[Today’s Guide]
> Two companies under Xinxing Cathay suspend trading, central enterprises reform to speed up
> Xinjiang to build special energy zone, surging export drive urea price high
> Yueyang Forest & Paper to invest in garden industry, New World to develop general health industry
> Gold Mantis Construction Decoration to develop supply chain finance, Broadcast & TV Network Intermediary to invest in next-generation broadcast & TV network
[XFA Focus]
○ Two companies under Xinxing Cathay suspend trading, central enterprises reform to speed up
------
Jihua Group Corporation Limited (601718.SH) announced trading suspension from June 17 to prepare for issuing stocks. Xinxing Cathay International Group, the substantial shareholder of the company, is one of the first six central enterprises to conduct pilot reform. Xinxing Ductile Iron Pipes Co., Ltd. (000778.SZ), another listed company under the group, also suspended trading. The reform of the remaining five central enterprises is under progress. Valiant Co., Ltd. (002643.SZ) under China Energy Conservation and Environmental Protection Group and Beijing New Building Materials Public Limited Company (000786.SZ) under China National Building Materials Group Corporation are both under trading suspension. Valiant is involved in significant assets reorganizations.
Comment: Various policies on the state-owned enterprises (SOEs) reform have been released recently. The National Development and Reform Commission (NDRC) and the Leading Group for Overall Reform released relevant documents on May 18 and June 5, respectively. The structured funds invested in SOEs reform index have recorded a capital inflow of billions of yuan. Research institutes are bullish about ‘small companies under big groups’ in competitive industries with competitive industries with certain reform experiences and a relatively low asset securitization rate. Statistics show that Ruitai Materials Technology Co., Ltd. (002066.SZ) is the only company the China National Building Materials that has not suspended trading so far. China Nonferrous Metal Mining (Group) Co., Ltd., the substantial shareholder of China Nonferrous Metal Industry's Foreign Engineering and Construction Co., Ltd. (000758.SZ) and Aluminum Corporation of China, another central enterprise, have highly similar businesses with each other. According to the commitment of China National Building Materials, the competition among Xinjiang Tianshan Cement Co., Ltd. (000877.SZ), Ningxia Building Materials Group Co., Ltd. (600449.SH) and Gansu Qilianshan Cement Group Co., Ltd. (600720.SH) will try to be eliminated by September 7.
◆Bank of Communications Co., Ltd. (03328.HK; 601328.SH) announced on the same day that its scheme in relation to the deepening of reform has obtained the approval of the State Council. It will explore the introduction of private capital, actively exert effects of strategic investors and explore mechanism of shareholding by senior management and employees.
○ Rizhao to build Shandong Pilot FTZ Rizhao Area
------
Liu Xingtai, mayor of Rizhao City, indicated at the China-Central Asia Cooperation opened on June 16 that Rizhao City will invest more in the construction of an international trade and shipping center and strengthen the Central Asia (Rizhao) Shipping Services Center and the Central Asia (Rizhao) Port Logistics Park. It will actively establish Rizhao Comprehensive Bonded Zone and China Shandong Pilot Free Trade Zone Rizhao Area and build it into a regional logistics center for Central Asia.
[XFA Selection]
○ ‘Opinions on the Implementation of Certain Policies on Promoting Mass Entrepreneurship and Innovation by the State Council’ was released on June 16. The establishment of the Shanghai Stock Exchange strategic emerging board has been covered in the documents of the State Council for the first time.
○ The ‘Internet plus’ strategy facilitated the rapid development of onshore services outsourcing market in the first five months with an amount increase of 14 percent year on year.
○ The first coordination meeting of urban agglomerations in the middle and down streams of the Yangtze River was held on June 16. It will study the comprehensive traffic system with the rail transportation as the breakthrough.
○ The Ministry of Environmental Protection inspected certain power and water enterprises with outstanding pollution and emission-reducing problems and ordered 25 enterprises to rectify within specified periods.
○ China made new breakthroughs in the fuel cell industry and developed methanol electro-oxidation with high activity.
[Industry Information]
○ Xinjiang to conduct pilot comprehensive energy reform and build into special energy zone
------
XFA learnt from insiders that it is planned to list Xinjiang Uygur Autonomous Region as a pilot for the comprehensive reform of energy in China and will introduce more policies and opportunities for Xinjiang. In the future, the oil exploration and refining are likely to be deregulated first and it will be built into a ‘special energy zone’. Besides, the Energy Information Administration estimated that the Sichuan Basin and the Tarim Basin in China have 145 trillion cubic meters of minable shale gas resources and hoped that the overall development of shale gas can be transferred to China. The China-U.S. Summit in September is expected to mention it and Xinjiang is likely to be a key pilot area in the joint development of shale gas between China and the U.S.
Comment: Among listed companies, Guanghui Energy Co., Ltd. (600256.SH) is located in Xinjiang. Its subsidiary Xinjiang Guanghui Petroleum Co., Ltd. has obtained the qualification for the import of non-state-owned crude trade issued by the Ministry of Commerce. Xinjiang Tianfu Energy Co., Ltd. (600509.SH), a comprehensive energy business platform in the Xinjiang Production and Construction Corps (XPCC), announced last year that it plans to invest no more than 100 million yuan in three years in the exploration and evaluation of shale gas in various basins in Xinjiang.
○ Peak season and surging export drive urea price high
------
XFA learnt that the urea price in China has been surging driven by the booming demand for fertilizers in summer and the tendering in overseas markets. The average quoted price in Shandong Province and Henan Province in the recent week hiked nearly 2 percent, setting a new high in recent years. As a result of the new tariff policies, the urea export maintained high growth. Statistics from customs show that the export of urea in the previous four months reached 5,278,000 tons, representing a growth of 61 percent from the 3.27 million tons in the corresponding period of last year. Insiders estimate that the export of urea will account for 20 percent of the industry and will effectively relieve the domestic over capacity.
Comment: Relevant factories indicate that the urea price is likely to continue hiking and the reasonable price will be about 2,000 yuan per ton. It is expected to hike by another 10 percent or more. In terms of listed companies, Shandong Hualu-Hengsheng Chemical Co., Ltd. (600426.SH) is a leading coal-based urea enterprise in China with huge cost advantages and an annual capacity of nearly 1.8 million tons. Hualu Holdings CO., Ltd., the substantial shareholder of the company, is expected to benefit from the state-owned assets reform in Shandong Province. Luxi Chemical Group Co., Ltd. (000830.SZ) owns a capacity of 1.85 million tons of urea. It is actively developing e-business and the expansion of Luxi Store under is advancing smoothly.
[Announcement Interpretation]
○ Yueyang Forest & Paper to invest in garden industry with over RMB3.5 bln and pilot staff shareholding
------
Yueyang Forest & Paper Co., Ltd. (600963.SH) plans to raise 3,553 million yuan by issuing 550 million shares at 6.46 yuan per share, among which, 1,012 million yuan will be used to acquire 100 percent equities of Zhejiang Kaisheng Garden Municipal Construction Company Limited and the rest will be used to supplement working capital and pay off loans. China Paper Corporation, direct controller of the company, phase I asset management plan of the staff shareholding plan of Yueyang Forest & Paper, Shandong State-owned Asset Investment Holding Co., Ltd., etc. will participate in the subscription. Kaisheng Garden is a comprehensive company integrating green construction of gardens, design of landscape architecture and green conservation.
Comment: Yueyang Forest & Paper can vitalize forestry asset through this private placement and its staff shareholding plan is involved, becoming the first listed company under central enterprises to pilot staff shareholding plan.
○ New World to develop general health industry with RMB1.7 bln
------
Shanghai New World Co., Ltd. (600628.SH) plans to raise 1,746 million yuan by issuing 150 million shares to the State-owned Assets Supervision and Administration Commission (SASAC) of Huangpu District, Shanghai New World Holding Co., Ltd., Shanghai ZongYi Holding Co., Ltd., etc. at 11.64 yuan per share through private placement to invest in the expansion project of general health, re-upgrading project of store business “Internet + all channels” and pay off loans. Moreover, the company plans to acquire the rest 40 percent equities of Shanghai Caitongde Pharmaceutical Co., Ltd. to achieve full control of Caitongde Pharmaceutical.
Comment: New World is a listed company directly controlled by the SASAC of Huangpu District in Shanghai. Upon completion of private placement, the company will build a health care industrial chain with Caitongde medicine store as the core.
○ Gold Mantis Construction Decoration to develop supply chain finance with over RMB4.0 bln
------
Suzhou Gold Mantis Construction Decoration Co., Ltd. (002081.SZ) plans to raise 4,081 million yuan by issuing 143 million shares at no less than 28.52 yuan per share, among which, 3.0 billion yuan will be invested in the supply chain financial service of decoration industry and 1.05 billion yuan will be used to supplement working capital. Phase I staff shareholding plan of Gold Mantis Construction Decoration, New China Life Insurance Company Ltd., Ping’an Old Age Care Insurance Company Limited, etc. will subscribe the private placement. Upon completion of private placement, the company will provide small and micro suppliers, substations of Home Decoration E station, etc. with financial services, and support rapid development of the company’s decoration business.
○ Broadcast & TV Network Intermediary to invest in next-generation broadcast & TV network with over RMB900 mln, Oriental Pearl Media and Tsinghua Tongfang to subscribe private placement
------
Shaanxi Broadcast & TV Network Intermediary（Group）Co., Ltd. (600831.SH) plans to raise 955 million yuan by issuing 52.44 million shares at 18.21 yuan per share, among which, 693 million yuan will be invested in next-generation broadcast & TV network and 262 million yuan will be used to pay off loans. Shanghai Oriental Pearl Media Co., Ltd. (600637.SH) and Tsinghua Tongfang Co., Ltd. (600100.SH) will subscribe the private placement with 355 million yuan and 300 million yuan, respectively. The to-be-invested project will lay foundations for the company’s development of Cloud platform business, development of intelligent terminal application and high-definition/4K video products by making large-scale planning in users’ home gateway and intelligent terminals.
○ AVCON Information Technology to join hands with Yibao Hulian to develop mobile medical service
------
AVCON Information Technology Co., Ltd. (300074.SZ) plans to invest 30 million yuan to acquire 9.1 percent equities of Yibao Hulian Medical Information Technology (Beijing) Company Limited. Under the support of the Ministry of Human Resources and Social Security, Yibao Hulian has successfully developed a mobile APP called “Social Security 123” and signed APP service agreements with the authorities of Human Resources and Social Security in eight cities including Hangzhou, Guangzhou, Chengdu, Nanning, etc., covering over 63 million people. The company will provide common people with safe, reasonable, quality and highly-efficient doctor service and personal service through doctor-patient communication platform together with Yibao Hulian.
[Data Speaks]
○ Explore companies expecting performance growth via acquisition and reorganization
------
According to XFA’s statistics, 43 companies among the listed companies who have forecasted their semi-yearly performance achieve performance growth or stop loss mainly by relying on consolidation of reorganized assets. From the beginning of the year, their average surge is as high as 179 percent, obviously exceeding the index. For companies completed acquisition and reorganization in the second quarter, it is possible that their performance in the first half of the year might grow largely due to consolidation of assets. Among companies having not forecasted their performance in the first half of the year, Shenzhen Changfang Light Emitting Diode Lighting Co., Ltd. (300301.SZ) completed the acquisition of 60 percent equities of Shenzhen Kang Mingsheng Industry Co., Ltd. in May and the latter promises that its performance this year will reach 105 million yuan; Hubei Kaile Science and Technology Co., Ltd. (600260.SH) completed acquisition of 100 percent equities of Shanghai Vanzo Communication Technology Co., Ltd. in May and enters new-generation information technology area. The subject asset promises that its performance this year will reach 100 million yuan.
[Trading Alarms]
○ Three new stocks including Science Sun Pharmaceutical start subscription on June 17
------
Beijing Science Sun Pharmaceutical Co., Ltd. (300485.SZ) issues shares at 38.46 yuan per share with an up-limit per account of 12,000 shares; Tianshui Zhongxing Bio-technology Co., Ltd. (002772.SZ) issues shares at 13 yuan per share with an up-limit per account of 14,500 shares; Chengdu Kanghong Pharmaceutical Group Co., Ltd. (002773.SZ) issues shares at 13.62 yuan per share with an up-limit per account of 13,500 shares. Maximum subscription needs 830,000 yuan. Institutions recommend Science Sun Pharmaceutical as first choice. Science Sun Pharmaceutical is involved in the medicines for cardiovascular and cerebrovascular diseases, immune diseases and nervous system diseases and its performance is experiencing sound expansion.
> Two companies under Xinxing Cathay suspend trading, central enterprises reform to speed up
> Xinjiang to build special energy zone, surging export drive urea price high
> Yueyang Forest & Paper to invest in garden industry, New World to develop general health industry
> Gold Mantis Construction Decoration to develop supply chain finance, Broadcast & TV Network Intermediary to invest in next-generation broadcast & TV network
[XFA Focus]
○ Two companies under Xinxing Cathay suspend trading, central enterprises reform to speed up
------
Jihua Group Corporation Limited (601718.SH) announced trading suspension from June 17 to prepare for issuing stocks. Xinxing Cathay International Group, the substantial shareholder of the company, is one of the first six central enterprises to conduct pilot reform. Xinxing Ductile Iron Pipes Co., Ltd. (000778.SZ), another listed company under the group, also suspended trading. The reform of the remaining five central enterprises is under progress. Valiant Co., Ltd. (002643.SZ) under China Energy Conservation and Environmental Protection Group and Beijing New Building Materials Public Limited Company (000786.SZ) under China National Building Materials Group Corporation are both under trading suspension. Valiant is involved in significant assets reorganizations.
Comment: Various policies on the state-owned enterprises (SOEs) reform have been released recently. The National Development and Reform Commission (NDRC) and the Leading Group for Overall Reform released relevant documents on May 18 and June 5, respectively. The structured funds invested in SOEs reform index have recorded a capital inflow of billions of yuan. Research institutes are bullish about ‘small companies under big groups’ in competitive industries with competitive industries with certain reform experiences and a relatively low asset securitization rate. Statistics show that Ruitai Materials Technology Co., Ltd. (002066.SZ) is the only company the China National Building Materials that has not suspended trading so far. China Nonferrous Metal Mining (Group) Co., Ltd., the substantial shareholder of China Nonferrous Metal Industry's Foreign Engineering and Construction Co., Ltd. (000758.SZ) and Aluminum Corporation of China, another central enterprise, have highly similar businesses with each other. According to the commitment of China National Building Materials, the competition among Xinjiang Tianshan Cement Co., Ltd. (000877.SZ), Ningxia Building Materials Group Co., Ltd. (600449.SH) and Gansu Qilianshan Cement Group Co., Ltd. (600720.SH) will try to be eliminated by September 7.
◆Bank of Communications Co., Ltd. (03328.HK; 601328.SH) announced on the same day that its scheme in relation to the deepening of reform has obtained the approval of the State Council. It will explore the introduction of private capital, actively exert effects of strategic investors and explore mechanism of shareholding by senior management and employees.
○ Rizhao to build Shandong Pilot FTZ Rizhao Area
------
Liu Xingtai, mayor of Rizhao City, indicated at the China-Central Asia Cooperation opened on June 16 that Rizhao City will invest more in the construction of an international trade and shipping center and strengthen the Central Asia (Rizhao) Shipping Services Center and the Central Asia (Rizhao) Port Logistics Park. It will actively establish Rizhao Comprehensive Bonded Zone and China Shandong Pilot Free Trade Zone Rizhao Area and build it into a regional logistics center for Central Asia.
[XFA Selection]
○ ‘Opinions on the Implementation of Certain Policies on Promoting Mass Entrepreneurship and Innovation by the State Council’ was released on June 16. The establishment of the Shanghai Stock Exchange strategic emerging board has been covered in the documents of the State Council for the first time.
○ The ‘Internet plus’ strategy facilitated the rapid development of onshore services outsourcing market in the first five months with an amount increase of 14 percent year on year.
○ The first coordination meeting of urban agglomerations in the middle and down streams of the Yangtze River was held on June 16. It will study the comprehensive traffic system with the rail transportation as the breakthrough.
○ The Ministry of Environmental Protection inspected certain power and water enterprises with outstanding pollution and emission-reducing problems and ordered 25 enterprises to rectify within specified periods.
○ China made new breakthroughs in the fuel cell industry and developed methanol electro-oxidation with high activity.
[Industry Information]
○ Xinjiang to conduct pilot comprehensive energy reform and build into special energy zone
------
XFA learnt from insiders that it is planned to list Xinjiang Uygur Autonomous Region as a pilot for the comprehensive reform of energy in China and will introduce more policies and opportunities for Xinjiang. In the future, the oil exploration and refining are likely to be deregulated first and it will be built into a ‘special energy zone’. Besides, the Energy Information Administration estimated that the Sichuan Basin and the Tarim Basin in China have 145 trillion cubic meters of minable shale gas resources and hoped that the overall development of shale gas can be transferred to China. The China-U.S. Summit in September is expected to mention it and Xinjiang is likely to be a key pilot area in the joint development of shale gas between China and the U.S.
Comment: Among listed companies, Guanghui Energy Co., Ltd. (600256.SH) is located in Xinjiang. Its subsidiary Xinjiang Guanghui Petroleum Co., Ltd. has obtained the qualification for the import of non-state-owned crude trade issued by the Ministry of Commerce. Xinjiang Tianfu Energy Co., Ltd. (600509.SH), a comprehensive energy business platform in the Xinjiang Production and Construction Corps (XPCC), announced last year that it plans to invest no more than 100 million yuan in three years in the exploration and evaluation of shale gas in various basins in Xinjiang.
○ Peak season and surging export drive urea price high
------
XFA learnt that the urea price in China has been surging driven by the booming demand for fertilizers in summer and the tendering in overseas markets. The average quoted price in Shandong Province and Henan Province in the recent week hiked nearly 2 percent, setting a new high in recent years. As a result of the new tariff policies, the urea export maintained high growth. Statistics from customs show that the export of urea in the previous four months reached 5,278,000 tons, representing a growth of 61 percent from the 3.27 million tons in the corresponding period of last year. Insiders estimate that the export of urea will account for 20 percent of the industry and will effectively relieve the domestic over capacity.
Comment: Relevant factories indicate that the urea price is likely to continue hiking and the reasonable price will be about 2,000 yuan per ton. It is expected to hike by another 10 percent or more. In terms of listed companies, Shandong Hualu-Hengsheng Chemical Co., Ltd. (600426.SH) is a leading coal-based urea enterprise in China with huge cost advantages and an annual capacity of nearly 1.8 million tons. Hualu Holdings CO., Ltd., the substantial shareholder of the company, is expected to benefit from the state-owned assets reform in Shandong Province. Luxi Chemical Group Co., Ltd. (000830.SZ) owns a capacity of 1.85 million tons of urea. It is actively developing e-business and the expansion of Luxi Store under is advancing smoothly.
[Announcement Interpretation]
○ Yueyang Forest & Paper to invest in garden industry with over RMB3.5 bln and pilot staff shareholding
------
Yueyang Forest & Paper Co., Ltd. (600963.SH) plans to raise 3,553 million yuan by issuing 550 million shares at 6.46 yuan per share, among which, 1,012 million yuan will be used to acquire 100 percent equities of Zhejiang Kaisheng Garden Municipal Construction Company Limited and the rest will be used to supplement working capital and pay off loans. China Paper Corporation, direct controller of the company, phase I asset management plan of the staff shareholding plan of Yueyang Forest & Paper, Shandong State-owned Asset Investment Holding Co., Ltd., etc. will participate in the subscription. Kaisheng Garden is a comprehensive company integrating green construction of gardens, design of landscape architecture and green conservation.
Comment: Yueyang Forest & Paper can vitalize forestry asset through this private placement and its staff shareholding plan is involved, becoming the first listed company under central enterprises to pilot staff shareholding plan.
○ New World to develop general health industry with RMB1.7 bln
------
Shanghai New World Co., Ltd. (600628.SH) plans to raise 1,746 million yuan by issuing 150 million shares to the State-owned Assets Supervision and Administration Commission (SASAC) of Huangpu District, Shanghai New World Holding Co., Ltd., Shanghai ZongYi Holding Co., Ltd., etc. at 11.64 yuan per share through private placement to invest in the expansion project of general health, re-upgrading project of store business “Internet + all channels” and pay off loans. Moreover, the company plans to acquire the rest 40 percent equities of Shanghai Caitongde Pharmaceutical Co., Ltd. to achieve full control of Caitongde Pharmaceutical.
Comment: New World is a listed company directly controlled by the SASAC of Huangpu District in Shanghai. Upon completion of private placement, the company will build a health care industrial chain with Caitongde medicine store as the core.
○ Gold Mantis Construction Decoration to develop supply chain finance with over RMB4.0 bln
------
Suzhou Gold Mantis Construction Decoration Co., Ltd. (002081.SZ) plans to raise 4,081 million yuan by issuing 143 million shares at no less than 28.52 yuan per share, among which, 3.0 billion yuan will be invested in the supply chain financial service of decoration industry and 1.05 billion yuan will be used to supplement working capital. Phase I staff shareholding plan of Gold Mantis Construction Decoration, New China Life Insurance Company Ltd., Ping’an Old Age Care Insurance Company Limited, etc. will subscribe the private placement. Upon completion of private placement, the company will provide small and micro suppliers, substations of Home Decoration E station, etc. with financial services, and support rapid development of the company’s decoration business.
○ Broadcast & TV Network Intermediary to invest in next-generation broadcast & TV network with over RMB900 mln, Oriental Pearl Media and Tsinghua Tongfang to subscribe private placement
------
Shaanxi Broadcast & TV Network Intermediary（Group）Co., Ltd. (600831.SH) plans to raise 955 million yuan by issuing 52.44 million shares at 18.21 yuan per share, among which, 693 million yuan will be invested in next-generation broadcast & TV network and 262 million yuan will be used to pay off loans. Shanghai Oriental Pearl Media Co., Ltd. (600637.SH) and Tsinghua Tongfang Co., Ltd. (600100.SH) will subscribe the private placement with 355 million yuan and 300 million yuan, respectively. The to-be-invested project will lay foundations for the company’s development of Cloud platform business, development of intelligent terminal application and high-definition/4K video products by making large-scale planning in users’ home gateway and intelligent terminals.
○ AVCON Information Technology to join hands with Yibao Hulian to develop mobile medical service
------
AVCON Information Technology Co., Ltd. (300074.SZ) plans to invest 30 million yuan to acquire 9.1 percent equities of Yibao Hulian Medical Information Technology (Beijing) Company Limited. Under the support of the Ministry of Human Resources and Social Security, Yibao Hulian has successfully developed a mobile APP called “Social Security 123” and signed APP service agreements with the authorities of Human Resources and Social Security in eight cities including Hangzhou, Guangzhou, Chengdu, Nanning, etc., covering over 63 million people. The company will provide common people with safe, reasonable, quality and highly-efficient doctor service and personal service through doctor-patient communication platform together with Yibao Hulian.
[Data Speaks]
○ Explore companies expecting performance growth via acquisition and reorganization
------
According to XFA’s statistics, 43 companies among the listed companies who have forecasted their semi-yearly performance achieve performance growth or stop loss mainly by relying on consolidation of reorganized assets. From the beginning of the year, their average surge is as high as 179 percent, obviously exceeding the index. For companies completed acquisition and reorganization in the second quarter, it is possible that their performance in the first half of the year might grow largely due to consolidation of assets. Among companies having not forecasted their performance in the first half of the year, Shenzhen Changfang Light Emitting Diode Lighting Co., Ltd. (300301.SZ) completed the acquisition of 60 percent equities of Shenzhen Kang Mingsheng Industry Co., Ltd. in May and the latter promises that its performance this year will reach 105 million yuan; Hubei Kaile Science and Technology Co., Ltd. (600260.SH) completed acquisition of 100 percent equities of Shanghai Vanzo Communication Technology Co., Ltd. in May and enters new-generation information technology area. The subject asset promises that its performance this year will reach 100 million yuan.
[Trading Alarms]
○ Three new stocks including Science Sun Pharmaceutical start subscription on June 17
------
Beijing Science Sun Pharmaceutical Co., Ltd. (300485.SZ) issues shares at 38.46 yuan per share with an up-limit per account of 12,000 shares; Tianshui Zhongxing Bio-technology Co., Ltd. (002772.SZ) issues shares at 13 yuan per share with an up-limit per account of 14,500 shares; Chengdu Kanghong Pharmaceutical Group Co., Ltd. (002773.SZ) issues shares at 13.62 yuan per share with an up-limit per account of 13,500 shares. Maximum subscription needs 830,000 yuan. Institutions recommend Science Sun Pharmaceutical as first choice. Science Sun Pharmaceutical is involved in the medicines for cardiovascular and cerebrovascular diseases, immune diseases and nervous system diseases and its performance is experiencing sound expansion.
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