Return to 1958 and build a century-old giant

Chapter 797 A Summary of Wealth in 1977 (2)

“Okay, I’ve already looked into it.” Zheng Zhijie said, “Wharf Holdings currently has two main sources of revenue: first, leasing, with Harbour City as the main business, and second, real estate development, which is the land that Wharf Holdings used to own.”
The former had a turnover of HK$3.3 million last year, with a net profit of approximately HK$9000 million; the latter had a turnover of HK$2.8 million, with a net profit of around HK$1.2 million.

"Is the main issue with rent in Harbour City?" Yang Wendong asked.

Zheng Zhijie said, "Yes, Harbour City's business is very good. The reason for the low net profit is that the debt was very heavy when Harbour City was built. As long as it takes 5 years to pay off the debt, the net profit of Harbour City alone can reach about HK$2.5 million. If Hong Kong's economy develops better, this figure will be even higher."

"Well, it seems that investing heavily in building Harbour City was the right choice," Yang Wendong said with a smile.
Harbour City is just starting out now, and it may only generate two or three hundred million a year. But when Hong Kong's economy takes off in the future, the revenue will be several billion a year. This is the most profitable shopping mall in human history, almost without exception.

Even future top Fortune 500 companies would be envious of a project that earns billions of Hong Kong dollars a year without lifting a finger. After all, it's so easy to make money without much hard work. It just goes to show that the British chose a good location in the early days, which ultimately benefited the Chinese.

Zheng Zhijie smiled and said, "Yes."

Yang Wendong said, "Wharf Holdings' property development profits are also very high, aren't they?"

Zheng Zhijie replied, "Yes, that's mainly because the land is owned by the owners, and many of it is commercial in nature. They can simply demolish the old properties and build houses to sell, especially in the Tsim Sha Tsui area, where the prices are quite high."

Yang Wendong thought for a moment and said, "Well, tell Wharf Holdings that there's no need to cash out like this, and they have nowhere else to invest."
In this way, some properties near the sea or in good commercial locations can be owned after construction. If management becomes too difficult, office buildings can be constructed and rented out.

Given the size of the Cheung Hing Group, it's inconvenient for them to buy properties in Hong Kong on a large scale anymore, as this would only cause property prices to skyrocket. However, there's no need to sell their own properties anymore; they could even wait until 81, when property prices were at their peak, to sell them.

Zheng Zhijie asked, "Is the net profit of Harbour City the same?"

“Yes, apart from keeping some for our own use, the rest will all be converted into property and we’ll continue to collect rent.” Yang Wendong nodded and said, “Wharf Holdings doesn’t need to engage in diversified businesses; it can just focus on being a landlord.”

For external expansion, he has Cheung Hing Properties, or Hutchison Whampoa as a publicly listed company for external investment. Wharf Holdings' goal is simply to hoard land.

Zheng Zhijie replied, "Okay, I understand."

"What about Hutchison Whampoa? I see its market value has exceeded 25 billion. Have they paid off their debts?" Yang Wendong then asked.

Zheng Zhijie laughed and said, "It hasn't been fully paid off yet. Now, those banks that used to urge us to pay back the money are no longer interested in us and hope that we can continue to lend to them."

Currently, Hutchison Whampoa's liabilities have decreased to only HK$8 million, its market capitalization is HK$26 billion, and its net profit last year was HK$1.8 million, which are very healthy figures.

“That’s normal. Banks always just add icing on the cake,” Yang Wendong said. “Okay, I don’t interfere much with Hutchison Whampoa’s other businesses. As for the port sector, besides Hong Kong, have you considered investing overseas?”

Zheng Zhijie replied, "There are no good investment targets at the moment. We can't participate in Europe and America. In Southeast Asia, most countries initially hold their own ports, so it's difficult for companies like Cheung Hing Infrastructure or Hutchison Whampoa to have opportunities."

"Aren't you going to attract investment from outside the region?" Yang Wendong asked in return.

Zheng Zhijie replied, "Basically no. It's mainly the IMF and the World Bank that are very enthusiastic about such projects, providing low-interest loans to these countries to build their own container terminals. However, our infrastructure company has taken on the construction work for several projects."

“Alright then. These countries’ ports are undoubtedly in excellent locations now. With the IMF involved, we are indeed no match for them,” Yang Wendong nodded.

As far as I can remember, Hutchison Whampoa's port development in the past only started in the 80s and 90s. At that time, many second-tier cities started building ports, and the country's capital was insufficient, so foreign investment was introduced.

It took Lao Li decades of hard work to build up his port business.
At this point in time, it is indeed very difficult to acquire key ports in some countries.
It seems we still have to pin our hopes on the mainland in the future. The mainland has a large number of high-quality ports, including several in the world's top ten. Securing a portion of them would be enough.

Zheng Zhijie said, "Yes."

"Okay, that's settled then. Just keep developing." Yang Wendong didn't ask for too many other details. The group's business is too big now. If he asked about everything, the meeting would probably never end before dark. It's enough to focus on a few key points.

Then, he looked at Liu Huayu and asked, "Old Liu, how's Carrefour's overseas expansion going lately?"

Carrefour already has a monopoly in Hong Kong, so there's not much to ask; its main focus is on overseas markets.

Liu Huayu said: "Mr. Yang, Carrefour has opened 145 stores in 8 Southeast Asian countries. The average turnover per store is HK$1863 million and the net profit is about HK$200 million. However, since most of them are joint ventures, we still need to share the profits with our overseas partners."
Including its Hong Kong stores, the company's total revenue last year was HK$6.3 million, with a net profit of HK$8500 million.

"Well, a profit of around ten percent isn't very high, but it's alright," Yang Wendong nodded.

In the retail industry, the competition is all about low profits. The lower the profit, the larger the scale. In Carrefour's current situation, raising prices appropriately could increase net profit, but doing so would only encourage competitors to grow.
Like Coca-Cola, Walmart has maintained low prices for many years, thus completely monopolizing the market. Walmart employs a similar strategy.

Liu Huayu continued, "Mr. Yang, actually Carrefour's biggest profit lies in procurement, and a lot of the extra profits are in the hands of Changxing Trading Company."

Huang Wenbin of Changxing Trading Company also said: "Yes, we are a third party. We cooperate with Carrefour's overseas companies, and many of our products are sourced from Hong Kong."

Yang Wendong nodded and asked, "How are your trading company's orders from European and American supermarkets?"

Huang Wenbin said, "Currently, we mainly rely on Walmart and some supermarkets in Europe. Last year, the turnover of exports to Europe and the United States reached HK$8 million, but the profit margin was not high, only about HK$3000 million."

“Yes, these trading companies focus on scale, so their profits are bound to be low,” Yang Wendong said. “Then let’s continue to cooperate with Walmart and European supermarkets, and let them know the value for money of our Asian products.”
Also, you should cooperate more with companies in mainland China; their prices are lower there.

Changxing Trading Company mainly handles the trade of daily necessities for supermarkets, mostly light industrial products. This perfectly matches the domestic export demand, and the domestic prices are also very reasonable, making it a perfect partnership. "Okay, Mr. Yang," Huang Wenbin replied.

Yang Wendong then looked at Zhou Haoran and asked, "Old Zhou, how's your Watson's?"

Zhou Haoran laughed and said, "Thanks to Mr. Yang, Watsons has been doing very well recently. Its main business is currently the OEM production of various snacks, instant noodles, ham sausages, Pepsi, and Red Bull."

Among them, instant noodles and ham sausages had a turnover of over 3 million last year. Overseas demand is very high, mainly for export. Pepsi's OEM manufacturing also did very well last year. Our factory in Malaysia is about to be completed. Last year's turnover was 5.7 million, but the profit margin of OEM manufacturing is not high, only 5%.

Red Bull is still the most profitable, with global revenue of HK$8.6 million last year. Theoretically, its net profit should be around HK$3-4 million, but all of this money is reinvested in advertising, resulting in Red Bull currently operating on a non-profit policy.

“Okay, Red Bull doesn’t need to rush to make money. Coca-Cola and other companies have also launched their own sports drinks, right?” Yang Wendong asked.

Zhou Haoran replied, "Yes, Pepsi, Danone, Nestlé, and some Japanese beverage giants have all entered this industry. Although our market share is currently rising, it is actually declining because more and more companies are entering the market."

“Then let’s continue with the current strategy and advertise heavily in the European and American markets,” Yang Wendong said. “If you don’t have enough funds, just let me know and I will transfer funds from other places to help you.”

The others gasped in shock. Red Bull makes hundreds of millions in profit a year, and it has to invest all of it in advertising, and that's still not enough.

It seems that his boss has a lot of confidence in Red Bull and wants to monopolize the market, forcing other players to withdraw.

“Okay, Mr. Yang,” Zhou Haoran agreed.

Yang Wendong said, "It's the same on your side. We should source many raw materials from the mainland whenever possible. As for meat, we need to increase cooperation with Yuezhou City and expand the scale of the Yuezhou production base. This will benefit both us and them."

Watson's ham sausages require a lot of meat, as do instant noodles. This meat is mainly produced by China Resources' breeding base in Guangzhou.
Zhou Haoran replied, "Understood, Mr. Yang."

Yang Wendong nodded, then looked at Wang Zhiqun and smiled, "Old Wang, you're the last one."

There are other industries as well, such as film and comics, but recently, Zou Wenhuai has been unwell and Wu Hailin went to Japan to handle a cultural infringement matter, so I will talk about them separately later.

Wei Zetao joked, "The best of all should be saved for last."

"Mr. Wei, you flatter me." Wang Zhiqun smiled and said, "Glory Electronics now has many businesses, involving various home appliances and the new arcade machine industry;
Last year, total revenue was HK$17.7 billion, and net profit was HK$6.1 million. The core profit source was arcade games; a total of 7 units were sold, and each unit generated approximately US$1200 in net profit.

"Wow~" Many people at the scene were shocked. Although they knew that Glory Electronics' profits would not be low, such a high profit still seemed unbelievable to them.

Yang Wendong smiled faintly and said, "There's no need for everyone to be surprised. The electronics industry is just getting started. Companies like Sony and RCA have annual net profits of hundreds of millions of dollars, while our total net profit is only a little over one hundred million dollars. Compared to them, we still have a long way to go."

While an arcade machine can indeed be extremely profitable, this industry still cannot compare to the decades of hard work done by other companies.

Furthermore, the most profitable industries are always those that directly face end customers. Arcade customers are bars, which leads to a limited market. The future of gaming is home consoles and personal computers.

Wang Zhiqun said, "Yes, compared with the world's top electronics giants, we are still far behind."

"Yes, no rush, we'll catch up eventually." Yang Wendong nodded, then asked, "How's your cooperation with domestic partners going?"

Wang Zhiqun said, "Currently, many of the parts for my kitchen appliances are manufactured domestically. There is a company in Shanghai that is quite bold and dares to borrow money from Hang Seng Bank to buy equipment from Hong Kong to produce them. The quality of the products they produce is also quite good. So I am also planning to continue to increase cooperation with these companies."

“Okay, that’s settled then. As we expand, some of our orders can be transferred to the mainland. As long as we control the quality, the costs there will be much lower,” Yang Wendong said with a smile.

In fact, apart from a few industries protected by patents and copyrights, many of Changxing Group's current industries rely on low cost and medium quality to seize the market.
This is an inevitable development. As a time traveler, he can no longer be of much help in many industries. He can only rely on his own business operations. At most, his foresight in finance, real estate, shipping, and other fields can bring in enough cash flow.

Many companies, such as those in basic electrical appliances, paper manufacturing, steel and container manufacturing, need to compete in the market themselves.
The biggest factor in competition is cost control. If two products of the same quality cost 10 yuan and 9.5 yuan respectively, the latter can take 90% of the market share from the former.

With the mainland's impending reform and opening up, costs there are lower, which is very beneficial for many labor-intensive industries. Moreover, the mainland's large size allows for the formation of industrial chains that Hong Kong cannot develop, making it even more suitable for manufacturing.

Wang Zhiqun replied, "Okay, Mr. Yang."

"That concludes today's meeting. Please give the documents to Sister Wang later; headquarters will review them one by one," Yang Wendong said with a smile.

While reports are submitted, there is still a review process at headquarters. For the past ten years or so, this has been the only way to maintain the normal operation of the group.

At this moment, Wei Zetao said, "Mr. Yang, actually I have an industry here that is suitable for domestic business."

"Oh, what industry?" Yang Wendong asked in return.

Wei Zetao said, "It's the business that made our fortune: sticky mouse traps."

"Sticky rat traps?" Yang Wendong seemed to recall something from over a decade ago, so he asked, "Where are sticky rat traps manufactured now?"

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(End of this chapter)