Gemdale Properties Announces Major Subsidiary Disposal: Potential Impacts on Shareholders and Share Price

Key Highlights of the Transaction

• Disposal of Shenzhen Subsidiary: Gemdale Properties and Investment Corporation Limited (the “Company”, Stock Code: 535) announced that it has entered into a share transfer agreement to sell 100% equity interest in its indirect wholly-owned subsidiary, Shenzhen Weilu Technology Co., Ltd. (the “Target Company”).
• Transaction Value: The total consideration for the disposal is approximately RMB135.7 million, with an additional arrangement for the repayment of a shareholder’s loan of about RMB54.7 million owed by the Target Company to the Group.
• Buyer and Strategic Fit: The purchaser is Yajingyuan Holdings (Shenzhen) Co., Ltd., which is not only independent from the Group but also currently the largest tenant in the Target Project.
• Deconsolidation Impact: Upon completion, the Target Company will cease to be a subsidiary, and its financial results will no longer be consolidated into the Group’s accounts.
• Financial Effects: The Group expects to record an unaudited loss before taxation of approximately RMB50.9 million from the disposal, but will receive net cash of around RMB190.4 million and reduce its consolidated interest-bearing debt by around RMB192 million.
• Valuation Basis: The consideration is supported by an independent valuation, with the appraised value of shareholders’ equity at RMB137.1 million as of 30 September 2025.
• Transaction Timeline: Completion is expected within 5 business days after the initial payment and loan repayment, with final payment due within 90 days post-completion.

Details of the Transaction

On 17 March 2026, after market trading hours, Gemdale’s subsidiary Vision (Shenzhen) Software Technology Co., Ltd. (the “Vendor”) entered into an agreement with Yajingyuan Holdings (Shenzhen) Co., Ltd. (the “Purchaser”) for the disposal of the entire equity interest in Shenzhen Weilu Technology Co., Ltd. The Target Company holds the Shenzhen Kelu project, a business park located at Baolong 1st Road, Longgang District, Shenzhen, with a total gross floor area (GFA) of approximately 86,200 square meters, mainly leased for R&D, trial production, and back office use.

Consideration and Payment Structure

• The consideration of RMB135.7 million will be paid in cash, structured as follows:
  • Initial payment of RMB125.9 million to the Vendor;
  • Deposit of RMB39.7 million for the shareholder’s loan into an escrow account;
  • Upon registration of the shareholding change, RMB39.7 million is released to the Vendor, and the remaining RMB15 million of the shareholder’s loan is to be repaid by the Target Company;
  • The final RMB9.8 million of consideration is to be paid within 90 days after completion.
• The purchaser is also obliged to provide funding for the Target Company to fully repay the RMB54.7 million shareholder’s loan before completion.

Valuation and Impairment Details

The valuation was performed by Shenzhen Touchstone Deming Asset Appraisal Co., Ltd., using the asset-based approach due to the lack of comparable companies and the Target Company’s recent losses. As of 30 September 2025, the appraised value of the Target Company’s shareholders’ equity was RMB137.1 million, down from a book value of RMB186.6 million. The main reasons for this impairment were:

• Investment property (Target Project) impairment of RMB51.9 million (11.2% rate), primarily due to a sluggish real estate market and declining property prices.
• Full impairment of long-term deferred expenses (RMB6.5 million) as their value was already reflected in the property valuation.
• Partial impairment of deferred tax assets (RMB4.1 million, 43% rate) due to recoverability concerns.
• Partial impairment of deferred tax liabilities (RMB13 million, 23.5% rate) as some obligations were deemed invalid.

Financial Performance of the Target Company

• For the nine months ended 30 September 2025, the Target Company generated revenue of RMB25.8 million but recorded a net loss after tax of RMB12.98 million.
• For the years ended 2024 and 2023, the Target Company also reported net losses of RMB14.74 million and RMB2.68 million, respectively.
• As of 30 September 2025, the Target Company had unaudited total assets of RMB500.9 million, liabilities of RMB314.3 million, and net assets of RMB186.6 million.

Board’s Perspective and Rationale

The Board, including independent non-executive directors, considers the disposal to be on fair and reasonable terms, supported by an independent valuation. The sale allows the Company to divest from a loss-making operation, improve financial performance, enhance liquidity, and focus resources on other core business developments. The transaction will also reduce the Group’s consolidated debt, thereby strengthening the balance sheet.

Potential Share Price and Shareholder Impact

• Positive: The transaction provides a significant cash inflow (about RMB190.4 million) and reduces debt (about RMB192 million), improving the Group’s financial flexibility and capital structure.
• Negative: The disposal is expected to result in a one-off pre-tax loss of approximately RMB50.9 million, as the consideration is lower than the book value of net assets. Investors should note the loss may negatively impact short-term profitability.
• Neutral: As the transaction is a “discloseable transaction” under the Hong Kong Listing Rules, it does not require shareholder approval or independent financial advice, but is considered price-sensitive information due to its material effect on the Group’s financials and asset base.

Shareholders should closely monitor further announcements regarding the timing of completion and the use of proceeds from the disposal, as these may influence the Company’s strategic direction and future earnings capacity.

About the Purchaser

Yajingyuan Holdings (Shenzhen) Co., Ltd. is a PRC company focusing on power supply products R&D and manufacturing. It is ultimately controlled by Mr. Zheng Zilong and is currently the largest tenant in the Target Project, implying a smooth transition of ownership and continued operation of the business park.

Conclusion

The announced disposal marks a strategic shift for Gemdale Properties to streamline operations, exit a persistently loss-making asset, and refocus resources on core business areas. While there is an immediate financial loss, the longer-term strengthening of the balance sheet and improved cash position may be viewed positively by investors. The transaction represents a material development that may affect investor sentiment and the Company’s share price.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors are advised to conduct their own due diligence and consult with professional advisors before making investment decisions related to Gemdale Properties and Investment Corporation Limited.

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