[Today’s Guide]
> Sinopharm’s mixed ownership system reform approved, China Chengtong strives to be pilot for state-owned capitals operation
> Ministry of Transport to talk about transportation and poverty relief in minority areas, requiring coverage of hard surfaced roads to all villages
> Export of railway equipment sees rapid increase, Inspur Electronic Information Industry to purchase military informatization assets through private placement
> Chaodong Cement to purchase similar-finance companies, Shiji Information Technology sees net buying through four institutional seats
[XFA Focus]
○ Sinopharm’s mixed ownership system reform approved, China National Medicines selected as first pilot
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Listed companies under the China National Pharmaceutical Group Corporation (Sinopharm), including China National Medicines Corporation Ltd. (600511.SH), Shanghai Shyndec Pharmaceutical Co., Ltd. (600420.SH) and Beijing Tiantan Biological Products Corporation Limited (600161.SH), announced on Feb. 5 evening that the plan on the mixed ownership system reform of Sinopharm has been approved by the State-owned Assets Supervision and Administration Commission (SASAC) of the State Council. Among the companies, China National Medicines is one of the first pilot companies under Sinopharm that develop the mixed ownership economy.
Comment: The mixed ownership system reform is the biggest concern in the pilot reform of central enterprises. It is considered to have huge potential. China National Accord Medicines Corporation Ltd. (000028.SZ) is also an A-share company under Sinopharm. Analysts believe that the assets under Sinopharm will be injected into four platforms during the reform of Sinopharm. Sinopharm Group Co. Ltd. (01099.HK), China Traditional Chinese Medicine Co. Limited (00570.HK), China National Biotec Group Company Limited and Shyndec Pharm. are the commercial platform, TCM platform, biological products platform and chemical drugs platform, respectively. Experts at the SASAC indicated that the first approval of the pilot plan on Sinopharm means the official “implementation” of the pilot reform of central enterprises. The pilots of five other central enterprises, including China National Building Materials Group Corporation and Jihua Group Corporation Limited (601718.SH), will also be approved, which is highly concerned by the market.
◆China Chengtong strives to be pilot for state-owned capitals operation, central enterprises reform likely to accelerate and expand
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China Chengtong Holdings Group Ltd., a central enterprise, convened its 2015 work conference recently. It indicated that it will strive to be a pilot for state-owned capitals operation companies.
Comment: The SASAC launched the first six central enterprises reform pilots in last July. The A-share market saw a wave of enthusiasm on central enterprises reform. Although it is covered in the six pilots, China Chengtong is highly expected to be reformed by the market. The proposal on striving to be a pilot for state-owned capitals operation companies shows its eagerness for reform and the assets reorganization of relevant enterprises are also expected to speed up. The A-share listed companies under China Chengtong include Yueyang Forest & Paper Co., Ltd. (600963.SH), CMST Development Co., Ltd. (600787.SH) and Guangdong Guanhao High-Tech Co., Ltd. (600433.SH). Yueyang Forest & Paper is principally engaged in the integration operation of forest, pulp and paper. As a result of the sluggish industry, it has been on the brink of losses for years. CMST Development owns massive logistics and storage resources in China, providing important material basis for reform and transformation. Guanhao High-Tech, principally engaged in carbonless copy paper, is a key supplier of the State Post Bureau of China and is actively exploring the logistics and express delivery business.
[XFA Selection]
○ China and Argentine officially signed an agreement on the establishment of nuclear power stations in Argentine with an investment of 12.8 billion U.S. dollars.
○ China Telecom Corporation Limited (CHA.NYSE; 00728.HK) sets the target of 100 million 4G users in 2015 and will invest 16 billion yuan in promoting the sale of cellphones.
○ Ma Yufeng, mayor of Baoding City in Hebei Province, disclosed on Feb. 5 that the city will invest over 600 billion yuan in more than 300 projects to connect Beijing and Tianjin.
○ Hainan Province will establish a model demonstration area for modern international cooperation in agriculture and will conduct pragmatic cooperation with countries along the 21st Century Maritime Silk Road.
○ The reorganization of Guangdong Qunxing Toys Joint-Stock Co., Ltd. (002575.SZ) and Zhejiang WHWH Industry Co., Ltd. (600576.SH) was rejected. Market participants indicated that it is rare that all of many projects for approval are vetoed down.
[Industry Information]
○ Ministry of Transport to talk about transportation and poverty relief in minority areas, requiring coverage of hard surfaced roads to all villages
------
The Ministry of Transport will hold an online interview on strengthening the transportation development in minority areas and providing guarantees to build a moderately prosperous society on Feb. 6. Based on the development goal, 100 percent incorporated villages shall have access to hard surfaced roads by 2020. The traffic conditions gap between the central and western regions and the eastern areas shall be significantly narrowed.
Comment: Chinese President Xi Jinping made important instructions on the development of roads in rural areas, indicating that the construction of transportation infrastructure plays a leading role. The Ministry of Transport further sets the target for hard surfaced roads on the basis of the “village to village” project, which will directly promote the demand for cement and concretes in minority areas. Among A-share companies, Xinjiang Qingsong Building Materials and Chemicals (Group) Co., Ltd. (600425) is located at Aksu City, Xinjiang Uyghur Autonomous Region. China West Construction Group Co., Ltd. (002302.SZ) has branches in Korla City and Kashgar City in Xinjiang. Tibet Tianlu Co., Ltd. (600326.SH) has been approved by the SASAC in investing in a cement project through private placement.
○ Export of railway equipment sees rapid increase, overseas income of CNR to double
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The headline of CCTV News on Feb. 5 highlighted the export of high-speed rail: the export of China’s railway equipment reached 26.77 billion yuan last year, representing a year-on-year growth of 22.6 percent; the total contract amount added up to 24.7 billion U.S. dollars, meaning an increase of more than 300 percent year on year. The Ministry of Commerce indicated on the same day that the proportion of the overseas income of China CNR Corporation Limited (601299.SH; 06199.HK) will be lifted to 20 percent this year.
Comment: According to the half-year report of CNR in last year, its overseas income just accounted for 6 percent, meaning that its export income is expected to be multiplied this year. The High-speed Railway Design Specification has been implemented from this month, and it will further push China’s high-speed rail to win the market by technology.
[Announcement Interpretation]
○ Inspur Electronic Information Industry to purchase military informatization assets through private placement
------
Inspur Electronic Information Industry Co., Ltd. (000977.SZ) plans to issue 76.68 million shares through private placement at 35.21 yuan per share to raise 2.7 billion yuan. 1.2 billion yuan of the raised funds will be used to purchase the industrial personal computer and completely domestic system business assets of Shandong Beyond Group, and the rest funds will be used to invest in the development and industrialization projects of Cloud server, high-end storage system as well as autonomous, controllable, secure and reliable computing platform and to supplement working capital. Inspur Electronic Information Industry indicated that after this non-public issuance, the military business of Shandong Beyond Group will be integrated into the company. Diversified development of military and civil business will be achieved and it is beneficial to the continuous improvement of profitability.
○ Chaodong Cement to purchase equities of five similar-financial companies
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Anhui Chaodong Cement Co., Ltd. (600318.SH) proposes to purchase the equities of five similar-finance companies with 1,682 million yuan, namely, 60.75 percent equities of Anhui Derun Leasing Co., Ltd., 55.83 percent equities of Hefei Deshan Micro-credit Co., Ltd., 68.86 percent equities of Anhui Dehe Pawnshop Limited Company, 100 percent equities of Anhui Dexin Financing Guarantee Co., Ltd. and 67.5 percent equities of Anhui Dezhong Finance Information Service Co., Ltd., covering the hottest similar-finance businesses like finance leasing, micro-credit, pawnshop, P2P etc. currently. The counterparties promise that the net profits of the above subject companies from 2015 to 2017 will be no less than 190 million yuan, 240 million yuan and 310 million yuan.
Comment: Chaodong Cement, principally engaged in cement, saw a performance growth of 132 percent year on year in the third quarter of last year. As the growth of real estate industry falls, the company will transform itself towards similar-finance business through this assets reorganization.
○ Steyr Motors to control Hengxinrong Lithium Technology to develop new energy area
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Steyr Motors (Jiangsu) Investment Co., Ltd., a wholly-owned subsidiary of Steyr Motors Corp. (000760.SZ), plans to increase capitals in and control Qinghai Hengxinrong Lithium Technology Co., Ltd. with self-raised 153 million yuan so as to expand to the new energy area. Steyr Motors indicates that this investment helps the company to expand new energy vehicle industrial chain and achieve sustainable development.
[Trading Trends]
○Shiji Information Technology sees net buying through institutional seats
------
The trading volume ranking list on Feb. 5 shows that Beijing Shiji Information Technology Co., Ltd. (002153.SZ) was bought through four institutional seats with a total of 140 million yuan, accounting for 22 percent of its intraday turnover. And another institute sold 17.90 million yuan.
Comment: Institutions believe that after Shiji Information Technology transforms itself from software service provider to service operator, its PMS (Hotel Property Management System), as the topmost consumption entrance of tourism industry, is of obvious strategic value. Ctrip.com International Ltd. (NASDAQ:CTRP) purchased three PMS companies last year. Shiji Information Technology actively applies for national prepaid card and embeds PMS system into the payment system so as to form a closed cycle of general consumption as “hotel, catering and retailing” in the future.
> Sinopharm’s mixed ownership system reform approved, China Chengtong strives to be pilot for state-owned capitals operation
> Ministry of Transport to talk about transportation and poverty relief in minority areas, requiring coverage of hard surfaced roads to all villages
> Export of railway equipment sees rapid increase, Inspur Electronic Information Industry to purchase military informatization assets through private placement
> Chaodong Cement to purchase similar-finance companies, Shiji Information Technology sees net buying through four institutional seats
[XFA Focus]
○ Sinopharm’s mixed ownership system reform approved, China National Medicines selected as first pilot
------
Listed companies under the China National Pharmaceutical Group Corporation (Sinopharm), including China National Medicines Corporation Ltd. (600511.SH), Shanghai Shyndec Pharmaceutical Co., Ltd. (600420.SH) and Beijing Tiantan Biological Products Corporation Limited (600161.SH), announced on Feb. 5 evening that the plan on the mixed ownership system reform of Sinopharm has been approved by the State-owned Assets Supervision and Administration Commission (SASAC) of the State Council. Among the companies, China National Medicines is one of the first pilot companies under Sinopharm that develop the mixed ownership economy.
Comment: The mixed ownership system reform is the biggest concern in the pilot reform of central enterprises. It is considered to have huge potential. China National Accord Medicines Corporation Ltd. (000028.SZ) is also an A-share company under Sinopharm. Analysts believe that the assets under Sinopharm will be injected into four platforms during the reform of Sinopharm. Sinopharm Group Co. Ltd. (01099.HK), China Traditional Chinese Medicine Co. Limited (00570.HK), China National Biotec Group Company Limited and Shyndec Pharm. are the commercial platform, TCM platform, biological products platform and chemical drugs platform, respectively. Experts at the SASAC indicated that the first approval of the pilot plan on Sinopharm means the official “implementation” of the pilot reform of central enterprises. The pilots of five other central enterprises, including China National Building Materials Group Corporation and Jihua Group Corporation Limited (601718.SH), will also be approved, which is highly concerned by the market.
◆China Chengtong strives to be pilot for state-owned capitals operation, central enterprises reform likely to accelerate and expand
------
China Chengtong Holdings Group Ltd., a central enterprise, convened its 2015 work conference recently. It indicated that it will strive to be a pilot for state-owned capitals operation companies.
Comment: The SASAC launched the first six central enterprises reform pilots in last July. The A-share market saw a wave of enthusiasm on central enterprises reform. Although it is covered in the six pilots, China Chengtong is highly expected to be reformed by the market. The proposal on striving to be a pilot for state-owned capitals operation companies shows its eagerness for reform and the assets reorganization of relevant enterprises are also expected to speed up. The A-share listed companies under China Chengtong include Yueyang Forest & Paper Co., Ltd. (600963.SH), CMST Development Co., Ltd. (600787.SH) and Guangdong Guanhao High-Tech Co., Ltd. (600433.SH). Yueyang Forest & Paper is principally engaged in the integration operation of forest, pulp and paper. As a result of the sluggish industry, it has been on the brink of losses for years. CMST Development owns massive logistics and storage resources in China, providing important material basis for reform and transformation. Guanhao High-Tech, principally engaged in carbonless copy paper, is a key supplier of the State Post Bureau of China and is actively exploring the logistics and express delivery business.
[XFA Selection]
○ China and Argentine officially signed an agreement on the establishment of nuclear power stations in Argentine with an investment of 12.8 billion U.S. dollars.
○ China Telecom Corporation Limited (CHA.NYSE; 00728.HK) sets the target of 100 million 4G users in 2015 and will invest 16 billion yuan in promoting the sale of cellphones.
○ Ma Yufeng, mayor of Baoding City in Hebei Province, disclosed on Feb. 5 that the city will invest over 600 billion yuan in more than 300 projects to connect Beijing and Tianjin.
○ Hainan Province will establish a model demonstration area for modern international cooperation in agriculture and will conduct pragmatic cooperation with countries along the 21st Century Maritime Silk Road.
○ The reorganization of Guangdong Qunxing Toys Joint-Stock Co., Ltd. (002575.SZ) and Zhejiang WHWH Industry Co., Ltd. (600576.SH) was rejected. Market participants indicated that it is rare that all of many projects for approval are vetoed down.
[Industry Information]
○ Ministry of Transport to talk about transportation and poverty relief in minority areas, requiring coverage of hard surfaced roads to all villages
------
The Ministry of Transport will hold an online interview on strengthening the transportation development in minority areas and providing guarantees to build a moderately prosperous society on Feb. 6. Based on the development goal, 100 percent incorporated villages shall have access to hard surfaced roads by 2020. The traffic conditions gap between the central and western regions and the eastern areas shall be significantly narrowed.
Comment: Chinese President Xi Jinping made important instructions on the development of roads in rural areas, indicating that the construction of transportation infrastructure plays a leading role. The Ministry of Transport further sets the target for hard surfaced roads on the basis of the “village to village” project, which will directly promote the demand for cement and concretes in minority areas. Among A-share companies, Xinjiang Qingsong Building Materials and Chemicals (Group) Co., Ltd. (600425) is located at Aksu City, Xinjiang Uyghur Autonomous Region. China West Construction Group Co., Ltd. (002302.SZ) has branches in Korla City and Kashgar City in Xinjiang. Tibet Tianlu Co., Ltd. (600326.SH) has been approved by the SASAC in investing in a cement project through private placement.
○ Export of railway equipment sees rapid increase, overseas income of CNR to double
------
The headline of CCTV News on Feb. 5 highlighted the export of high-speed rail: the export of China’s railway equipment reached 26.77 billion yuan last year, representing a year-on-year growth of 22.6 percent; the total contract amount added up to 24.7 billion U.S. dollars, meaning an increase of more than 300 percent year on year. The Ministry of Commerce indicated on the same day that the proportion of the overseas income of China CNR Corporation Limited (601299.SH; 06199.HK) will be lifted to 20 percent this year.
Comment: According to the half-year report of CNR in last year, its overseas income just accounted for 6 percent, meaning that its export income is expected to be multiplied this year. The High-speed Railway Design Specification has been implemented from this month, and it will further push China’s high-speed rail to win the market by technology.
[Announcement Interpretation]
○ Inspur Electronic Information Industry to purchase military informatization assets through private placement
------
Inspur Electronic Information Industry Co., Ltd. (000977.SZ) plans to issue 76.68 million shares through private placement at 35.21 yuan per share to raise 2.7 billion yuan. 1.2 billion yuan of the raised funds will be used to purchase the industrial personal computer and completely domestic system business assets of Shandong Beyond Group, and the rest funds will be used to invest in the development and industrialization projects of Cloud server, high-end storage system as well as autonomous, controllable, secure and reliable computing platform and to supplement working capital. Inspur Electronic Information Industry indicated that after this non-public issuance, the military business of Shandong Beyond Group will be integrated into the company. Diversified development of military and civil business will be achieved and it is beneficial to the continuous improvement of profitability.
○ Chaodong Cement to purchase equities of five similar-financial companies
------
Anhui Chaodong Cement Co., Ltd. (600318.SH) proposes to purchase the equities of five similar-finance companies with 1,682 million yuan, namely, 60.75 percent equities of Anhui Derun Leasing Co., Ltd., 55.83 percent equities of Hefei Deshan Micro-credit Co., Ltd., 68.86 percent equities of Anhui Dehe Pawnshop Limited Company, 100 percent equities of Anhui Dexin Financing Guarantee Co., Ltd. and 67.5 percent equities of Anhui Dezhong Finance Information Service Co., Ltd., covering the hottest similar-finance businesses like finance leasing, micro-credit, pawnshop, P2P etc. currently. The counterparties promise that the net profits of the above subject companies from 2015 to 2017 will be no less than 190 million yuan, 240 million yuan and 310 million yuan.
Comment: Chaodong Cement, principally engaged in cement, saw a performance growth of 132 percent year on year in the third quarter of last year. As the growth of real estate industry falls, the company will transform itself towards similar-finance business through this assets reorganization.
○ Steyr Motors to control Hengxinrong Lithium Technology to develop new energy area
------
Steyr Motors (Jiangsu) Investment Co., Ltd., a wholly-owned subsidiary of Steyr Motors Corp. (000760.SZ), plans to increase capitals in and control Qinghai Hengxinrong Lithium Technology Co., Ltd. with self-raised 153 million yuan so as to expand to the new energy area. Steyr Motors indicates that this investment helps the company to expand new energy vehicle industrial chain and achieve sustainable development.
[Trading Trends]
○Shiji Information Technology sees net buying through institutional seats
------
The trading volume ranking list on Feb. 5 shows that Beijing Shiji Information Technology Co., Ltd. (002153.SZ) was bought through four institutional seats with a total of 140 million yuan, accounting for 22 percent of its intraday turnover. And another institute sold 17.90 million yuan.
Comment: Institutions believe that after Shiji Information Technology transforms itself from software service provider to service operator, its PMS (Hotel Property Management System), as the topmost consumption entrance of tourism industry, is of obvious strategic value. Ctrip.com International Ltd. (NASDAQ:CTRP) purchased three PMS companies last year. Shiji Information Technology actively applies for national prepaid card and embeds PMS system into the payment system so as to form a closed cycle of general consumption as “hotel, catering and retailing” in the future.
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