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Shanghai financial state-owned asset reform fired the first shot, JuneYao became second largest shareholder of AJ Group
ReleaseDate: 2015-09-22

 Sept 22, 2015 China Business News   Zhang Jingyi, Xia Xinyu 

With the landing of the guiding opinions for state enterprise reform, recently reform of state-owned assets in all regions picked up speed, against such background, AJ Group fired the first shot of Shanghai’s reform of financial state-owned assets.

AJ Group recently published report, saying the company’s second biggest shareholder Shanghai International Group Co., Ltd planned to transfer shares, Shanghai JuneYao (Group) Co., Ltd is the proposed recipient. Although it’s not clear about both sides’ integration paths and strategic adjustments after JuneYao’s admission, some market opinions pointed out that, it’s unlikely for AJ Group to change the direction of propelling construction of financial holding platform, what’s more as the state-owned asset reform makes progress, it is expected to embrace more new opportunities.

The expectation of Shanghai’s financial state-owned asset reform came true.

Since suspension of trading on June 30, AJ Group Co., Ltd received continual attention from the market even before renaming due to its expectation of state-enterprise reform.

“Similar financial holding platforms have 100 billion market value, but AJ now only has a market value of over 20 billion yuan, making it an excellent investment target in terms of quality. Judging from fundamental facts, AJ has a very interesting equity structure; the biggest shareholder is a private enterprise, the second biggest shareholder is a Shanghai state-owned subsidiary, this is a shareholder structure very suitable for promoting state-enterprise reform.” Ding Wentao, Director of the Research Institute of Soochow Securities who kept monitoring AJ Group Co., Ltd, told the ”China Business News”.

Before the public notice was published, the biggest shareholder of AJ Group Co., Ltd was Shanghai Business Community Patriotic Contribution Special Foundation, which held 177 million shares, accounting for 12.3% of total equity. After stock selling in the second quarter, the former second biggest shareholder Shanghai International Group held 102 million shares, accounting for 7.08% of total equity.

According to Ding Wentao’s previous research report, in the early days of the Reform and Opening up there were three private financial enterprises, namely CITIC Group, Everbright Group, and AJ Group Co., Ltd; CITIC and Everbright have been turned into state ownership, currently AJ Group Co., Ltd is the only private enterprise with government background. It also emphasized that, against the macro trend in which Shanghai is developing to become international financial center, as Shanghai’s local integrated financial holding platform, AJ will embrace new opportunities in the reform of Shanghai state-owned assets and state-owned enterprises.

An equity transfer notice on August 28 further confirmed conjecture in the market. According to the public notice, after obtaining approval from the Shanghai Municipal State-owned Assets Supervision and Administration Commission, Shanghai International Group planned to adopt open solicitation of recipient method to transfer 102 million shares directly held by the company, accounting for 7.08% of AJ Group Co., Ltd’s total equity. Share price of AJ Group Co., Ltd was 16.73 yuan/share before suspension of trading, the above-mentioned shares corresponded to a market value of 1.706 billion yuan.

After close of trading on September 17, the renamed AJ Group published another notice, saying Shanghai International Group Co., Ltd had selected JuneYao Group as proposed recipient of the equity transfer. Previously, market rumor said potential recipients included Wanda, Ant Financial Services Group etc; nevertheless, judging from statements targeting at state enterprise reform and actions in the financial field from JuneYao Group, its takeover of the position as AJ Group’s second biggest shareholder was not unexpected.

In its stance toward taking part in state enterprise reform, JuneYao always indicated clear attitude. During the “Two Sessions” period for two consecutive years, Chairman of Shanghai JuneYao Group Wang Junjin invariably emphasized the importance of developing mixed ownership. Financial business is also a key business division in JuneYao’s deployment.

In January this year, Shanghai Huarui Bank, a bank initiated by JuneYao Group with 30% shareholding, received opening approval from the Shanghai Banking Regulation Bureau. JuneYao also showed interest in involvement in more financial businesses such as leasing company. Wang Junjin once openly said, JuneYao Group’s future industrial deployment will include modern service industry dominated by JuneYao Airlines, macro health and food industry on the basis of traditional dairy business, and banking business division represented by Huarui Bank.

Construction of financial holding platform may pick up speed

After the notice on JuneYao’s ascension to the second biggest shareholder was released, AJ Group’s next move immedaitely became the focus of market discussion; and the focal point is what kind of reform expectation both sides will foment.

JuneYao’s relevant chief persons told our newspaper that, this matter is still in the process of unfoldng; analysts monitoring AJ also said it still needs to wait for unveiling of detailed trading rules before it became possible to estimate the exact impact on the listed company. Some opinions pointed out, judging from both sides’ asset features and previous strategies, its’ not easy for AJ Group to change the direction of creating a Shanghai local financial holding platform.

Ding Wentao pointed out, since introducing strategic investor in mid 2012, up till now AJ has progressviely developed integrated financial real estate platform dominated by six financial pillars of trust, securities, asset management, capital management, wealth management and financing & leasing, and assisted by real estate business such as industrial development, and architectural design etc. Judging from qualification features, its small volume and well-developed platform provide solid foundation for future transition.

On the other hand, according to the half year report recently publdshed by AJ Group Co., Ltd, in the first half of the year the company’s total operating revenue grew by 26% on Y-o-Y basis, net profit attributed to listed company shareholder grew by 25% on Y-o-Y basis. Wherein, AJ Trust and leasing main businesses still maintained relatively fast growth, but the remaining business divisions all experienced slow-down in profit growth, the demand for transition breakthrough became increasingly urgent.

“AJ Capital and AJ Wealth still need to further speed up cultivation of operation foundation, AJ asset company and AJ industrial company actively propelled project landing, and sought breakthrough in transition”, research report of Pingan Securities also pointed out that, the strategic deployment integrating industry and financing is expected to become the company’s new highlight in the future.