Orient Cable Plans RMB 73 Million Purchase of 32 Properties From Sister Company for Employee Housing, Draws Regulatory Scrutiny

On January 9, Orient Cable (SH603606, share price RMB 60.9; market cap RMB 41.882 billion) issued its reply to the Shanghai Stock Exchange’s regulatory inquiry letter.

Earlier, the company announced plans to spend RMB 73.299 million to purchase 32 residential units in the “Yunxie Puting” project from Ningbo Oriental Nanyuan Real Estate Co., Ltd. (“Orient Real Estate”), an affiliated party under its controlling shareholder. The homes are intended for self-use as talent apartments to better support employees’ housing needs.

A review of the disclosure shows the transaction drew regulatory attention largely due to three factors: the seller’s weak financial position, the mortgage status of the underlying project land, and the originally proposed “prepayment” structure. Regulators questioned whether the deal could effectively function as early payment to relieve the affiliate’s liquidity pressure, or whether it could involve potential benefit transfer to a related party.

A “sister company” under strain: negative net assets

Based on the figures disclosed by Orient Cable, Orient Real Estate—acting as the seller—faces significant financial stress.

As of November 30, 2025, Orient Real Estate reported total assets of RMB 730 million, while net assets stood at -RMB 92.5131 million, indicating it is technically insolvent.

Profitability also remained under pressure. For the first 11 months of 2025, Orient Real Estate recorded a net loss of RMB 10.3174 million, and net cash flow from operating activities of -RMB 267 million, underscoring a substantial funding gap.

At the end of November 2025, the company held cash and cash equivalents of RMB 40.2036 million, while carrying long-term borrowings of RMB 419 million and other payables of RMB 378 million.

Orient Cable further disclosed that the land for the “Yunxie Puting” project is currently under mortgage. As of November 30, 2025, Orient Real Estate had pledged a parcel in Beilun District (Xiaogang area) to Agricultural Bank of China, Ningbo Beilun Branch, with an actual loan amount of approximately RMB 420 million. The mortgage term runs through September 25, 2026.

This means that if the full borrowing is not repaid by the final due date, the land mortgage cannot be lifted—creating a material obstacle to property sales and title transfers.

Orient Cable explained that Orient Real Estate is a 77%-owned subsidiary of its controlling shareholder, Ningbo Orient Group Co., Ltd. (“Orient Group”), and that “Yunxie Puting” is currently Orient Real Estate’s only development project. To address concerns, Orient Group has committed to fully承擔 repayment obligations for any unpaid debt to the bank within the outstanding balance.

In addition, the bank has reportedly issued a statement agreeing to extend the loan term to September 2028.

On construction progress, Orient Cable stated that all buildings in the project have topped out, interior rough work has been completed, and the development has entered the fine-fit-out stage. The company expects the fine-fit-out to be completed by October 30, 2026, and the final completion acceptance to be finished by February 28, 2027.

Based on funding plans, financing arrangements, and construction progress, Orient Cable said Orient Real Estate can deliver the properties on schedule, and the project does not face a risk of non-delivery or becoming a stalled development.

Company stance: buying is cheaper than renting, no benefit transfer

Beyond counterparty risk, regulators also focused on pricing fairness and the payment structure.

Orient Cable plans to purchase the 32 units for RMB 73.299 million, implying an average unit price of roughly RMB 17,500 per square meter.

In response to questions about pricing, Orient Cable referenced nearby projects’ filing prices. A project about 3 km away, “Binjiang Tianjie · Jiangyucheng,” had a recorded average price of RMB 20,100 per square meter (shell condition). After factoring renovation costs, the company estimated this at around RMB 23,100 per square meter. Another project, “AUX Yueyunting,” showed a recorded average price of RMB 21,500.15 per square meter.

Taking into account recent transaction prices for comparable new homes in the same area, project positioning, floor-level differences, and Orient Real Estate’s selling prices to non-related parties, Orient Cable stated that the transaction pricing is reasonable.

On the necessity of the purchase, Orient Cable noted that by the end of November 2025, it had 1,788 employees. The company’s current leased inventory of 50 dormitory units can no longer meet demand, and rental costs have been rising. For the first 11 months of 2025, rent expenses were already close to RMB 1 million.

The company also presented a cost comparison. Assuming a 50-year service life, the annualized cost of purchasing is about RMB 1.466 million. Renting similar-size properties would cost an estimated RMB 1.723 million per year.

A key concern from the exchange was timing: although the homes are expected to be delivered by December 30, 2027, the initial plan involved paying the full amount roughly two years in advance. The SSE therefore asked Orient Cable to explain the rationale for early payment and whether it could be viewed as easing the affiliate’s funding stress or transferring benefits.

In its reply, Orient Cable said the parties have adjusted the payment terms to an installment structure: 50% down payment, 35% after completion acceptance filing, and the remaining 15% after obtaining the property ownership certificate.

Orient Cable emphasized that the revised payment arrangement does not serve to relieve the affiliate’s liquidity constraints, and does not constitute a channel for benefit transfer to related parties.