Why Does YOUNGOR 16 Billion 500 Million Stake In CITIC Shares?

YOUNGOR (600177.SH) is a well-known brand for most consumers.

For investors in the two tier market, the company is already not just a brand clothing manufacturer. Compared with the traditional clothing and brand agency companies, investment is a business segment that everyone is interested in, and YOUNGOR often makes great efforts in the market.

The latest record of success is that the company has invested 16 billion 467 million yuan in its strategic stake in 0267.HK, accumulatively holding 1 billion 425 million shares, accounting for 4.9% of the total share capital of CITIC.

This investment is different from the previous one-time investment methods such as fixed increase and two level market buying. The company spent a whole year. From the beginning of 2015, it chose to buy four times through the two tier market and participate in the subscription of new shares, and finally completed the big deal. To this end, the investment has accounted for 86.83% of the company's net assets (2015 reported net assets data in the report.

Of the shares held by the company, 2.9% are subscribed for issuing new shares, with two years of lock in period and 2% of the other two markets are circulating shares.

Reviewing the history of the company

Without considering Kay stone's investment as a factor of the company's substantive related companies, it is only an investment behavior at the level of the listed company. This strategic stake in CITIC shares has been the largest investment project since it took part in the unlisted equity of 600030.SZ in 1999.

Even in the same period, the initial investment amount of the two major projects of the Shanghai Pudong Development Bank (600000.SH) and the Ningbo Bank (002142.SZ) was less than zero.

It makes people wonder what YOUNGOR really wants to do.

To see the company's current revenue and profit structure, for most market analysts and investors, YOUNGOR is not only a textile and garment company, but also a flexible target in the bull market. Apart from the stable main business income of clothing, the company's large equity investment in every round of bull market has contributed a lot to the company's performance.

According to the data disclosed by the company in 2015, in the 8 billion 713 million yuan of revenue and 2 billion 906 million yuan net profit, the investment business realized 1 billion 877 million yuan of investment income and net profit 1 billion 950 million yuan, accounting for 67.1%.

While the other two drivers in the company's three carriages "clothing + real estate" have contributed all the revenue, the net profit contribution is less than 1/3.

The management clearly stated in the China Daily that the company's investment business will follow the strategic plan of "pition from financial investment to industrial investment", "key layout big finance, big health, comprehensive group and other fields".

The China Daily also significantly separates the strategic investment from the financial investment target to show the investment attitude.

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After analyzing the company's investment changes through the latest position list in the three quarter, first of all, apart from the large holdings of CITIC shares, the company is also constantly increasing the shareholding ratio of the Shanghai Pudong Development Bank and the Ningbo bank. The latest reference market value of the three strategic investments has reached 29 billion 230 million yuan.

And other financial investment nature, whether it is the new stock of the new stock, or the long term holding time, the 300451.SZ and 002103.SZ, which are already in the market before the listing, are all on the high side this year.

The 002036.SZ, a listed company controlled by the company, is also preparing for shell selling.

In May 21st, YOUNGOR announced the announcement of the major asset reorganization of hemp industry, and realized the backdoor listing of LIAN electronics.

At present, the three banks are concentrated in terms of market valuation, performance and dividend rate. They are all good targets for long-term investment.

In this year's report, CITIC, Pudong Development Bank and Ningbo bank have achieved a double increase in revenue and net profit. The three reported net assets yield (ROE) rates are 8.42%, 9.35% and 9.34% respectively.

The net profit of the three investments at the end of the year will also be very significant for the company's performance contribution according to the shareholding ratio.

CITIC shares borrowed CITIC Pacific in August 2014, realizing CITIC Group's overall listing in Hong Kong.

According to the data disclosed in the semi annual report in 2015, the contribution of the financial sector to the overall net profit of the group accounts for up to 68%.

Compared with the decline of real estate and mining dominated non-financial sector (-9%), the financial sector's net profit in the first half of the year increased by 59%.

CITIC is one of the wholly licensed financial control groups in China. It can hold strategic stake in CITIC, which means that YOUNGOR's investment pattern has changed qualitatively.

Compared with the previous two years of market pactions, participation in fixed market growth, the involvement of PE and pre-IPO and other short-term models, with the gradual increase of capital and the decline of traditional main business, YOUNGOR began to explore industrial investment and financial stocks to seek more long-term development.

Li Rucheng, chairman of the company, believes that CITIC is the most licensed market controlled company with a high degree of marketization. Although there are many bad assets, the quality assets are also outstanding.

YOUNGOR, a pilot enterprise in the reform, can take part in the reform of CITIC's mixed ownership. It also means that the strategic cooperation platform of the company's future business has gone up a new stage.

The company's earnings report also revealed more industrial investment dynamics, including 1 billion yuan to set up the YOUNGOR health industry fund (limited partnership), to invest in the PE project as the main way, to grasp the investment opportunities of the big health industry to invest, and invest 3 billion yuan to subscribe the Beijing alliance energy Industry Investment Fund (limited partnership) to participate in CNPC's three gas pipeline project.

The company said it has started a new 13th Five-Year plan, and hopes to learn from past experience and investment from high volatility investment to long-term investment with stable returns.