[Today’s Guide]
> Political Bureau requires increasing public services, education, health care and environmental protection enjoy long-term growth
> Red-envelope war to facilitate mobile payment growth, NEA highlights power grid safety
> Overall listing of Material Industrial Zhongda Yuantong parallels mixed ownership reform, Infinova to acquire smart transportation enterprise
> Hyron Software to develop Internet finance, Zhongyuan Environment-protection to further invest in sewage treatment business
[XFA Focus]
○ Political Bureau requires increasing public services, education, health care and environmental protection enjoy long-term growth
------
The Political Bureau of the CPC Central Committee convened a conference on Feb. 12 and discussed the government work report. It required achieving medium and high growth towards medium and high-end levels, stabilizing policies and expectations, promoting reform and structural adjustments, encouraging public entrepreneurship and innovation and increasing public products and services in order to maintain the momentum of economic growth with higher quantity and better quality.
Comment: The conference reemphasized education, medicines and health, environmental protection as well as other areas, which are called for improvement urgently by the public. The education, medicines and health and environmental protection are few industries with insufficient supplies, which are favored by various investment institutes for long term and relevant A-share companies enjoy huge potentials. Beijing Lanxum Technology Co., Ltd. (300010.SZ) acquired the online education project in Anqing City. The PPP model may be copied in the future after its success. Shanghai Fosun Pharmaceutical (Group) Co., Ltd. (02196.HK; 600196.SH) actively explores the establishment of hospitals with mixed ownership system. It reached a cooperation agreement with the First Hospital of Qiqihaer City.
[XFA Selection]
○ Chinese Premier Li Keqiang and the newly-elected Greek Prime Minister Alexis Tsipras made a telephone conversation on Feb. 11. Tsipras indicated that Greece with support the construction of the Piraeus port project by China COSCO Holdings Company Limited (01919.HK; 601919.SH).
○ The China Banking Regulatory Commission (CBRC) issued the revised “Measures for Administration of Leverage Ratio of Commercial Banks”. The banking industry will benefit from the increase of the leverage ratio.
○ Enterprises and financial institutes in China (Shanghai) Pilot Free Trade Zone will independently conduct overseas financing, which will effectively cut the financing costs of enterprises.
○ China’s wind power capacity increased 45 percent year on year in 2014. It is expected to maintain a high growth of above 25 percent this year.
○ The National Development and Reform Commission (NDRC) indicated that it will mull relevant polices in facilitating the development of life service industries and deepen the pilots of comprehensive reform on service industries in China.
○ Media reported that the added-value tax rate for the real estate industry after replacing the business tax with a value-added tax is temporarily set at 11 percent. Insiders believe that the industry may see heavier tax burdens.
[Industry Information]
○ BAT joins red-envelope war, mobile payment to see higher growth
------
WeChat initiated the first round of Spring Festival red-envelope war on Feb. 12, which will send over 500 million yuan in cash. The online payment operator Alipay began to give Spring Festival red envelopes to its users on Feb 11. Baidu Inc. (NASDAQ: BIDU) also joined the battle for red envelopes for the Year of Sheep. A total of more than 10 billion yuan will be distributed. According to the latest data of the central bank, the mobile payment totaled 22 trillion yuan in 2014 in China, representing a year-on-year growth of 134 percent and much higher than the average growth of the payment industry.
Comment: The hot red-envelope war will promote individual users to form the online payment habit and help enterprises get used to online marketing. In terms of listed companies, Wuhan Tianyu Information Industry Co., Ltd. (300205.SZ) expects a sales increase in the SWP-SIM card products. Fujian Newland Computer Co., Ltd. (000997.SZ) obtained the orders of Alipay for barcode scanner guns. Beijing Shiji Information Technology Co., Ltd. (002153) cooperated with Alibaba Group Holding Limited (BABA.NYSE) in expanding the hotel O2O business.
○ NEA highlights power grid safety, domestic companies likely to benefit
------
The National Energy Administration (NEA) convened a briefing on the network and information security work in the power industry on Feb. 11 with the participation of leaders from the Cyberspace Administration and the Ministry of Public Security. The safety of power grid has received policies supporting since last year. The NEA has issued measures requiring power enterprises choosing products and services meeting the information safety requirements. The NDRC also issued the “Regulations on the Safety and Protection of Power Monitoring System”, requiring achieving the reliability of the calculation environment and network environment.
Comment: The power grid is a key national infrastructure. With the increasing expansion of the power grid and the intelligent trend, it may be conducive to online attacks. The construction of power grid safety will benefit relevant homemade equipment and software enterprises. In terms of listed companies, YGSOFT INC. (002063.SZ) recently won the bidding for the production safety management and controlling project in Jiangxi Province. Beijing Forever Technology Co., Ltd. (300365.SZ) participated in Beijing Olympic Games and other key power supply projects.
[Announcement Interpretation]
○ Material Industrial Zhongda Yuantong to merge Materials Industry Group, overall listing parallels mixed ownership reform
------
Zhejiang Material Industrial Zhongda Yuantong Group Co., Ltd. (600704.SH) plans to issue shares at 8.86 yuan per share through private placement to merge its substantial shareholder Zhejiang Materials Industry Group Corporation, and the transaction is priced at 10.5 billion yuan. It also proposes to issue shares at the same offering price through private placement to purchase 9.6 percent equities of Zhejiang Materials Industry International Co., Ltd., and raising supporting funds from employee shareholding plan, Zhejiang Tiantang Guigu Rongyuan Equity Investment Limited Partnership, CITIC Merger & Acquisition Investment Fund (Shenzhen) Limited Partnership-Shenzhen Xinzhe Investment Center Limited Partnership, Shanghai Zhongzhi Xinqiao Investment Management Co., Ltd., etc. to push forward mixed ownership reform. After the transaction, the integrated service business of bulk commodity supply chain of Materials Industry Group will be wholly injected into the listed company. The stock price of the company closed at 10.38 yuan per share before trading suspension.
○ Infinova to acquire smart transportation enterprise
------
Shenzhen Infinova Limited (002528.SH) plans to purchase 100 percent equities of Hangzhou Sharp Wisdom Technology Co., Ltd. by issuing shares at 11.81 yuan per share through private placement and in cash. The transaction is priced at 210 million yuan. The subject company provides clients with integrated solutions of video monitoring and cooperates closely with public security and transportation management departments. Its high-definition smart e-police products, high-definition video monitoring products, etc. are widely applied in multi cities including Hangzhou, Wenzhou, Hefei, etc. The counterparty committed that its net profit in 2015 will be no less than 23 million yuan with corresponding P/E ratio at 9 times. The stock price of the company closed at 11.48 yuan per share before trading suspension.
○Hyron Software to develop Internet finance
------
Shanghai Hyron Software Co., Ltd. (002195.SZ) proposes to issue shares at no less than 41.69 yuan per share through private placement to raise 4.8 billion yuan for investing in projects including Internet finance platform, Internet finance supermarket, etc. The company also plans to establish a wholly-owned subsidiary focusing on Internet finance business with planned registered capital at 100 million yuan. Moreover, the company proposes to a 15-for-10 conversion of capital surplus into shares combined with 1 yuan dividend for every 10 shares in its annual report. The stock price of the company closed at 49.12 yuan per share before trading suspension.
○ Zhongyuan Environment-protection to further invest in sewage treatment business
------
Zhongyuan Environment-protection Co., Ltd. (000544.SZ) plans to issue shares at 10.77 yuan per share through private placement to purchase several sewage treatment works at the price of 3 billion yuan so as to further strengthen the sewage treatment business that has relatively high gross profit rate. Meanwhile, it plans to raise supporting funds at no less than 10.77 yuan per share. After the transaction, the company’s ability of sewage treatment can be drastically lifted from 670,000 tons to 1.62 million tons per day, achieving the unification of sewage treatment business in Zhengzhou City, Henan Province. The stock price of the company closed at 12.27 yuan per share before trading suspension.
○ Septwolves and Tempus Global Business Service, etc. jointly establish insurance company
------
Fujian Septwolves Industry Co., Ltd. (002029.SZ) and Shenzhen Tempus Global Business Service Holding Ltd. (300178.SZ) plan to respectively contribute 315 million yuan and 300 million yuan, accounting for 10.5 percent and 10 percent, to establish a reinsurance company together with Shenzhen Qianhai Financial Holdings Limited, China Post Group, SZ Capital Co., Ltd. owned by the State-owned Assets Supervision and Administration Commission (SASAC) of Shenzhen, etc. The reinsurance company will mainly focus on various properties, accidents and health reinsurance, life reinsurance, etc.
[Financial Reports Express]
○ Jingui Silver Industry and Leyard Optoelectronic plan high share conversion and dividend
------
The controlling shareholder of Chenzhou City Jingui Silver Industry Co., Ltd. (002716.SZ) proposes a 12-for-10 conversion of capital surplus into shares in its 2014 annual report. Its latest stock price is 23.48 yuan per share; the controlling shareholder of Leyard Optoelectronic Co., Ltd. (300296.SZ) proposes a 10-for-10 conversion of capital surplus into shares. Its latest stock price is 21.41 yuan per share.
[Trading Trends]
○ Oriental Nations bought through five institutional seats
------
The trading volume ranking list on Feb. 12 shows that Business-intelligence of Oriental Nations Corporation Ltd. (300166.SZ) was bought through five institutional seats with a total of 151 million yuan, accounting for 32.88 percent of its intraday turnover.
Comment: Oriental Nations provides all industrial products of business intelligence in telecom industry, and builds new commercial modes and profit growth points through big data operation based on years of customer confidence and accumulation. The company forecasts its net profit in 2014 to see a year-on-year growth of 40 to 55 percent. After taking the consolidated profit of Beijing North Billion Technology Co., Ltd. and Beijing Krmsoft Co., Ltd. off, its net profit sees a year-on-year growth of 11 to 27 percent. Analysts believe that the company enjoys obvious advantages in big data and sees emerging effect of external expansion.
> Political Bureau requires increasing public services, education, health care and environmental protection enjoy long-term growth
> Red-envelope war to facilitate mobile payment growth, NEA highlights power grid safety
> Overall listing of Material Industrial Zhongda Yuantong parallels mixed ownership reform, Infinova to acquire smart transportation enterprise
> Hyron Software to develop Internet finance, Zhongyuan Environment-protection to further invest in sewage treatment business
[XFA Focus]
○ Political Bureau requires increasing public services, education, health care and environmental protection enjoy long-term growth
------
The Political Bureau of the CPC Central Committee convened a conference on Feb. 12 and discussed the government work report. It required achieving medium and high growth towards medium and high-end levels, stabilizing policies and expectations, promoting reform and structural adjustments, encouraging public entrepreneurship and innovation and increasing public products and services in order to maintain the momentum of economic growth with higher quantity and better quality.
Comment: The conference reemphasized education, medicines and health, environmental protection as well as other areas, which are called for improvement urgently by the public. The education, medicines and health and environmental protection are few industries with insufficient supplies, which are favored by various investment institutes for long term and relevant A-share companies enjoy huge potentials. Beijing Lanxum Technology Co., Ltd. (300010.SZ) acquired the online education project in Anqing City. The PPP model may be copied in the future after its success. Shanghai Fosun Pharmaceutical (Group) Co., Ltd. (02196.HK; 600196.SH) actively explores the establishment of hospitals with mixed ownership system. It reached a cooperation agreement with the First Hospital of Qiqihaer City.
[XFA Selection]
○ Chinese Premier Li Keqiang and the newly-elected Greek Prime Minister Alexis Tsipras made a telephone conversation on Feb. 11. Tsipras indicated that Greece with support the construction of the Piraeus port project by China COSCO Holdings Company Limited (01919.HK; 601919.SH).
○ The China Banking Regulatory Commission (CBRC) issued the revised “Measures for Administration of Leverage Ratio of Commercial Banks”. The banking industry will benefit from the increase of the leverage ratio.
○ Enterprises and financial institutes in China (Shanghai) Pilot Free Trade Zone will independently conduct overseas financing, which will effectively cut the financing costs of enterprises.
○ China’s wind power capacity increased 45 percent year on year in 2014. It is expected to maintain a high growth of above 25 percent this year.
○ The National Development and Reform Commission (NDRC) indicated that it will mull relevant polices in facilitating the development of life service industries and deepen the pilots of comprehensive reform on service industries in China.
○ Media reported that the added-value tax rate for the real estate industry after replacing the business tax with a value-added tax is temporarily set at 11 percent. Insiders believe that the industry may see heavier tax burdens.
[Industry Information]
○ BAT joins red-envelope war, mobile payment to see higher growth
------
WeChat initiated the first round of Spring Festival red-envelope war on Feb. 12, which will send over 500 million yuan in cash. The online payment operator Alipay began to give Spring Festival red envelopes to its users on Feb 11. Baidu Inc. (NASDAQ: BIDU) also joined the battle for red envelopes for the Year of Sheep. A total of more than 10 billion yuan will be distributed. According to the latest data of the central bank, the mobile payment totaled 22 trillion yuan in 2014 in China, representing a year-on-year growth of 134 percent and much higher than the average growth of the payment industry.
Comment: The hot red-envelope war will promote individual users to form the online payment habit and help enterprises get used to online marketing. In terms of listed companies, Wuhan Tianyu Information Industry Co., Ltd. (300205.SZ) expects a sales increase in the SWP-SIM card products. Fujian Newland Computer Co., Ltd. (000997.SZ) obtained the orders of Alipay for barcode scanner guns. Beijing Shiji Information Technology Co., Ltd. (002153) cooperated with Alibaba Group Holding Limited (BABA.NYSE) in expanding the hotel O2O business.
○ NEA highlights power grid safety, domestic companies likely to benefit
------
The National Energy Administration (NEA) convened a briefing on the network and information security work in the power industry on Feb. 11 with the participation of leaders from the Cyberspace Administration and the Ministry of Public Security. The safety of power grid has received policies supporting since last year. The NEA has issued measures requiring power enterprises choosing products and services meeting the information safety requirements. The NDRC also issued the “Regulations on the Safety and Protection of Power Monitoring System”, requiring achieving the reliability of the calculation environment and network environment.
Comment: The power grid is a key national infrastructure. With the increasing expansion of the power grid and the intelligent trend, it may be conducive to online attacks. The construction of power grid safety will benefit relevant homemade equipment and software enterprises. In terms of listed companies, YGSOFT INC. (002063.SZ) recently won the bidding for the production safety management and controlling project in Jiangxi Province. Beijing Forever Technology Co., Ltd. (300365.SZ) participated in Beijing Olympic Games and other key power supply projects.
[Announcement Interpretation]
○ Material Industrial Zhongda Yuantong to merge Materials Industry Group, overall listing parallels mixed ownership reform
------
Zhejiang Material Industrial Zhongda Yuantong Group Co., Ltd. (600704.SH) plans to issue shares at 8.86 yuan per share through private placement to merge its substantial shareholder Zhejiang Materials Industry Group Corporation, and the transaction is priced at 10.5 billion yuan. It also proposes to issue shares at the same offering price through private placement to purchase 9.6 percent equities of Zhejiang Materials Industry International Co., Ltd., and raising supporting funds from employee shareholding plan, Zhejiang Tiantang Guigu Rongyuan Equity Investment Limited Partnership, CITIC Merger & Acquisition Investment Fund (Shenzhen) Limited Partnership-Shenzhen Xinzhe Investment Center Limited Partnership, Shanghai Zhongzhi Xinqiao Investment Management Co., Ltd., etc. to push forward mixed ownership reform. After the transaction, the integrated service business of bulk commodity supply chain of Materials Industry Group will be wholly injected into the listed company. The stock price of the company closed at 10.38 yuan per share before trading suspension.
○ Infinova to acquire smart transportation enterprise
------
Shenzhen Infinova Limited (002528.SH) plans to purchase 100 percent equities of Hangzhou Sharp Wisdom Technology Co., Ltd. by issuing shares at 11.81 yuan per share through private placement and in cash. The transaction is priced at 210 million yuan. The subject company provides clients with integrated solutions of video monitoring and cooperates closely with public security and transportation management departments. Its high-definition smart e-police products, high-definition video monitoring products, etc. are widely applied in multi cities including Hangzhou, Wenzhou, Hefei, etc. The counterparty committed that its net profit in 2015 will be no less than 23 million yuan with corresponding P/E ratio at 9 times. The stock price of the company closed at 11.48 yuan per share before trading suspension.
○Hyron Software to develop Internet finance
------
Shanghai Hyron Software Co., Ltd. (002195.SZ) proposes to issue shares at no less than 41.69 yuan per share through private placement to raise 4.8 billion yuan for investing in projects including Internet finance platform, Internet finance supermarket, etc. The company also plans to establish a wholly-owned subsidiary focusing on Internet finance business with planned registered capital at 100 million yuan. Moreover, the company proposes to a 15-for-10 conversion of capital surplus into shares combined with 1 yuan dividend for every 10 shares in its annual report. The stock price of the company closed at 49.12 yuan per share before trading suspension.
○ Zhongyuan Environment-protection to further invest in sewage treatment business
------
Zhongyuan Environment-protection Co., Ltd. (000544.SZ) plans to issue shares at 10.77 yuan per share through private placement to purchase several sewage treatment works at the price of 3 billion yuan so as to further strengthen the sewage treatment business that has relatively high gross profit rate. Meanwhile, it plans to raise supporting funds at no less than 10.77 yuan per share. After the transaction, the company’s ability of sewage treatment can be drastically lifted from 670,000 tons to 1.62 million tons per day, achieving the unification of sewage treatment business in Zhengzhou City, Henan Province. The stock price of the company closed at 12.27 yuan per share before trading suspension.
○ Septwolves and Tempus Global Business Service, etc. jointly establish insurance company
------
Fujian Septwolves Industry Co., Ltd. (002029.SZ) and Shenzhen Tempus Global Business Service Holding Ltd. (300178.SZ) plan to respectively contribute 315 million yuan and 300 million yuan, accounting for 10.5 percent and 10 percent, to establish a reinsurance company together with Shenzhen Qianhai Financial Holdings Limited, China Post Group, SZ Capital Co., Ltd. owned by the State-owned Assets Supervision and Administration Commission (SASAC) of Shenzhen, etc. The reinsurance company will mainly focus on various properties, accidents and health reinsurance, life reinsurance, etc.
[Financial Reports Express]
○ Jingui Silver Industry and Leyard Optoelectronic plan high share conversion and dividend
------
The controlling shareholder of Chenzhou City Jingui Silver Industry Co., Ltd. (002716.SZ) proposes a 12-for-10 conversion of capital surplus into shares in its 2014 annual report. Its latest stock price is 23.48 yuan per share; the controlling shareholder of Leyard Optoelectronic Co., Ltd. (300296.SZ) proposes a 10-for-10 conversion of capital surplus into shares. Its latest stock price is 21.41 yuan per share.
[Trading Trends]
○ Oriental Nations bought through five institutional seats
------
The trading volume ranking list on Feb. 12 shows that Business-intelligence of Oriental Nations Corporation Ltd. (300166.SZ) was bought through five institutional seats with a total of 151 million yuan, accounting for 32.88 percent of its intraday turnover.
Comment: Oriental Nations provides all industrial products of business intelligence in telecom industry, and builds new commercial modes and profit growth points through big data operation based on years of customer confidence and accumulation. The company forecasts its net profit in 2014 to see a year-on-year growth of 40 to 55 percent. After taking the consolidated profit of Beijing North Billion Technology Co., Ltd. and Beijing Krmsoft Co., Ltd. off, its net profit sees a year-on-year growth of 11 to 27 percent. Analysts believe that the company enjoys obvious advantages in big data and sees emerging effect of external expansion.
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