[Today’s Guide]
> Supporting policies on One Belt and One Road released, Guangxi and Fujian to promote international cooperation
> Emission permits trading speeds up, tumor immunotherapy to initiate medical revolution
> Huaren Phar. to acquire Hongta Innovation, SG Automotive to acquire E-POW through private placement
> GI Technologies to expand production overseas through private placement, Guangdong Advertising to launch equity incentive at market price
[XFA Focus]
○ Supporting policies on One Belt and One Road released, Guangxi and Fujian to promote international cooperation
------
The Ministry of Transport disclosed on June 1 that the ‘Implementation Plan on the One Belt and One Road Strategy by the Ministry of Transport (for deliberation)’ has been passed recently. It highlighted that the transportation is the fundamental and guarantee to the implementation of the One Belt and One Road strategy. It will firmly push forward the implementation of major tasks and key projects. The Ministry of Commerce issued the ‘Plan on the Development of Node Cities in China (2015-2020’ on the same day, proposing to implement the One Belt and One Road initiative and improve the land and sea accesses.
At the same time, provinces and regions along the One Belt and One Road are actively promoting international cooperation. XFA learnt that the People’s Government of Qinzhou City, Guangxi Zhuang Autonomous Region and Guangxi Beibu Gulf International Port Group Ltd. will build the Qinzhou Port at Beibu Gulf with the Singaporean side. Beibu Gulf International Port Group is also actively attracting overseas strategic investors. Officials of the Fujian Development and Reform Commission indicated that it has reported four projects to conduct maritime cooperation with countries along the One Belt and One Road. It also speeds up in advancing the construction of the Xiamen Southeast International Shipping Center and the Pingtan Comprehensive Experimental Area.
Comment: The free trade will boost the throughput of ports. The expansion of free trade zones will bring more development opportunities to local logistic and foreign trade enterprises. In terms of listed companies, Beibuwan Port Co., Ltd. (000582.SZ) is the only listed platform of Beibu Gulf International Port Group. A subsidiary of Guangxi Wuzhou Communications Co., Ltd. (600368.SH) operates the Pingxiang Logistics Park. Xiamen Port Development Co., Ltd. (03378.HK; 000905.SZ), Xiamen Xiangyu Co., Ltd. (600057.SH) and Xiamen ITG Group Corp., Ltd. (600755.SH) jointly established the Xiamen Container Terminal Group Co., Ltd.
[XFA Selection]
○ China and South Korea on Monday formally signed the bilateral free trade agreement (FTA) on June 1. It is the largest FTA for China in terms of trade volume.
○ Reuters reported that the central bank of China has recently provided Pledged Supplementary Lending (PSL) to select banks and cut the interest rate to encourage credit availability.
○ The CSI 500 Index recorded a premium of over 500 points over the spot price index by the closing hours on June 1. The bullish expectation is intensively high for futures market .
○ The International Olympic Committee (IOC) released an assessment report on the candidates for the 2022 Winter Games, saying high of the bidding conditions and the ability of holding games of Beijing and Zhangjiakou City.
○ Chengdu Military Region announced that it will organize a joint air-ground exercise n the China-Burma border within our organization from June 2.
○ The Yonhap News Agency reported on June 1 that one patient in close contact with the first confirmed MERS case of Middle East Respiratory Syndrome (MERS) has died.
[Industry Information]
○ Emission permits trading speeds up, market with hundreds of billions of yuan to develop
------
XFA learnt that relevant work on the emission permits trading is speeding up in various areas. Local governments in Gansu Province, Chongqing Municipality and Jilin Province have released relevant documents to promote the trading of emission permits.
Comment: With the establishment of the trading system for emission permits, the governance and compensation model of polluters have changed significantly and they are more enthusiastic in improving emission. The market demand of environmental enterprises will grow significantly. Institutes estimate that if the proportion of third-part operation is raised from the current 5 percent to 30 percent in the industrial area, the market size of third-part treatment market will be over 100 billion yuan every year. In terms of listed companies, Shanghai Safbon Water Service Co., Ltd. (300262.SZ) is competitive in industrial water treatment and has sufficient orders. CEC Environmental Protection Co., Ltd. (300172.SZ) is principally engaged in water treatment and is actively developing the third-party treatment of pollution.
○ ASCO annual meeting focuses on tumor immunotherapy
------
The 51st Annual Meeting of American Society of Clinical Oncology (ASCO) was opened on May 30 in Chicago, the U.S. The meeting will focus on tumor immunotherapy. Experts participated in the meeting indicate that tumor immunotherapy enjoys great advantages in treating tumors and represents the development trend of medical science as well as the orientation of clinical practice. It will initiate a new medical revolution.
Comment: Major tumor immunotherapy varieties in the world are currently produced by five to six large pharmaceutical enterprises, including BMS, Roche, Merck, AstraZeneca and Pfizer). A-share companies are also actively developing tumor immunotherapy. Liaoning MEDI Biotechnology Co., Ltd., whose 51 percent equities are held by Beijing SL Pharmaceutical Co., Ltd. (002038.SZ), has obtained the patent for the immune cells biotherapy technology and has treated over 16,000 tumor patients. Shanghai Kaibao Pharmaceutical Co., Ltd. (300039.SZ) also gives priorities to cells treatment.
[Announcement Interpretation]
○ Huaren Phar. to fully control Hongta Innovation with RMB3.4 bln to develop venture capital investment
------
Huaren Pharmaceutical Co., Ltd. (300110.SZ) proposes to acquire 100 percent equities of Hongta Innovation Investment Co., Ltd. priced at 3.44 billion yuan by issuing over 390 million shares at 7.47 yuan per share through private placement and paying 500 million yuan in cash. It also plans to raise a supporting fund of 500 million yuan by issuing shares at 7.47 yuan per share.
Hongta Innovation is principally engaged in equities investment. It has invested in 41 companies so far and has successfully exited from 11 companies. Among those 30 it has investments, 10 have been successfully listed. Hongta Innovation has an excellent performance in the venture capital investment industry in China. The comprehensive internal rate of return (IRR) of all investment projects is 32.57 percent. It recorded a net profit of 166 million yuan and 206 million yuan from 2013 to 2014.
○ SG Automotive to acquire E-POW through private placement to expand to power battery of new energy vehicles
------
Liaoning SG Automotive Group Co., Ltd. (600303.SH) plans to raise 617 million yuan by issuing 88.21 million shares at 6.99 yuan per share through private placement, among which, 71.30 million yuan will be used to acquire 28.2 percent equities of Huizhou E-power Electronics Co., Ltd. (E-POW), 100 million yuan will be used to increase capital in E-POW and 339 million yuan will be used to pay off bank loans. Upon completion of private placement, the company will hold 70.4 percent equities of E-POW. The company’s staff shareholding plan “Changxin Fund-Shuguang No.1” will be involved in the subscription.
E-POW is principally engaged in the development and sales of large-scale battery management systems including power battery, power storage station, etc. Its products are finally applied in areas like automobile manufacturing, communications, high-speed rail, etc. The counterparty promises that the net profit of E-POW from 2015 to 2017 will be no less than 15.00 million yuan, 29.00 million yuan and 40.00 million yuan.
○ GI Technologies to expand production overseas with RMB1 bln through private placement
------
GI Technologies (Beijing) Co., Ltd. (300309.SZ) plans to raise 1 billion yuan by issuing 46.84 million shares at 21.35 yuan per share through private placement to invest in the construction of oil refinery in Tajikistan and to supplement working capital. Guo Renxiang, to-be-appointed general manager of the company, and the company’s staff shareholding plan “Xingzheng GI No.1” will participate in the subscription. The average annual net profit will reach 958 million yuan after the project reaches designed capacity.
○ Guangdong Advertising to launch equity incentive at market price, performance to double in four years
------
Guangdong Advertising Co., Ltd. (002400.SZ) plans to award 9.033 million stock options to incentive objects at the market price of 30.50 yuan per share. Three general managers of the company and 264 management as well as backbones are awarded. The options will be unlocked in three phases and the performance condition is that the net profit of the company from 2016 to 2018 shall grow by no less than 44 percent, 72.8 percent and 107 percent, respectively, compared with 2014. And the income of principal business shall account over 90 percent.
○ Zoomlion Heavy Industry Science and Technology to acquire overseas environmental protection asset
------
Zoomlion Heavy Industry Science and Technology Co., Ltd. (000157.SZ; 01157.HK) plans to acquire 75 percent equities of Italian LADURNER Company with 75.00 million Euro together with Mandarin Capital Partners, among which, the company invests 57.00 million Euro (around 386 million yuan) to gain 57 percent equities. The subject company is an advanced overall solution provider and investment operator in environment and recycling resource in Europe and its business covers urban solid waste treatment, sewage and sludge disposal, renewable energy, soil reclamation, etc.
Comment: At present, the market share of Zoomlion Heavy Industry Science and Technology in domestic environmental sanitation machines ranks first. This procurement will speed up its strategic transformation from environmental sanitation equipment provider to overall solution provider and investment operator of the environmental protection industry.
○ Kaishan Compressor to join hands with Sinopec Engineering to explore energy conservation service market
------
Zhejiang Kaishan Compressor Co., Ltd. (300257.SZ) signs cooperation agreement with Sinopec Engineering (Group) Co., Ltd. to complete the industrial application and promotion of low-level energy recycling technology in oil and chemical industry and to explore the huge waste heat recycling market in domestic oil refining, oil and chemical, new-type coal chemical industry and even global oil, chemical, industries together.
Comment: The signing of energy conservation service cooperation agreement is of great importance to the promotion of low-temperature waste heat recycling power generation technology and the company’s performance. During its trading suspension, the Chinext Board continued to surge.
[Trading Trends]
○ Victory Precision Manufacture bought by three institutions
------
The trading volume ranking list on June 1 shows that Suzhou Victory Precision Manufacture Co., Ltd. (002426.SZ) was bought by three institutions with a total of 45.39 million yuan, accounting for 3.7 percent of its intraday turnover.
Comment: Victory Precision Manufacture announced on May 30 that the review of its asset reorganization was suspended. Its stock price even dropped to the daily 10 percent limit at one time. Institutions believe that suspended review of reorganization does not change the company’s strategy of external expansion. The company’s main product covers the structural components of Flat-Panel TV and computer. The company’s planning of expanding to mobile terminals through large-size component strategy is not changed.
[Trading Alarms]
○ 11 new stocks including China National Nuclear Power start subscription on June 2
------
China National Nuclear Power Co., Ltd. (780985.SH) issues shares at 3.39 yuan per share with an up-limit per account of 1,167,000 shares; Guangxi Nanning Waterworks Co., Ltd. (780368.SH) issues shares at 6.43 yuan per share with an up-limit per account of 44,000 shares; Hangzhou Gaoxin Rubber & Plastic Materials Co., Ltd. (300478.SZ) issues shares at 14.84 yuan per share with an up-limit per account of 5,500 shares; Beijing Hezong Science &Technology Co., Ltd. (300477.SZ) issues shares at 10.61 yuan per share with an up-limit per account of 10,000 shares; Anhui Julong Transmission Technology Co., Ltd. (300475.SZ) issues shares at 8.8 yuan per share with an up-limit per account of 20,000 shares; Sichuan Sunny Seal Co., Ltd. (300470.SZ) issues shares at 34.6 yuan per share with an up-limit per account of 5,000 shares; Guangdong SACA Precision Manufacturing Co., Ltd. (300464.SZ) issues shares at 10.2 yuan per share with an up-limit per account of 8,000 shares; Chongqing Landai Powertrain Corp., Ltd. (002765.SZ) issues shares at 7.67 yuan per share with an up-limit per account of 20,500 shares; ShenZhen HuiJie Group Co., Ltd. (002763.SZ) issues shares at 13.1 yuan per share with an up-limit per account of 21,500 shares; Jinfa Labi Maternity & Baby Articles Co., Ltd. (002762.SZ) issues shares at 26 yuan per share with an up-limit per account of 6,500 shares; Dohia Home Textile Co., Ltd. (002761.SZ) issues shares at 7.28 yuan per share with an up-limit per account of 12,000 shares.
Maximum subscription totally needs 5.55 million yuan. Institutions recommend China National Nuclear Power as the first choice. They believe that the scarcity of stocks related to nuclear power will push up its valuation after being listed.
> Supporting policies on One Belt and One Road released, Guangxi and Fujian to promote international cooperation
> Emission permits trading speeds up, tumor immunotherapy to initiate medical revolution
> Huaren Phar. to acquire Hongta Innovation, SG Automotive to acquire E-POW through private placement
> GI Technologies to expand production overseas through private placement, Guangdong Advertising to launch equity incentive at market price
[XFA Focus]
○ Supporting policies on One Belt and One Road released, Guangxi and Fujian to promote international cooperation
------
The Ministry of Transport disclosed on June 1 that the ‘Implementation Plan on the One Belt and One Road Strategy by the Ministry of Transport (for deliberation)’ has been passed recently. It highlighted that the transportation is the fundamental and guarantee to the implementation of the One Belt and One Road strategy. It will firmly push forward the implementation of major tasks and key projects. The Ministry of Commerce issued the ‘Plan on the Development of Node Cities in China (2015-2020’ on the same day, proposing to implement the One Belt and One Road initiative and improve the land and sea accesses.
At the same time, provinces and regions along the One Belt and One Road are actively promoting international cooperation. XFA learnt that the People’s Government of Qinzhou City, Guangxi Zhuang Autonomous Region and Guangxi Beibu Gulf International Port Group Ltd. will build the Qinzhou Port at Beibu Gulf with the Singaporean side. Beibu Gulf International Port Group is also actively attracting overseas strategic investors. Officials of the Fujian Development and Reform Commission indicated that it has reported four projects to conduct maritime cooperation with countries along the One Belt and One Road. It also speeds up in advancing the construction of the Xiamen Southeast International Shipping Center and the Pingtan Comprehensive Experimental Area.
Comment: The free trade will boost the throughput of ports. The expansion of free trade zones will bring more development opportunities to local logistic and foreign trade enterprises. In terms of listed companies, Beibuwan Port Co., Ltd. (000582.SZ) is the only listed platform of Beibu Gulf International Port Group. A subsidiary of Guangxi Wuzhou Communications Co., Ltd. (600368.SH) operates the Pingxiang Logistics Park. Xiamen Port Development Co., Ltd. (03378.HK; 000905.SZ), Xiamen Xiangyu Co., Ltd. (600057.SH) and Xiamen ITG Group Corp., Ltd. (600755.SH) jointly established the Xiamen Container Terminal Group Co., Ltd.
[XFA Selection]
○ China and South Korea on Monday formally signed the bilateral free trade agreement (FTA) on June 1. It is the largest FTA for China in terms of trade volume.
○ Reuters reported that the central bank of China has recently provided Pledged Supplementary Lending (PSL) to select banks and cut the interest rate to encourage credit availability.
○ The CSI 500 Index recorded a premium of over 500 points over the spot price index by the closing hours on June 1. The bullish expectation is intensively high for futures market .
○ The International Olympic Committee (IOC) released an assessment report on the candidates for the 2022 Winter Games, saying high of the bidding conditions and the ability of holding games of Beijing and Zhangjiakou City.
○ Chengdu Military Region announced that it will organize a joint air-ground exercise n the China-Burma border within our organization from June 2.
○ The Yonhap News Agency reported on June 1 that one patient in close contact with the first confirmed MERS case of Middle East Respiratory Syndrome (MERS) has died.
[Industry Information]
○ Emission permits trading speeds up, market with hundreds of billions of yuan to develop
------
XFA learnt that relevant work on the emission permits trading is speeding up in various areas. Local governments in Gansu Province, Chongqing Municipality and Jilin Province have released relevant documents to promote the trading of emission permits.
Comment: With the establishment of the trading system for emission permits, the governance and compensation model of polluters have changed significantly and they are more enthusiastic in improving emission. The market demand of environmental enterprises will grow significantly. Institutes estimate that if the proportion of third-part operation is raised from the current 5 percent to 30 percent in the industrial area, the market size of third-part treatment market will be over 100 billion yuan every year. In terms of listed companies, Shanghai Safbon Water Service Co., Ltd. (300262.SZ) is competitive in industrial water treatment and has sufficient orders. CEC Environmental Protection Co., Ltd. (300172.SZ) is principally engaged in water treatment and is actively developing the third-party treatment of pollution.
○ ASCO annual meeting focuses on tumor immunotherapy
------
The 51st Annual Meeting of American Society of Clinical Oncology (ASCO) was opened on May 30 in Chicago, the U.S. The meeting will focus on tumor immunotherapy. Experts participated in the meeting indicate that tumor immunotherapy enjoys great advantages in treating tumors and represents the development trend of medical science as well as the orientation of clinical practice. It will initiate a new medical revolution.
Comment: Major tumor immunotherapy varieties in the world are currently produced by five to six large pharmaceutical enterprises, including BMS, Roche, Merck, AstraZeneca and Pfizer). A-share companies are also actively developing tumor immunotherapy. Liaoning MEDI Biotechnology Co., Ltd., whose 51 percent equities are held by Beijing SL Pharmaceutical Co., Ltd. (002038.SZ), has obtained the patent for the immune cells biotherapy technology and has treated over 16,000 tumor patients. Shanghai Kaibao Pharmaceutical Co., Ltd. (300039.SZ) also gives priorities to cells treatment.
[Announcement Interpretation]
○ Huaren Phar. to fully control Hongta Innovation with RMB3.4 bln to develop venture capital investment
------
Huaren Pharmaceutical Co., Ltd. (300110.SZ) proposes to acquire 100 percent equities of Hongta Innovation Investment Co., Ltd. priced at 3.44 billion yuan by issuing over 390 million shares at 7.47 yuan per share through private placement and paying 500 million yuan in cash. It also plans to raise a supporting fund of 500 million yuan by issuing shares at 7.47 yuan per share.
Hongta Innovation is principally engaged in equities investment. It has invested in 41 companies so far and has successfully exited from 11 companies. Among those 30 it has investments, 10 have been successfully listed. Hongta Innovation has an excellent performance in the venture capital investment industry in China. The comprehensive internal rate of return (IRR) of all investment projects is 32.57 percent. It recorded a net profit of 166 million yuan and 206 million yuan from 2013 to 2014.
○ SG Automotive to acquire E-POW through private placement to expand to power battery of new energy vehicles
------
Liaoning SG Automotive Group Co., Ltd. (600303.SH) plans to raise 617 million yuan by issuing 88.21 million shares at 6.99 yuan per share through private placement, among which, 71.30 million yuan will be used to acquire 28.2 percent equities of Huizhou E-power Electronics Co., Ltd. (E-POW), 100 million yuan will be used to increase capital in E-POW and 339 million yuan will be used to pay off bank loans. Upon completion of private placement, the company will hold 70.4 percent equities of E-POW. The company’s staff shareholding plan “Changxin Fund-Shuguang No.1” will be involved in the subscription.
E-POW is principally engaged in the development and sales of large-scale battery management systems including power battery, power storage station, etc. Its products are finally applied in areas like automobile manufacturing, communications, high-speed rail, etc. The counterparty promises that the net profit of E-POW from 2015 to 2017 will be no less than 15.00 million yuan, 29.00 million yuan and 40.00 million yuan.
○ GI Technologies to expand production overseas with RMB1 bln through private placement
------
GI Technologies (Beijing) Co., Ltd. (300309.SZ) plans to raise 1 billion yuan by issuing 46.84 million shares at 21.35 yuan per share through private placement to invest in the construction of oil refinery in Tajikistan and to supplement working capital. Guo Renxiang, to-be-appointed general manager of the company, and the company’s staff shareholding plan “Xingzheng GI No.1” will participate in the subscription. The average annual net profit will reach 958 million yuan after the project reaches designed capacity.
○ Guangdong Advertising to launch equity incentive at market price, performance to double in four years
------
Guangdong Advertising Co., Ltd. (002400.SZ) plans to award 9.033 million stock options to incentive objects at the market price of 30.50 yuan per share. Three general managers of the company and 264 management as well as backbones are awarded. The options will be unlocked in three phases and the performance condition is that the net profit of the company from 2016 to 2018 shall grow by no less than 44 percent, 72.8 percent and 107 percent, respectively, compared with 2014. And the income of principal business shall account over 90 percent.
○ Zoomlion Heavy Industry Science and Technology to acquire overseas environmental protection asset
------
Zoomlion Heavy Industry Science and Technology Co., Ltd. (000157.SZ; 01157.HK) plans to acquire 75 percent equities of Italian LADURNER Company with 75.00 million Euro together with Mandarin Capital Partners, among which, the company invests 57.00 million Euro (around 386 million yuan) to gain 57 percent equities. The subject company is an advanced overall solution provider and investment operator in environment and recycling resource in Europe and its business covers urban solid waste treatment, sewage and sludge disposal, renewable energy, soil reclamation, etc.
Comment: At present, the market share of Zoomlion Heavy Industry Science and Technology in domestic environmental sanitation machines ranks first. This procurement will speed up its strategic transformation from environmental sanitation equipment provider to overall solution provider and investment operator of the environmental protection industry.
○ Kaishan Compressor to join hands with Sinopec Engineering to explore energy conservation service market
------
Zhejiang Kaishan Compressor Co., Ltd. (300257.SZ) signs cooperation agreement with Sinopec Engineering (Group) Co., Ltd. to complete the industrial application and promotion of low-level energy recycling technology in oil and chemical industry and to explore the huge waste heat recycling market in domestic oil refining, oil and chemical, new-type coal chemical industry and even global oil, chemical, industries together.
Comment: The signing of energy conservation service cooperation agreement is of great importance to the promotion of low-temperature waste heat recycling power generation technology and the company’s performance. During its trading suspension, the Chinext Board continued to surge.
[Trading Trends]
○ Victory Precision Manufacture bought by three institutions
------
The trading volume ranking list on June 1 shows that Suzhou Victory Precision Manufacture Co., Ltd. (002426.SZ) was bought by three institutions with a total of 45.39 million yuan, accounting for 3.7 percent of its intraday turnover.
Comment: Victory Precision Manufacture announced on May 30 that the review of its asset reorganization was suspended. Its stock price even dropped to the daily 10 percent limit at one time. Institutions believe that suspended review of reorganization does not change the company’s strategy of external expansion. The company’s main product covers the structural components of Flat-Panel TV and computer. The company’s planning of expanding to mobile terminals through large-size component strategy is not changed.
[Trading Alarms]
○ 11 new stocks including China National Nuclear Power start subscription on June 2
------
China National Nuclear Power Co., Ltd. (780985.SH) issues shares at 3.39 yuan per share with an up-limit per account of 1,167,000 shares; Guangxi Nanning Waterworks Co., Ltd. (780368.SH) issues shares at 6.43 yuan per share with an up-limit per account of 44,000 shares; Hangzhou Gaoxin Rubber & Plastic Materials Co., Ltd. (300478.SZ) issues shares at 14.84 yuan per share with an up-limit per account of 5,500 shares; Beijing Hezong Science &Technology Co., Ltd. (300477.SZ) issues shares at 10.61 yuan per share with an up-limit per account of 10,000 shares; Anhui Julong Transmission Technology Co., Ltd. (300475.SZ) issues shares at 8.8 yuan per share with an up-limit per account of 20,000 shares; Sichuan Sunny Seal Co., Ltd. (300470.SZ) issues shares at 34.6 yuan per share with an up-limit per account of 5,000 shares; Guangdong SACA Precision Manufacturing Co., Ltd. (300464.SZ) issues shares at 10.2 yuan per share with an up-limit per account of 8,000 shares; Chongqing Landai Powertrain Corp., Ltd. (002765.SZ) issues shares at 7.67 yuan per share with an up-limit per account of 20,500 shares; ShenZhen HuiJie Group Co., Ltd. (002763.SZ) issues shares at 13.1 yuan per share with an up-limit per account of 21,500 shares; Jinfa Labi Maternity & Baby Articles Co., Ltd. (002762.SZ) issues shares at 26 yuan per share with an up-limit per account of 6,500 shares; Dohia Home Textile Co., Ltd. (002761.SZ) issues shares at 7.28 yuan per share with an up-limit per account of 12,000 shares.
Maximum subscription totally needs 5.55 million yuan. Institutions recommend China National Nuclear Power as the first choice. They believe that the scarcity of stocks related to nuclear power will push up its valuation after being listed.
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