A year later, Anta Sports was short-sold again. Why was it so "lethal" this time?

Being targeted again by short-selling institutions, Anta Sports (02020) experienced a difficult night.

On May 30, the short-selling agency "Killer Whale" Blue Orca Capital questioned Anta Sports' corporate governance and the opaque income of its FILA brand at an investment forum. It is expected that Anta Sports' stock price will fall by 34% and it is recommended to sell short. As soon as the news came out, Anta Sports plunged during the session, once falling by more than 12%, touching HK$43.5, the largest drop since October last year.

Before the market opened the next day, Anta Sports issued two announcements, strongly denying this false speculation, and disclosed that related parties subscribed for new shares, accounting for 0.59% of the total share capital. Subsequently, its stock price opened more than 1.8% higher, and then the increase quickly expanded to nearly 6%, closing at 48.0 yuan per share, up 2.24%.

In fact, this is not the first time Anta Sports has been shorted. GMT Research, a short-selling agency that shorted Changhe in May this year, also short-sold Anta Sports in June last year. At that time, Anta Sports was questioned as having "unbelievably high" profit margins. Anta Sports also strongly denied it, but its stock price did not have a significant impact and has since risen.

Criticizing Fila’s “non-transparent income”, Anta issued two consecutive announcements denying it

At present, "Killer Whale" has not officially released a short-selling report. There are only some PPT pictures displayed at the Hong Kong Investment Forum, questioning Fila's income disclosed by Anta.

On May 30, Soren Aandahl, founder and CIO of "Killer Whale", questioned Anta's corporate governance and the opaque income of its brand Fila at the 2019 Sohn Hong Kong Investment Forum, and gave Anta a discount of approximately 15% on last year's income and net profit. let. Aandahl said that based on net profit in 2018 and 2019, Anta's price-to-earnings ratios were 22.9 times and 17.8 times respectively. The target price of Anta this year is 32.93 yuan, so it is believed that Anta's stock price has room for a decline of up to 34%.

According to the 2018 annual report, Anta Sports' revenue reached 24.1 billion yuan, a year-on-year increase of 44.5%; net profit was 4.1 billion yuan, a year-on-year increase of 32.87%, creating the best performance in Anta's history. Ding Shizhong, chairman and CEO of Anta Sports, once revealed in public that Fila contributed more than 10 billion yuan in revenue in 2018, making it the brand that contributed the most to Anta's growth.

However, the company did not disclose the specific revenue and other data of Fila. It only disclosed that as of December 31, 2018, Anta had a total of 1,652 Fila stores in mainland China, Hong Kong, Macau and Singapore. The data was in At the end of 2017, there were 1,086. At the same time, ANTA Sports predicts that the average growth rate of all the company's brands by 2020 will be 15%-20%, while the average growth rate of FILA, FILA KIDS and FILA FUSION is expected to be more than 30%.

"Killer Whale" has seized on this point and believes that Fila's income in mainland China is not transparent. At present, Fila's stores in mainland China are mainly directly operated stores, accounting for as high as 80%. Based on Fila's wholesale channel revenue in South Korea, Aandahl deduced that Fila's revenue in the mainland was approximately 5.116 billion yuan, which was 41% higher than Anta's previous guidance of 8.7 billion yuan. Therefore, Aandahl concluded that Anta had exaggerated Fila Mainland income.

Aandahl also believes that Fila's single-store revenue in mainland China is significantly higher than its single-store revenue in South Korea and Taiwan, China. In fiscal year 2018, Fila's mainland single-store revenue was approximately 6.3 million yuan, exceeding that of Taiwan by 134% and South Korea by 29%.

In addition to questioning Fila's financial problems, the "Killer Whale" also raised questions about Anta's governance, mainly around the fact that Anta Sports has a large amount of cash, but it has still raised funds many times and has stable cash flow, but the dividend rate has dropped from 70% to 45% both ways.

However, at the performance meeting at the end of February, Ding Shizhong said that the decline in dividend rates was mainly due to acquisitions. After the acquisitions are completed, if future business, profits or cash flow improve, the dividend payout ratio will exceed 30%.

On May 31, Anta Sports issued two announcements, one of which was a clarification announcement. In the announcement, ANTA Sports stated that the board of directors strongly denies the relevant speculation in the report and believes that the relevant speculation is inaccurate and misleading. ANTA Sports stated that the company reserves the right to take legal action against the "Killer Whale" and/or those responsible for related accusations.

In the subsequent second announcement, Anta Sports disclosed that related parties subscribed for new shares with HK$49.11 in cash, accounting for 0.59% of the total share capital, which was a discount of approximately 1.19% from the closing price of HK$49.70 on the last trading day before the subscription, and the total subscription amount was HK$778 million. .

The subscriber is the major shareholder of Mascot JVCo, and Anta Sports indirectly holds 57.95% of Mascot JVCo’s shares through Anta SPV. Therefore, Mascot JVCo is defined as a subsidiary of Anta Sports according to the listing rules, and the subscriber is a related person of Anta's intention at the subsidiary level.

After the two announcements were released, Anta Sports' stock price opened more than 1.8% higher. Since then, the increase has rapidly expanded to nearly 6%, closing at 48.0 yuan per share, up 2.24%.

In addition to related parties, Anta Sports has also received support from Yamato and Guotai Junan International. Among them, Guotai Junan International said it believed in the authenticity of the company's financial data, maintained its recommendation for Anta Sports, and suggested that investors can buy at low prices and hold for the long term.

I was short-sold just a year ago, this time I encountered a veteran "killer"

This is not the first time that Anta Sports has been disappointed. In June last year, short-selling agency GMT Research also pointed its gun at Anta Sports and raised five major issues, including excessive operating profit margins, a large number of abnormalities in cash or prepaid accounts, and a large amount of cash derived to match the inflated revenue. flow, the proportion of inventory relative to revenue is too low and the proportion of prepaid accounts relative to inventory is too high. The agency's final rating for Anta was sell and the stock price was lowered to HK$10 per share.

However, after the release of this short-selling report, Anta Sports' stock price did not suffer any significant impact, and subsequently rose all the way to new highs.

As for the lethality of the "killer whale" this time, it has something to do with its "profound" background. Killer Whale, which was established early last year, was founded by Soren Aandahl, co-founder and former chief researcher of Glaucus Research, and focuses on Hong Kong stocks as one of its main battlefields. Because Glaucus sniper companies are almost always successful, the "Killer Whale" attracted attention as soon as it was established.

At the end of May 2018, the first target of the "Killer Whale" was Samsonite. Its report pointed out that the company's governance and accounting issues warranted a discount to its peers, and the target price given to Samsonite was only HK$17.95, a discount of up to 48% from the previous day's closing price.

Since then, Samsonite has suffered a nightmare year. The then CEO Ramesh Tainwala resigned, and the group's stock price not only fell below HK$17.95, but also hit new lows this year. On May 31, the stock traded at its lowest price of HK$16.10.

Beijing News reporter Zhang Zeyan editor Wang Jinyu proofread Wu Xingfa

Reporter’s email: zhangzeyan@xjbnews.com