[Today's Guide]
○Chinese President requires enhancing economic structure reform to reduce surplus capacity
○Oil reform to open upstream market, geographic information industry to maintain high growth
○Giant Interactive achieves back-door listing via New Century Cruise, Infotmic adds stakes in main business through private placement
○SAAE to control Shanghai Delphi, Shenghua Biok Biology to acquire Blaze Loong Technology
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[SSN Focus]
○Chinese President requires enhancing economic structure reform to reduce surplus capacity
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Chinese President Xi Jinping held the 11th meeting of the Central Leading Group on Financial and Economic Affairs on Nov. 10, studying economic structure reform and urban work. It requires enlarging the total demands properly, and meanwhile reinforcing structure reform of suppliers; it also proposes to reduce surplus capacity efficiently, and enhance industrial optimization and reorganization.
Comments: Stable benefit is the essence for stable growth of China's economy according to analysis of experts in Development Research Center of the State Council. Besides a large number of incentive policies to increase investment demands, it is more proper to speed up quit and restructuring of surplus capacity to enhance price rebound and enterprises' performances. Since this year, Chinese Premier Li Keqiang has mentioned "zombie enterprise" twice. Li clearly pointed out in the executive meeting of the State Council last week that reorganization and integration of "zombie enterprises" should be boosted or such enterprises should quit from the market. Steal and coal are representatives in the industries with surplus capacity, and their P/E ratios are very close to the lowest level in A-share market. Reducing the surplus capacity is beneficial for profit rebound. High-speed rail wheel business of Maanshan Iron ＆ Steel Company Limited (600808.SH) attracts attention of institutions; stock prices of Hebei Iron and Steel Co., Ltd. (000709.SZ) and Beijing Shougang Co., Ltd. (000959.SZ) are lower than the bottom prices of their pre-plan of private placement.
◆Chinese President Xi Jinping also pointed out that we should prevent financial risks, and speed up to form a stock market of improved financing function, solid basic system, efficient market supervision to fully protect the investors' interest.
[SSN Selection]
○Chinese Premier Li Keqiang held a forum on economic trend on Nov. 9, requiring promoting infrastructure construction, especially public facilities in central and western China.
○According to statistics of the Ministry of Industry and Information Technology, China's new energy automobile output reached 50,700 in October, up by eight times year on year.
○Three ministries and commissions including the Ministry of Finance jointly held a video conference a few days ago, proposing to improve policies and measures to strengthen the popularity of new energy buses.
○Based on announcement of Shanghai Pudong Development Bank Co., Ltd. (600000.SH), Funde Sino Life Insurance Co., Ltd. holds 15 percent equities of the company, which is third time to buy the share of Pudong Development Bank through secondary market acquisition exceeding the 5 percent limit.
○The announcement of Ningbo Zhongbai Co., Ltd. (600857.SH) and Deluxe Family Co., Ltd. (600503.SH) shows that shares of the both companies held by Shanghai Zexi Investment Co., Ltd. will be frozen for two years by the Department of Public Security.
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[Industry Information]
○Oil reform to open upstream market, private exploration enterprises to benefit
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SSN learns that the oil reform scheme, which is under preparation now, might open the mining right market. The advance application will be replaced by competitive transfers. Meanwhile, it will relax the restrictions on the qualification for oil and gas exploration and development, and implement a bidding system for mining rights. Besides, it will strictly control the mechanism for the exit of oil and gas exploration right, increase the cost for holding mines and establish systems for the transfer of oil and gas mining rights as well as the reserves transfer.
Comment: Industrial insiders believe that this move will promote and vitalize the oil and gas exploration in China, increase upstream input and competition, boost enterprises' input in exploration and advance their technologies. In the long run, it will weaken the monopoly of upstream enterprises and enhance the voices of private exploration enterprises. As to listed companies, Lanzhou Haimo Technologies Co., Ltd. (300084.SZ) provides oilfield customers with services including the production measuring, assessment and exploration testing of oil wells; GI Technologies (Beijing) Co., Ltd. (300309.SZ) is one of the professional domestic manufacturers with the most advanced technology in oil-well-logging and the greatest growth potential.
○Geographic information industry to maintain high growth, Internet giants competes in market planning
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The 2015 Geographic Information Industry Conference was held in Beijing on Nov. 10. According to introduction, the total output of the whole industry this year might reach 360 billion yuan, or grow by 22 percent, indicating a high growth. The State has launched various supporting policies to the geographic information industry in recent years. Segmented industries including satellite navigation, Internet-based map and the Internet of Cars move to maturity progressively. Under the driving of national strategies including the "Belt and Road" initiatives and the "Internet Plus" action plan, geographic information industry will continue to maintain high growth.
Comment: Geographic information, as the entrance of basic data and traffic, plays an important role in various "Internet Plus" areas and incurs competition among Internet giants. Institutions believe that the total output of the industry might exceed 800 billion yuan by 2020. Relevant enterprises with mature business mode will embrace booming performance. As to listed companies, Hi-Target Navigation Tech Co., Ltd. (300177.SZ) provides Baidu, Inc. (NASDAQ:BIDU) with three-dimensional streetscape data in cities like Kunming, Changsha and Chengdu; Navinfo Co., Ltd. (002405.SZ) is a leading enterprise engaged in electronic navigation map. Tencent is the second largest shareholder of the company.
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[Announcement Interpretation]
○Giant Interactive achieves back-door listing via New Century Cruise
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Chongqing New Century Cruise Co., Ltd. (002558.SZ) plans to acquire 100 percent equities of Giant Interactive Group, Inc. (NYSE: GA) with 13.1 billion yuan by issuing 443 million shares at 29.58 yuan per share to Shanghai Lanlin Investment Management Co., Ltd. Upon completion of transaction, Lanlin Investment Management, the actual controller of which is Shi Yuzhu, will become the controlling shareholder of the company, and Shi Yuzhu will become the actual controller of New Century Cruise.
The counterparty promises that the net profit of Giant Interactive from 2016 to 2018 will be no less than 1 billion yuan, 1.2 billion yuan and 1.5 billion yuan, respectively. The company also plans to raise a supporting fund of 5 billion yuan by issuing 169 million shares through private placement for investment in the R＆D, agency, operation and issuance of online games.
○Infotmic to raise RMB500 mln to expand businesses including electronic terminal processor
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Infotmic Co., Ltd. (000670.SZ) terminates its planning of major asset reorganization. Meanwhile the company plans to raise 500 million yuan by issuing 80 million shares through private placement to invest in the R＆D of game application terminal processor, mobile intelligent terminal processor and intelligent image processor as well as to supplement working capital. Chen Zhicheng, actual controller of the company, plans to subscribe 10 percent of the private placement and the lock-up period will last for 36 months.
In addition, Shanxi Guanghe landscape Culture Communication Co., Ltd. (600234.SH) and Xinjiang Xuefeng Sci-Tech (Group) Co., Ltd. (603227.SH) also resume trading with termination of major asset reorganization.
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○SAAE to acquire Shanghai Delphi with RMB100 mln
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Shanghai Aerospace Automobile Electromechanical Co., Ltd. (SAAE) (600151.SH) plans to purchase 50 percent equities of Shanghai Delphi Automotive Air Conditioning Systems Co., Ltd. with 99 million U.S. dollars, increasing its stake to 87.5 percent. Shanghai Delphi is a world famous automobile components company and is the only platform for Delphi Corporation to develop air conditioning business in China. It boasts the cutting-edge automobile air conditioning technology. Therefore, this acquisition will help SAAE optimize and consolidate its automobile component business, especially automobile air conditioning business. After the deal is done, this sector will see significant proportion in revenue.
○Shenghua Biok Biology to acquire Blaze Loong Technology with RMB1.6 bln to develop games industry
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Zhejiang Shenghua Biok Biology Co., Ltd. (600226.SH) intends to buy 100 equities of Chengdu Blaze Loong Technology Co., Ltd. by issuing 256 million shares at 3.12 yuan per share through private placement. The acquisition will cost 1.6 billion yuan, of which the company will pay half in cash. It also plans to raise 1.5 billion yuan as supporting funds by issuing shares at 4.02 yuan per share through private placement to its controlling shareholder Shen Peijin. During the trading suspension, the company conducted a 17-for-10 conversion of capital surplus into shares combined with 2.5 yuan dividend for every 10 shares. The latest share price is 5.23 yuan per share.
Blaze Loong Technology is a domestic famous developer and proxy publisher of online games. According to performance commitment, its net profits will be no less than 90 million yuan, 126 million yuan, 164 million yuan and 197 million yuan during 2015 and 2018 respectively.
○Prolto Supply Chain Management to raise RMB950 mln to develop financial leasing of medical devices
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Shenzhen Prolto Supply Chain Management Co., Ltd. (002769.SH) plans to raise 950 million yuan by issuing 19,383,800 shares at no less than 49.01 yuan per share through private placement. 700 million yuan of the total fundraising will be invested in its subsidiary Shenzhen Qianhai Ruitai Financial Leasing Co., Ltd. to develop financial leasing of medical devices and to expand business chain, and the rest will supplement working capitals.
○Hengyi Petrochemical to carry out private placement for Brunei petrochemical project
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Hengyi Petrochemical Co., Ltd. (000703.SZ) plans to raise 3.8 billion yuan by issuing 500 million shares through private placement for PMB's petrochemical project in Brunei. This project is jointly invested by the company and the Brunei government, which is an integration of oil refining and chemical engineering with crude oil and gas condensate as raw material. This project will be located in Pulau Muara Besar of Brunei Darussalam. This project, once established, will help the company tackle the bottleneck problem of source of PX material, extend industrial chain, complete strategic deployment on upstream of petrochemical industrial chain, and consolidate its core competitiveness and anti-risk capability.
○Yuyuan Tourist Mart to buy tourism assets of Hokkaido of Japan with RMB947 mln
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Shanghai Yuyuan Tourist Mart Co., Ltd. (600655.SH) plans to purchase 100 percent equities of Hoshino Resort Tomamu at 18.4 billion yen (or about 947 million yuan). The major assets of the latter are in ski resort of Hokkaido Tomamu, whose net profits amounted to 701 million yen in 2014. Yuyuan Tourist Mart stated that as this project and Yuyuan shopping mall are tourist real estates, it highly matches the company's strategy for interactive development of commercial tourism culture.
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