Source: China Economic Network
China Economic Network Beijing June 15th News Recently, Shenzhen Stock Exchange issued a letter of restructuring inquiry for Guangdong Hydropower Second Bureau Co., Ltd. (licensing restructuring inquiry letter [2022] No. 8). On June 2, Guangdong Hydropower Second Bureau Co., Ltd. (hereinafter referred to as "Yuan Hydropower", 002060.SZ) issued a report on issuing shares to purchase assets and raise supporting funds and related transactions (draft). The
draft shows that the listed company plans to purchase 100% of the equity of Construction Group held by Construction Holdings through the issuance of shares. According to the "Target Asset Appraisal Report" issued by Zoomlion Evaluation, as of the appraisal base date, the appraisal value of all shareholders of Construction Engineering Group was 10.797 billion yuan. As a provincial enterprise in Guangdong Province, Construction Engineering Holdings must pay state-owned capital income to the Guangdong Provincial Department of Finance. Since Construction Engineering Group is an important operating entity under Construction Engineering Holdings, on May 27, 2022, Construction Engineering Holdings made a shareholder decision to review the profit distribution plan of Construction Engineering Group, and Construction Engineering Group distributed 300 million yuan in cash dividends to Construction Engineering Holdings. Based on the above evaluation results and comprehensively considering the amount of cash dividends of Construction Engineering Group in the future, after consultation between the listed company and the counterparty, it was determined that the transaction price of 100% equity of Construction Engineering Group was 10.497 billion yuan. After the completion of this transaction, Construction Engineering Group will become a wholly-owned subsidiary of a listed company.
The counterparty of this restructuring transaction is Jiangong Holdings, which is the controlling shareholder of the listed company. Therefore, Construction Engineering Holdings is an affiliate of a listed company. According to the relevant provisions of laws, regulations and normative documents such as the "Restructuring Management Measures" and "Listing Rules", this transaction constitutes an associated transaction.
In this transaction, the listed company purchased assets by issuing shares. The type of shares involved is RMB common shares A shares , with a face value of 1.00 yuan per share, and the listing location is the Shenzhen Stock Exchange.
The target asset of this transaction is 100% equity of Construction Engineering Group. The transaction price of the target assets this time is based on the evaluation results of the target assets by Zoomlion and determined by negotiation between the two parties to the transaction. The evaluation report filed by the Guangdong Provincial State-owned Assets Supervision and Administration Commission issued by Zhonglian Evaluation uses the income method and the asset base method to evaluate the total equity value of the shareholders of Construction Engineering Group, and the income method evaluation results are used as the final evaluation conclusion.
takes December 31, 2021 as the evaluation base date, and the appraisal value of all shareholders of Construction Engineering Group is 10.797 billion yuan. Compared with the consolidated financial statements corresponding to the 100% equity of Construction Engineering Group on December 31, 2021, the appraisal value-added rate is 107.08%. After the evaluation base date, Construction Engineering Holdings reviewed and approved the profit distribution plan of Construction Engineering Group and distributed 300 million yuan in cash dividends to Construction Engineering Holdings. Based on the above evaluation results and comprehensively considering the cash dividend amount of Construction Engineering Group in the future, after negotiation between Guangdong Hydropower and the counterparty, it was determined that the transaction price of 100% equity of Construction Engineering Group was 10.497 billion yuan. After the completion of this transaction, Construction Engineering Group will become a wholly-owned subsidiary of a listed company.
As of December 31, 2020 and December 31, 2021, the book value of accounts receivable of Construction Engineering Group was 9.638 billion yuan and 13.705 billion yuan, respectively, accounting for 21.57% and 24.75% of the total assets, accounting for 18.84% and 22.17% of the current operating income, respectively. At the end of 2021, the net accounts receivable increased by 4.067 billion yuan compared with the end of 2020, an increase of 42.19%. In addition, as of December 31, 2021, the book balance of accounts receivable by Construction Engineering Group was 14.57 billion yuan, bad debt reserves were 3.865 billion yuan, and set aside was 5.94%.
As of December 31, 2020 and December 31, 2021, other receivables of Construction Engineering Group were RMB 6.945 billion and RMB 6.60 billion, respectively, accounting for 15.54% and 11.92% of the total assets, respectively, and the amount and proportion showed a slight downward trend. At the end of each period of the reporting period, the specific situation of other receivables of Construction Engineering Group is as follows:
Shenzhen Stock Exchange pointed out that at the end of 2021, the other receivables of Construction Engineering Group were 6599.6314 million yuan, of which 3.049 billion yuan of equity transfers arising from the divestiture of assets, accounting for 42.45%, and other units received 2.535 billion yuan of payments, accounting for 35.30%.
report shows that the balance of accounts receivable by Construction Engineering Group at the end of 2021 was 14.57 billion yuan, and the provision of bad debts was 865.3903 million yuan, with a provision of 5.94%. The net accounts receivable increased by 4.067 billion yuan compared with the end of 2020, an increase of 42.19%, accounting for 22.41% of Construction Engineering Group's total assets. The main reason is the further expansion of the scale of construction business. At the end of 2021, the total proportion of the transaction subject receivables (including accounts receivable and receivable financing) and contract assets accounted for more than 30% of the operating income. The appraisal of the transaction subject assets showed that the construction project construction cycle was shortened, and enterprises accelerated their recovery of project funds.
The following is the original text:
Letter for restructuring inquiry letter to Guangdong Hydropower Second Bureau Co., Ltd.
Letter for licensing restructuring inquiry letter [2022] No. 8
Board of Directors of Guangdong Hydropower Second Bureau Co., Ltd.:
On June 2, 2022, your company directly disclosed the "Report on Issuing Shares to Purchase Assets and Raising Supporting Funds and Related Transactions (Draft)" (hereinafter referred to as the "Report"). Our department conducted a post-examination of the above disclosed documents and now provides feedback on the following opinions:
1. Regarding the transaction plan
1. The report shows that on December 1, 2021, the Guangdong Provincial State-owned Assets Supervision and Administration Commission transferred 90% and 10% of the equity of the transaction target (hereinafter referred to as "Construction Engineering Group") held by the Provincial Government and the Provincial Department of Finance to the counterparty Guangdong Construction Engineering Group Holdings Co., Ltd. (hereinafter referred to as "Construction Engineering Holdings") free of charge. Before this free transfer, the investor of Construction Engineering Group was the Guangdong Provincial State-owned Assets Supervision and Administration Commission and the Guangdong Provincial Department of Finance, and Construction Engineering Holdings was a wholly-owned subsidiary of Construction Engineering Group; after this free transfer, the investor of Construction Engineering Holdings was changed to the Guangdong Provincial State-owned Assets Supervision and Administration Commission and the Guangdong Provincial Department of Finance, and Construction Engineering Group was changed to the wholly-owned subsidiary of Construction Engineering Holdings. On December 2, 2021, Construction Engineering Holdings made a shareholder decision, agreeing to reduce the registered capital of Construction Engineering Group from RMB 9375.905 million to RMB 290 million. Please ask your company:
(1) Based on the main assets and operating conditions of Construction Engineering Group before and after the free transfer, explain the main considerations for making relevant arrangements, whether it is conducive to the business development of Construction Engineering Group and thus safeguarding the interests of listed companies.
(2) Explain the actual amount of capital paid by Construction Engineering Holdings to Construction Engineering Group so far. Before planning this transaction, the main considerations of Construction Engineering Group's capital reduction, the purpose of capital reduction funds and the actual completion status, and whether the capital reduction matters are conducive to maintaining the stability of production and operation and business development of Construction Engineering Group.
Please check and express clear opinions on the independent financial advisor.
2. The report shows that after the completion of this transaction, your company's 2021 related sales preparation amount will be 3518.9535 million yuan, an increase of 162.96% compared with before this transaction, and the operating income preparation amount will be 7599.60677 million yuan, an increase of 429.17% compared with before this transaction. Please:
(1) Explain the amount, proportion and gross profit margin of the corresponding related income of Construction Group's engineering construction business during the reporting period, and whether there is a big difference with the gross profit margin of the engineering construction business provided by Construction Group to other non-affiliated parties and the related businesses of comparable listed companies in the same industry. At the same time, based on the background of related transactions, project acquisition methods, pricing basis, charging model, etc., explain whether the relevant related transactions are fair and reasonable.
(2) Explain whether the new orders of Construction Engineering Group during the reporting period mainly come from related parties and whether there are major related parties dependence.
(3) Based on the reply to the above questions, analyze and explain whether this transaction complies with Article 11 (6) of the "Management Measures for Major Asset Restructuring of Listed Companies in " and Article 4 (4) of the "Regulations on Standardizing Major Asset Restructuring of Listed Companies in ".
Please verify and express clear opinions from independent directors and independent financial consultants.
3. The report shows that some divested assets such as real estate have not completed the transfer registration procedures due to objective circumstances. If the above-mentioned divested assets fail to promptly complete the registration procedures for the right holder change or other matters related to the above-mentioned divested assets, the Construction Engineering Group or the listed company suffers any losses after this transaction, Construction Engineering Holdings promises to provide compensation.Please explain the progress of the relevant asset divestiture so far, the specific reasons and resolution period for not registering, whether there are substantial obstacles, the liquidation status and plans of relevant accounts receivable, if the divestiture of real estate and other related assets cannot be completed, the subsequent promotion arrangements for this transaction, and fully remind the relevant risks. At the same time, please follow the requirements of "Guidelines for Supervision of Listed Companies No. 4 - Commitments of Listed Companies and their Related Parties" to further clarify the performance methods and performance deadlines of relevant commitments. Please ask an independent financial consultant or law firm to verify and express clear opinions.
2. Regarding the transaction subject
4. At the end of 2021, the other receivables of Construction Engineering Group were RMB 6599.6314 million, of which 3049.1668 million yuan of equity transfer funds arising from asset divestiture and restructuring were RMB 304.91668 million, accounting for 42.45%, and other units had RMB 253.53814 million, accounting for 35.30%. Please:
(1) Explain the specific situation of the equity transfer payments and other units' transactions, including but not limited to the background, date of occurrence, amount of occurrence, nature of the transaction, counterparty and related relationship with your company, whether it may constitute external financial assistance or non-operating funds occupation.
(2) At the end of 2021, the balance of bad debt reserves for other receivables in Construction Engineering Group was RMB 582.8262 million, accounting for 8.11% of the book balance of other receivables. Please explain whether the provisions for bad debts of other receivables are sufficient and reasonable based on the circumstances of other receivables, the previous recovery situation and the actual loss of bad debts of , the expected recovery arrangements, the funds and credit status of the main counterparty, etc.
Please ask independent financial consultants and audit institutions to verify and express clear opinions.
5. The report shows that the balance of accounts receivable by Construction Engineering Group at the end of 2021 was 14570.4564 million yuan, and the provision of bad debts was 865.3903 million yuan, with a provision of 5.94%. The net amount of accounts receivable increased by 4066.8433 million yuan compared with the end of 2020, an increase of 42.19%, accounting for 22.41% of the total assets of Construction Engineering Group. The main reason is the further expansion of the scale of construction business. At the end of 2021, the total proportion of the transaction subject receivables (including accounts receivable and receivable financing) and contract assets accounted for more than 30% of the operating income. The appraisal of the transaction subject assets showed that the construction cycle of the construction project was shortened and the company's recovery of project funds accelerated. Please:
(1) Explain the specific reasons for the significant increase in the relevant accounts receivable, whether it mainly comes from related transactions, the expected repayment arrangements and deadlines of relevant funds, and analyze the adequacy and rationality of the provisions for bad debts of accounts receivable based on the willingness and ability of the main counterparty to perform the contract.
(2) Please explain the main reasons and rationality of the significant increase in the receivables and the proportion of revenues in the high proportion of revenue based on the specific situation of the shortening of the construction project cycle span and the acceleration of the enterprise's project recovery project funds, and explain whether the changes in receivables are consistent with the changes in operating cash inflows.
Please ask independent financial consultants and audit institutions to verify and express clear opinions.
6. The audit report of the transaction subject matter shows that as of the end of 2021, the balance of advance payments with an account age of more than one year and an important amount was 66.8969 million yuan. The reasons for failure to settle in time are "not meeting the settlement conditions." Please explain the nature and specific content of the relevant advance payment, the reasons why the settlement conditions have not been met, the relationship between the counterparty and your company's controlling shareholder, actual controller, directors, supervisors, and senior management, and whether the relevant funds constitute financial assistance or the non-operating funds occupied by your company after the completion of this reorganization.
Please ask independent financial consultants and audit institutions to verify and express clear opinions.
7. The report shows that although the articles of association of the Construction Engineering Group, which is currently applicable to Construction Engineering Holdings and approved by the Guangdong Provincial State-owned Assets Supervision and Administration Commission, stipulate that the company's operating period is permanently existing, as of the date of signing this report, the operating period in its industrial and commercial registration is "August 4, 2021 to December 1, 2022". Although the counterparty is promoting the change of the operating period and is expected to be completed before the expiration of the operating period, there is still a risk of failure to change as scheduled. Please explain the progress of the relevant matters as of the date of reply, whether there is a risk of failure, and make major risk warnings.Please ask an independent financial consultant or law firm to verify and express clear opinions.
8. The report shows that Construction Engineering Group provides guarantees to Foshan Construction Construction Technology Co., Ltd. (hereinafter referred to as "Foshan Construction Construction"), a shareholder with a shareholding ratio of 49%, with a guarantee balance of 85.5523 million yuan. Another shareholder with a 51% stake, Foshan Construction Investment Urban Construction Co., Ltd., provides equal guarantees based on the investment ratio. Please explain the date of Foshan Construction, registration location, legal representative, registered capital, main business, equity structure, and whether there is any affiliated relationship or other business contact with your company and its controlling shareholder, actual controller, directors, supervisors, and senior management personnel. The main considerations for your company to provide guarantees for them.
9. The report shows that during the reporting period, the total amount of fines received by Construction Engineering Group was more than 50,000 yuan and the corresponding penalty amounts of higher-level fines in accordance with the regulations. Please explain the impact of the relevant administrative penalty matters on Construction Engineering Group, whether it constitutes a substantial obstacle to this transaction, and the rectification measures taken for the relevant illegal matters, and the specific measures to ensure the safe production and compliant operation of the transaction subject in the future. Please ask an independent financial consultant or law firm to verify and express clear opinions.
3. About asset evaluation
10. The "Asset Appraisal Report" issued by Zhonglian International Appraisal Consulting Co., Ltd. (Zhonglian International Review No. [2022] No. VSGQD0389, hereinafter referred to as the "Assessment Report") shows that this appraisal uses the asset-based method and the income method to evaluate the total equity value of shareholders of the transaction subject as of the appraisal base date, and uses the income method evaluation results as the final evaluation conclusion. Taking December 31, 2021 as the appraisal base date, the appraisal value of all shareholders of Construction Group under the income method is 10797.0578 million yuan, the appraisal value of 7865.655 million yuan, the appraisal value of 268.32%, and the appraisal value of all shareholders of Construction Group under the asset-based method is 7291.2485 million yuan, the appraisal rate of 148.73%.
(1) Under the asset-based method, the value-added rates of the transaction target intangible assets, non-current assets and long-term equity investments are 2138.02%, 55.67%, and 71.58%, respectively. Please explain the book value, value-added rate, and evaluation results of the main assets that have a great impact on the evaluation results, the main calculation process and basis for the relevant asset appraisal, and the main reasons and rationality of the high appreciation of some asset appraisals.
(2) Please explain the main evaluation assumptions, evaluation process, key evaluation parameters, evaluation results, etc. of the transaction subject's income method evaluation, explain the reasons and rationality of the difference with the asset-based method, the main reasons for the high appreciation rate of the transaction subject evaluation, and make special risk warnings.
Please check and express your opinions by independent financial consultants and evaluation agencies.
11. As of the date of signing the report, the transaction subject and its subsidiaries owned a total of 8 land use rights in China, with a total land use rights area of 2004,658.81 square meters, and 327 properties, with a total construction area of 139,485.42 square meters. Some of the land and the land where the house is located have not completed the transfer procedures. During the process, some of the owned properties have not obtained a real estate certificate. Some of the land occupied by the leased property is allocated land . The owner or lessor of the above-mentioned leased property did not provide approval procedures from the land management department, nor did they provide proof of land income paid. The transaction target and its holding subsidiaries have not completed the lease registration registration. Please ask your company:
(1) List to disclose the specific situation of the relevant defective assets, including but not limited to book value, acquisition time, transaction price, and purpose, whether the relevant assets are of importance to the production and operation of the transaction subject, as well as the impact on the future production and operation of the transaction subject, whether there are related risks such as punishment, recycling, etc., and make special risk warnings, and the resolution measures and periods to be taken for defective assets, and whether relevant arrangements are conducive to safeguarding the legitimate rights and interests of listed companies and small and medium shareholders. Please ask an independent financial consultant or law firm to verify and express clear opinions.
(2) Some real estate properties have not yet obtained property rights certificate documents, and the total area of relevant real estate is 24,251.62 square meters. Among them, the office building of the basic headquarters is a cooperative building, and the assessed unit only has the right to use it.The relevant real estate appraisal shall be calculated using the declared area of the assessed unit, but the actual area shall be based on the actual surveying and mapping area of the land and housing management department. If there are major differences, the evaluation conclusion shall be adjusted accordingly. This assessment did not consider the impact of the property rights defects, nor did it deduct taxes and fees that may arise from the future application of a property rights certificate. Please explain the main basis and rationality of determining the real estate declaration area without a property certificate document, the main reasons for the failure of the property certificate document to be processed, whether there is uncertainty in the future of the property certificate document and the expected amount of taxes and fees, the main basis and rationality of including the basic headquarters office building with only the right to use in the appraisal scope, and whether the relevant asset appraisal results account for the proportion of the appraisal value of the transaction subject, and whether it is prudent and reasonable. Please ask the independent financial adviser and evaluation agency to verify and express opinions.
(3) The certificate of some real estate property does not match the name of the actual user. The total area of the relevant property is 1.0646 million square meters. The company has issued a written proof to explain the reason for the inconsistency and believes that the property right should belong to the assessed unit. This assessment did not consider the impact of the property rights defects, nor did it deduct taxes and fees that may arise from future transfers. For related properties whose ownership belongs to the certificate is not the Construction Engineering Group, please disclose the actual user names and specific situations of the relevant property in the form of a list, determine the main basis for the property rights to be assigned to the assessed unit, and explain item by item the main reasons why the relevant assets have not been transferred, whether there are substantial obstacles to the subsequent transfer, whether the assessed unit needs to pay the relevant fees to the right holder in the certificate in addition to taxes and fees, and the specific measures and periods that your company intends to take to resolve relevant matters. At the same time, please explain the book value of the relevant defects assets , the appraised value and proportion, the estimated tax and fee amount of transfer, and explain the basis and rationality of including the relevant assets in the appraisal scope. Please ask the independent financial adviser and evaluation agency to verify and express opinions.
(4) Some state-owned land use certificate use does not match the purpose of house ownership certificate . The relevant land area is 2415.81 square meters. The actual use of the relevant house is an office building. The purpose of the state-owned land use certificate is entertainment land and residential land. At present, the project is undergoing land division and changes to house ownership certificate . The end use of the house cannot be determined. This assessment is calculated based on the actual use of the office building. Please explain the book value and appraisal value of the relevant land that is involved in the use of the state-owned land use certificate and the use of the house ownership certificate, the legality and compliance of the construction and use of the house according to the use stated in the certificate, the progress of the land division and change of the house property certificate and the estimated completion time of the above-mentioned assets, whether the taxes and land transfer fees arising from future property certificate changes (if any). Please ask the independent financial adviser and evaluation agency to verify and express opinions.
12. The asset appraisal part of the transaction target shows that according to the relationship between the operating income of Construction Engineering Group and the construction contract , the forecast of Construction Engineering Group's revenue during the clear forecast period is divided into two periods according to the actual situation of the enterprise. The revenue growth rate of the transaction target is divided into two stages from 2022 to 2023 and from 2024 to 2026. Among them, the forecast from 2022 to 2023 is mainly based on historical situations and on-hand orders, and the revenue growth rate from 2024 to 2026 is 5%. Please ask your company:
(1) Explain the specific change relationship between the operating income of Construction Engineering Group and the construction contract, and make the income forecast respectively according to the two periods, and the specific differences and reasons for the basis of the forecast and the basis of the forecast of the two periods.
(2) The historical data based on the first issue of the forecast only mentions the revenue growth rate in 2021 compared with 2020. Please indicate whether the historical data considered in revenue forecast only considers the growth rate of the same period in 2021. If so, further explain the reasons and rationality of not considering multiple historical data.
(3) Please explain whether the performance commitment of the transaction target matches the profit forecast based on the changes in supply and demand in the downstream industry, the main basis for valuation in this assessment, and the selection of important parameters.
(4) Construction Engineering Group's net profit in 2020 and 2021 was RMB 841.1007 million and RMB 982.1935 million respectively. The performance commitment period for the issuance of shares to purchase assets is 2022, 2023 and 2024. If the issuance of shares to purchase assets is completed in 2023, the aforementioned performance commitment period will be changed to 2023, 2024 and 2025. Construction Engineering Holdings promises that Construction Engineering Group's net profit attributable to the parent company's owners after deducting non-recurring gains and losses in in 2022, 2023, 2024 and 2025 (if involved) will not be less than RMB 956.0147 million, RMB 1046.041 million, RMB 1095.2788 million, and RMB 113.3012 million (if involved). Please explain the main basis for setting relevant performance commitment indicators based on the historical performance of the transaction target, future development plan, industry development trend, etc., and analyze the rationality and achievability of the performance commitment indicators.
(5) report shows that the gross profit margin level of Construction Engineering Group in 2020 and 2021 is relatively stable, and it is predicted that Construction Engineering Group will maintain a relatively stable gross profit margin in the next year. Please explain the reasons and rationality of the gross profit margins of each business segment of the transaction target in the forecast period and whether the different risk factors that the transaction target may face in the future are fully considered.
Please check and express clear opinions from your company's independent financial consultant and evaluation agency.
13. The appraisal report shows that the assessed unit has declared off-balance sheet intangible assets, and the client has confirmed that it will be included in the appraisal scope, including 20 trademarks, 155 software copyrights, 1,178 patents, and 7 domain names. Please provide additional disclosure of the appraised value of the relevant off-balance sheet assets, the proportion of the appraised value of the transaction subject, and the main reasons why it is not included in the balance sheet of the assessed unit, and explain the reasonable compliance of the inclusion of the assets in the appraised scope.
14. The appraisal report shows that the land in the 23KM camp in Vientiane, Laos is the land use right long-term leased by the Hydropower Bureau ( Laos ) from Ms. Southida Presayan. The book value of the relevant assets is 2.3205 million yuan and the appraisal value is 12.8961 million yuan. According to the Lease Agreement, the land lease term is 30 years. After the lease expires, it can be automatically extended for 30 years or extended to the maximum period allowed in accordance with Laos laws. Please explain the main terms and rental standards of the relevant land use right lease contract, and explain the basis and rationality of including the leased land use right as assets in the scope of appraisal. Please ask independent financial advisers and evaluation agencies to verify and express clear opinions.
Please make a written explanation of the above issues and disclose the relevant explanation materials to our department before June 20, 2022.
This letter is given to
Shenzhen Stock Exchange
Listed company management department
June 14, 2022
