Nanshang Falls Short of Biz Performance Goals

On November 25, the company announced that Nanjing Commercial Travel plans to acquire 100% of the equity of Nanjing Huangpu Hotel Co., Ltd. (referred to as Huangpu Hotel) held by its controlling shareholder, Nanjing Tourism Group Co., Ltd. (referred to as Nanjing Tourism Group), through the issuance of shares and cash payments, and will raise up to 80 million yuan in supporting funds.

It is noteworthy that the latest announcement indicates that Nanjing Commercial Travel intends to no longer acquire the 49% equity of Nanshang Operation held by Nanjing Commercial Building, citing changes in market conditions. Industry insiders suggest this may be due to Nanshang Operation's performance not meeting expectations.

Plans to acquire 100% of Huangpu Hotel for 222 million yuan

Public information shows that Huangpu Hotel, which opened in 2003, has a building area of 31,000 square meters, comprised of a 28-story main building and a 13-story auxiliary building. The four-star Huangpu Hotel has a total of 350 rooms, including business, scenic, and luxury rooms, and is equipped with various facilities such as a buffet restaurant, banquet hall, and multifunctional hall.

According to the announcement, from 2022 to the first nine months of 2024, the operating revenues of Huangpu Hotel were 57.35 million, 90.48 million, and 53.15 million yuan, while net profits were -7.91 million, 5.38 million, and 4.07 million yuan respectively.

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In addition, from 2022 to the first nine months of 2024, the average room rates for Huangpu Hotel were 320.67, 398.87, and 387.72 yuan, with occupancy rates of 59.49%, 85.73%, and 83.54%, and gross profit margins for main operations of 16.30%, 35.10%, and 41.90% respectively.

According to the asset appraisal report issued by Northern Asia Affairs, as of the valuation benchmark date (April 30, 2024), the value of 100% of Huangpu Hotel's equity is estimated at 221.5854 million yuan, which is also the transaction price for this equity deal.

In terms of the payment method for the transaction price, 188.3476 million yuan will be paid through the issuance of shares for 6.92 yuan per share, amounting to more than 27 million shares. The remaining 33.2378 million yuan will be paid in cash.

Regarding the supporting fundraising, this round of fundraising will not exceed 80 million yuan. In addition to being used for cash payments related to this transaction and intermediary fees and taxes, the remaining amount is intended to supplement the liquidity of the listed company.

Nanjing Commercial Travel states that upon the completion of this reorganization, the company will have a new hotel sector business, further extending its layout within the cultural tourism industry chain.

From Nanjing Commercial Travel’s equity structure, as of the end of the third quarter this year, Nanjing Tourism Group and its concerted actor, Nanjing Commercial Building, held a combined 35.03% stake, making them the controlling shareholder of the company. In this restructuring, Nanjing Tourism Group will subscribe for shares issued by the listed company, further increasing its equity stake in the future.

Regarding this reorganization, Nanjing Commercial Travel has indicated that the asset scale, operating revenue, and net profit of the listed company are expected to improve, and there will be no circumstance leading to a dilution of earnings per share due to this issuance of shares and cash payments for asset purchases.

Facilitates Nanjing Commercial Travel's focus on its core business

Nanjing Commercial Travel, formerly known as Nanfang Co., was established in 1978, and initially focused on the import and export of textiles, clothing, and other products. The company went public on the A-share market in 2001 and acquired a 51% stake in Qinhuai Scenic Area Company in 2019, marking its entry into the tourism sector. As the tourism business increasingly contributed to its revenue, the company officially changed its name to "Nanjing Commercial Travel" in November 2023.

In terms of performance, the announcement reveals that in the first three quarters of this year, Nanjing Commercial Travel achieved revenues of 602 million yuan, a slight decrease of 0.55% year-on-year, while the net profit attributable to shareholders reached 39 million yuan, a year-on-year increase of 5.66%; the net profit after deductions attributable to shareholders was 22 million yuan, a year-on-year decrease of 39.97%. The company stated that the decline in net profit after deductions is primarily due to the year-on-year decrease in the main business profits.

Regarding its core business, Nanjing Commercial Travel's current operational strategy focuses on a dual main business development model of "tourism + trade." The core competitiveness of its tourism business is based on the national 5A scenic area "Fuzimiao-Qinhuai Scenic Belt." Its subsidiary, Qinhuai Scenic Area, holds the exclusive management rights for the Qinhuai River water tour in this scenic area for 20 years, making it the only water sightseeing company in the region. In the first half of this year, the revenue from the Qinhuai scenic boats was 103 million yuan, accounting for nearly 17% of the company's total revenue.

As the only publicly listed company under Nanjing Tourism Group, Nanjing Commercial Travel has increasingly emphasized "cultural tourism transformation" in recent years, with its controlling shareholder, Nanjing Tourism Group, having made a commitment to promote Nanjing Commercial Travel's transformation during its restructuring in 2019.

Additionally, to address potential competition issues post-restructuring, Nanjing Tourism Group has decided to manage its hotels, tourism services, and scenic operations through "entrusted management" given that these related companies do not meet the conditions for injection into the listed company due to profitability factors.

On the evening of November 24, Nanjing Commercial Travel announced its intention to sign a "Management Entrustment Agreement" with Nanjing Tourism Group and its subsidiaries. The assets entrusted for management include seven hotels, four companies engaged in tourism services, and the Nanjing Yangtze River Cruise Company, primarily involved in scenic operations.

The announcement indicates that the entrustment period will be three years, with Nanjing Commercial Travel stating that this move will benefit the acceleration of the listed company's cultural tourism transformation and align with the interests of the company and all shareholders.