Panda Fireworks: Why is it destroying value all the time?

Where is the source of value? Let us consider an intuitive example: assuming that the return on investment is 10%, we invest 100 yuan and expect to earn 10 yuan of cash flow in the future each year. Obviously, we can understand this investment as the current 100 yuan to buy the future of 10 yuan per year of cash flow. The rate of return on investment is unchanged, if we want to earn 20 yuan of cash flow every year, we should pay 200 yuan now. In other words, the price of an asset depends on the ability of the asset to earn future cash flows.　　If future cash flows are expected to grow by 1 time times, the value or price of assets will increase by 1 time times. This is a truth that even the taxi driver knows. Taxi licences are undoubtedly the property of taxi drivers.　　If the market demand for taxis in the future is hot, the price of taxi licences will tend to rise; conversely, if the market demand for future taxis is fatigue, the price of taxi licences will tend to decline.　　After understanding the relationship between asset value and the ability of assets to create future cash flows, we can understand many of the concepts associated with it. Why, for example, do accountants decrement assets?　　Since the ability of assets to create future cash flows has fallen, the value of assets should also be reduced, and accountants will confirm the value of the decline in asset values as impairment losses. How do we create value for our shareholders? If the average investment return rate of the whole society is 10%, we will invest $100 each year to earn $15 in cash flow, while others will have to invest 150 yuan to earn $15 cash flow. In other words, we have 100 yuan of capital, equivalent to the other 150 yuan of capital, we have for our shareholders to create a value increase of 50 yuan. Obviously, the value is created because we have a 15% return on investment, which exceeds the social average of 10% per cent. The source of value is that our investment is more profitable than others. If we invest 100 yuan a year, we can only earn 4 yuan of cash flow, while others have to earn $4 of cash flow only need 40 yuan of investment. Our investment of 100 yuan is equivalent to 40 yuan of other people's investment, we destroyed the value of 60 yuan shareholder. The reason for the damage is that our return on investment is only 4%, below the social average of 10%.　　The source of value destruction is that our investment is not as good as other people's money. After understanding the source of value, let's look at how Panda fireworks destroy value-one of the value-destroying behaviors: The change of company name Panda Fireworks and Liuyang fireworks, which one is famous? Believe unbiased readers, can come to the correct conclusion, Liuyang fireworks in the field of China's status, absolutely no less than Maotai liquor in China's status. Using the name Liuyang Fireworks, the cash flow to the company should be greater than the use of panda fireworks.　　"Hunan Liuyang Fireworks Co., Ltd." renamed as "Panda Fireworks Group Co., Ltd.", is undoubtedly a value-destroying behavior. Value destruction behavior of the second: Raise funds idle Hunan Securities and Supervision Bureau recentlyThe decision to correct the panda fireworks points out that the 180 million yuan of the panda fireworks raised in 2001, as at the end of 2009, still has 13.08 million yuan unused. The idle capital cannot bring any income to the shareholder, its value is 0!　　Cause shareholder value to be destroyed 13.08 million yuan! Value of the destruction of the third: the acquisition of the relevant party inferior assets according to the Hunan Provincial Bureau of the Correction decision book, Panda Fireworks "December 2005 from the major shareholder-related party Hunan climbed Tatsu Investment Co., Ltd. to buy fixed assets, under construction projects and other assets 10 million yuan", after "cumulative investment of 19.8239 million yuan. The fixed assets "after the acquisition is basically unused, years of disrepair, and lost the risk of explosive materials storage qualification." According to the conclusion, Panda fireworks acquisition of fixed assets have basically lost the ability to create future cash flow, the original value has been destroyed!　　The acquisition of the project "has been taken into account in the construction project impairment of 2.4584 million yuan", means that the construction of the future cash flow due to the ability to reduce the value of the damage to 2.4584 million yuan. At the same time, Panda Fireworks "invested 11 million yuan from the major shareholder-related party to purchase land use rights and leasing rights, the asset has long been idle, October 2009 as a whole for rental, 3-year rent only 1 million".　　This means that the purchase of land rights in the future of the next annual cash flow of only about 330,000 yuan, if the social average return on investment of 10%, the creation of this cash flow of only 3.3 million yuan investment, this investment project destroyed about 7.7 million yuan worth!　　Why do panda fireworks spoil the value? A little thought, we are not difficult to find: first, "Panda" is the largest shareholder of Panda fireworks Guangzhou Galaxy International Investment Co., Ltd. (hereinafter referred to as "Guangzhou Galaxy", formerly known as Canton Climbing) trademarks. Panda Fireworks only have 10 years of trademark rights. The use of the trademark license Panda Fireworks can be achieved through the sale of Liuyang production of fireworks products to promote the "Panda" brand value of the effect, but also to "Liuyang fireworks" gradually fade out of people's memories, it is stone. The biggest beneficiary is naturally the largest shareholder in Guangzhou Galaxy. As for the damage caused by the value of the small shareholders of the panda fireworks, it is not a matter for the major shareholders to consider.　　Zhao Weiping, the company's actual controller and chairman, was absent 14 times in the 16 shareholder meetings since 2007, and did not explain the same problem? Secondly, the value loss caused by the bad assets of the affiliated party is the value of the major shareholder and other related party.　　According to our preliminary calculation, from these related transactions, major shareholders and other related parties of the value of the harvest at least 28.5381 million yuan. Third, according to the panda fireworks since 2009 announced the holding shareholder in Guangzhou Galaxy reduction (including transfer) situation, we compiled a chart. From the chart we are not difficult to find, Guangzhou Galaxy cumulative reduction of 22.29 million shares, reduce net income accumulated up to 256 million yuan, reduce the net yield of 504.51%! Since the controlling shareholder can reduce its holdings from the two-tier market and gain huge profits, itStill need to enhance the main business of panda fireworks to create value? Because of the kindness of small and medium-sized investors in the two market, because of the lack of sufficient vigilance on controlling shareholders by small and medium investors, Yucheng the controlling shareholder's great wealth. There is no need for the controlling shareholder to lament the value damage.　　It is hoped that our analysis will allow small and medium-sized investors in the two-tier market to look after their wallets, far from undermining shareholder value, away from companies that exploit the disorder of the two-tier market valuation system to grab wealth. (the author is a professor of Central University of Finance)