Core Viewpoint - The recent high-premium cross-border investment by the traditional Chinese jewelry brand Lao Feng Xiang (600612.SH) has drawn significant market attention amid high gold prices and pressure on its core business. The company announced a $24 million investment in a newly established luxury goods company with a net asset value of only $1,300, raising questions about the rationale behind such a high valuation and the uncertainty of investment returns [1][2]. Group 1 - Lao Feng Xiang plans to invest $24 million to acquire 20% of Maybach Luxury Goods Asia Pacific (MAP), which was established on February 11, 2025, and has not yet commenced operations. The valuation of MAP is $126 million, with a staggering appreciation rate of 9,692,207.69%, indicating a significantly inflated transaction value [2][3]. - The Shanghai Stock Exchange has issued a regulatory inquiry, requesting Lao Feng Xiang to justify the necessity and reasonableness of acquiring a minority stake at such a high premium without any historical operating performance from MAP [2][4]. - Lao Feng Xiang will not participate in the daily operations of MAP, only appointing one director and one financial director, which raises concerns about the company's involvement in the management and operational decisions of the new investment [3][4]. Group 2 - The luxury goods sector is a new area for Lao Feng Xiang, which may face challenges such as brand recognition, market promotion, pricing strategies, and consumer acceptance as it attempts to expand into this market [4]. - The international gold price has surged from around $3,300 per ounce to over $4,000, with a nearly 60% increase this year, negatively impacting the demand for gold jewelry and pressuring the performance of traditional gold retailers [5][6]. - Despite efforts to enhance its brand and expand into high-end markets, Lao Feng Xiang's financial performance has suffered, with a 20.5% decline in revenue to 56.793 billion yuan and a nearly 12% drop in net profit to 1.95 billion yuan in 2024 [7][9].

Core Viewpoint - The company, Lao Feng Xiang, is expanding into the luxury goods market through an investment in Maybach Luxury Asia Pacific Co. Limited, aiming to leverage its existing high-end product capabilities and explore new market opportunities in the Asia-Pacific region [6][7][10]. Investment Purpose and Strategy - The investment aims to jointly develop the high-end luxury goods market in the Asia-Pacific region, integrating the company's existing high-end and customized product resources to enrich its product system [6][7]. - The company plans to leverage the operational models of luxury brands to enhance its capabilities in high-end product investment and management [10][13]. Operational Structure and Governance - After the investment, the company will appoint one director to the board of Maybach Luxury Asia Pacific and will not be involved in daily operations, focusing instead on oversight of capital and budget control [8][10]. - The governance structure includes protective clauses for shareholder voting rights and financial oversight to safeguard the company's investment interests [8][9]. Market Risks and Challenges - The luxury goods sector is a new area for the company, which may face challenges in brand recognition, market penetration, pricing strategies, and consumer acceptance [2][10]. - There are risks associated with operational integration, market competition, and the cyclical nature of the luxury goods industry, which could impact the company's performance [2][11]. Financial Projections and Valuation - The investment is based on a valuation of $12 million post-investment, with a projected annual compound growth rate of 36.5% for the luxury goods sector [16][19]. - The company has conducted due diligence and valuation assessments to ensure the investment's feasibility and alignment with market expectations [25][28]. Brand and Trademark Considerations - The investment is contingent upon obtaining the necessary trademark licenses from Mercedes-Benz Group AG, which currently only authorizes operations within mainland China [43][44]. - The company must navigate potential obstacles in securing these licenses before the investment agreement's expiration date in March 2026 [43][44].