[Today’s Guide]
> Capitals favor SOEs reform theme, systematical reform to promote growth
> MOA to promote decoupling of institutes and enterprises in seed industry, new energy vehicles output maintains high growth
> Huahong Technology to acquire WELM Technology, Gosuncn Technology to develop big safety protection through acquisitions
> AVIC Heavy Machinery to add stakes in main business, Bright Dairy & Food to acquire overseas again
[XFA Focus]
○ Capitals favor SOEs reform theme, systematical reform to promote growth
------
Many state-owned big-cap stocks expected to reform led the surge on June 8, driving the SSE Composite Index to 5,100 points. Institutes are concerned about the SOEs reform theme. GF Securities Co., Ltd. (01776.HK) believes that under the background of the mixed ownership system, the policies to prevent the loss of state-owned assets will support the assets price of listed companies. Industrial Securities Co., Ltd. (601377.SH) believes that the trading resumption of CRRC Corporation Limited (01766.HK; 601766.SH) and the plan on the mixed ownership system reform of Bank of Communications Co., Ltd. (03328.HK; 601328.SH) will be approved soon, which will continue to invigorate the theme. Various capitals are flowing into the SOEs reform theme through structured funds. Fargo China Securities State-owned Enterprise Reform Index Graded Securities Investment Fund has recorded a net subscription application of over 10 billion yuan since late May.
Comment: Many state-owned enterprises have quality resources, but they lack effective incentive systems. After the reshuffle of management or the improvement of the incentive system, they are highly expected to achieve performance growth. In addition, the going global of the high-end equipment manufacturing industry is an important part in the One Belt and One Road strategy. Many central enterprises in the same industry are necessary to consolidate after the CSR Corporation Limited (01766.SH; 601766.SH) and China CNR Corporation Limited (06199.HK; 601299.SH). Among A-share companies, the trading volume ranking list on June 8 shows that two institutes bought FAW Car Co., Ltd. (000800.SZ). FAW Group is the only car group that has not completely listed in China. China Shipbuilding Industry Company Limited (601989.SH) and China CSSC Holdings Limited (600150.SH) saw the resignation of senior management recently. Institutes are rosy about the consolidation of China State Shipbuilding Corporation (CSSC) and China Shipbuilding Industry Corporation (CSIC). The substantial shareholder of SDIC Xinji Energy Co., Ltd. (601918.SH) has been listed as a pilot for the operation of state-owned capital investment.
[XFA Selection]
○ China’s imports and exports both declined in May. Institutes believe foreign trade is likely to recover in the third quarter.
○ Three ministries jointly released a document to promote the photovoltaic industrial upgrading. Industrial leaders meeting certain technical criteria will receive policy supports.
○ China Telecom Corporation Limited (CHA.NYSE; 00728.HK) initiated the invitation for bids for the IDC supporting system in eight cities. Institutes are optimistic about the increasing demand for and the value of data centers.
○ The first China-CEEC Investment and Trade Expo was opened in Ningbo City on June 8. The mayor of Ningbo indicated that it will include the construction of the port economic circle into the One Belt and One Road strategy.
○ The third China-Central Asia Cooperation Forum will be held in Rizhao City on June 16 with the theme of boosting connectivity.
○ CITIC Securities Company Limited (06030.HK; 600030.SH) intends to raise 11.5 billion HK dollars by issuing H shares to the social insurance fund through private placement. The plan on issuing H shares by the China Merchants Securities Co., Ltd. (600999.HK) has been approved by the State-owned Assets Supervision and Administration Commission.
[Industry Information]
○ MOA to promote decoupling of institutes and enterprises in seed industry to promote resources flowing to leading enterprises
------
The Ministry of Agriculture released the ‘Circular on Accelerating the ‘Decoupling of Institutions and Enterprises’ in the Seed Industry’ on June 8, which specified the coverage, criteria and requirements for the decoupling to further deepen the systematical reform in the seed industry and guarantee the completion of the decoupling of institutes and enterprises by the end of 2015.
Comment: To guarantee the completion of the decoupling of institutes and enterprises, the circular even proposed that the business certificates of seed enterprises failing to complete the decoupling within the period will be cancelled and they will be prohibited to conduct the production and operation of seeds. It will improve the concentration ration of the industry and promote the flow of talents, capitals and technology as well as other advantageous resources to leading enterprises with capital and research and development advantages and greatly improve the commercialized breeding ability. In terms of A-share companies, Zhongnongfa Seed Industry Group Co., Ltd. (600313.SH) enjoys obvious advantages in resources consolidation and extensional development as the platform under the central enterprise China National Agricultural Development Group Co., Ltd. Yuan Longping High-tech Agriculture Co., Ltd. (000998.SZ), a leading enterprise in the domestic hybrid rice seeds, proposes to issue shares to CITIC Group through private placement to become a state-owned enterprise and accelerate the expansion.
○ New energy vehicles output up 300 pct in May
------
According to the website of the Ministry of Industry and Information Technology (MIIT), the output of new energy vehicles in May maintained high growth and reached 19,100, increasing 300 percent year on year and 112 percent from April. Driven by supporting policies and the gradually mature consumption environment, the output of new energy vehicles in 2015 is expected to reach over 200,000 and maintain a high growth.
Comment: The MIIT released the method for the management requirements on new electric passenger cars enterprises. Compared with the draft for soliciting opinions, it has lowered the access thresholds. The deregulation of the new energy vehicles production licenses is likely to speed up and more operation entities are expected in the market. The mass production of new energy vehicles will bring more orders to the lithium battery, the motor and controller as well as other industrial chains. Among listed companies, the private placement plan of Do-Fluoride Chemicals Co., Ltd. (002407.SZ) on investment in lithium ion battery packs has been approved at the general meeting. The company also proposes to acquire 72.5 percent equities of Hebei Hongxing Automobiles Manufacturing Co., Ltd. to expand into the downstream. Rongda Lithium, a subsidiary wholly owned by Luxiang Co., Ltd. (002192.SZ), currently owns the biggest spodumene mine in China.
[Announcement Interpretation]
○ Huahong Technology to acquire WELM Technology to develop elevator components
------
Jiangsu Huahong Technology Co., Ltd. (002645.SZ) proposes to acquire 100 percent equities of Jiangsu WELM Technology Co., Ltd. with 813 million yuan, of which 300 million yuan will be paid in cash and the remaining will be paid by issuing shares at 15.21 yuan per share through private placement. It will also raise a supporting fund of 312 million yuan by issuing shares at 15.83 yuan per share through private placement to Huahong, the substantial shareholder, and other participants.
WELM Technology is principally engaged in precision components for elevators and the signaling system of elevators. Based on the performance commitment, the net profit of WELM Technology in 2015 will be 76 million yuan and in 2016 and 2017 will be totaled 184 million yuan. Huahong Technology recorded a net profit of 10.14 million yuan last year.
○ Gosuncn Technology to acquire two companies through private placement to develop big safety protection
------
Gosuncn Technology Group Co., Ltd. (300098.SZ) plans to acquire 100 percent equities of Hangzhou Chuanglian Electronic Technology Company and 90 percent equities of Guangzhou Goldmessage Technology Co., Ltd. by issuing 78,997,000 shares at 14.72 yuan per share through private placement and in cash. The total transaction consideration will be 1,288 million yuan. Meanwhile, it will raise 1.2 billion yuan by issuing shares at 16.32 yuan per share through private placement to the controlling shareholders and an assets management plan.
Chuanglian Electronic Technology is a leading provider of railway transport safety products and solutions in China. Goldmessage Technology is a leading provider of data safety products and solutions in China. The business of the listed company will be expanded to the railway, data safety and other industrial applications after the acquisitions.
○ AVIC Heavy Machinery to add stakes in high-end military and civilian products with RMB3.7 bln
------
AVIC Heavy Machinery Co., Ltd. (600765.SH) plans to raise around 3.73 billion yuan by issuing shares at no less than 25.48 yuan per share through private placement to invest in 11 projects involved in forging and casting, high-end hydraulic integration, etc., among which, 1.01 billion yuan will be invested in the construction of the advanced forging industrial base in the New District of Xi’an City, 370 million yuan will be invested in the production line of aerial ring forging for civil use, 175 million yuan will be invested in the forging of the rotor system of medium and large helicopters, and etc.
The company will take this opportunity to make planning in the whole industrial chain of forging, form a structure with the forging and casting of defense product as leading part and civil forging as supplementary part, and promote the upgrading and updating of high-end hydraulic integration industry to meet military and civilian demand.
○ Bright Dairy & Food to acquire overseas with RMB9 bln, CITIC Private Equity Funds Management involved
------
Bright Dairy & Food Co., Ltd. (600597.SH) plans to raise 9 billion yuan by issuing 559 million shares at 16.1 yuan per share, among which, 6.87 billion yuan will be used to acquire 100 percent equities of Bright Food Singapore Investment Pte. Ltd. Bright Food Singapore Investment, an acquisition platform set by Bright Food (Group) Co., Ltd. earlier, has acquired 76.7 percent equities of Israeli diary company TNUVA Group. As one of the largest comprehensive food enterprises in Israel, TNUVA’s sales of dairy products account for over 50 percent of that in Israel and its products are also sold in the Middle East, Europe and America, etc.
Comment: Shenzhen Xinsheng Investment Partnership Enterprise (Limited Partnership) under CITIC Private Equity Funds Management Co., Ltd. will subscribe 3.5 billion yuan, Shengchuang Investment Company Limited will subscribe 3.0 billion yuan, and the rest will be subscribed by SAIC Capital Company Limited, Shanghai Guosheng Group Investment Company Limited, Shanghai Yimin No.1 Foods (Group) Co., Ltd., etc. Bright Dairy & Food takes this opportunity to introduce long-term strategic investors to expand domestic and overseas dairy market.
○ CANUDILO Fashion & Accessories to transform to Internet plus brand operator with RMB1.1 bln
------
Guangzhou CANUDILO Fashion & Accessories Co., Ltd. (002656.SZ) plans to raise 1.14 billion yuan by issuing 75.00 million shares to the company’s Phase I staff shareholding plan, Guangzhou Ruide Jinsheng Investment Management Partnership Enterprise, Dongguan Changjiu Venture Capital Firm (Limited Partnership), etc. at 15.25 yuan per share through private placement to invest in the O2O project of fashion buyer stores, acquire 51 percent equities of Italian LEVITAS S.P.A., invest in the construction of the brand marketing network of Dirk Bikkembergs, pay off loans, etc. This move will drive the company’s marketing mode to change from “channel-oriented” to “user-oriented” and the company will transform to “Internet Plus” global fashion brand operator.
○ China Western Power Industrial to control Tianhe Environmental Engineering with RMB3.0 bln
------
China Western Power Industrial Co., Ltd. (002630.SZ) plans to raise 2.95 billion yuan by issuing 160 million shares to Shenzhen Guokai Jintai Investment Development Partnership Enterprise (Limited Partnership), Zhuhai Hengqing Yuancheng Equity Investment Center (Limited Partnership), etc. at 18.38 yuan per share through private placement to acquire 60 percent equities of Tianhe (Baoding) Environmental Engineering Co., Ltd., pay off loans and supplement working capital. The counterparty promises that the net profit of Tianhe Environmental Engineering from 2015 to 2017 will be 200 million yuan, 259 million yuan and 339 million yuan. Tianhe Environmental Engineering is the largest denitration catalyst manufacturer and cellular denitration catalyst manufacturer in terms of capacity, and also the second largest flat-plate denitration catalyst manufacturer in China.
○ Jinming Machinery to raise RMB500 mln through private placement to develop agricultural intelligent equipment
------
Guangdong Jinming Machinery Co., Ltd. (300281.SZ) plans to raise 500 million yuan by issuing 32.49 million shares at 15.39 yuan per share through private placement to invest in agricultural ecological film intelligent equipment project, pay off loans and supplement working capital. Ma Zhenxin, actual controller of the company, together with Ma Jiazhen, Ma Danjie, his son and daughter, etc. are involved in the subscription. Three core product series, including special equipment for producing packaging film, special equipment for producing special film and the special equipment for producing agricultural film and geomembrane, will bring new profit growth points to the company.
[Financial Reports Express]
○ Semiyearly report of Special Electric Motor announces high share conversion and dividend
------
Controlling shareholder of Jiangxi Special Electric Motor Co., Ltd. (002176.SZ) proposes a 12-for-10 conversion of capital surplus into shares combined with 0.1 yuan dividend for every 10 shares in its 2015 semiyearly profit distribution scheme.
> Capitals favor SOEs reform theme, systematical reform to promote growth
> MOA to promote decoupling of institutes and enterprises in seed industry, new energy vehicles output maintains high growth
> Huahong Technology to acquire WELM Technology, Gosuncn Technology to develop big safety protection through acquisitions
> AVIC Heavy Machinery to add stakes in main business, Bright Dairy & Food to acquire overseas again
[XFA Focus]
○ Capitals favor SOEs reform theme, systematical reform to promote growth
------
Many state-owned big-cap stocks expected to reform led the surge on June 8, driving the SSE Composite Index to 5,100 points. Institutes are concerned about the SOEs reform theme. GF Securities Co., Ltd. (01776.HK) believes that under the background of the mixed ownership system, the policies to prevent the loss of state-owned assets will support the assets price of listed companies. Industrial Securities Co., Ltd. (601377.SH) believes that the trading resumption of CRRC Corporation Limited (01766.HK; 601766.SH) and the plan on the mixed ownership system reform of Bank of Communications Co., Ltd. (03328.HK; 601328.SH) will be approved soon, which will continue to invigorate the theme. Various capitals are flowing into the SOEs reform theme through structured funds. Fargo China Securities State-owned Enterprise Reform Index Graded Securities Investment Fund has recorded a net subscription application of over 10 billion yuan since late May.
Comment: Many state-owned enterprises have quality resources, but they lack effective incentive systems. After the reshuffle of management or the improvement of the incentive system, they are highly expected to achieve performance growth. In addition, the going global of the high-end equipment manufacturing industry is an important part in the One Belt and One Road strategy. Many central enterprises in the same industry are necessary to consolidate after the CSR Corporation Limited (01766.SH; 601766.SH) and China CNR Corporation Limited (06199.HK; 601299.SH). Among A-share companies, the trading volume ranking list on June 8 shows that two institutes bought FAW Car Co., Ltd. (000800.SZ). FAW Group is the only car group that has not completely listed in China. China Shipbuilding Industry Company Limited (601989.SH) and China CSSC Holdings Limited (600150.SH) saw the resignation of senior management recently. Institutes are rosy about the consolidation of China State Shipbuilding Corporation (CSSC) and China Shipbuilding Industry Corporation (CSIC). The substantial shareholder of SDIC Xinji Energy Co., Ltd. (601918.SH) has been listed as a pilot for the operation of state-owned capital investment.
[XFA Selection]
○ China’s imports and exports both declined in May. Institutes believe foreign trade is likely to recover in the third quarter.
○ Three ministries jointly released a document to promote the photovoltaic industrial upgrading. Industrial leaders meeting certain technical criteria will receive policy supports.
○ China Telecom Corporation Limited (CHA.NYSE; 00728.HK) initiated the invitation for bids for the IDC supporting system in eight cities. Institutes are optimistic about the increasing demand for and the value of data centers.
○ The first China-CEEC Investment and Trade Expo was opened in Ningbo City on June 8. The mayor of Ningbo indicated that it will include the construction of the port economic circle into the One Belt and One Road strategy.
○ The third China-Central Asia Cooperation Forum will be held in Rizhao City on June 16 with the theme of boosting connectivity.
○ CITIC Securities Company Limited (06030.HK; 600030.SH) intends to raise 11.5 billion HK dollars by issuing H shares to the social insurance fund through private placement. The plan on issuing H shares by the China Merchants Securities Co., Ltd. (600999.HK) has been approved by the State-owned Assets Supervision and Administration Commission.
[Industry Information]
○ MOA to promote decoupling of institutes and enterprises in seed industry to promote resources flowing to leading enterprises
------
The Ministry of Agriculture released the ‘Circular on Accelerating the ‘Decoupling of Institutions and Enterprises’ in the Seed Industry’ on June 8, which specified the coverage, criteria and requirements for the decoupling to further deepen the systematical reform in the seed industry and guarantee the completion of the decoupling of institutes and enterprises by the end of 2015.
Comment: To guarantee the completion of the decoupling of institutes and enterprises, the circular even proposed that the business certificates of seed enterprises failing to complete the decoupling within the period will be cancelled and they will be prohibited to conduct the production and operation of seeds. It will improve the concentration ration of the industry and promote the flow of talents, capitals and technology as well as other advantageous resources to leading enterprises with capital and research and development advantages and greatly improve the commercialized breeding ability. In terms of A-share companies, Zhongnongfa Seed Industry Group Co., Ltd. (600313.SH) enjoys obvious advantages in resources consolidation and extensional development as the platform under the central enterprise China National Agricultural Development Group Co., Ltd. Yuan Longping High-tech Agriculture Co., Ltd. (000998.SZ), a leading enterprise in the domestic hybrid rice seeds, proposes to issue shares to CITIC Group through private placement to become a state-owned enterprise and accelerate the expansion.
○ New energy vehicles output up 300 pct in May
------
According to the website of the Ministry of Industry and Information Technology (MIIT), the output of new energy vehicles in May maintained high growth and reached 19,100, increasing 300 percent year on year and 112 percent from April. Driven by supporting policies and the gradually mature consumption environment, the output of new energy vehicles in 2015 is expected to reach over 200,000 and maintain a high growth.
Comment: The MIIT released the method for the management requirements on new electric passenger cars enterprises. Compared with the draft for soliciting opinions, it has lowered the access thresholds. The deregulation of the new energy vehicles production licenses is likely to speed up and more operation entities are expected in the market. The mass production of new energy vehicles will bring more orders to the lithium battery, the motor and controller as well as other industrial chains. Among listed companies, the private placement plan of Do-Fluoride Chemicals Co., Ltd. (002407.SZ) on investment in lithium ion battery packs has been approved at the general meeting. The company also proposes to acquire 72.5 percent equities of Hebei Hongxing Automobiles Manufacturing Co., Ltd. to expand into the downstream. Rongda Lithium, a subsidiary wholly owned by Luxiang Co., Ltd. (002192.SZ), currently owns the biggest spodumene mine in China.
[Announcement Interpretation]
○ Huahong Technology to acquire WELM Technology to develop elevator components
------
Jiangsu Huahong Technology Co., Ltd. (002645.SZ) proposes to acquire 100 percent equities of Jiangsu WELM Technology Co., Ltd. with 813 million yuan, of which 300 million yuan will be paid in cash and the remaining will be paid by issuing shares at 15.21 yuan per share through private placement. It will also raise a supporting fund of 312 million yuan by issuing shares at 15.83 yuan per share through private placement to Huahong, the substantial shareholder, and other participants.
WELM Technology is principally engaged in precision components for elevators and the signaling system of elevators. Based on the performance commitment, the net profit of WELM Technology in 2015 will be 76 million yuan and in 2016 and 2017 will be totaled 184 million yuan. Huahong Technology recorded a net profit of 10.14 million yuan last year.
○ Gosuncn Technology to acquire two companies through private placement to develop big safety protection
------
Gosuncn Technology Group Co., Ltd. (300098.SZ) plans to acquire 100 percent equities of Hangzhou Chuanglian Electronic Technology Company and 90 percent equities of Guangzhou Goldmessage Technology Co., Ltd. by issuing 78,997,000 shares at 14.72 yuan per share through private placement and in cash. The total transaction consideration will be 1,288 million yuan. Meanwhile, it will raise 1.2 billion yuan by issuing shares at 16.32 yuan per share through private placement to the controlling shareholders and an assets management plan.
Chuanglian Electronic Technology is a leading provider of railway transport safety products and solutions in China. Goldmessage Technology is a leading provider of data safety products and solutions in China. The business of the listed company will be expanded to the railway, data safety and other industrial applications after the acquisitions.
○ AVIC Heavy Machinery to add stakes in high-end military and civilian products with RMB3.7 bln
------
AVIC Heavy Machinery Co., Ltd. (600765.SH) plans to raise around 3.73 billion yuan by issuing shares at no less than 25.48 yuan per share through private placement to invest in 11 projects involved in forging and casting, high-end hydraulic integration, etc., among which, 1.01 billion yuan will be invested in the construction of the advanced forging industrial base in the New District of Xi’an City, 370 million yuan will be invested in the production line of aerial ring forging for civil use, 175 million yuan will be invested in the forging of the rotor system of medium and large helicopters, and etc.
The company will take this opportunity to make planning in the whole industrial chain of forging, form a structure with the forging and casting of defense product as leading part and civil forging as supplementary part, and promote the upgrading and updating of high-end hydraulic integration industry to meet military and civilian demand.
○ Bright Dairy & Food to acquire overseas with RMB9 bln, CITIC Private Equity Funds Management involved
------
Bright Dairy & Food Co., Ltd. (600597.SH) plans to raise 9 billion yuan by issuing 559 million shares at 16.1 yuan per share, among which, 6.87 billion yuan will be used to acquire 100 percent equities of Bright Food Singapore Investment Pte. Ltd. Bright Food Singapore Investment, an acquisition platform set by Bright Food (Group) Co., Ltd. earlier, has acquired 76.7 percent equities of Israeli diary company TNUVA Group. As one of the largest comprehensive food enterprises in Israel, TNUVA’s sales of dairy products account for over 50 percent of that in Israel and its products are also sold in the Middle East, Europe and America, etc.
Comment: Shenzhen Xinsheng Investment Partnership Enterprise (Limited Partnership) under CITIC Private Equity Funds Management Co., Ltd. will subscribe 3.5 billion yuan, Shengchuang Investment Company Limited will subscribe 3.0 billion yuan, and the rest will be subscribed by SAIC Capital Company Limited, Shanghai Guosheng Group Investment Company Limited, Shanghai Yimin No.1 Foods (Group) Co., Ltd., etc. Bright Dairy & Food takes this opportunity to introduce long-term strategic investors to expand domestic and overseas dairy market.
○ CANUDILO Fashion & Accessories to transform to Internet plus brand operator with RMB1.1 bln
------
Guangzhou CANUDILO Fashion & Accessories Co., Ltd. (002656.SZ) plans to raise 1.14 billion yuan by issuing 75.00 million shares to the company’s Phase I staff shareholding plan, Guangzhou Ruide Jinsheng Investment Management Partnership Enterprise, Dongguan Changjiu Venture Capital Firm (Limited Partnership), etc. at 15.25 yuan per share through private placement to invest in the O2O project of fashion buyer stores, acquire 51 percent equities of Italian LEVITAS S.P.A., invest in the construction of the brand marketing network of Dirk Bikkembergs, pay off loans, etc. This move will drive the company’s marketing mode to change from “channel-oriented” to “user-oriented” and the company will transform to “Internet Plus” global fashion brand operator.
○ China Western Power Industrial to control Tianhe Environmental Engineering with RMB3.0 bln
------
China Western Power Industrial Co., Ltd. (002630.SZ) plans to raise 2.95 billion yuan by issuing 160 million shares to Shenzhen Guokai Jintai Investment Development Partnership Enterprise (Limited Partnership), Zhuhai Hengqing Yuancheng Equity Investment Center (Limited Partnership), etc. at 18.38 yuan per share through private placement to acquire 60 percent equities of Tianhe (Baoding) Environmental Engineering Co., Ltd., pay off loans and supplement working capital. The counterparty promises that the net profit of Tianhe Environmental Engineering from 2015 to 2017 will be 200 million yuan, 259 million yuan and 339 million yuan. Tianhe Environmental Engineering is the largest denitration catalyst manufacturer and cellular denitration catalyst manufacturer in terms of capacity, and also the second largest flat-plate denitration catalyst manufacturer in China.
○ Jinming Machinery to raise RMB500 mln through private placement to develop agricultural intelligent equipment
------
Guangdong Jinming Machinery Co., Ltd. (300281.SZ) plans to raise 500 million yuan by issuing 32.49 million shares at 15.39 yuan per share through private placement to invest in agricultural ecological film intelligent equipment project, pay off loans and supplement working capital. Ma Zhenxin, actual controller of the company, together with Ma Jiazhen, Ma Danjie, his son and daughter, etc. are involved in the subscription. Three core product series, including special equipment for producing packaging film, special equipment for producing special film and the special equipment for producing agricultural film and geomembrane, will bring new profit growth points to the company.
[Financial Reports Express]
○ Semiyearly report of Special Electric Motor announces high share conversion and dividend
------
Controlling shareholder of Jiangxi Special Electric Motor Co., Ltd. (002176.SZ) proposes a 12-for-10 conversion of capital surplus into shares combined with 0.1 yuan dividend for every 10 shares in its 2015 semiyearly profit distribution scheme.
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