In Shanghai, Zhang Yida visited the Chinese Cultural Industry Fund for the second time.
"Mr. Li, how have you considered the matter of Canxing Culture?" Zhang Yida looked at Li Ruigang with a smile.
"Mr. Zhang, we have negotiated internally and are willing to accept investment from Zhonghe Group."
Li Ruigang added: "This is the valuation, there is a slight increase.
In March last year, Zhefu Holdings acquired 6.0698% of Canxing Culture's shares at a cost of 300 million yuan. The valuation at the time was 5 billion yuan.
It has been almost a year since this financing. It is normal for the valuation to increase. I hope Mr. Zhang understands."
"That's no problem," Zhang Yida nodded. "It's normal for valuations to rise as operating performance rises."
Zhang Yida's words are also very direct. If you want the valuation to rise, let's talk about actual operating performance.
"Okay, here are the financial reports of Canxing Culture in recent years. Mr. Zhang please take a look at them."
Li Ruigang asked his secretary to pass a stack of materials to Zhang Yida. After Zhang Yida took it, he started to read through it.
In 2015, the revenue was 2.46188 billion yuan, with a net profit of 806.47 million yuan; in 2016, the revenue was 2.706 billion yuan, with a net profit of 728.59 million yuan.
Revenue increased by 10%, but net profit dropped by 10%, which is a bit strange.
Zhang Yida continued to read. In 2015 and 2016, the program production income of "The Voice of China" and "China New Singing" accounted for 46.43% and 37.33% of the total income respectively.
Total assets are 4.206 billion yuan, total liabilities are 1.159 billion yuan, and the net assets on the books are 3.047 billion yuan.
The goodwill on the balance sheet is as high as 1.983 billion yuan, which means that two-thirds of Canxing Culture's net assets are composed of goodwill.
The proportion of this goodwill in the asset system is a bit too high!
Zhang Yida couldn't help but ask: "Why is the goodwill so high?"
"Oh, this!"
Li Ruigang said calmly, "The year before last, Canxing Culture acquired the music production company Mengxiang Qiangyin for a transaction consideration of 2.08 billion yuan.
At that time, Mengxiang Qiangyin’s book net assets were only 112 million yuan, so this ultra-high premium acquisition added 1.97 billion yuan of goodwill to Canxing Culture’s consolidated statements.”
Li Ruigang's frankness surprised Zhang Yida. Generally, such premium acquisitions are secretive.
It would be nice for this person to explain it clearly to you directly.
In fact, you can't hide this matter even if you want to, unless you commit financial fraud.
"Well, I've almost finished reading it. Mr. Li, please give me a price!"
"15 billion!"
Tsk tsk tsk, in less than a year, the valuation has tripled!
"Mr. Li, how did you calculate the 15 billion?"
Li Ruigang smiled and said: "This price is not high, it is not even 20 times PE."
Zhang Yida said: "When Zhefu Holdings bought shares, its profit in 2015 was 800 million yuan, 6 times the PE.
The profit dropped by 10% in 2016, how come the valuation tripled?"
Li Ruigang explained: "Profits have declined because the revenue generated by "The Voice" in 2015 was 1.143 billion yuan, and the revenue created by "New Singing" in 2016 was 1.01 billion yuan.
Mr. Zhang, you may also know that at the beginning of last year, negotiations between Canxing and Dutch Talpa, the copyright owner of "The Voice", collapsed due to price issues.
Then Tangde Film and Television came out to cut the corners and exclusively bought the rights to the program model of "The Voice of..." for 5 years and 4 seasons, while Canxing lost the rights to the famous "The Voice of China"."
Zhang Yida knew about this matter, and it caused quite a big fuss at the time.
Everyone thought that Canxing Culture would be in trouble if it lost the copyright of "The Voice of China". As a result, they launched a copycat version of "The Voice of China", which was still very popular.
In terms of revenue, last year’s “The Voice of China” earned 1.01 billion yuan, which was only 130 million yuan less than the revenue of “The Voice of China” the year before.
The gap is not big. It can be said that the last battle was successful.
Li Ruigang continued: "At that time, everyone thought Canxing would be finished, but they were disappointed.
Relying on more than ten years of experience and accumulation in variety show production, we launched our own program "China's New Singing", which continued the ratings miracle.
Likewise, this matter has once again proved the strength and potential of Canxing Culture."
Speaking of this, Li Ruigang had a smile on his face. He was not called the number one brother in domestic variety shows for nothing, he thought copyright would block us.
However, Li Ruigang also knew how dangerous this was, and it would not be an exaggeration to say it was a gamble.
Zhang Yida believes that after losing the copyright of Good Voice, Canxing Culture can continue to succeed, and the company's strength must be there.
In addition, the main reason is that the previous Good Voice was too successful and had a user base and inertia.
Compared with "The Voice", "New Singing" just changed the vest.
The TV station has not been changed, the host has not been changed, the production company has not been changed, and the general flow of the program has not been changed...
The audience didn't feel much difference after watching it.
Especially Hua Shao, that is simply a highlight of the show.
"So, Mr. Zhang, don't think that I'm raising the price indiscriminately. At that time, when Zhefu Holdings bought shares, the situation was still unclear.
The contract with the Netherlands has just been terminated, and the new songs for the first season have not been released yet. No one knows what the situation is.
Therefore, when Zhefu Holdings bought shares, the valuation was only 5 billion yuan.
Now that the situation is clear, New Songs will continue to succeed. In the foreseeable next few years, the performance will not be lower than last year."
It was a bad time to invest in shares and I didn’t pick up the slack.
Zhang Yida was not disappointed and said: "Canxing Culture relies too much on the variety show New Singing. This is not a good thing for a company."
Li Ruigang understood that he just wanted to bargain! He said with a smile: "Mr. Zhang, you are right, but you can also see from the financial report that the revenue ratio is declining.
The year before last it accounted for nearly half of the total revenue, but last year it was only a little more than one-third.
This year, it will definitely drop to less than one-third.
In this case, the income structure is still very stable and healthy."
After hearing this, Zhang Yida said nothing. He was not very optimistic about the future of Canxing Culture.
Originally thinking of a valuation of several billion, I came here to pick up a bargain.
The valuation of 15 billion yuan is a bit too high. Although the valuation of Canxing Culture in the previous life once reached more than 20 billion yuan, no one knew whether this valuation could be sustained before it was listed and realized.
Any variety show is popular, and The Voice has been launched for several years. Various data show that its popularity is declining.
If it leaves the flagship variety show The Voice and Canxing Culture cannot launch new flagship programs, its performance is likely to change drastically.
And the goodwill of up to 2 billion yuan is another small bomb.
Mengxiang Qiangyin and Canxing Culture are both subsidiaries of Star Chinese Media, and they are considered brother companies.
As a result, Canxing Culture acquired this little brother with a net worth of 112 million yuan for 2.08 billion yuan, which can be regarded as a related transaction.
It’s not an Internet company or a technology company, so the 20 times premium is indeed a bit high.
Although there is a possibility that Meng Xiang Qiangyin will launch an awesome program, the possibility is relatively small.
This kind of thing, which relies entirely on creativity and even a bit of luck, is not as likely as the sudden launch of a popular game by a certain gaming company, such as Blue Hole.
Zhang Yida smiled and shook his head, "If Canxing Culture can solve the problem of single-point dependence on performance, for example, reducing the revenue share of New Songs to less than 20%, Zhonghe Group can agree to a valuation of 15 billion."
"Mr. Zhang, this is a bit overwhelming."
Li Ruigang said unhurriedly: "Many film and television entertainment companies have obvious single-point dependence problems for their performance. The annual performance of these companies often depends on a single film or a single program on which they have made heavy bets.
For example: a successful Lunar New Year blockbuster may lead to explosive growth in the performance of a listed film and television company, but if the Lunar New Year film does not do well at the box office, the company's performance may be in danger of falling off a cliff.
Whether it is Huayi Brothers, Huace Film and Television, Hualu Baina, or companies like Tangde Film and Television or Guangguang Optical Media, there is no exception."
This is true. If a movie does not do well at the box office, it can even cause the movie company to go bankrupt.
"How about performance betting?"
Zhang Yida decided to take a roundabout way and rely on betting to achieve the purpose of investing in shares at a low valuation.
After much deliberation, he decided that Canxing Culture still had to take a stake. Its variety show production capabilities were an indispensable part of Zhonghe Group's entertainment strategy.
If DouShi or Bilibili want to enter the field of long-form videos, they must produce several popular variety shows. Of course, they must also create popular online dramas.
"Betting? How to bet?"
Zhang Yida said with a smile: "Simple, just use the revenue and net profit in 2016 as the standard, and the performance in the next three years will not be lower than this number."
Li Ruigang was also an old man. After hearing this, he did not reply immediately, but thought about it seriously.
Zhang Yida's gambling conditions cannot be said to be strict, and they do not even require a three-year growth rate, so they are considered loose.
But my family knows their own affairs, and the new singing voice is already going downhill.
However, programs such as "The Masked Singer", "The Great Challenge", "Outstanding Chinese", and "The Golden Star Show" can only be said to be pretty good.
He cannot take over the big responsibility from Xin Gesheng and become the company’s new ace.
Zhang Yida did not ask further questions and drank tea quietly.
There is no doubt that Canxing Culture is a good company. At least in terms of domestic variety shows, it is currently the number one company.
In previous lives, Ahri and Penguin also invested in Canxing, and Canxing also co-launched the variety show "Instant Electronic Music" with Penguin Video.
However, Zhang Yida remembered that starting from this year, Canxing seemed to have started to decline, and its performance had deteriorated. It was also stolen from the limelight by iQiyi's "Hip-Hop in China" and Penguin's "Produce 101".
That's why Zhang Yida dared to make a three-year bet.
"What about not completing the bet?" Li Ruigang thought for a while and then asked.
"Recalculate the valuation based on 20 times PE. The original shareholders will provide equity compensation to Zhonghe Group."
Li Ruigang asked again: "How much does Zhonghe Group plan to invest?"
“Should the share exchange between DouShi and Canxing Culture be carried out as mentioned last time?
If not, we will invest 300 million yuan in cash; if there is a share exchange, we will invest an additional 1 billion yuan."
Li Ruigang smiled and said: "Our board of directors has discussed it. The size of DouShi is too big and is not on the same level as ours. It is better not to exchange shares!"
Li Ruigang has repeatedly analyzed DouShi's valuation of tens of billions of dollars, and still feels that the valuation is too high and somewhat unworthy.
A software that has been popular for less than two years has been valued at nearly 100 billion yuan. I don’t know how big the bubble is.
"It's okay if you don't exchange shares, then invest 300 million yuan in cash."
Zhang Yida wanted to tie Canxing Culture onto the DouVision chariot, but the other party didn't catch it, which made him a little regretful.
"Mr. Zhang, don't you invest more? 300 million is only 2% of the shares."
Zhang Yida smiled and said: "Zhonghe Group is still a start-up company with limited funds. We can increase the funds later when we have sufficient funds! Just buy a few shares now and form an alliance."
Zhang Yida actually wanted to make a fortune of one billion or two billion, and wait three years to ensure that he would win the bet and earn money.
However, one is that funds are currently not allowed, and the other is that the equity of Canxing Culture is dispersed, with many outstanding producers holding shares.
I won so much on the bet that I became a major shareholder and was dumbfounded when I forced the talent away. The most important asset of this kind of company is talent.
Only with talent can we have a steady stream of hit variety shows. Without talent, we can't sustain our two-year investment.
The company is a bit useless. Just like Penguin, Ahli can just invest a few points or two in the company. There is no need to pursue a controlling stake.
"Okay, 300 million is 300 million. If you want to make a bet, you need to negotiate with the original shareholders."
Zhang Yida smiled and said: "Don't make me wait for several months like last time."
Li Ruigang repeatedly waved his hand and said no. He had delayed the release of the 2016 financial report, and there was no point in delaying it any longer.
Zhang Yida stayed in Magic City for another day. After the shareholders of Canxing Culture arrived, they signed an investment agreement and a gambling agreement together.
Li Ruigang gave Zhang Yida a slight discount. The valuation of 15 billion was calculated after the investment, but not before the investment. The investment of 300 million yuan came in, accounting for exactly 2% of the shares.