[Today’s Guide]
> Four shipping companies all suspend trading, integration of central enterprises accelerated
> Supportive policies in medical equipment to strengthen, Buffett to procure Precision Castparts
> Taicheng Phar. to acquire Xinning Phar., UniStrong Science & Technology to develop high-precision surveying and mapping business
> Insight Investment to reorganize, CSF buys shares of Tiancheng Holding and Qixiang Tengda Chemical
[XFA Focus]
○ Four shipping companies all suspend trading, integration of central enterprises accelerated
------
China Shipping Container Lines Company Limited (601866.SH; 02866.HK) and China Shipping Development Company Limited (600026.SH; 01138.HK) under China Shipping (Group) Company, and China COSCO Holdings Company Limited (601919.SH; 01919.HK) and COSCO Shipping Co., Ltd. (600428.SH) under China Ocean Shipping (Group) Company all announced trading suspension on late Aug.7. The reason claimed for trading suspension is that their controlling shareholders are planning significant issues. Above four companies all made announcement clarifying rumors of integration in late April and indicated that no significant issues will be planned within three months. Since the limit is due, China Shipping and China Ocean Shipping might become another case of central enterprise integration after CRRC Corporation Limited and State Power Investment Corporation.
Comment: Chinese President Xi Jinping proposed to reform state-owned enterprises to become stronger and more competitive during his inspection tour to Jilin Province last month. For export-oriented central enterprises including shipping enterprises, integration helps to improve their international competitiveness. The monetary policy implementation report recently released by the People's Bank of China (PBOC), the central bank, proposes to encourage acquisition and reorganization of key shipbuilding enterprises. China State Shipbuilding Corporation and China Shipbuilding Industry Corporation, two large central enterprises, even had their leaders exchanged in March. China Shipbuilding Industry Company Limited (601989.SH), China CSSC Holdings Limited (600150.SH), CSSC Offshore & Marine Engineering (Group) Company Limited (600685.SH; 00317.SZ), CSSC Steel Structure Engineering Co., Ltd. (600072.SH), etc. might embrace reform opportunities. The integration in infrastructure, non-ferrous metals, and etc. industries also helps to avoid overseas cutthroat competition. For import-oriented enterprises faced with large loss, integration helps to ease over-competition and surplus capacity. Steel and coal industries might enhance industrial concentration ratio by depending on powerful central enterprises.
[XFA Selection]
○ Zhang Yujun, assistant chairman of the China Securities Regulatory Commission (CSRC), emphasized on a forum held recently that maintaining stock market stability and restoring investor confidence are still its top priorities.
○ Deng Ge, the spokesman of the CSRC, indicated on Aug.7 that punishment on illegal cases of insider trading will be intensified gradually.
○ The exporting of foreign trade decreases by 8.3 percent year on year in July, worse than expected. Institutions believe that policies promoting stable growth will be added later.
○ The non-agricultural employment data of the U.S. improves in July, intensifying expectation on increasing interest rate. The price of oil futures fell by 2 percent in New York Mercantile Exchange on Aug. 7, setting a new low recently.
○ CCTV News launches a series of report called “Glorious 50 years, beautiful new Tibet” from Aug. 9.
○ According to report by China Times, the investigation report on constructing nuclear power stations in inland area has been finished and it will be submitted to the central government for final determination.
[Industry Information]
○ Supportive policies in medical equipment to strengthen, product localization to accelerate
------
XFA learns that the “Thirteenth Five-Year Development Plan” on the medical industry, medical treatment and health care has been basically completed. The plan specifies that the high-performance medical equipment will be a key field to break through. Besides, the National Development and Reform Commission (NDRC) recently introduced a major project package enhancing the manufacturing industry, pledging to vigorously develop high-end medical equipment and accelerate the substitution with domestic products.
Comment: Data shows that since China highly relies on imported mid- and high-end medical equipment, foreign brands have seized nearly 70 percent market share. Currently, relevant authorities are urging hospitals to use more domestic medical equipment and reduce their independence on imported products. Institutions predict that driven by health cost containment policy by medical insurance and localization, medical equipment enterprises with technology and competitive advantages will embrace more market opportunities. The first batch of excellent domestic medical equipment selected includes digitized X-ray machines and other products from China Resources Wandong Medical Equipment Co., Ltd. (600055.SH) and Shinva Medical Instrument Co., Ltd. (600587.SH). This suggests that the two companies are leaders in the industry in terms of competitive strength.
○ Buffett to spend huge money to procure Precision Castparts; high-end manufacturing is in long-term bullishness
------
According to the report of foreign media, Berkshire Hathaway Inc., a company under the control of Buffett, is negotiating with Precision Castparts Corp., an aircraft parts and energy production equipment manufacturer. The trading would exceed 30 billion U.S. dollars. If the final agreement is reached, this would be the biggest deal Berkshire Hathaway has ever had. Data shows that Precision Castparts was established in 1949 and spans a business scope of precision aluminum alloy products, industrial hydraulic-control parts, heavy-duty machinery, and metal apparatus, etc. Its products have been applied in the aerospace industry and general industry, and it is the designated spare and accessory parts manufacturer of Boeing, Rolls-Royce and Airbus, etc.
Comment: Buffett’s huge investment in purchasing Precision Castparts reveals that high-end manufacturing has big attraction to long-term investors. What’s more, “Made in China 2025” issued by the State Council this May is expected to be a long-term development opportunity for this industry. Among listed companies, Zhejiang Rifa Precision Machinery Co., Ltd. (002520.SZ) is comprehensively deploying in the aerospace market after acquiring the MCM Company of Italy, and has won the bidding for manufacturing digitalized precision finishing table for aircrafts, which is a symbol of its formal advance in the aeronautic equipment market. Sichuan Chengfa Aero Science & Technology Co., Ltd. (600391.SH) is a manufacturer of the main parts of aero-engine and gas turbine and its partners include GE, Honeywell and Siemens, etc.
○ State Council General Office promotes agricultural development mode transformation, agricultural machinery to enjoy greater support
------
The General Office of the State Council issued opinions on speeding up transforming the agricultural development mode on Aug. 7. The document proposed to make positive progresses in transforming the agricultural development mode and to accelerate the development of diversified moderate-scale agricultural operation by 2020, and to obtain remarkable achievements in the transformation to efficiently utilize agricultural resources by 2030. It emphasizes innovating agricultural operating pattern, deepening agricultural structure adjustment, enhancing resources utilization efficiency and strengthening innovation in agricultural technologies.
Comment: Driven by the intelligent manufacturing and agricultural modernization and with scale operation forming gradually, China will further offer greater support on agricultural machinery The potential of the market will reach hundreds of billion yuan. Xingguang Agricultural Machinery Co., Ltd. (603789.SH) is principally engaged in agricultural harvesters and enjoys higher market share in rice and wheat markets. Jiangsu Nonghua Intelligent Agriculture Technology Co., Ltd. (000816.SZ) is leading in the ancillary gasoline and diesel engines to agricultural machines and its subsidiary Shanghai Nongyi Information Technology Co., Ltd. is aggressively developing agricultural informatization business.
[Announcement Interpretation]
○ Taicheng Phar. to acquire Xinning Phar. with RMB300 mln to extend industrial chain
------
Guangdong Taicheng Pharmaceutical Co., Ltd. (002728.SZ) proposes to acquire 100 percent equities of Taishan Xinning Pharmaceutical Co., Ltd. with a consideration of no more than 300 million yuan. Xinning Phar. is principally engaged in the development and sales of bulk pharmaceutical chemicals and some preparation drugs. After the acquisition, Taicheng Phar. will obtain potential products, which will form a new profit growth point.
○ UniStrong Science & Technology to acquire three enterprises with RMB146 mln and arrange high-precision surveying and mapping business
------
Beijing UniStrong Science & Technology Co., Ltd. (002383.SZ) proposes to acquire the equities of and increase the investment in three companies, including Guangzhou Geoelectron Technology Co., Ltd, Guangzhou Geo Optics Co., Ltd and Stonex Measurement Technology Co., Ltd., with 146 million yuan. These three companies are all specialized in high-precision surveying and mapping in the satellite positioning industry, and their main operation is related to handheld high-precision products, RTX measurement products and 3D laser measurement products. After the acquisition, UniStrong Science & Technology will respectively hold 51 percent equities of each company.
Comment: Beidou high-precision business is the most significant business orientation of UniStrong Science & Technology. Currently, the company has already owned the internationally-advanced high-precision chip, board card technology and satellite-based geo-stationary navigation overlay system. Based on these core technologies, the company makes overall arrangement for the upstream and downstream businesses of the high-precision industrial chain to obtain the high-precision product technologies and a stable and sustainable development in the market.
○ Insight Investment to acquire Xueda Education with RMB5.5 bln, Tsinghua Holdings to become controlling shareholder
------
Xiamen Insight Investment Co., Ltd. (000526.SZ) proposes to issue 287 million shares at 19.13 yuan per share to nine institutions, including Tibet Unisplendour Education Investment Co., Ltd., Great Wall Capital Co., Ltd as well as the No. 1 of the first phase of employee shareholding plan under Insight Investment. The proceeds of 5.5 billion yuan will be used in acquiring 100 percent equities of Xueda Education Group (XUE.NYSE), establishing the International Education School Investment Service Co., Ltd. and an online education platform. After the issuance, Tsinghua Holdings Co., Ltd. will hold 31.70 percent equities of Xiamen Insight Investment through the Unisplendour Zhuoyuan and Unisplendour Education, and becomes its actual controlling shareholder.
Xueda Education is a company listed on the New York Stock Exchange, mainly operating K12 educational training with personalized one-to-one intelligent tutoring as the core business. Xueda Education takes up the second largest market share in China, only after the New Oriental Education and Technology Group Inc. (EDU.NYSE).
○ CSF buys shares of Tiancheng Holding and Qixiang Tengda Chemical
------
Guizhou Changzheng Tiancheng Holding Co., Ltd. (600112.SH) disclosed the shareholding of its top ten shareholders by Aug. 6. China Securities Finance Corporation Limited (CSF) became the second biggest shareholder holding 15,226,100 shares, accounting for 2.99 percent of the total share capital. Each of another ten asset management plans under the name of “CSF” holds 0.99 percent equities, ranking the fifth biggest shareholders and accounting for a total of 9.9 percent of the total share capital. Besides, Shenzhen Eternal Asia Investment Holdings Co., Ltd., the controlling shareholder of the Eternal Asia Supply Chain Management Ltd. (002183.SZ), holds 7.65 million shares, ranking the fourth biggest shareholder of the company.
Zibo Qixiang Tengda Chemical Co., Ltd. (002408.SZ) disclosed that the CSF directly holds 2.53 million shares of the company by July 31. Another ten funds hold 16.30 million shares of the company through the CSF asset management plan with a total of 8.83 million shares, accounting for 2.43 percent of the total share capital.
○ Yonghui Superstores to raise RMB6.4 bln and cooperate with JD.com
------
Yonghui Superstores Co., Ltd. (601933.SH) intends to raise 6.45 billion yuan by issuing 720 million shares at 9 yuan per share through private placement. The proceeds will be invested in the stores of the chain superstore, the establishment the logistics distribution center and the development of the cold chain logistics system for cold and fresh products. The company also signed a strategic cooperation agreement with JD.com to conduct online and offline retail and financial services.
Jiangsu JD Bangneng Investment Management Co., Ltd. and Jiangsu Yuanzhou E-Commerce Co., Ltd. controlled by Liu Qiangdong and Sun Jiaming will contribute 4.3 billion yuan to acquire 10 percent of the shares of the company. Dairy Farm International Holdings Ltd., formerly the second biggest shareholder of the company, will contribute 1.29 billion yuan to maintain a shareholding proportion of 19.9 percent. Zhang Xuansong, one of the actual controllers of the company, will also participate in the subscription with 860 million yuan.
Comment: Through the deep cooperation with Dairy Farm International, Yonghui Superstores will obtain global procurement channels. The introduction of Liu Qiangdong as a strategic investor, it established channels for deep cooperation with JD.com, a leader in the e-commerce.
○ Qian Hai Life Insurance increases shareholding in Shaoneng Group
------
Guangdong Shaoneng Group Co., Ltd. (000601.SZ) announced that as it is rosy about the prospects of the company, Qian Hai Life Insurance Co., Ltd. bought 54.04 million shares of the company through secondary market acquisition from Aug. 3 to 7, accounting for 5 percent of the total share capital. After the change of the equities, Qian Hai Life Insurance totally holds 10 percent of the total share capital of the company, reaching the 5 percent limit once again.
> Four shipping companies all suspend trading, integration of central enterprises accelerated
> Supportive policies in medical equipment to strengthen, Buffett to procure Precision Castparts
> Taicheng Phar. to acquire Xinning Phar., UniStrong Science & Technology to develop high-precision surveying and mapping business
> Insight Investment to reorganize, CSF buys shares of Tiancheng Holding and Qixiang Tengda Chemical
[XFA Focus]
○ Four shipping companies all suspend trading, integration of central enterprises accelerated
------
China Shipping Container Lines Company Limited (601866.SH; 02866.HK) and China Shipping Development Company Limited (600026.SH; 01138.HK) under China Shipping (Group) Company, and China COSCO Holdings Company Limited (601919.SH; 01919.HK) and COSCO Shipping Co., Ltd. (600428.SH) under China Ocean Shipping (Group) Company all announced trading suspension on late Aug.7. The reason claimed for trading suspension is that their controlling shareholders are planning significant issues. Above four companies all made announcement clarifying rumors of integration in late April and indicated that no significant issues will be planned within three months. Since the limit is due, China Shipping and China Ocean Shipping might become another case of central enterprise integration after CRRC Corporation Limited and State Power Investment Corporation.
Comment: Chinese President Xi Jinping proposed to reform state-owned enterprises to become stronger and more competitive during his inspection tour to Jilin Province last month. For export-oriented central enterprises including shipping enterprises, integration helps to improve their international competitiveness. The monetary policy implementation report recently released by the People's Bank of China (PBOC), the central bank, proposes to encourage acquisition and reorganization of key shipbuilding enterprises. China State Shipbuilding Corporation and China Shipbuilding Industry Corporation, two large central enterprises, even had their leaders exchanged in March. China Shipbuilding Industry Company Limited (601989.SH), China CSSC Holdings Limited (600150.SH), CSSC Offshore & Marine Engineering (Group) Company Limited (600685.SH; 00317.SZ), CSSC Steel Structure Engineering Co., Ltd. (600072.SH), etc. might embrace reform opportunities. The integration in infrastructure, non-ferrous metals, and etc. industries also helps to avoid overseas cutthroat competition. For import-oriented enterprises faced with large loss, integration helps to ease over-competition and surplus capacity. Steel and coal industries might enhance industrial concentration ratio by depending on powerful central enterprises.
[XFA Selection]
○ Zhang Yujun, assistant chairman of the China Securities Regulatory Commission (CSRC), emphasized on a forum held recently that maintaining stock market stability and restoring investor confidence are still its top priorities.
○ Deng Ge, the spokesman of the CSRC, indicated on Aug.7 that punishment on illegal cases of insider trading will be intensified gradually.
○ The exporting of foreign trade decreases by 8.3 percent year on year in July, worse than expected. Institutions believe that policies promoting stable growth will be added later.
○ The non-agricultural employment data of the U.S. improves in July, intensifying expectation on increasing interest rate. The price of oil futures fell by 2 percent in New York Mercantile Exchange on Aug. 7, setting a new low recently.
○ CCTV News launches a series of report called “Glorious 50 years, beautiful new Tibet” from Aug. 9.
○ According to report by China Times, the investigation report on constructing nuclear power stations in inland area has been finished and it will be submitted to the central government for final determination.
[Industry Information]
○ Supportive policies in medical equipment to strengthen, product localization to accelerate
------
XFA learns that the “Thirteenth Five-Year Development Plan” on the medical industry, medical treatment and health care has been basically completed. The plan specifies that the high-performance medical equipment will be a key field to break through. Besides, the National Development and Reform Commission (NDRC) recently introduced a major project package enhancing the manufacturing industry, pledging to vigorously develop high-end medical equipment and accelerate the substitution with domestic products.
Comment: Data shows that since China highly relies on imported mid- and high-end medical equipment, foreign brands have seized nearly 70 percent market share. Currently, relevant authorities are urging hospitals to use more domestic medical equipment and reduce their independence on imported products. Institutions predict that driven by health cost containment policy by medical insurance and localization, medical equipment enterprises with technology and competitive advantages will embrace more market opportunities. The first batch of excellent domestic medical equipment selected includes digitized X-ray machines and other products from China Resources Wandong Medical Equipment Co., Ltd. (600055.SH) and Shinva Medical Instrument Co., Ltd. (600587.SH). This suggests that the two companies are leaders in the industry in terms of competitive strength.
○ Buffett to spend huge money to procure Precision Castparts; high-end manufacturing is in long-term bullishness
------
According to the report of foreign media, Berkshire Hathaway Inc., a company under the control of Buffett, is negotiating with Precision Castparts Corp., an aircraft parts and energy production equipment manufacturer. The trading would exceed 30 billion U.S. dollars. If the final agreement is reached, this would be the biggest deal Berkshire Hathaway has ever had. Data shows that Precision Castparts was established in 1949 and spans a business scope of precision aluminum alloy products, industrial hydraulic-control parts, heavy-duty machinery, and metal apparatus, etc. Its products have been applied in the aerospace industry and general industry, and it is the designated spare and accessory parts manufacturer of Boeing, Rolls-Royce and Airbus, etc.
Comment: Buffett’s huge investment in purchasing Precision Castparts reveals that high-end manufacturing has big attraction to long-term investors. What’s more, “Made in China 2025” issued by the State Council this May is expected to be a long-term development opportunity for this industry. Among listed companies, Zhejiang Rifa Precision Machinery Co., Ltd. (002520.SZ) is comprehensively deploying in the aerospace market after acquiring the MCM Company of Italy, and has won the bidding for manufacturing digitalized precision finishing table for aircrafts, which is a symbol of its formal advance in the aeronautic equipment market. Sichuan Chengfa Aero Science & Technology Co., Ltd. (600391.SH) is a manufacturer of the main parts of aero-engine and gas turbine and its partners include GE, Honeywell and Siemens, etc.
○ State Council General Office promotes agricultural development mode transformation, agricultural machinery to enjoy greater support
------
The General Office of the State Council issued opinions on speeding up transforming the agricultural development mode on Aug. 7. The document proposed to make positive progresses in transforming the agricultural development mode and to accelerate the development of diversified moderate-scale agricultural operation by 2020, and to obtain remarkable achievements in the transformation to efficiently utilize agricultural resources by 2030. It emphasizes innovating agricultural operating pattern, deepening agricultural structure adjustment, enhancing resources utilization efficiency and strengthening innovation in agricultural technologies.
Comment: Driven by the intelligent manufacturing and agricultural modernization and with scale operation forming gradually, China will further offer greater support on agricultural machinery The potential of the market will reach hundreds of billion yuan. Xingguang Agricultural Machinery Co., Ltd. (603789.SH) is principally engaged in agricultural harvesters and enjoys higher market share in rice and wheat markets. Jiangsu Nonghua Intelligent Agriculture Technology Co., Ltd. (000816.SZ) is leading in the ancillary gasoline and diesel engines to agricultural machines and its subsidiary Shanghai Nongyi Information Technology Co., Ltd. is aggressively developing agricultural informatization business.
[Announcement Interpretation]
○ Taicheng Phar. to acquire Xinning Phar. with RMB300 mln to extend industrial chain
------
Guangdong Taicheng Pharmaceutical Co., Ltd. (002728.SZ) proposes to acquire 100 percent equities of Taishan Xinning Pharmaceutical Co., Ltd. with a consideration of no more than 300 million yuan. Xinning Phar. is principally engaged in the development and sales of bulk pharmaceutical chemicals and some preparation drugs. After the acquisition, Taicheng Phar. will obtain potential products, which will form a new profit growth point.
○ UniStrong Science & Technology to acquire three enterprises with RMB146 mln and arrange high-precision surveying and mapping business
------
Beijing UniStrong Science & Technology Co., Ltd. (002383.SZ) proposes to acquire the equities of and increase the investment in three companies, including Guangzhou Geoelectron Technology Co., Ltd, Guangzhou Geo Optics Co., Ltd and Stonex Measurement Technology Co., Ltd., with 146 million yuan. These three companies are all specialized in high-precision surveying and mapping in the satellite positioning industry, and their main operation is related to handheld high-precision products, RTX measurement products and 3D laser measurement products. After the acquisition, UniStrong Science & Technology will respectively hold 51 percent equities of each company.
Comment: Beidou high-precision business is the most significant business orientation of UniStrong Science & Technology. Currently, the company has already owned the internationally-advanced high-precision chip, board card technology and satellite-based geo-stationary navigation overlay system. Based on these core technologies, the company makes overall arrangement for the upstream and downstream businesses of the high-precision industrial chain to obtain the high-precision product technologies and a stable and sustainable development in the market.
○ Insight Investment to acquire Xueda Education with RMB5.5 bln, Tsinghua Holdings to become controlling shareholder
------
Xiamen Insight Investment Co., Ltd. (000526.SZ) proposes to issue 287 million shares at 19.13 yuan per share to nine institutions, including Tibet Unisplendour Education Investment Co., Ltd., Great Wall Capital Co., Ltd as well as the No. 1 of the first phase of employee shareholding plan under Insight Investment. The proceeds of 5.5 billion yuan will be used in acquiring 100 percent equities of Xueda Education Group (XUE.NYSE), establishing the International Education School Investment Service Co., Ltd. and an online education platform. After the issuance, Tsinghua Holdings Co., Ltd. will hold 31.70 percent equities of Xiamen Insight Investment through the Unisplendour Zhuoyuan and Unisplendour Education, and becomes its actual controlling shareholder.
Xueda Education is a company listed on the New York Stock Exchange, mainly operating K12 educational training with personalized one-to-one intelligent tutoring as the core business. Xueda Education takes up the second largest market share in China, only after the New Oriental Education and Technology Group Inc. (EDU.NYSE).
○ CSF buys shares of Tiancheng Holding and Qixiang Tengda Chemical
------
Guizhou Changzheng Tiancheng Holding Co., Ltd. (600112.SH) disclosed the shareholding of its top ten shareholders by Aug. 6. China Securities Finance Corporation Limited (CSF) became the second biggest shareholder holding 15,226,100 shares, accounting for 2.99 percent of the total share capital. Each of another ten asset management plans under the name of “CSF” holds 0.99 percent equities, ranking the fifth biggest shareholders and accounting for a total of 9.9 percent of the total share capital. Besides, Shenzhen Eternal Asia Investment Holdings Co., Ltd., the controlling shareholder of the Eternal Asia Supply Chain Management Ltd. (002183.SZ), holds 7.65 million shares, ranking the fourth biggest shareholder of the company.
Zibo Qixiang Tengda Chemical Co., Ltd. (002408.SZ) disclosed that the CSF directly holds 2.53 million shares of the company by July 31. Another ten funds hold 16.30 million shares of the company through the CSF asset management plan with a total of 8.83 million shares, accounting for 2.43 percent of the total share capital.
○ Yonghui Superstores to raise RMB6.4 bln and cooperate with JD.com
------
Yonghui Superstores Co., Ltd. (601933.SH) intends to raise 6.45 billion yuan by issuing 720 million shares at 9 yuan per share through private placement. The proceeds will be invested in the stores of the chain superstore, the establishment the logistics distribution center and the development of the cold chain logistics system for cold and fresh products. The company also signed a strategic cooperation agreement with JD.com to conduct online and offline retail and financial services.
Jiangsu JD Bangneng Investment Management Co., Ltd. and Jiangsu Yuanzhou E-Commerce Co., Ltd. controlled by Liu Qiangdong and Sun Jiaming will contribute 4.3 billion yuan to acquire 10 percent of the shares of the company. Dairy Farm International Holdings Ltd., formerly the second biggest shareholder of the company, will contribute 1.29 billion yuan to maintain a shareholding proportion of 19.9 percent. Zhang Xuansong, one of the actual controllers of the company, will also participate in the subscription with 860 million yuan.
Comment: Through the deep cooperation with Dairy Farm International, Yonghui Superstores will obtain global procurement channels. The introduction of Liu Qiangdong as a strategic investor, it established channels for deep cooperation with JD.com, a leader in the e-commerce.
○ Qian Hai Life Insurance increases shareholding in Shaoneng Group
------
Guangdong Shaoneng Group Co., Ltd. (000601.SZ) announced that as it is rosy about the prospects of the company, Qian Hai Life Insurance Co., Ltd. bought 54.04 million shares of the company through secondary market acquisition from Aug. 3 to 7, accounting for 5 percent of the total share capital. After the change of the equities, Qian Hai Life Insurance totally holds 10 percent of the total share capital of the company, reaching the 5 percent limit once again.
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