Youngor: Double-edged sword for making quick money

The bottleneck: Whether real estate and financial investment have high growth potential is doubtful, and it has been difficult to achieve progress in the spin-off of the three business segments. It is not easy to lose weight.

New engine: financial investment and real estate development.

Status: In 2010, Youngor’s investment business lost nearly 2 billion yuan, but this year’s growth still depends on equity and real estate investment.

In order to “enrich the industry chain”, Younger, who was involved in equity and real estate investment, now has the traction of apparel, equity investment, real estate investment troika, and even the profitability of the latter two businesses has been far higher than the main business clothing. But if you look at real estate and equity investment as Younger's new engine, it obviously underestimates the greater value of the new engine. A company that pursues an evergreen business needs to be able to lead its second-generation new business in its business process. However, in the case of severely-foamed real estate and the stock market, a company that started out as a traditional manufacturing industry focuses on these two businesses. At the same time, it is still looking for simple speculation in a bubbled business environment.

Younger started with clothing. When the entire apparel industry has been outsourcing production and sales, only branding, and taking the path of light assets, Youngor chose the opposite business path. At the time, Youngor, which owns Asia’s largest garment production base, began to expand significantly upstream and downstream in the industry chain. Downstream of the industrial chain, Youngor spent huge sums of money to buy buildings in major cities to invest about RMB 7 billion to build 500 stores. In the upstream, Youngor spent a lot of money to establish cotton production bases, washing plants, and textile industrial cities. In this way, from the raw materials, fabrics, garments to sales, Youngor's clothing industry has been getting longer and longer, and it has become heavier and heavier. However, Younger's operating conditions have not only failed to show his momentum, but on the contrary, Youngor’s overseas operations continued to show negative growth in 2009 and 2010. This also made Youngor begin to devote more energy to developing other businesses.

The demand of the Chinese people for the house has spawned a myth of real estate, which also gave rise to the desire of many companies to seek profits across the border. Red bean, Shanshan, Li Ning, Youngor and other clothing companies, transformed into a developer, Haier, Hisense, TCL and other home appliances companies, but also began to dig gold on the land. Among these, Youngor has been regarded as a typical example. The appraisal of Youngor’s capital market is usually “not a good job”. Instead of focusing on the development of apparel business, he is obsessed with making quick money from investment and real estate business.

Let's take a look. Where is Youngor's “not working”? This year alone, Youngor has sold a total of up to RMB 5.5 billion in total, and has subscribed for up to 10 non-public offerings of listed companies, including Suning Appliance, Foton Motors, Xugong Machinery, and other semi-annual reports published by Youngor. In terms of investment, its investment income was as high as 943 million yuan, accounting for 77.18% of its operating profit. In terms of real estate business, only in 2010, Youngor respectively auctioned plots of high prices in Hangzhou and Shanghai for 2.4 billion yuan and 3.3 billion yuan respectively. Prior to this, Youngor also made a lot of criticisms because he frequently produced "land kings" at high prices.

As for the “not to work” theory, Younger’s chairman, Li Rucheng, apparently disagreed. His logic is to invest in real estate through the money earned from clothing, and financial investment is the backing to drive the overall improvement of Youngor’s industrial structure. Li Rucheng emphasized that if he has not entered real estate and financial investment, Youngor cannot have more than 20 billion yuan in net assets. Both clothing and real estate are the core businesses of Youngor. This business policy will not be shaken for at least 20 years.

However, entity companies like Youngor have entered the real estate field. Obviously this is not a good phenomenon. It is not a mature business environment. The bad influence is even more obvious, because these enterprises can divert funds in the real economy and real estate, real estate control "Air conditioning", the industrial economy has shrunk.

Returning to the common sense of business, a company’s new engine should be able to stimulate the company to rejuvenate its youth, not only in its net assets, but also in its substantive growth in the future, its cultural environment, and its industrial structure. The positive impact, and more importantly, it should not be affected by the environment and policies belong to the Chaoyang and high growth, high-tech industries. But only in 2010, affected by the continuing downturn in the stock market, Youngor’s investment business lost nearly 2 billion yuan. Therefore, in the long run, the real estate and equity investment brought to Youngor is only temporary prosperity.