Xiaojie HUANG: Regional Leaders Have Potential for IPO

2010-12-06

It’s reported that Jack Ma (Founder and Chairman of Alibaba Group) said to Xiaojie HUANG, “I think you are some kind of like me.” Although it cannot be confirmed, they really have a lot in common.ZcZ九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

In 2001, after graduating with his bachelor degree from UIBE School of Banking and Finance, Xiaojie HUANG continued to study in GSPBC for master and doctor’s degrees. After graduation, he acted as Researcher, Deputy Director, and Principal Assistant in the school successively. In the middle of 2007, he resigned to set up Jiuding Capital.ZcZ九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Just like Jack Ma resigned from school for business deals, Xiaojie HUANG has similarly brisk insights and resolute ability. With more than 3 years’ efforts, Jiuding Capital has developed into a dark horse with two investments in the growth enterprise market (GEM). For him, the tiring job with a clear-calculated profit just began.ZcZ九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

As the first 28 GEM listed enterprises were lifted bans on November 1st, the 56 associated PE firms ushered in a harvest time. However, Jiuding Capital, founded in 2007, ranked 2nd among the total earning list based on its 25-fold earnings from its two invested companies GEFORE (300022) and GEEYA (300028), becoming a deserved dark horse among Chinese PE firms.ZcZ九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Meanwhile, the company announced it has finished the fundraising of first US fund, Jiuding China Growth Fund, on November 18th, which was jointly invested by 8 investment companies including Vertex Management, SGG Capital, Jade Invest, and AUDA with total investments of 120 million US dollars. In addition, three projects have been confirmed.ZcZ九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

From a Chinese PE firm less than 4 years old to an institution well recognized among international top investing firms, Jiuding Capital has astonished the insiders by his strategy of continuous investments in one field rather than various ones.ZcZ九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Five consumption upgrade-led hot spotsZcZ九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Southern Weekly: Let’s talk about your US fund. As a Chinese PE firm, does it go well to raise your first US fund? Have you begun to invest?ZcZ九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Xiaojie HUANG: Yes. We began to raise our first US funds at the end of last year and closed for the first time in May and second time in October. Although it is not a long time, we got opportunities to raise excessive funds and selected suitable LPs.ZcZ九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

We have invested the fund in three enterprises: a pesticide R&D company in Nanjing, the best in Chinese pesticide compound synthesis sector; China’s biggest medicine logistic enterprise, accounting for almost 35% of the market share of provincial logistic services; and a No. 1 guarantee company for SMEs in China.ZcZ九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Southern Weekly: Have agriculture, medicine and consumption become your most concerned sectors at present?ZcZ九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Xiaojie HUANG: It’s right. We are attaching great importance to agriculture, medicine, consumption, advanced manufacturing and emerging industries now. ZcZ九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

The simple truth is urbanization and consumption upgrade have become two prosperous development trends nowadays, and most people in China have experienced the same processes like me, namely born in countryside but studying and living in metropolis. During the past two decades, China’s urbanization has been promoted at an annual rate of 0.9% and reached 46.7% in 2009. I think the figure will be raised to 65% according to Chinese population structure and land resource. In the process, national wealth increases with consumption upgrade. Everyone wants to live in a comfortable, cleaner and healthier environment. The boss of a garment company invested by us once said it’s irreversible just like “making a dressed girl ugly”. Hence, we make investments under such backgrounds and the fields we set foot in are closely related to the above–mentioned trends.ZcZ九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

IPO can be achieved in one Chinese provinceZcZ九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Southern Weekly: Counting Nanjing’s pesticide R&D Company you just mentioned, Jiuding Capital has finished investments in nine pesticide companies. Why you are so densely concentrated in this sector? ZcZ九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Xiaojie HUANG: In fact, we have invested in many fields beside this sector. Maybe it seems weird, but it’s our strategy.ZcZ九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

First, we never invest in strange sectors before mastering the industrial scale, competitive pattern and core points in 5 to 10 years. If you have got your own ideas about a sector, you’ll invest in resolutely.ZcZ九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Second, why we are so densely concentrated in the sector? Normally, the mature stage of an industry is monopoly, such as China’s milk enterprises Bright Dairy, Yili and Mengniu. However, most of industries in China have not entered into that stage, which will help some enterprises become stronger and be merged in 20-30 years and cause a long investment period so as to bring us considerable returns.ZcZ九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Southern Weekly: Do you mean regional enterprises can be listed through IPO among the decentralized industry?ZcZ九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Xiaojie HUANG: Yes. Actually, Sichuan market is as big as that of a European country. If you can run an enterprise well in Chinese Sichuan province, which has market scale and achievements like a listed company, you can run a nationwide enterprise in foreign countries.ZcZ九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

The excellent companies in certain areas should be out those areas for further expansion. Taking Hongqi Chain as example, the company ranked first among Chengdu with 800 chain stores when we invested. After we helped it merge more stores in other two cities, it has become Sichuan’s No.1 chain store company able to be listed and expand to Southern China, even the entire China. ZcZ九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Objectively speaking, it’s very difficult to find suitable projects in China now, because most of national-sized companies have been listed. Hence, it’s better for us to find suitable ones regionally and provincially.ZcZ九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

PE is the same to enterprise investmentZcZ九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Southern Weekly: Due to the severe competition among PE industry, investors shall put a lot to explore provincial markets. This year, Jiuding Capital has become a dark horse through investing Gifore and GEEYA. My question is how far will you go in next two years?ZcZ九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Xiaojie HUANG: The reason why investors give their money to us for PE is not because we can invest in those to-be-listed companies. If so, they can directly invest in a securities company. ZcZ九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Although the PE market is severe in competition, it has clear measurement standards. What we attached importance to is whether investees’ performance and scale can be increased in next five years, which requires investors to thoroughly know the industry. In addition, we have always looked for good projects in far-away areas. Take new energy for instance, it seems we are not interest in this sector, but actually we have done researches for two years and will take actions soon.ZcZ九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

In fact, PE is the same to enterprise investment. It’s truly successful if PE in China can earn when its price is lowered by 15 times. We are striving to become such PE.ZcZ九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Investment ReflectionZcZ九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

LP and investees are clientsZcZ九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

There is a debate among investment industry: who are clients on earth? LP (Limited Partner), the investor, is the client without a doubt. How about the invested enterprises? If not, they can be regarded as the tools of earning money, and you will try your best to extract their surplus value. I don’t agree. LP is the client, too. So the invested enterprises do. We are a bridge to acquire money and give them to the recognized enterprises for value increase.ZcZ九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

 In addition, the process of seeking out potential enterprises is just like falling in love with somebody. You should know an industry clearly and investigate thoroughly to be responsible for yourself. For instance, many our invested companies have become our LP, which is like the process of falling in love to becoming lovers. We regard LP and invested enterprises as our customers.ZcZ九鼎投资(600053.SH)_上交所私募股权投资领域上市公司


ZcZ九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

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