Country Garden service terminated its subscription, and Hefei Brilliant’s share price plummeted by over 50%.

On the evening of February 7,Country GardenService Holdings Limited (referred to as "Country GardenService ") and Hefu Huihuang Group Holdings Co., Ltd. (referred to as" Hefu Huihuang ") jointly announced that the two parties had terminated the strategic cooperation agreement and possible acquisitions on the same day.

According to the agreement,Country GardenAll previous obligations and responsibilities of Property Hong Kong, Mr. Fu Weicong, China-net Holding Ltd and Hefu Brilliant under the strategic cooperation agreement will be completely lifted and revoked immediately, with immediate effect. Therefore, the subscription will not be carried out.

The announcement pointed out that the decision was made after considering the current market conditions, recent fluctuations in the capital market, expected changes in the implementation schedule of the underlying transaction by the contracting parties, and potential strategic and cooperation objectives.

As soon as the news of the termination of the subscription came out, it was early on February 8.Hefu huihuangThe stock price plummeted, falling by more than 50% at one time., down 4 as of press time.one.90%, at 0.6oneHong kong dollars.

It is reported that the terminated cooperation began in November 2023.

At that time,Country GardenService and Hefu Brilliant announced the conclusion of a strategic cooperation agreement.Country GardenThe property intends to acquire 71.64 million shares of Hefei Brilliant (equivalent to about 10.63% of the issued share capital of Hefei Brilliant).

If the acquisition is completed,Country GardenThe shareholding ratio of property in Hong Kong has increased from about 25% to about 35.63%, making it the largest in Hefei.shareholder, the total consideration of selling shares is HK$ 115 million, which is equivalent to the price of selling shares per share of HK$ 1.61.

According to the announcement of the agreement, within five years after the completion of the relevant subscription,Country GardenThe service will support Hefei Brilliant to develop a comprehensive trading platform covering first-hand sales agents, inventory property sales, asset management and online marketing services; Hefu brilliant will also becomeCountry GardenThe core suppliers of these services in the service business ecosystem will establish a brilliant core competitive advantage and market share of Hefei.

However, at that time, UBS held a negative view on the transaction. The agency said that Hefei Huihuang is mainly engaged in second-hand housing agency business, and it is expected that the synergy between the two parties is limited, and Hefei Huihuang is the main high-end real estate agent in the Guangzhou market, andCountry GardenandCountry GardenThere is not much overlap in the services. Relatively speaking,Country GardenServices to repurchase shares or pay dividends can bring more favorable returns to shareholders than buying real estate agency business.

Before this cooperation,Country GardenThe service has initiated many acquisitions to Hefu Brilliant.

As early as June 2020,Country GardenThe service acquired about 24 million shares of Hefu Huihuang, equivalent to about 3.53% of all its issued shares, at a consideration of about HK$ 36 million.

Then in November 2022,Country GardenService acquired about 21.47% of the shares from Fu Weicong’s family at a cost of about HK$ 233 million, increasing the shareholding ratio to 25%, becoming the second largest shareholder of Hefei.

According to public information, Hefu Huihuang was established in 1995 and listed on the main board of the Hong Kong Stock Exchange in 2004. It is a property agency service provider, and its main business includes property agency service and financial service business.

Affected by the rapid decline of the real estate market in the past two years,Most housing enterprises have liquidity difficulties.It also indirectly affects intermediary agencies like Hefei Huihuang.

According to the semi-annual report of 2023, Hefu Brilliant achieved revenue of about HK$ 700 million in the first half of 2023, which was about 22% lower than that of HK$ 898 million in the same period last year. It recorded a net profit loss of about HK$ 151 million, compared with a net loss of about HK$ 664 million in the same period last year.

This is also the third consecutive year that Hefei Brilliant has suffered losses since 2021. In 2022 and 2021, its net profit also lost HK$ 545 million and HK$ 580 million respectively.

The decline in performance is also reflected in the reduction of business scope. By the first half of 2023, Hefu Brilliant Property Agency business mainly focused on Guangzhou, covering 70 cities in China, with more than 800 agency projects and about 140 second-hand branches.

But by the end of 2022, this data is still: covering more than 80 cities in China, with more than 1,100 agency projects and about 160 second-hand branches.

Also inCountry GardenServices are also dragged down by related parties, and profits may be on the verge of loss.

On December 18 last year,Country GardenService disclosed the impairment of its assets, and revealed that it would set aside 1.8 billion yuan to 2.3 billion yuan and 1.4 billion yuan to 1.8 billion yuan respectively for trade receivables, goodwill and other intangible assets of related parties, and predicted that its net profit in 2023 would be reduced by about 3.2 billion yuan to 4.1 billion yuan.

According to the financial report data in 2022,Country GardenThe revenue in the service year was about 41.367 billion yuan, and the net profit was 2.261 billion yuan. In the first half of 2023,Country GardenThe service income is 20.733 billion yuan, and the core net profit attributable to shareholders of the company is about 2.615 billion yuan.

Then followCountry GardenThe asset impairment disclosed by the service provider, if its performance growth rate is not high in 2023, and the net profit continues to decrease,Country GardenServices will also face losses.