Key Enterprises Saw Steady Growth, Backflow of Resources Emphasized
According to South China Morning Post, Legend Holdings Corporation (3396.HK) announced annual results of the Company and its subsidiaries for the year ended December 31, 2019. Revenue of the Company was RMB389.218 billion, representing an increase of 8% yoy. The consolidated profit for the year was RMB8.63 billion while net profit was RMB3,607 million, representing a decrease of 17% yoy. The company explained that it was due to the decrease in some of the businesses of the financial services segment and the innovative consumption and services segment. Nevertheless, the strategic investments segment recorded positive revenue growth in 2019, of which the revenue from IT, financial services and agriculture and food recorded a remarkable increase. The financial investments emphasized the backflow of resources with successful fund raising, bucking the market recession, resulting in a net profit increase of 68% yoy.
Facing the complex international political and economic environment in 2019, Legend Holdings still maintained a relatively stable development trend and bright spots can be identified in both strategic investments as well as financial investments of the Company. As said in the announcement, “the strategic investments saw the upbeat performance of several portfolio companies with sound fundamentals for growing into pillar assets, thanks to years of business investment and operational improvement.”
Lenovo Group, which always been a pillar asset of Legend Holdings, has accelerated its intelligent transformation by implementing the 3S strategy, namely smart Internet of Things, smart vertical, and smart infrastructure. In 2019, Lenovo delivered a record high performance, with the highest-ever pre-tax income and RMB1.608 billion of net profit attributable to equity holders of the Company. In particular, its PC and smart device business continued to lead the industry with a record high pre-tax income rate.
After Legend Holdings’ acquisition, Banque Internationale a Luxembourg S.A. (BIL), being another pillar asset, also generated good results. Its retail banking, corporate banking and wealth management all recorded good results. The assets under management increased by 10.3% year on year to EUR43.5 billion, and profit before tax from core businesses increased by 20% year on year to EUR136 million. The CET-1 ratio rose to 12.47%. BIL has formulated the new five-year strategic plan “Together 2025”, in which its new businesses in China will become a strategic focus. Meanwhile, BIL also cooperate with fund platform in financial investments segment, thus the intra-portfolio synergy gradually emerged.
It’s worth noting that, Lakala, under financial services segment, became one of the successful “two-wheel-drive” examples between Legend Holdings and Legend Capital. During the reporting period, it was listed on the ChiNext Board and saw rapid growth in performance and value, boosting the fair value of the equities Legend Holdings has in it. As shown in the announcement that invested enterprises including Levima Advanced Materials, Joy Wing Mau, Hunan Huawen Food, and EAL are trying to push ahead their A share listing process, we are convinced that Legend Holdings’ value will receive a long-term and steady growth when those capital operations carry out.
It is also important to note that the company’s accurate grasp of market dynamics is an important reason for its stable performance in the adverse market environment. In terms of another “wheel”, the Company’s financial investments segment contributed a good performance. The three financial investment platforms sized up the situation, slowed down the investment pace, and exited from their projects in a timely and decisive manner, generating over RMB5 billion of cash back.
Facing a challenging external environment, the Company possess a sound risk control system to ensure the safety of capital, its risk resisting ability is considered to be strong and what’s more, the liquidity is adequate. By the end of the Reporting Period, the Company’s cash reserve stood at RMB62.3 billion, and the unused bank line of credit of the Head Office stood at RMB89.2 billion, sufficient to meet the demand for business development.
During the past few months, COVID-19 has been going viral globally, which brought uncertainty to the market, the Company noted, “The COVID-19 and capital market turmoil at 2020 beginning have compounded the challenges and uncertainties of the business environment. While ensuring prevention and fight against the disease, Legend Holdings immediately provided support to the portfolio companies, helping them to make dynamic assessments on the business operation and to adopt measures to survive the epidemic. In 2020, Legend Holdings will continue to consolidate and adjust the current businesses, and will also dynamically formulate work plans for the next few years based on the external business environment and the proprietary resources.”
Funds under management: 21
Total AUM: Exceeded RMB 50 billion
During the Reporting Period: Launched three new funds raising RMB 9.391 billion, with the newly raised amount of over RMB4.2 billion, a total of 29 new project investments were completed, 40 projects were fully or partially existed. 10 companies under its management were successfully listed domestic and overseas capital markets, contributing more than RMB2 billion cash back to Legend Holdings.
Funds under management: 7
Total AUM: Nearly RMB2.5 billion
During the Reporting Period: Conducted an aggregate of over 260 onshore or offshore investment projects, invested in nearly 30 onshore or offshore projects, nearly 60 projects under management undertook follow-up financing, while 20 projects were already exited, the 4th RMB fund and 4th US dollar fund completed first closing.
Funds under management: 12
Total AUM: Exceeded RMB80 billion
During the Reporting Period: Completed the final closing of its cultural industry fund, and the 3rd property fund sent the notice for the first closing, issued 4 new funds in total, promoted the exists of investments and project exits in an orderly manner, contributing more than RMB1.2 billion cash back to Legend Holdings.