Rebirth in Hong Kong: From Dessert Shop to Industrial Empire

Chapter 28 Fixed Assets (Please add to your favorites, vote for this chapter, and recommend it to others!)

The new home in Jindu Garden.

Chen Bingwen stood on the balcony, gazing at the distant horizon, greedily inhaling the fresh morning air.

Having a space and bed that truly belong to me makes even sleep exceptionally peaceful and sweet.

Back inside, breakfast prepared by Wang Qiaozhen was already laid out on the dining table: steaming white porridge with a few side dishes, simple yet exuding the warmth of home.

"Dad, Mom," Chen Bingwen said as he sat down at the table and picked up his chopsticks, "I have an important decision to discuss with you."

Chen Guofu and Wang Qiaozhen stopped what they were doing and looked at their son.

"I plan to formally integrate all of Chenji's businesses and register a company called Chenji Food Co., Ltd."

"A company?" Chen Guofu put down his bowl, a hint of doubt and curiosity in his eyes. "Like those big trading companies on TV?"

“Yes, but not exactly the same,” Chen Bingwen explained, trying to use language his parents could understand. “We’re not one of those old, established companies. Establishing a company means bringing everything we have now—our two food factories in Cheung Sha Wan and Kwun Tong, our mobile food trucks in Kowloon, our standard stores in Mong Kok and Central, our dessert recipes, and the Chen Kee brand—all under one official name.”

He paused, looking at his parents: "From now on, when signing contracts, borrowing money from banks, or even hiring people, we will use the name of Chenji Food Co., Ltd."

The advantage is that we operate more systematically and reputably, others will value us more, and in the long run, the company's brand will be much more valuable than a single dessert shop or factory.

Wang Qiaozhen's face showed worry: "Awen, starting a company sounds complicated, right? There must be a lot of procedures, right? Does it cost a lot of money?"

“Mom, there will definitely be troubles and expenses, such as registration fees and lawyer fees to help with the procedures,” Chen Bingwen patiently explained. “But this money is well spent! It is the stepping stone for our Chenji to go from a small shop to a large, reputable enterprise.”

With this company's identity, it will be much easier for us to get bank loans to expand production or to negotiate cooperation with large shopping malls. People will also be more willing to trust us.

This investment will definitely be recouped tenfold or even a hundredfold in the future, allowing Chen's to reach new heights!

Looking at the familiar determination in his son's eyes, Chen Guofu nodded: "If you say it's worth it, then there must be a reason. Go for it, Dad supports you!"

Although Wang Qiaozhen didn't quite understand, she breathed a sigh of relief and smiled: "Mom doesn't understand these things either, so you can make the decision. Don't overwork yourself."

After breakfast, Chen Bingwen called Gao Zhenhai to Dexin Accounting Firm, a well-regarded accounting firm in Central.

They were greeted by a senior accountant named Fang Wenshan, who was about fifty years old and had his hair neatly combed back, looking shrewd and capable.

"Mr. Chen, Mr. Gao, I've long admired your names. The Hong Kong Island Commercial Daily's report was excellent." Fang Wenshan said politely, gesturing for Chen Bingwen and Gao Zhenhai to sit down.

"Mr. Chen mentioned on the phone that he wanted to set up a food company with considerable assets, which would require professional evaluation and structural design. Please explain in detail."

Chen Bingwen handed over the prepared list: "Accountant Fang, this is a list of all of Chen Ji's current operating assets, including two food factories, thirty standardized mobile food trucks, five standard Chen Ji dessert stations, core dessert recipes, 'Chen Ji' related trademarks, and the value of the exclusive distribution contract with Shunda Logistics, etc."

Please have your team conduct a professional assessment and assist with the company registration process.

Fang Wenshan took the list, glanced at it carefully, and a hint of surprise flashed in his eyes.

He initially thought it was just an emerging dessert brand, but he was surprised to find that its assets were so solid, its business model was clear, and it had the potential to be replicated.

"Mr. Chen's plan is very thorough. Regarding the company structure, I suggest adopting a limited company registered locally in Hong Kong Island, with the founder holding a controlling stake, which will facilitate the introduction of strategic investment or consideration of listing in the future."

At the same time, it is recommended that the core formula be licensed to the company as a trade secret, with a strict confidentiality agreement signed.

Trademark registration must be initiated immediately, providing protection across all categories, especially food and beverages, to prevent others from registering it first.

“That suits me perfectly.” Chen Bingwen nodded. “Please also handle the trademark registration and patent application. We need to register the brand name ‘Chen Ji’ and our signboard design.”

For core recipes, such as the improved version of tangerine peel red bean paste, sesame paste, and the upcoming coconut milk sago and mango pomelo sago, we should apply for process patents or design patents for all of them that are eligible.

This is our core competitiveness, and we must protect it with legal means.

“No problem, Mr. Chen is very insightful,” Fang Wenshan praised. “We will prepare all the application documents. If you confirm that the company name is ‘Chen Ji Food Co., Ltd.’, we will start the name verification and registration process today.”

"Confirmed. Thank you, Accountant Fang, the sooner the better." Chen Bingwen knew that time was money.

Fang Wenshan smiled and nodded. "Mr. Chen, if I may be frank, judging from this preliminary asset structure alone, your company faces a critical hidden danger that could significantly impact its long-term development and its acceptance by the capital market."

"Hidden dangers? Please explain clearly, Accountant Fang." Chen Bingwen leaned forward slightly, his expression focused.

Fang Wenshan picked up the documents Chen Bingwen had given him and said, "Your two largest assets, the production sites in Cheung Sha Wan and Kwun Tong, are leased rather than owned."

This means that the value of these core facilities that support your actual operations will be significantly reduced on your financial statements.

He looked up at Chen Bingwen, his tone carrying the rigor characteristic of an accountant: "Mr. Chen, if your goal is long-term development or even listing on the stock exchange..."

Therefore, investors in the capital market, especially those institutions that value the foundation of a real business, will place great emphasis on the 'net fixed assets' of a food manufacturing company when evaluating its value. These assets are tangible, real land, factory buildings, and key equipment that truly belong to the company.

These are hard indicators that demonstrate resilience against risks and long-term operational capabilities.

Fang Wenshan was silent for a few seconds, then his eyes suddenly turned serious: "Mr. Chen, this means that on the balance sheet of the soon-to-be-established 'Chenji Food Co., Ltd.,' the land, factory buildings, and equipment that constitute its production capacity and physical foundation will mostly be reflected as leased right-to-use assets, rather than fixed assets that can be used as collateral for financing!"

Before Chen Bingwen could answer, Fang Wenshan picked up a pen and drew several vertical lines heavily on the blank paper: "What do potential investors look for when evaluating an industrial company?"
Net assets! Collateral! The factory and equipment are rented, meaning your core production assets are suspended in mid-air!

Without tangible assets like land and factory buildings, Chenji Foods is like a castle built on sand, its valuation is highly inflated and it cannot withstand the storms of the capital market.

“So, Mr. Chen,” he paused, then suggested, “if your goal is for Chenji Food Co., Ltd. to gain full recognition and a high valuation from the capital market in the future, then I strongly suggest that you prioritize solving this problem and convert at least one core production base from lease to ownership.”

Even if it's just acquiring this relatively small factory in Changsha Bay, it's a crucial step in solidifying the company's asset base, enhancing future financing capabilities, and boosting market confidence.

With his extensive investment banking experience, how could Chen Bingwen not know these things?

“Accountant Fang sees things clearly.” Chen Bingwen smiled knowingly. “On the financial statements, leased assets are ultimately just the right to use, a cost item. They do not generate asset appreciation, and they cannot be used as core collateral to leverage bank credit support.”

He tapped the table lightly with his fingers. "As for our own factory buildings and land, those are real fixed assets, the ballast of the company's net assets."

It not only significantly improves the structure of our balance sheet, making banks and capital more willing to lend us money for expansion, but more importantly, it sends a signal to the market: Chenji Foods is rooted in the real economy and intends to operate in the long term.

This established foundation, in the eyes of investors, directly relates to the valuation multiple they are willing to assign.

As Fang Wenshan listened to Chen Bingwen's clear and incisive analysis, a hint of surprise flashed across his eyes.

He originally thought this young boss might be better at market development, but he never expected that his understanding of capital operation and financial structure would be so profound.

“Since we’re going to buy it,” Chen Bingwen said decisively, “let’s go all the way.”

I plan to buy both the Cheung Sha Wan and Kwun Tong food factories and inject them directly into the new company as core fixed assets. This will ensure a solid foundation.

Fang Wenshan's smile deepened, carrying the ease of meeting someone knowledgeable: "Mr. Chen has considered everything thoroughly. With this approach, the foundation will be much more solid for future financing or listing. I have no problem with it."

Leaving the accounting firm, Chen Bingwen and Gao Zhenhai walked on the bustling streets of Central.

Skyscrapers stand tall, financial elites hurry about, and the air is filled with the scent of capital.

Chen Bingwen was filled with excitement. He knew that Chen Ji's stage would gradually extend from the streets of Sham Shui Po to here.

"Brother Wen, setting up a company and registering so many things makes it feel so much more formal, and the burden on my shoulders feels heavier too," Gao Zhenhai remarked.

“Ah Hai, this is just the beginning.” Chen Bingwen patted him on the shoulder. “The company is just a shell; the real skill is to make the things inside increasingly valuable.”

New product development and bottling projects are like filling a container with gold.

Recalling Vincent Fang's emphasis on the importance of fixed assets, Chen Bingwen knew that buying the factory was the first step in laying a solid foundation.

He quickly identified the easiest target to break through: Uncle Zhong, the former owner of Changsha Bay Food Factory.

This landlord was eager to sell because his son was immigrating to Canada, and the previous short-term rental agreement with a deposit of one month's rent and payment of one month's rent in advance revealed his need to cash out.

Now is the perfect time to take it all down.

Without delay, Chen Bingwen met with Uncle Zhong again that afternoon in a quiet private room of a teahouse in Sham Shui Po.

Compared to his previous anxiety, Uncle Zhong was much calmer now, indicating that the immigration process was on track.

"Uncle Zhong, congratulations on your upcoming reunion with your family." Chen Bingwen congratulated him with a sincere smile: "Thank you for your help last time, the short-term rental solved my urgent problem."

"I've taken the liberty of inviting you out today because I'd like to discuss a permanent solution to the factory's problems." Uncle Zhong sipped his tea, remaining calm: "Oh? Ah Wen, your business is thriving, and you're looking to lease it long-term?"

We can discuss it, but the market is good right now, so the rent...

“No, Uncle Zhong,” Chen Bingwen interrupted him, his tone filled with unwavering determination, “I want to buy it.”

We bought it all, including the factory's equipment.

Uncle Zhong paused, a hint of surprise flashing in his eyes. "Buy?"

Ah Wen, although the location of this factory is not top-notch, it is practical and has enough space.

Last year the market was bad, and I asked for an annual rent of 30,000 because I needed the money urgently.

"Now," he drawled, "the factory building and equipment, a flat price of 350,000."

Three hundred and fifty thousand! Chen Bingwen sneered inwardly.

This price far exceeds its actual value; it's almost like paying the premium for a newly built factory in a prime location.

The equipment is second-hand and has been used for many years, so its valuation is extremely low.

Zhong Bo clearly understood that he urgently needed a stable production site.

Chen Bingwen did not immediately counter-offer, but instead took out a document and pushed it over. "Uncle Zhong, this is my five-year long-term lease for the warehouse next to the new factory in Kwun Tong. It was just signed. The annual rent is HK$35,000, with a deposit of three months' rent and payment of one month's rent in advance."

He pointed to the clear terms and amounts on the lease. "I originally planned to gradually relocate and integrate the production of the Changsha Bay plant there, where there is more space and logistics are more convenient."

The reason for buying this place is more out of friendship and consideration for stability, since the workers are familiar with the environment.

However, if the price far exceeds the cost of building a new facility, then for me, consolidation and relocation would be more cost-effective, even though it would be more troublesome in the short term.

Chen Bingwen knew that what Uncle Chung needed most was to quickly cash out and leave Hong Kong. Dragging it out would be disadvantageous for him.

By strategically revealing the lease for the Kwun Tong warehouse, he was essentially telling Uncle Chung: I have a way out; I don't necessarily need you.

Uncle Zhong examined the lease carefully, his expression changing slightly.

He really couldn't afford to waste any more time; his son had been urging him many times to go and take care of his grandson.

If I go and anger my son and daughter-in-law, they'll be in big trouble if they don't take care of me in my old age.

After a moment's hesitation, Uncle Zhong tentatively asked, "Then, Awen, what do you think is a suitable amount?"

"The equipment depreciation is so severe that it can be basically ignored."

Chen Bingwen cut to the chase, “Based on the current actual transaction prices in the Cheung Sha Wan Industrial Zone, a factory building of 1,200 square feet should have a reasonable price of around HK$250,000.”

Considering our pleasant working relationship, I'm willing to offer 260,000 yuan, payable in full upfront, saving you all the trouble of collecting rent and managing the property. You can take the money and leave, focusing on enjoying family life with your son. What do you say?

Chen Bingwen accurately pinpointed Zhong Bo's core need: to quickly and thoroughly cash out and leave. Although 260,000 was lower than his expected price, it was far higher than the desperate price when no one was interested last year, and it was a one-time payment, clean and efficient.

Compared to the potential risks of rental fluctuations, factory maintenance, or even vacancy if they continue to hold the property, this price becomes acceptable given their eagerness to leave the port.

The moment he signed the contract, a huge weight was lifted from Chen Bingwen's shoulders.

The Changsha Bay factory, the starting point for Chen Ji's rise, officially became the first cornerstone of Chen Ji's sweet soup.

Having resolved the Cheung Sha Wan issue, Chan Ping-man immediately turned his attention to Kwun Tong.

The landlord of the Kwun Tong food factory is a local industrialist, Mr. Lam, who owns many properties. This factory is just one of many rental properties for him, so he is relatively relaxed about it.

Chan Ping-man met with Mr. Lam at an upscale restaurant in Kwun Tong.

He got straight to the point: "Mr. Lin, thank you for renting the factory to me. Chen Ji Kwun Tong Factory is operating smoothly and we are very satisfied with the site and location."

For long-term development and to ensure stable production, I hope to purchase this factory building along with the newly rented R&D center warehouse next door.

Mr. Lin, a shrewd businessman, slowly cut his steak: "Mr. Chen is a promising young man; his business is booming."

Buying a factory? Of course, that's negotiable. However, the Kwun Tong Industrial Estate has great development potential, and this factory is in a prime location. Plus, you've already set up a research and development center next door, making it even more valuable.

Including the warehouse next door, it's a flat price of one million.

This price is clearly inflated.

The factory in Kwun Tong is indeed larger than the one in Cheung Sha Wan, about 2,000 square feet, but its location is not the very heart of the city.

The R&D center warehouse was only recently rented, and the property rights are still in Mr. Lin's hands, so there is limited room for premium pricing.

However, Chan Ping-man was prepared; he had already asked his lawyer to check the transaction data of industrial land and factory buildings in the Kwun Tong area.

It is very clear that the actual transaction price of factory buildings of similar size and location in Kwun Tong is between HK$230 and HK$250 per square foot.

His factory has a usable area of ​​about 2,000 square feet, which, even at the maximum estimate, would only be worth about 500,000.

The adjacent warehouse has an area of ​​approximately 1,100 square feet, and based on the ratio of industrial warehousing rent to selling price, its value is no more than 250,000.

Mr. Lin's quote was a bit too high in premium.

“Mr. Lin,” Chen Bingwen said in a calm but sharp tone, “I love business, but I’m not a sucker.”

I can accept a reasonable premium.

Based on fair market prices, I'm willing to offer 680,000 yuan for the factory and warehouse as a package deal.

When their exorbitant asking price was exposed, the other party offered a reasonable and sincere price.

After a moment's consideration, Mr. Lin proposed that the transaction price should not be less than HK$700,000.

Seeing this, Chen Bingwen stopped hesitating and agreed immediately.

The ownership of the Kwun Tong Food Factory and the adjacent R&D center warehouse has officially been transferred to Chan Kee.

The transfer of ownership of Cheung Sha Wan Food Factory and Kwun Tong Food Factory is being processed efficiently at the law firm.

Signatures, seals, and check delivery were all completed efficiently and without any delays.

When the HK$700,000 bank draft bearing the Wing Lung Bank logo was handed to Mr. Lin, the composure on his face was finally replaced by a barely perceptible hint of surprise.

Seven hundred thousand is no small sum in this day and age. How could a young man selling sweet soup so easily and decisively pull it out?

"Mr. Chen, you are a promising young man." Boss Lin put away the check, his smile becoming more sincere. "I wish you a prosperous business."

After saying that, he smiled, waved, and turned to leave.

Dexin Accounting Firm.

When Vincent Fang took the two property ownership documents, which still smelled of fresh ink, he saw that they were the property ownership certificates for the Cheung Sha Wan Food Factory, the Kwun Tong Factory, and the R&D Center Warehouse.

There was a hint of barely perceptible admiration in his eyes as he looked at Chen Bingwen.

"Mr. Chen, these two documents are the most solid ballast for Chenji Food Co., Ltd."

Factory buildings and land are the foundation of an industrial company! With them, Chenji Food's net asset value will achieve a qualitative leap!

It's no longer a castle in the air.

The difference in bank credit lines and future financing bargaining power will be enormous!

Chen Bingwen sat calmly opposite him. "Please have the accounting team complete the final assessment as soon as possible, and ensure that all assets are legally and compliantly injected into the new company. Please expedite the registration process."

"It's my duty!" Fang Wenshan nodded solemnly. "With the property transfer procedures complete, the full asset appraisal report and company registration documents can be submitted to the registry office by the day after tomorrow at the latest!"

　I'll update first and then revise later. Thanks for your support! I was delayed by working overtime today!
　　
　
(End of this chapter)