News description

Beijing University Founder Group, the school-managed enterprise of Peking University, broke the bond default for the first time. On December 2, it failed to pay the minimum amount of 2 billion CNY short-term financing bonds on schedule to repay the principal and interest.

 

Impact analysis

Peking University Founder Group has three business segments, namely PCB business, Internet connection service business, and an IT system integration and solution business. In the first half of 2019, its PCB business revenue was approximately 1.37 billion CNY, with an annual growth rate of 16.32%. The business revenue of its Internet connection service was 305 million CNY, a significant decline of 50.14% compared with the same period last year. The business income of its IT system integration and solutions was 276 million CNY, a slight increase of 1.62%. Due to the substantial growth of its PCB business and the decline of other businesses, it has significantly raised its overall revenue proportion of PCB business from less than 40% three years ago to the nearly 70% that they currently have.

 

If we observe the Founder Group’s financial figures, we can see that its current ratio has been between 0.7~0.8 for a long time. In other words, its cash, inventory, accounts receivable, etc., are smaller than its short-term borrowings, advance receipts, and other current liabilities. Generally, the basis for evaluating if a company’s short-term operation has a turnover risk will require the company’s liquidity ratio to be above 2. Therefore, we can already track the short-term financing bond default of the Founder Group.

 

The Founder Group’s Internet connection service is the main reason the group has declined. In the first half of 2019, the number of Internet users in its portfolio decreased by 263,000 compared with the end of 2018. Under the dual pressure of falling prices and volume, the online business that can bring short-term cash inflows has severely affected the flexibility of its fund scheduling. In the future, it is expected that it will introduce a capital injection cooperation with other large telecommunications companies. Anyhow, as the Founder Group’s new PCB plant in Zhuhai is nearing completion, it is speculated that it will pay more attention to companies that focus on PCB production in the future.