Pillar Assets Continuously reinforced Competitiveness, Funds Demonstrated Outstanding Results
According to South China Morning Post, in the first half of 2021, the uncertainty of the COVID-19 threatened the global economic recovery, while China benefited from the good control of the epidemic situation, the economy continued to recover steadily, production and market demand continued to increase, many enterprises emerged from the impact of the epidemic and announced excellent interim results. Legend Holdings Corporation (3396.HK) is one of them that has attracted market attention. Legend Holdings announced interim results of the Company and its subsidiaries on August 31, it has made an outstanding performance with both revenue and net profit attributable to equity holders recorded a historical high level. Revenue stood at RMB 228.57 billion, representing a year-on year increase of 24%; net profit attributable to equity holders of the Company amounted to RMB 4.69 billion, representing a year-on year increase of 636%. Driven by the interim results, the share price of Legend Holdings increased 14.83% to HKD 14.4 yesterday, which fully shows that investors are optimistic about its development.
The market is also concerned about the reason why Legend Holdings has achieved high growth. Mr. Li Peng, Executive Director and CEO of Legend Holdings, pointed out the answer, “Through effective management and value-added services, Legend Holdings consolidated and strengthened its business operation fundamentals, steadily developed its pillar assets, and enhanced its competitive advantages. Meanwhile, the Company adjusted its business strategy, seized the opportunity of China’s high-quality economic development, and actively promoted the layout of the technology sector to achieve good performance growth, and various business optimization initiatives are steadily progressing. In addition, the Company’s funds continued to perform well with the listing of many portfolio companies and the orderly implementation of various fundraising, investment, management and exiting work.”
During the first half of 2021, both strategic investments and financial investments segments demonstrated thriving performance. Net profit attributable to equity holders of the Company from strategic investments segment has out of red with approximately RMB3 billion climbs; net profit attributable to equity holders of the Company from financial investments segment soared 81% to approximately RMB2,558 million.
Legend Holdings further strengthened its industrial operation capability and gained profit in all business sectors of strategic investments. For the IT segment, the net profit attributable to equity holders of Legend Holdings generated by Lenovo increased 172% year-on-year. For the advanced manufacturing and professional service segment, its revenue was up by 46% year-on-year to RMB 3,894 million, and net profit attributable to the equity holders of Legend Holdings increased by 108% year-on-year. Agriculture and Food segment benefited from the improvement of fruit and animal protein businesses, contributing a year-on-year increase of 9% to RMB 9,778 million in revenue, and the net profit attributable to equity holders of Legend Holdings was RMB 240 million. The adverse impact of the COVID-19 pandemic on innovative consumption and services has been largely offset, with the revenue rising by 103% year-on-year to RMB 533 million and net profit attributable to equity holders of Legend Holdings of RMB 67 million. Excluding the impact of the one-off loss from share dilution of Hankou Bank, and the disposal and impairment loss of Kaola Technology, the financial services segment recorded net profit attributable to the equity holders of Legend Holdings grew by 20% year-on-year.
The interim results announcement clearly shows the good profits of the above segments, and through in-depth and specific analysis, we can find the enhancement of the competitiveness of Legend Holdings’ pillar assets and optimization of asset portfolio. In line with the development trend, Legend Holdings further increased investment in the field of science and technology, adheres to the development path of science and technology leading, deepening innovation-driven, and strengthening industrial synergy to promote sustainable and high-quality development of the enterprise.
Attributable to the global digital and intelligent transformation, Lenovo achieved long-term and sustainable profit growth, with revenue up 25% year-on-year to RMB 210.78 billion, and the net profit attributable to equity holders of Legend Holdings surged by 172% to RMB 1.54 billion. The personal computer business remained No.1 globally, and the non-pc business also showed strong growth. As the consensus “carbon neutrality” accelerates, Lenovo significantly exceeded its emission reduction target in 2019/20 fiscal year and strives to achieve zero carbon emissions by 2050.
Notable highlights were RMB 548 million net profit from Levima Advanced Materials, a 131% increase on the corresponding period, and its market value also saw a significant increase. Meanwhile, it energetically plans for investment and merges and acquisitions, acquiring Levima (Shandong) Chemicals to further improve the industrial layout and enhance the sustainable profitability and stability; investing in Jiangxi Keyuan Bio-Material to cultivate new growth points in the field of biodegradable materials. Furthermore, the company’s main plant economic and technological indicators were further optimized, continue to maintain a leading position in the industry.
Banque Internationale a Luxembourg (BIL) displayed significant growth amid the epidemic in Europe. In the first half of 2021, its net profit increased by 18% year-on-year to approximately EUR 47 million, and the assets under management increased to EUR 45.5 billion with CET-1 ratio 13.18%. In response to the new post-epidemic environment, BIL will progressively advance its business in China by further reinforcing the connection among Luxembourg, Switzerland, and Hong Kong SAR and Beijing, China.
Joyvio Group deepened its strategic layout and focused on the core businesses. Joy Wing Mau continued to improve the layout of the whole industrial chain of fruits and achieved rapid revenue growth by reinforcing the advantages in its supply chain and the core products strategy. As prices in the international market continue to rebound, Joyvio Food’s salmon business gradually recovered.
In 2020, Legend Holdings took its first strategic stake in Fullhan Microelectronics, laying out the semiconductors track, and as of June 30, 2021, Legend Holdings, as the largest shareholder, holds an aggregate of 15.91% equity in Fullhan Microelectronics through its subsidiaries. Legend Holdings will engage with the Fullhan Microelectronics management team for deeper cooperation to jointly promote the long-term development of Fullhan Microelectronics.
In addition, Legend Holdings continued to exit non-core businesses to ensure a more focused business and accelerate cash and resources flow-back, bringing ample financial resources to future development in new sectors. In the first half of 2021, Legend Holdings determined an orderly exit strategy for Kaola Technology; some equities in investee enterprises from agriculture and food segment were sold.
In the first half of 2021, low interest rates in the market provide a good opportunity for investment, and the capital market progressed strongly. Funds under Legend Holdings demonstrated outstanding results. More than 60 projects were fully or partially exited, contributing more than RMB 2 billion of cash flow.
Legend Star managed eight funds with a size exceeding RMB 3.3 billion, investing in more than 300 domestic and overseas projects accumulatively. During the first half of 2021, Legend Star’s total number of investment projects was over 20, it made follow-on investments in approximately 50 projects and exited 15 projects. As of June 30, 2021, the final closing of the 4th USD fund was completed as well as the first round closing of the biotechnology fund. Legend Capital managed a total of 28 funds, with a size of more than RMB 60 billion. As of June 30, 2021, the total amount raised by the funds was RMB 6,335 million. During the first half of 2021, Legend Capital accumulatively completed 20 new project investments, fully or partially exited 33 projects, bringing sound cash returning. As of June 30, in total, 90 of Legend Capital’s portfolio companies went public (not including those listed on NEEQS). Hony Capital’s businesses cover PE, real estate, public offering fund management, hedge fund, and venture capital. The AUM amounted to RMB 100 billion.
It is also important to note that Legend Holdings has an in-depth understanding of the operation of the capital market, which coincides with the opportunity of a new round of capital market mechanism reform. As of June 30, 2021, 12 portfolio companies got listed, and at least 11 are promoting the IPO.
Eastern Air Logistics was listed on the Shanghai Stock Exchange on June 9, which was the first civil aviation enterprise included in the first batch of domestic pilot enterprises under the mixed-ownership reform-making it a successful case of the “two-wheel-drive business model” of Legend Holdings. Chemclin Diagnostics Corporation, a project in the biomedical field invested by Zhengqi Holdings, was listed on April 9. Gocom Information Technology entered the capital market on June 28, becoming the first stock of industrial railway signal control and intelligent scheduling in China. In addition, Joy Wing Mau and Hankou Bank are orderly preparing IPO.
In terms of financial investment, Keymed Biosciences, invested by Legend Star, issued its IPO in Hong Kong on July 8. Ten enterprises under the management of Legend Capital went public during the first half of 2021, such as CareRay Digital Medical Technology Co., Ltd., Beijing Kawin Technology Share-Holding Co., Ltd., NexImmune, Inc., and New Horizon Health Limited and so on. Besides, Dindong Shopping, invested by Hony Capital, issued its IPO during the first half of 2021.
Legend Holdings and its three fund platforms have paid attention to and invested in the high-tech industry for a long time, accumulating considerable assets. More than 20 portfolio companies were included in the list of National “Little Giants with Specialties, Refined Products and Management, Unique Technologies, and Innovation” announced by the Ministry of Industry and Information Technology of the People’s Republic of China (MIIT), such as Fullhan Microelectronics, Gocom Information Technology, QuantumCTek, Sansure Biotech, Hanshow Technology, MNCHIP, INST Magnets, Faith Long Crystal, LEADMICRO, Zonsen Biotech, CAXA, YUNJI Technology and so on. These companies will embrace a broad development space, as they feature remarkable results, high technology, and strong market competitiveness, and suit the trend of industrial upgrading in China.
These developments are exactly in line with Mr. Ning Min’s prospect and expectations for Legend Holdings in the future, Ning Min, Chairman, and Executive Director of Legend Holdings, said that, “In the first half of 2021, Legend Holdings grasped the new development pattern, and seized the historical opportunities given by the new era, made steady progress and breakthroughs, and achieved good results, which also laid a more solid foundation for the long-term development of the Company. In the meantime, the Company has always attached great importance to corporate social responsibilities from a strategic perspective, adhered to the mission of ‘serving the country through industrial development’, and upheld the concept of ‘people orientation’. It is our first priority to develop our business in the direction adhered by the state, and to continue to promote win-win development of China’s real economy, entrepreneurship and innovation through our own industrial accumulation and unique business model to create better economic and social benefits; the Company will pay constant attention to the environment and energy and support its subsidiaries to play a leading role in green energy conservation and environmental protection; and will continue to insist on social welfare investment.”