  ming yuan cloud said its adjusted net profit last year dropped up to 27 from 2020   the company is actively transitioning its erp business and rapidly growing its more profitable saas but investors remain unimpressed china’s slumping real estate market is casting a shadow over ming yuan cloud group holdings ltd 0909hk the provider of software as a service saas products and enterprise resource planning erp solutions to real estate companies issued a profit forecast on monday disclosing it expects to post a loss of 310 million yuan 498 million to 360 million yuan for last year narrowing by around half from its 704 million yuan loss for 2020 but excluding nonoperating factors such as around 803 million yuan worth of stockbased compensation in the past two years the company’s adjusted profit last year fell by as much as 27 to between 280 million yuan and 330 million yuan from the 383 million yuan in 2020 the forecast said the company said the adjusted amount better reflects its operating performance by discounting noncash transactions the company will release its annual financial report on march 28 the results weren’t exactly welcomed by investors who sold off ming yuan cloud’s shares to the tune of a 166 decline on tuesday to close at hk1024 – a new low since the company’s september 2020 listing the comedown was all the more notable because the stock had reached a high of hk6080 just half a year after its ipo nearly four times its offering price of hk1650 but after stumbling over the past year the stock is now 83 below its alltime high and 28 lower than the ipo price a breakdown of the company’s results between the first and second halves of the year shows why investors are glum calculations using the new fullyear forecast show the company expects to post an adjusted profit of just 87 million yuan to 137 million yuan in the latter half of the year down sharply from a 194 million yuan adjusted profit in the first half of the year that most likely reflects sluggishness in china’s realestate market in last year’s fourth quarter and the serious challenges continued weakness in the sector could pose to ming yuan cloud due to its heavy reliance on the sector according to chinese government data economic output for china’s realestate industry in last year’s fourth quarter totaled 197 trillion yuan down 29 yearonyear the construction industry’s output was 26 trillion yuan down by a similar 21 from the yearago period the fourth quarter weakness contrasted with annual output gains of 52 and 21 for the two sectors respectively the fourthquarter contraction reflected the deteriorating financial conditions for many of china’s leading real estate companies ming yuan cloud earns its money by providing saas solutions to those real estate developers that are now hurting many suffering under heavy debt and unable to borrow more money by the end of june 2021 the company had partnership with 96 of the country’s top 100 realestate developers and had a total of 5200 developers as clients according to thirdparty data cited by the company ming yuan accounted for around 246 of the contract value of its industry in 2019 two potential hightech comparisons for ming yuan are the publicly listed glodon inc 002410sz an ashare company with a focus on construction and kingdee international 0268hk which is in the middle of making a similar transition as ming yuan for its erp business ming yuan cloud has been impacted by both declines in the real estate industry and the softening of its erp business by contrast glodon which offers digital construction platform services released a positive profit forecast at the end of january it said it expected to report an adjusted profit of around 622 million yuan to 672 million yuan for 2021 up 106 to 122 from 2020 marking a major improvement that left ming yuan cloud in its shadow according to cinda securities china’s smart construction market was worth 1386 billion yuan in 2020 and expected to grow to 36 billion yuan by 2025 representing an annual compound growth rate of 21 glodon’s digital construction business reached a value of 943 million yuan in 2020 even after growing at an annual compound rate of around 50 from 2014 to 2020 it still accounted for just 68 of its market ming yuan also looks weaker than kingdee international due to its slower transition from erp into the newer enterprise business capability ebc solutions instead of focusing on a company’s own internal activities ebc has a broader scope that allows companies to consider factors involving their clients partners and other stakeholders using internet of things iot and smart analysis platforms ming yuan cloud posted revenue of 974 million yuan in the first half of last year up 452 year on year within that total saas revenue grew 655 to 552 million yuan accounting for more than half of all revenue erp product revenue grew at a slower 251 to 422 million yuan that shows the company’s is trying to use faster saas business growth to compensate for slowness in erp sales during the transition to ebc while allowing ming yuan cloud to maintain its business growth its saas business is also more profitable with a net profit margin of about 30 or more double the level of about 16 for traditional erp services ming yuan cloud’s management plans to focus more on the pace of its business transformation this year due to the uncertain industry outlook in the real estate sector according to a jpmorgan report released last month the bank expects the company’s revenue to grow by 13 to 20 in 2022 with saas growing 35 to 40 the bank pointed out that although ming yuan cloud’s shares are down 70 in the past year it currently trades at the bank’s forecast pricetoearnings pe ratio of 90 times this year and a predicted pricetosales ps ratio of 9 times which are both relatively high accordingly jpmorgan slashed its target price for ming yuan cloud by 62 to just hk19 from a previous hk50 glodon’s shares have also fallen in the last year though by a milder 26 using the adjusted profit figure from ming yuan’s latest forecast the company had a pe ratio last year of between 46 to 53 times that was far lower than glodon’s ratio of 81 to 88 times showing ming yuan is clearly not in a sunny spot right now with investors