Selling Assets As a Hong Kong-listed company, Crayon Shin-chan (Fujian) Food Industry Co., Ltd. (hereinafter referred to as Crayon Shin-chan) has rarely had "good news" to release in recent years. On the 18th, the company announced a "letter of intent regarding a potential disposal." Simply put, Crayon Shin-chan intends to sell land with a total site area of approximately 100,000 square meters, along with buildings with a total gross floor area of approximately 106,000 square meters (the assets), located in Jinjiang Food Industry Park. It also stated that it would engage in "sincere negotiations" over the next 60 days. "Since it's a transaction, both parties' agreement is enough, and there's no need for further comment. But looking at Crayon Shin-chan's performance in recent years, it's hard not to speculate; some have even questioned whether Crayon Shin-chan is planning to sell out," a food industry practitioner told New Finance Observer. He also emphasized that given Crayon Shin-chan's poor performance, selling land to raise funds would not be unreasonable. However, after the toxic capsule incident, it has become increasingly "low-key," and "it's hard to remember how it originally rose to prominence." Data shows that in 2017, Crayon Shin-chan achieved operating revenue of 903 million yuan, up 1.1% year-on-year; net loss narrowed by 51.9% to 289 million yuan. However, the announcement indicated that the reduction in net loss last year was mainly due to the recognition of an impairment provision for property, plant, and equipment of approximately 94.5 million yuan, a decrease of 147 million yuan compared with the amount recognized in 2016; and no provision was made for impairment of loans receivable in that year. Of course, the base figure is important. Data shows that in 2016, Crayon Shin-chan achieved revenue of 893 million yuan, down 14.8% year-on-year; annual loss expanded by 77.9%, with a huge loss of 600 million yuan. At that time, the company explained in its announcement that the increase in net loss was mainly due to the impact of weak consumer sentiment and the overall slowdown of the Chinese economy, leading to sustained weak market demand for the group's traditional snack foods; due to the expected decline in the group's business performance, a provision of approximately 242 million yuan was made for impairment of property, plant, and equipment recognized in 2016. Alongside the announcement, Crayon Shin-chan launched several new products in the snack food sector at a trade show in Shanghai, such as yogurt pudding, Ai Xiaoyu's hand-torn fish, and fresh scallops, but "the investment promotion was not good, and distributors were not optimistic," the aforementioned practitioner said. Not Focused on Core Business If Crayon Shin-chan is selling the above assets to "turn over funds" or boost its 2018 performance, then it might be a "good deal." "As for the target, based on experience, the selling price is estimated at around 300 to 400 million yuan," a professional manager in the property rights trading field told New Finance Observer. However, "selling assets has nothing to do with Crayon Shin-chan itself; that's just Crayon Shin-chan's investment project. Their investment projects have always been doing well," an insider told New Finance Observer. He also emphasized that Crayon Shin-chan's annual net profit sometimes is less than what its chairman earns from a single investment project. Supporting evidence is that business registration information shows that there are as many as 14 companies related to the current legal representative of Crayon Shin-chan. Among them, he serves as "legal representative" in 9 (including one revoked but not deregistered and two deregistered); as "shareholder" in 5, with shareholding ratios above 42% except for one company that has been revoked but not deregistered. Among these, companies directly related to the "investment" matters mentioned by the insider account for nearly 50% of the "surviving" companies. Interestingly, although Crayon Shin-chan mentioned in the aforementioned announcement that the company intending to purchase its assets is not affiliated with Crayon Shin-chan, this company seems to want to hide something. The company mentioned in the previous announcement that intends to purchase Crayon Shin-chan's assets worth several hundred million yuan is Fujian Jinjiang Oudian Supply Chain Management Co., Ltd. (hereinafter referred to as Oudian). Business registration information shows that this company was established on May 16, 2018. Apart from the company address and legal representative, phone, email, and website are still "blank." In other words, two days after Oudian was established, Crayon Shin-chan released the relevant announcement. "The other party's deliberate concealment can only mean that behind this transaction, there is either a big move or a little secret. Once the deal is successful, the 'hidden truth' should surface," the aforementioned insider said. Lack of Originality "Crayon Shin-chan started coasting four or five years ago," an industry insider who had a brief stint at Crayon Shin-chan and served as a senior executive told New Finance Observer. "This has something to do with the toxic capsule incident." In 2012, the toxic capsule incident broke out, and jelly, as a food containing "gelatin," suffered a heavy blow. Industry associations and companies came forward to defend themselves, but consumers, still wary, voted against the product. Years have passed, and the reality that jelly is hard to sell has not changed much. Crayon Shin-chan, which once ranked second in the jelly industry with a market share of over 10%, has gradually faded from people's sight. Although it has been controversial for "imitation," for the sake of development, Crayon Shin-chan has also dabbled in confectionery, beverages, and snack foods in recent years. However, "for fruit jelly, there's Xizhilang; for high-end jelly, there's Qiaomama; fish products are imitative, candies are imitative, so it can never be the leader, only the follower..." an industry insider pointed out Crayon Shin-chan's awkward position. Worse, in his view, the reason for its heavy losses in 2016 was the adoption of a high-profile sales model, with investment far exceeding output, leading to losses. It is not alone. "The jelly main business has no good performance, no noteworthy new products; innovation capability is poor, marketing methods are outdated, and the planned products are old products that other companies have been making for over a decade; although candy sales have increased, the jelly main business has declined seriously; the new snack foods have not performed well either, and the overall market performance is weak..." Ding Zhongwei, a senior food marketing expert, told New Finance Observer. Unfortunately, in an era where the whole "world" is building IP, Crayon Shin-chan, as one of the earliest food companies with an IP, failed to capitalize on the benefits that IP could bring to the company and its products. "With poor performance, the company's own problems are certainly more significant," the aforementioned practitioner said. Regarding Crayon Shin-chan's severe performance decline, the original intention of selling assets, and its returns in the investment field, no official response from Crayon Shin-chan was received by the time of writing. Source: New Finance Observer -END-