LVGEM (China) Real Estate Investment Company Limited Announces 2025 Annual Results: Major Losses, Liquidity Risks, and Ongoing Debt Restructuring

Key Financial Highlights for 2025

• Revenue: RMB 1,866.0 million, a sharp decrease of 49.8% compared to RMB 3,713.9 million in 2024.
• Gross Profit: RMB 938.2 million, up 14.7% from RMB 818.1 million in 2024; however, this is primarily due to shifts in business mix rather than overall business growth.
• Net Loss Attributable to Owners: RMB 8,795.1 million (2024: RMB 5,171.4 million), a year-on-year increase in losses of 70.1%.
• Gross Profit Margin: 50.3% (2024: 22.0%), reflecting changes in revenue composition rather than improved overall performance.
• Basic Loss per Share: RMB (145.75) cents (2024: RMB (100.69) cents), an increase in losses per share of 44.8%.

Critical Issues and Potentially Price-Sensitive Information for Shareholders

1. Severe Liquidity and Solvency Crisis

• Current Liabilities Exceed Current Assets: As of 31 December 2025, current liabilities exceeded current assets by RMB 1,593 million.
• Heavy Short-term Borrowings: Borrowings amount to RMB 29,874 million, with RMB 27,591 million immediately repayable on demand due to defaults or cross-defaults triggered.
• Bank Balances and Cash: Only RMB 183 million in cash and cash equivalents, a dangerously low level given the scale of liabilities.
• Support Letters and Loan Extensions: The Company has secured extensions on RMB 71 million of loans and is negotiating further with creditors, but the situation remains critical.

2. Winding-Up Petition and Legal Proceedings

• A winding-up petition was filed by a lender in the Hong Kong High Court on 4 February 2025 due to defaults on certain notes and guaranteed obligations.
• The hearing of the petition has been adjourned to 1 June 2026, but the risk of court-ordered liquidation remains until the matter is resolved.
• The Board is actively seeking legal and financial advice to oppose the petition and pursue a consensual restructuring with creditors.

3. Ongoing Offshore Debt Restructuring

• The Group is in the process of offshore debt restructuring, engaging with various creditors and professional advisors.
• Management is confident but there is no guarantee of success; failure to reach an agreement or to secure support from key creditors could result in insolvency or enforced liquidation.

4. Asset Disposal and Cash Generation Initiatives

• Asset Sales: The Group sold a hotel property in Los Angeles, USA, and generated RMB 73 million from onshore property disposals in Q4 2025.
• Ongoing efforts include identifying buyers for further asset disposals and accelerating property sales and cash collection through online and on-site marketing initiatives.

5. No Dividend Declared

• No dividend for the year ended 31 December 2025. The Board does not recommend any final dividend, reflecting the Group’s urgent need to preserve liquidity.
• No distributable reserves are available under Cayman Islands law.

6. Auditor’s Going Concern Warning

• The independent auditor has issued a material uncertainty related to going concern warning, noting that the Company’s ability to continue as a going concern depends on the successful implementation of debt restructuring and other liquidity-raising measures.
• If these measures fail, the Group may not be able to continue as a going concern, and significant write-downs of assets and reclassification of liabilities would be necessary.

7. Other Noteworthy Points

• There were no changes to the Company’s constitutional documents during the year.
• No purchase, sale, or redemption of listed securities by the Group or its subsidiaries during the year; no treasury shares held.
• Environmental, Social and Governance (ESG) report to be published separately. The Group claims compliance with all relevant laws and regulations as of the report date.
• No charitable donations made during the year.

Strategic Review and Outlook

• The Board remains cautiously optimistic about China’s economic recovery and urban renewal opportunities, especially in the Greater Bay Area.
• Management emphasizes a focus on “prime locations, quality products, and remarkable services” for a potential market turnaround.
• However, the near-term focus is on financial stability and liquidity, as the Group is under severe stress.

Investor Takeaway: High Risk, Potential Volatility

• This report reveals acute financial distress at LVGEM (China) Real Estate Investment Company Limited, with immediate liquidity concerns, major legal risks from a winding-up petition, and no assurance that the ongoing debt restructuring will succeed.
• Shareholders face the risk of total loss or significant dilution if restructuring fails or new financing cannot be secured.
• The absence of a dividend and continued heavy losses further erode the investment case in the short to medium term.
• Any news on the outcome of the debt restructuring, asset disposals, or the court’s decision on the winding-up petition could move the share price significantly in either direction.

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