[Today’s Guide]
> Central bank cuts RRR as expected, financial and real estate sectors with low valuation to benefit
> Chongqing SASAC conference convenes, mixed ownership system pilots to deepen
> Network lending companies to share credit resources, industrial application of graphene approaches
> Wisesoft to invest in face recognition, Dongjiang Environmental to develop sewage treatment project
[XFA Focus]
○ Central bank cuts RRR as expected, financial and real estate sectors with low valuation to benefit
------
The central bank decided to cut banks’ reserve requirement ratio (RRR) by 0.5 percentage points from Feb. 5. It also decided to cut the RRR by an extra 0.5 percentage points for urban and rural commercial banks engaged in proportionate lending to small and micro-sized companies. An additional 4 percentage points will be cut for the Agricultural Development Bank of China (ADBC).
Comment: The RRR cut by the central bank meets the market expectation. The Trading Trends in the Early Bird of XFA on Feb. 3 and the XFA View in the Strategy of XFA on Jan. 28 both mentioned the possible RRR cut in the short term. Securities companies estimate that the move will free up more than 600 billion yuan, which will significantly improve the expected market liquidity and is likely to push down the interest rates of capitals. Various institutes estimate that this year will see more than one RRR cut and more RRR and interest rate cuts are expected in the future. The A-share market will be driven by capitals again and the financial and real estate sectors with low valuation are likely to be favored by capitals.
◆ Due to the dual effect of performance growth and market adjustment, the valuation of some blue-chip stocks has greatly dropped. Statistics show that the current P/B ratio of the banking sector is 1.11, decreasing about 15 percent from the higher point of 1.31. The latest trailing 12 months (TTM) of the securities sector is 38 times, slumping 31 percent from the 55 times in the end of Dec., 2014.
○ Chongqing SASAC conference convenes, mixed ownership system reform to dominate
------
Liao Qingxuan, head of the Chongqing State-owned Assets Supervision and Administration Commission (Chongqing SASAC), indicated at the conference of the Chongqing SASAC convened on Feb. 4 that it would prepare the implementation plan on the SOEs reform of the Chongqing SASAC for 2014-2020, which will deepen six pilots, including the mixed ownership system reform of enterprises, the reorganization of state-owned capitals and the injection into operating companies as well as medium- and long-term incentive plans.
Comment: The total asset of the Chongqing SASAC is currently about 2 trillion, ranking fourth across the country. But the total market value of listed companies is relatively small, far below the target for assets securitization rate. Considering the relatively complete industrial classification of the eight major investment groups under the Chongqing SASAC, the reform is likely to speed up. In terms of companies, the substantial shareholder of Chongqing Gas Group Corporation Ltd. (600917.SH) owns shale gas resources. Chongqing Department Store Co., Ltd. (600729.SH) operates in a competitive industry and is substantially controlled by the Chongqing SASAC. Chongqing Gangjiu Co., Ltd. (600279.SH) owns the only water-land transport and trading port in Southwestern China.
[XFA Selection]
○ Chinese President Xi Jinping indicated that nuclear power will be a key sector pushed forward by the two countries in the following stage when meeting with the Argentine President.
○ The Economic Information reported that the “Overall Plan on the Coordinated Development of Beijing, Tianjin and Hebei” is likely to be officially released by the end of Feb.
○ The output value of the environmental protection equipment manufacturing industry reached the target of 500 billion yuan one year ahead of the schedule. It is expected to maintain an increase of about 15 percent in 2015.
○ The Ministry of Agriculture issued instructions on scientific fertilization for major crops in spring, which requires promoting testing soil for formulated fertilization.
○ Wanda Group will acquire Swiss sports marketing company Infront Sports & Media AG to expand its investment in sports.
[Industry Information]
○ Network lending companies to share PBOC’s credit resources and greatly reduce costs and risks
------
XFA reported on Feb. 4 that the Credit Reference Center of the central bank has established the Net Financial Credit System (NFCS) to facilitate P2P network lending companies sharing information and preventing credit risks. 370 network lending companies have been covered in the system by the end of last year. It currently receives nearly an average of nearly 5,000 inquiries every day.
Comment: The network lending industry is experiencing rapid development. The turnover in Jan., 2015 hiked 204 percent year on year. Risks controlling has become a major challenge. The review on individual borrower’s materials takes a high human cost and cannot prevent false materials. The industry will benefit after connecting the NFCS. Among A-share companies, Shenzhen Tempus Global Business Service Holding Ltd. (300178) saw a turnover of over 100 million yuan in its Tempus Venture P2P business. The yinhu.com of Panda Fireworks Group Co., Ltd. (600599.SH) will introduce the Android APP on Feb. 10.
○ Zhejiang University invents method for rapid graphene production, industrial application approaches
------
Professor Gao Chao and his colleagues at Zhejiang University invented a new method for the production of graphene at a large scale recently, which can make the single-layer graphene take shape in an hour. It can improve the efficiency by more than ten times without any explosion hazards or harmful substance. Relevant papers have been published on the Nature.
Comment: The graphene has drawn wide attention since its debut in 2004 thanks to its high strength, excellent toughness and light weight. The pure graphene is expected to be applied in industries at a large scale once it can be produced stably with a low cost. Among A-share companies, Fangda Carbon New Material Co., Ltd. (600516.SH) announced that its substantial shareholder plans to cooperate in the exploration of graphene mines and will inject it into the listed company when appropriate. A subsidiary of China Baoan Group Co., Ltd. (000009.SZ) acquired graphene ore-dressing plants in Heilongjiang Province recently.
[Announcement Interpretation]
○ Wisesoft to develop three-dimensional face recognition through private placement
------
Wisesoft Co., Ltd. (002253.SZ) proposes to issue 20.33 million shares at no less than 22.13 yuan per share through private placement to raise 450 million yuan, which will be invested in the purchase of Level-D flight simulators and the establishment of the simulation training center, the industrialization of high-precision three-dimensional full face cameras and three-dimensional face recognition system as well as supplementing working capital. Among them, the establishment of the three-dimensional full face cameras and three-dimensional face recognition project will last three years with an expected internal return rate of 21 percent.
Comment: Besides public security and counter-terrorism, various industries including the identity authentication in the financial payment safety, the cheat-proof ATM machines, the high-end intelligent access control of institutes and communities have potential demands for the three-dimensional face recognition system, which enjoys a promising future.
○ Dongjiang Environmental to develop sewage treatment project with RMB147 mln
------
Dongjiang Environmental Company Limited (00895.HK; 002672.SZ) intends to acquire 100 percent equities of Shenzhen Hengjian Tongda Investment Management Co., Ltd. at 147 million yuan in cash. The company will also repay the accounts payable of 65 million yuan for the target company. Hengjian Tongda holds 100 percent equities of Humen Green Source Water Co., Ltd. in Dongguan City, which owns the franchise to operate Humen Ningzhou Sewage Treatment Plant and Haidao Sewage Treatment Plant with a concession period of 25 years. The net profits of Hengjian Tongda and Green Source Water are totaled 22 million yuan. It is the first municipal sewage treatment and operation project obtained by Dongjiang Environmental.
○ Special railway of Sayram Modern Agriculture opens to overseas countries
------
The special railway for Keli Coal Logostics and Delivery Company in Huocheng County, a subsidiary of Xinjiang Sayram Modern Agriculture Co., Ltd. (600540.SH), has passed the inspection and opened and departed China in end-Jan. The special line is connected to the Jinghe-Yining-Horgos railway, which arrives in Kazakhstan from Horgos and reaches Amsterdam in the Netherlands after crossing the Central Asia. It is the second international railway opened to the west in China. The company is expected to share the dividend from the “One Belt and One Road” strategy.
[Financial Reports Express]
○ LingNan Landscape Co., Ltd. (002717.SZ) sees an increase of 20 percent in its 2014 net profit and proposes a 10-for-10 conversion of capital surplus into shares combined with 0.75 yuan dividend for every 10 shares.
[Companies Hotspot]
○ Great Star Industrial benefits from RMB depreciation, intelligent transformation enjoys bright prospects
------
Benefited from the U.S. economic recovery and the depreciation of RMB, Hang Zhou Great Star Industrial Co., Ltd. (002444.SZ), whose overseas sales accounting for 97 percent with 75 to 80 percent exported to the U.S., sees great increases in orders year on year. The company proposed to establish a wholly-owned subsidiary Great Star Robot, which is principally engaged in the development of intelligent service robots and intelligent tools industry, to bring new profit increases. It is increasing the input in the research and development, the development of intelligent tools in particular. Various institutes inspected the company recently.
[Trading Trends]
○ Four institutional seats buy NanFang Bearing
------
The public trading information on Feb. 4 shows that four institutional seats totally bought Jiangsu NanFang Bearing Co., Ltd. (002553.SZ) at 68.32 million yuan, accounting for 21 percent of its intraday turnover.
Comment: Institutes believe that NanFang Bearing saw a continuous high growth in its main business with a high capacity utilization rate. The company also has the ideas of Internet and establishes an online trading platform for bearings and auto parts. The company has sufficient cash at hand and is highly expected to expand outward.
> Central bank cuts RRR as expected, financial and real estate sectors with low valuation to benefit
> Chongqing SASAC conference convenes, mixed ownership system pilots to deepen
> Network lending companies to share credit resources, industrial application of graphene approaches
> Wisesoft to invest in face recognition, Dongjiang Environmental to develop sewage treatment project
[XFA Focus]
○ Central bank cuts RRR as expected, financial and real estate sectors with low valuation to benefit
------
The central bank decided to cut banks’ reserve requirement ratio (RRR) by 0.5 percentage points from Feb. 5. It also decided to cut the RRR by an extra 0.5 percentage points for urban and rural commercial banks engaged in proportionate lending to small and micro-sized companies. An additional 4 percentage points will be cut for the Agricultural Development Bank of China (ADBC).
Comment: The RRR cut by the central bank meets the market expectation. The Trading Trends in the Early Bird of XFA on Feb. 3 and the XFA View in the Strategy of XFA on Jan. 28 both mentioned the possible RRR cut in the short term. Securities companies estimate that the move will free up more than 600 billion yuan, which will significantly improve the expected market liquidity and is likely to push down the interest rates of capitals. Various institutes estimate that this year will see more than one RRR cut and more RRR and interest rate cuts are expected in the future. The A-share market will be driven by capitals again and the financial and real estate sectors with low valuation are likely to be favored by capitals.
◆ Due to the dual effect of performance growth and market adjustment, the valuation of some blue-chip stocks has greatly dropped. Statistics show that the current P/B ratio of the banking sector is 1.11, decreasing about 15 percent from the higher point of 1.31. The latest trailing 12 months (TTM) of the securities sector is 38 times, slumping 31 percent from the 55 times in the end of Dec., 2014.
○ Chongqing SASAC conference convenes, mixed ownership system reform to dominate
------
Liao Qingxuan, head of the Chongqing State-owned Assets Supervision and Administration Commission (Chongqing SASAC), indicated at the conference of the Chongqing SASAC convened on Feb. 4 that it would prepare the implementation plan on the SOEs reform of the Chongqing SASAC for 2014-2020, which will deepen six pilots, including the mixed ownership system reform of enterprises, the reorganization of state-owned capitals and the injection into operating companies as well as medium- and long-term incentive plans.
Comment: The total asset of the Chongqing SASAC is currently about 2 trillion, ranking fourth across the country. But the total market value of listed companies is relatively small, far below the target for assets securitization rate. Considering the relatively complete industrial classification of the eight major investment groups under the Chongqing SASAC, the reform is likely to speed up. In terms of companies, the substantial shareholder of Chongqing Gas Group Corporation Ltd. (600917.SH) owns shale gas resources. Chongqing Department Store Co., Ltd. (600729.SH) operates in a competitive industry and is substantially controlled by the Chongqing SASAC. Chongqing Gangjiu Co., Ltd. (600279.SH) owns the only water-land transport and trading port in Southwestern China.
[XFA Selection]
○ Chinese President Xi Jinping indicated that nuclear power will be a key sector pushed forward by the two countries in the following stage when meeting with the Argentine President.
○ The Economic Information reported that the “Overall Plan on the Coordinated Development of Beijing, Tianjin and Hebei” is likely to be officially released by the end of Feb.
○ The output value of the environmental protection equipment manufacturing industry reached the target of 500 billion yuan one year ahead of the schedule. It is expected to maintain an increase of about 15 percent in 2015.
○ The Ministry of Agriculture issued instructions on scientific fertilization for major crops in spring, which requires promoting testing soil for formulated fertilization.
○ Wanda Group will acquire Swiss sports marketing company Infront Sports & Media AG to expand its investment in sports.
[Industry Information]
○ Network lending companies to share PBOC’s credit resources and greatly reduce costs and risks
------
XFA reported on Feb. 4 that the Credit Reference Center of the central bank has established the Net Financial Credit System (NFCS) to facilitate P2P network lending companies sharing information and preventing credit risks. 370 network lending companies have been covered in the system by the end of last year. It currently receives nearly an average of nearly 5,000 inquiries every day.
Comment: The network lending industry is experiencing rapid development. The turnover in Jan., 2015 hiked 204 percent year on year. Risks controlling has become a major challenge. The review on individual borrower’s materials takes a high human cost and cannot prevent false materials. The industry will benefit after connecting the NFCS. Among A-share companies, Shenzhen Tempus Global Business Service Holding Ltd. (300178) saw a turnover of over 100 million yuan in its Tempus Venture P2P business. The yinhu.com of Panda Fireworks Group Co., Ltd. (600599.SH) will introduce the Android APP on Feb. 10.
○ Zhejiang University invents method for rapid graphene production, industrial application approaches
------
Professor Gao Chao and his colleagues at Zhejiang University invented a new method for the production of graphene at a large scale recently, which can make the single-layer graphene take shape in an hour. It can improve the efficiency by more than ten times without any explosion hazards or harmful substance. Relevant papers have been published on the Nature.
Comment: The graphene has drawn wide attention since its debut in 2004 thanks to its high strength, excellent toughness and light weight. The pure graphene is expected to be applied in industries at a large scale once it can be produced stably with a low cost. Among A-share companies, Fangda Carbon New Material Co., Ltd. (600516.SH) announced that its substantial shareholder plans to cooperate in the exploration of graphene mines and will inject it into the listed company when appropriate. A subsidiary of China Baoan Group Co., Ltd. (000009.SZ) acquired graphene ore-dressing plants in Heilongjiang Province recently.
[Announcement Interpretation]
○ Wisesoft to develop three-dimensional face recognition through private placement
------
Wisesoft Co., Ltd. (002253.SZ) proposes to issue 20.33 million shares at no less than 22.13 yuan per share through private placement to raise 450 million yuan, which will be invested in the purchase of Level-D flight simulators and the establishment of the simulation training center, the industrialization of high-precision three-dimensional full face cameras and three-dimensional face recognition system as well as supplementing working capital. Among them, the establishment of the three-dimensional full face cameras and three-dimensional face recognition project will last three years with an expected internal return rate of 21 percent.
Comment: Besides public security and counter-terrorism, various industries including the identity authentication in the financial payment safety, the cheat-proof ATM machines, the high-end intelligent access control of institutes and communities have potential demands for the three-dimensional face recognition system, which enjoys a promising future.
○ Dongjiang Environmental to develop sewage treatment project with RMB147 mln
------
Dongjiang Environmental Company Limited (00895.HK; 002672.SZ) intends to acquire 100 percent equities of Shenzhen Hengjian Tongda Investment Management Co., Ltd. at 147 million yuan in cash. The company will also repay the accounts payable of 65 million yuan for the target company. Hengjian Tongda holds 100 percent equities of Humen Green Source Water Co., Ltd. in Dongguan City, which owns the franchise to operate Humen Ningzhou Sewage Treatment Plant and Haidao Sewage Treatment Plant with a concession period of 25 years. The net profits of Hengjian Tongda and Green Source Water are totaled 22 million yuan. It is the first municipal sewage treatment and operation project obtained by Dongjiang Environmental.
○ Special railway of Sayram Modern Agriculture opens to overseas countries
------
The special railway for Keli Coal Logostics and Delivery Company in Huocheng County, a subsidiary of Xinjiang Sayram Modern Agriculture Co., Ltd. (600540.SH), has passed the inspection and opened and departed China in end-Jan. The special line is connected to the Jinghe-Yining-Horgos railway, which arrives in Kazakhstan from Horgos and reaches Amsterdam in the Netherlands after crossing the Central Asia. It is the second international railway opened to the west in China. The company is expected to share the dividend from the “One Belt and One Road” strategy.
[Financial Reports Express]
○ LingNan Landscape Co., Ltd. (002717.SZ) sees an increase of 20 percent in its 2014 net profit and proposes a 10-for-10 conversion of capital surplus into shares combined with 0.75 yuan dividend for every 10 shares.
[Companies Hotspot]
○ Great Star Industrial benefits from RMB depreciation, intelligent transformation enjoys bright prospects
------
Benefited from the U.S. economic recovery and the depreciation of RMB, Hang Zhou Great Star Industrial Co., Ltd. (002444.SZ), whose overseas sales accounting for 97 percent with 75 to 80 percent exported to the U.S., sees great increases in orders year on year. The company proposed to establish a wholly-owned subsidiary Great Star Robot, which is principally engaged in the development of intelligent service robots and intelligent tools industry, to bring new profit increases. It is increasing the input in the research and development, the development of intelligent tools in particular. Various institutes inspected the company recently.
[Trading Trends]
○ Four institutional seats buy NanFang Bearing
------
The public trading information on Feb. 4 shows that four institutional seats totally bought Jiangsu NanFang Bearing Co., Ltd. (002553.SZ) at 68.32 million yuan, accounting for 21 percent of its intraday turnover.
Comment: Institutes believe that NanFang Bearing saw a continuous high growth in its main business with a high capacity utilization rate. The company also has the ideas of Internet and establishes an online trading platform for bearings and auto parts. The company has sufficient cash at hand and is highly expected to expand outward.
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