Youngor's Twin Engine Failure Diversification Strategy Potential Risk

For the industry’s evaluation, Liu Xinyu, the Young Secretaries of the Board of Directors, refused to respond. "As far as real estate and finance are concerned, we have made it very clear in our annual report and semi-annual report that branded apparel is always the most core and basic industry."

Youngor's Twin Engine Failure

Since he tasted the "sweetness" of CITIC Securities, Youngor had "came into" the private placement of listed companies. Since then, Youngor has spent 3.588 billion yuan to subscribe for 100 million shares of Haitong Securities. As a result, at the time of the lifting of the ban on this batch of shares, its share price has fallen. According to an industry insider, “It seems that Younger’s investment in targeted private placement is indeed an end to the investment.”

Recently, the trend of equity investment in Youngor became more and more uncontrollable. It was held three times a year by the board of industry and the first time, holding 15.22% of the shares, and the number of shares held by the controlling shareholders was only 1,508,100 shares. Reports have pointed out that Youngor’s investment has been “destroyed”.

For this comment, Liu Xinyu stated that Younger’s investment in financial investment as an exploration industry was due to the early investment in CITIC Securities and Ningbo Bank getting better returns. "Investment has brought the market value of more than 10 billion financial assets to the company. It is impossible to invest in clothing and real estate all at once."

Liu Xinyu also stated that, as mentioned in the semi-annual report, the overall thinking of Youngor’s financial investment is “adjusting the structure and controlling the scale” because financial investment has a large impact on the performance of listed companies.

According to the semi-annual report, the revenue of Youngor's financial investment segment decreased by 62.30% compared with the same period of last year. According to the company, as the financial expenses and management expenses only decreased by 15.62% year-on-year, the entire sector suffered a loss of RMB 1,722,900.

As the real estate business of Younger's other carriages, the market has fallen since 2011 as the market entered a long period of regulation. In 2011, Youngor's total transaction volume in the main urban areas of Ningbo, Suzhou, Hangzhou, and Shanghai decreased by 15%, 23%, 53%, and 24% year-on-year, respectively. The net profit of real estate tourism development business for the year decreased by 15.86% year-on-year.

Judging from the current situation, the two engines of Youngor real estate and stock market investment have been seriously deficient. Xue Shengwen, a senior research fellow at China Investment Advisors, pointed out that Youngor received a high rate of return early in the equity investment, but the subsequent investment was more profitable, and it is still in a locked-in period.

Diversification Strategy Potential Risk

For Youngor, there are two risks to the twin engines of real estate and equity markets. “At present, the state’s control policy on real estate is severe, and further follow-up regulation is not ruled out.” Xue Shengwen also pointed out that since Youngor started with clothing, the technical level of real estate and equity investment is relatively weak. “The real estate and equity markets are on the surface with infinite scenery, but in fact they are undercurrent and there are great risks. The road chosen by Youngor is not conducive to the long-term development of the company.”

According to Li Hongxian, an analyst at Champion, “Younger did not stick to the brand that has become bigger and stronger, but chose to diversify, but failed to achieve synergy between the businesses.” From the clothing company to a diversified company Investment companies, company performance and profits have been greatly affected.

For Youngor's practice, there are also people in the industry who believe that it cannot be completely interpreted as deviating from the main business operation, but Youngor's "doing it is like going out of shape."

"After completing the accumulation of capital in the early stages, it is understandable to use financial means to seek greater benefits. It is just that wise and courage are trapped in the trap." Someone in the industry is evaluating Youngor's financial business.

Not only is Youngor, large companies have similar aspirations for "diversified" development. Wanxiang, Lenovo and other companies have stepped into the PE field. Seven wolves and Haier have entered into the real estate business. These diversified strategies did indeed add a lot to corporate financial statements.

"Real estate and equity investments in real estate are valued by the profitability of the capital market." Xue Shengwen said that diversification strategies such as real estate and stock market investments may receive relatively good returns in the short term, but in the long run, similar real estate and stock markets. The diversification strategy of investment is risky and sustainable profitability is not strong. "Diversification strategies such as relying on real estate and stock market investment are tantamount to "drinking and quenching thirst," and cannot enable the company to break through the development bottleneck."

According to industry sources, the investment in the industrial background must be realised in order to achieve development. It is necessary to get rid of the logical thinking and complex of the mother industry. After all, there are essential differences between the two sides.

"Diversification mode itself is not right or wrong, the key depends on the operation." Guo Jin Securities Zhang Bin told reporters that the current market is less and less space, companies need to consider when diversifying. "Need to pay attention to the financial situation, the debt leverage can not be too high, companies need to ensure cash flow rather than excessive pursuit of profits." Diversification needs to combine timing.