Strategic partners tear apart, AGILE GROUP is in a difficult situation

AGILE GROUP's former strategic partner has filed for liquidation. Although the debt amount is not high, it may be the beginning of a chain reaction. Key Points: AGILE GROUP is facing a liquidation petition filed by a subsidiary of its former partner Melco International in court. In the first 11 months of this year, the average price per square meter of the company's properties has dropped by 32% year-on-year to 9,113 yuan. Li Shida A "cultural tourism dream" that has been unresolved for many years has finally reached the doors of the court. Last Tuesday, AGILE GROUP Holdings Limited (3383.HK) saw its stock price plummet nearly 20% during trading, leading to a flurry of news. That evening, AGILE GROUP announced that it had received a court liquidation petition, further undermining the already fragile market confidence. AGILE GROUP announced that on the 9th of this month, it received a liquidation petition submitted by Melco (Zhongshan) Enterprise Management Co., Ltd. to the Hong Kong High Court, involving alleged unpaid amounts totaling approximately USD 18.587 million and HKD 2.234 million. The court has scheduled the first hearing for February 25 next year. In terms of amount, this debt of about 150 million yuan is just the tip of the iceberg relative to AGILE GROUP's overall debt scale. However, the market is concerned that the petition for liquidation was filed by what was originally seen as a "strong partnership" in cultural tourism, Melco International (0200.HK). Rewind to June 2021, AGILE GROUP and Melco acquired a large comprehensive land parcel of approximately 504,000 square meters in the Cuiheng New District of Zhongshan for a total price of 3.82 billion yuan, planning to invest about 10 billion yuan to create a cultural tourism ecological city that includes a theme park, five-star hotels, shopping centers, medical beauty centers, and high-end apartments. Breakthrough in Cultural Tourism Project According to the cooperation arrangement at that time, Melco was responsible for the theme park land, while AGILE GROUP was responsible for the remaining land. In terms of funding, AGILE GROUP was to invest about 5.65 billion yuan, while Melco was to invest no less than 400 million yuan. Subsequently, AGILE GROUP did not fulfill its obligations under the agreement and issued a notice of termination of cooperation in July 2022. The two parties reached an agreement to "part ways" in 2023; however, AGILE GROUP ultimately failed to pay the related amounts, leading Melco to resort to legal action. AGILE GROUP emphasized in its announcement that it strongly opposes the petition and will continue to communicate and cooperate with overseas creditors, hoping to achieve a comprehensive restructuring of the group's overseas debts and reach a restructuring agreement with major overseas creditors as soon as possible. AGILE GROUP's financial predicament is directly related to its large cultural tourism projects invested in mainland China in recent years. Including the Zhongshan Cuiheng Cultural Tourism City that triggered this dispute, AGILE GROUP has bet heavily on the cultural tourism complex model over the past decade. However, such projects require significant investment, long cycles, and slow returns, with cash recovery far inferior to residential development, becoming a major source of financial pressure. In the first half of this year, AGILE GROUP's revenue fell by 35.8% year-on-year to 13.57 billion yuan, while the loss attributable to shareholders narrowed by 17% to 8.03 billion yuan. The improvement in losses mainly came from extraordinary "bleeding control" measures, including the sale of its seasoning business, monetizing part of its stake in AGILE Living Services (3319.HK), as well as laying off about 6,000 employees and reducing operating expenses, which does not indicate a substantial recovery in its core business Average Price Plummets 32% In fact, the Chinese real estate market remains sluggish, making it difficult for the company to receive effective support. In the first 11 months of this year, Agile Group's cumulative pre-sale amount shrank by approximately 45% year-on-year to 8.08 billion yuan. Although the decline has narrowed from 64.8% compared to the same period last year, it still marks two consecutive years of significant decline; the sales area decreased by about 20% to 886,000 square meters. At the same time, the average selling price plummeted by approximately 32% year-on-year to 9,113 yuan per square meter, a drop far greater than the 10.2% decline in the same period last year. This reflects that developers, under pressure to reduce inventory, must resort to more aggressive price cuts to secure transactions, but sales volume has still not rebounded, and the recovery effect is limited. The financial statements further reveal the structural risks of the group. As of the end of June, the group's total liabilities amounted to 149.561 billion yuan, a slight decrease of 3.6% from 155.216 billion yuan at the end of 2024, but the debt structure has not materially improved. During this period, short-term borrowings due within one year still reached 37.87 billion yuan, while available cash was only 3.09 billion yuan, resulting in a short-term debt coverage ratio of less than 10%, indicating extremely weak cash buffers. On the asset side, Agile still holds approximately 29.62 million square meters of land reserves, with an average floor price of only 2,338 yuan per square meter, theoretically possessing certain realizable value. However, in the reality of cash flow depletion, some land reserves have been passively used as collateral for debts, with three plots of land in Hainan's Clearwater Bay auctioned by tax authorities at a base price of approximately 1.56 billion yuan for tax offsets. The company is also negotiating with local governments regarding the acquisition of commercial housing. In the past year, Agile has not been idle. The company has facilitated the extension of loan terms totaling 14.92 billion yuan, recovered over 1.2 billion yuan in high-risk receivables, sold non-core assets, and reduced costs. However, these measures essentially only delay the pressure and are insufficient to reverse the situation. Now, Melco has taken the lead in making a move, signaling to the market that the patience of creditors in negotiations has been exhausted