once a goodwill "black swan" event occurs, it will directly affect its net profit, and even cause the listed company's performance to change from profit to substantial loss in an instant, which is precisely what investors are difficult to guard against. investment risk.
Beware of goodwill becoming "damaged"
In recent years, there have been many cases of listed companies experiencing huge performance losses and plummeting stock prices due to impairment of goodwill. Incidents of goodwill explosions have become a lingering haze for investors. Since the goodwill of listed companies must be tested for impairment at least once a year, the impact of goodwill on performance is generally revealed in the annual report. Therefore, the annual reporting season also causes many investors to talk about the "discoloration" of goodwill.
"Investor Network" found based on Wind data statistics that more than 700 listed companies made provision for goodwill impairment losses in 2019, with the total impairment loss reaching 129.4 billion yuan. Among them, 30 listed companies have goodwill impairment losses of more than 1 billion yuan, and 9 companies belong to the media industry.
As can be seen from the "TOP20 Goodwill Impairment Loss in 2019", Wanda Movie became the largest goodwill impairment stock in 2019 with a goodwill impairment loss of more than 5.5 billion yuan, and ST Jinzhou's impairment loss exceeded 3 billion Yuan ranked second, followed by 9 companies including Aiglas , Fenda Technology, Yuheng Pharmaceutical, and Jinke Culture, with impairment losses exceeding 2 billion yuan each.
It is worth noting that the 20 companies on the list all ended 2019 with losses. Among the 19 listed companies with goodwill impairment losses exceeding 1.5 billion yuan, the amount of goodwill impairment of 9 companies was higher than their full-year net profit attributable to the parent company. This means that goodwill has become the main reason for the losses of these companies. If the impact of goodwill is excluded, the performance of these companies in 2019 will be profitable.
Taking the top-ranked Wanda Movie as an example, the annual report data shows that in 2019, the operating income of Wanda Movie was 15.435 billion yuan, a slight decrease of 5.23% from the previous year; the net profit attributable to the parent company was -4.729 billion yuan, A year-on-year decrease of 324.87% was the first loss in the past five years. The reason for
's huge losses is that in addition to the macroeconomic downturn, the overall slowdown in the film market growth, the continued intensification of theater competition, and changes in industry policies, the huge impairment of goodwill has become the biggest reason. "The impairment of goodwill is because these mergers and acquisitions failed to achieve performance expectations," Wanda Movie explained.
data shows that Wanda Film made goodwill impairment provisions of 5.575 billion yuan in 2019, accounting for more than 90% of the total asset impairment. This operation also directly dragged down the performance of the year. "Deducting the impact of asset impairment provisions, the company achieved a net profit of 1.141 billion yuan attributable to shareholders of listed companies." It is worth noting that after this provision, The goodwill balance of Wanda Movie is 8 billion yuan, still accounting for 56.61% of the net assets.
Due to the impairment of goodwill, the stock price of Wanda Movies will inevitably be affected. Since Wanda Film announced the goodwill impairment news on January 20, the stock price has fallen accordingly. The stock price fell from 22.15 yuan per share to 20.14 yuan on that day, and fell to a low of 14 yuan on February 4.
Coincidentally, the performance of the gaming company is also dragged down by goodwill. In the 2019 annual report, is responsible for its wholly-owned subsidiaries Hangzhou Souying, Beijing Thumb Play and . Technology has provided for goodwill impairment of approximately 907 million yuan, 182 million yuan, and 1.855 billion yuan respectively, with a total goodwill impairment loss of 2.96 billion yuan. This impairment directly caused Eglas to suffer a huge loss of 2.555 billion yuan.
html On May 19, Eglas announced that the company’s shareholders Julong Holdings and Julong Culture had reduced their holdings of 5.15 million shares in the company, accounting for approximately 0.28% of the company’s total shares; from May 31, 2019 From May 19 to May 19, 2020, the cumulative reduction of the company’s shares reached 5%, with a total reduction of 91.82 million shares.In fact, regulatory authorities have also strictly monitored the issue of goodwill impairment in recent years, and issued inquiry letters to companies that have made significant impairments of goodwill, requiring the company to supplement the disclosure of the amount of goodwill accrued this time. The specific content of the asset group, the process and method of goodwill impairment testing, the rationality of accruing large amounts of goodwill impairment, etc.
In recent years, high-premium acquisitions such as trend-following mergers and acquisitions of hot topics and blind cross-border mergers and acquisitions have become commonplace, resulting in huge amounts of goodwill. The huge amount of goodwill is like the Sword of Damocles hanging over the heads of listed companies. Once the sequelae of mergers and acquisitions such as goodwill impairment and performance collapse suddenly occur, investors will be caught off guard and suffer heavy losses.
Industry insiders said that goodwill impairment has a particularly significant impact on the stock price of specific stocks in the short term. Therefore, for companies with a high proportion of goodwill to net assets, or acquisition targets with more performance commitments due, especially the amount of performance commitments. For companies that account for a large proportion of net profits, investors should remain cautious. (Produced by Think Finance) ■
