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Early Bird 30-March-2015

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2015-03-30 13:35

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 [Today's Guide]
> One Belt and One Road action plan released, competitive edge of steel industry stands out
 
> Supporting policies to real estate released frequently, 3D printing covered in intelligent manufacturing
 
> Thirteenth Five-year Plan for medical devices to release, domestic MSG leader raises prices again
 
> Yitoa Intelligent Control to acquire Worldshine Technology, Mizuda Printing & Dyeing to raise funds through private placement
 
 
 [XFA Focus]
○ One Belt and One Road action plan released, competitive edge of steel industry stands out
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Three departments and commissions including the National Development and Reform Commission (NDRC) were authorized by the State Council to jointly release the “Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road” on March 28, proposing that the interconnection of infrastructure is prioritized in the construction of the “One Belt and One Road”.
Comment: The huge investment in the infrastructure construction of the “One Belt and One Road” brings great demand on steel, while the countries along the “One Belt and One Road” seeing net import of steel account for 70 percent. Most of the investment in the infrastructure construction along the “One Belt and One Road” will prefer China’s steel, the most competitive one. Experts estimate that the “One Belt and One Road” will drive a demand on building materials for nearly 18 million tons for six countries contiguous to Xinjiang Uygur Autonomous Region. Among A-share companies, Xinjiang Ba Yi Iron & Steel Co., Ltd. (600581.SH), located in Xinjiang, enjoys geographical advantage and is expected to go through group-level reform and transformation; Fujian Sansteel Minguang Co., Ltd. (002110.SZ), principally engaged in construction steel, is strongly expected to be involved in SOEs reform.
 
◆ Sino-Thai high-speed rail cooperation agreement signed, railway quickened in exporting
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Wang Yi, Minister of Foreign Affairs, disclosed on March 28 that China and Thailand have signed high-speed rail cooperation agreement. China-Laos railway is under progress. China is also willing to participate in the bidding of Singapore-Malaysia railway.
 
Comment: Under the promotion of the “One Belt and One Road” strategy, the exporting of China’s railway might be quickened. According to statistics, the total investment in rail transit projects in Southeast Asian market approaches 980 billion yuan. Moreover, China itself also plans an investment in railway as high as 800 billion yuan. A-share listed companies engaged in railway construction and vehicles will continue to see high prosperity. China Railway Group Limited (601390.SH; 00390.HK) participated in the bidding of Sino-Thai railway; Jiangyin Haida Rubber and Plastic Co., Ltd. (300320.SZ) is a leading enterprise engaged in the water sealing elements of shield tunnel and the sealing strips of railway vehicles.
 
 
 [XFA Selection]
○ Zhou Xiaochuan, indicated that China’s monetary policies are mainly determined by domestic economy and room is left for price and quantity regulation.
 
○ China Securities Regulatory Commission (CSRC) indicated that its law enforcement department convened a forum in Shenzhen Stock Exchange on March 24. Guangdong Qtone Education Co., Ltd. (300359.SZ) announced that it did not receive any document relating to stock price manipulation.
 
○ CSRC indicated that ZhuHai BoYuan Investment Co., Ltd. (600656.SH) is involved in a series of violations of law, has been transferred to public security organs for criminal sanctions and its listing shall be suspended.
 
○ Leaders from the Ministry of Environmental Protection disclosed that the Water Pollution Prevention and Control Action Plan has been approved by the State council and will be released soon after modification.
 
○ China Everbright Bank Co., Ltd. (601818.SH; 06818.HK) announces to establish a fully-owned financial business subsidiary. Institutions are optimistic about its valuation increase after spin-off listing.
 
 [Industry Information]
○ Supporting policies to real estate released frequently, first-tier cities to become main force in recovery
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As reported by the Economic Observer, the central bank is assessing house loan policies and will lower the down payment proportion of second homes. Some banks have determined to lower the at-least 60 percent down payment to 50 percent. The Ministry of Land and Resources and the Ministry of Housing and Urban-Rural Development distributed notice on March 27 requiring restricted supply of houses and residential lands. And as monitored by institutions, the dealing of real estate in key cities has seen month-on-month growth for four consecutive weeks.
Comment: This is the first time for government to issue document promoting the development of real estate since 2008. It helps to improve supply-demand structure, which is the most basic problem in the market. The policies from other departments and commissions including central bank are also worthy of expectation. First-tier cities with obvious net inflow of population and continuously great demand might become the main force in the recovery of real estate industry. As for listed companies, Beijing Capital Development Co., Ltd. (600376.SH) owns a land reserve of 3.88 million square meters in Beijing; Greenland group, which will achieve back-door listing through Shanghai Jinfeng Investment Co., Ltd. (600606.SH), will join hands with Alibaba to build “Real Estate Bao”; China Merchants Group, controller of China Merchants Property Development Co., Ltd. (000024.SZ), is one of the “three landlords” in Qianhai area, Shenzhen City.
 
○ China to establish manufacturing power work group, 3D printing to fuel intelligent manufacturing
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Su Bo, deputy Minister of Industry and Information Technology, disclosed on March 27 that China will establish Manufacturing Power Construction Leading Group and formulate “1+X” implementation scheme and planning system. Miao Yu, Minister of Industry and Information Technology, indicated on Ba Ao sub-forum “3D printing, digital manufacturing and the third industrial revolution” that intelligent manufacturing will become the focus of the new round of industrial competition.
Comment: 3D printing is the key area of the integration of informatization and advanced material, contributes to the enhancement of flexible industrial production, improves operation efficiency and reduces material consumption. It has been regarded as an important part of intelligent manufacturing and might see more support. As for listed companies, Wuhan Golden Laser Co., Ltd. (300220.SZ) is building 3D printing Cloud platform service and plans to develop industrial acquisition; Shenzhen Sunshine Laser & Electronics Technology Co., Ltd. (300227.SZ) plans to invest hundreds of millions of yuan in the 3D printing of cars, aerospace and medical areas.
 
○ Thirteenth Five-year Plan for medical devices to release, enterprises with technical advantage to see growth
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XFA learns from the Medical Device Industry Summit convened recently that the Thirteenth Five-year Plan for medical devices will be released soon and it focuses on new technologies like digital diagnostic equipment, tissue reconstruction and regeneration project, molecular diagnostic instrument and reagent, surgical robot, etc.
Comment: Medical device is an emerging industry widely recognized by investment institutions and sees broad market demand in the future. Listed companies which take the lead in investing the industry will enjoy high industrial growth. Grandhope Biotech Co., Ltd. (300238.SZ) is principally engaged in regenerative medical materials and regenerative implantable medical devices; Shanghai Tofflon Science and Technology Co., Ltd. (300171.SZ) has already made plans for medical equipment industry 4.0; Andon Health Co., Ltd. (002432.SZ) has developed products like iHealth smart watch and cooperated with WeChat.
 
○ Domestic MSG leader raises prices again, industrial consolidation boosts profitability
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Fufeng Group, the domestic MSG leader, raised the prices of its products by approximately 100 yuan per ton on March 26. The latest quotations are from 8,000 yuan to 8,100 yuan per ton, representing an increase of nearly 15 percent since last year.
Comment: The “first tier” in the MSG industry leading by Fufeng Group has formed after several industrial consolidations. The tier accounts for 80 to 90 percent of the MSG production in the overall industry. The manufacturers’ bargaining powers have been improved significantly and the profitability is strengthening. Currently, Fufeng Group owns an annual production capacity of 1.07 million tons. Meihua Holdings Group Co., Ltd. (600873.SH) is acquiring Ningxia Eppen Biotech Co. Ltd. and its total production capacity will be increased from 800,000 tons from 530,000 tons. Henan Lotus Flower Gourmet Powder Co., Ltd. (600186.SH) owns an annual production capacity of nearly 300,000 tons.
 
 
 [Announcement Interpretation]
○ Yitoa Intelligent Control to acquire Worldshine Technology and expand into intelligent home and Internet of Things
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Shenzhen Yitoa Intelligent Control Co., Ltd. (300131.SZ) proposes to acquire 100 percent equities of Shenzhen Worldshine Technology Co., Ltd. by issuing shares through private placement and in cash. The subject of the transaction is priced at 1,145 million yuan, part of which will be paid by issuing 114 million shares at 8.36 yuan per share and 189 million yuan will be paid in cash. Meanwhile, it proposes to raise a supporting fund of 215 million yuan by issuing shares at 13.46 yuan per share to pay the consideration in cash. The counterparty committed that the net profit of Worldshine Technology from 2015 to 2017 will be no less than 115 million yuan, 140 million yuan and 165 million yuan, respectively.
Worldshine Technology is market-oriented distributor professionally engaged in providing clients in the mobilephones, household electric appliances, vehicles and electronic industries with integrated services, including the distribution of electronic components, technical supporting and supply chains. The business of the company will be expanded to the upstream of the intelligent home and the Internet of Things industry chains after the reorganization.
 
○ Mizuda Printing & Dyeing to raise funds through private placement with participation of shareholders
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Zhejiang Mizuda Printing & Dyeing Group Co., Ltd. (002034.SZ) plans to raise 800 million yuan to supplement working capital by issuing 48.20 million shares at 16.58 yuan per share through private placement to Shan Jianming, its controlling shareholder, Bao Fengjiao, Shan’s spouse as well as Huzhou Mizuda Investment Partnership Enterprise, Hangzhou Jiuyi Investment Partnership Enterprise, Hangzhou Jinmanning Investment Management Partnership Enterprise and Darry Asset Management (Hangzhou) Co., Ltd. Shan will subscribe 24.10 million shares or 50 percent of the total amount. Mizuda Investment is a joint venture invested by the directors, senior management, core business teams of the company and the senior management of Mizuda group.
 
○ Centergate Technologies to raise RMB1.2 bln to develop phar. business
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Beijing Centergate Technologies (Holding) Co., Ltd. (000931.SZ) intends to raise 1.2 billion yuan by issuing 140 million shares at no less than 8.57 yuan per share through private placement. The proceeds will be used in repaying the principal and interests of the borrowings from its controlling shareholder GOME Electrical Appliances Holding Limited (00493.HK), the establishment of a drugs metabolism platform with the Institute of Pharmacology & Toxicology of AMMS, the establishment of active pharmaceutical ingredients (APIs) and oral solid dosages of Shandong Huasu Pharmaceutical Technology Co., Ltd. and the brand establishment of Huasu Phar. The controlling shareholder GOME committed to subscribe 400 million yuan.
Comment: The company is principally engaged in the pharmaceuticals, concrete, property and construction safety businesses. It has sold its construction safety businesses. It also plans to gradually reduce the proportion of the concrete and property in the revenue and focus on the development of the pharmaceutical business in the future.
 
○ Hangxiao Steel Structure to raise RMB300 mln to repay debts through private placement, actual controllers and senior management will subcribe all shares
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Hangxiao Steel Structure Co., Ltd. (600477.SH) proposes to raise 315 million yuan to repay the bank loans by issuing 53.16 million yuan at 5.93 yuan per share through private placement. Shan Yinmu, the actual controller of the company, will subscribe 28 million shares. Zhang Zhenyong, the general manager, will subscribe 6 million shares. Xu Ronggen and Lu Yongjun, two shareholders, will subscribe 5.10 million and 5 million shares, respectively. Chen Rui, the deputy chairman, and other senior management will subscribe the remaining shares.
Comment: The company intends to reduce financial risks through the private placement. It will boost the development of the green buildings and the construction industrialization businesses. The shareholders and senior management will subscribe all shares, which shows their confidence about its future development.
 
 
 [Financial Reports Express]
○ Haoningda Meters and CTS International Logistics propose high share conversion and
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Shenzhen Haoningda Meters Co., Ltd. (002356.SZ) saw a year-on-year growth of 103 percent in its 2014 net profit and proposes a 20-for-10 conversion of capital surplus into shares combined with 1.5 yuan dividend for every 10 shares. CTS International Logistics Corporation Limited (603128.SH) saw a year-on-year growth of 43 percent in its 2014 net profit and proposes a 10-for-10 conversion of capital surplus into shares combined with 1.16 yuan dividend for every 10 shares.
 
○ Xinhua Phar. expects great increase in Q1 results
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Shandong Xinhua Pharmaceutical Company Limited (00719.HK; 000756.SZ) expects its net profit in the first quarter will increase by 340 to 390 percent year on year thanks to the expanded sales and reduced production costs. The company also proposes to invest 182 million yuan in the establishment of a modern pharmaceutical international cooperation center.
 
 
 [Weekly Review]
○ Unexpected surprises
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The current A-share market is driven by innovation and reform. Once significant progresses are made, they will have significant and far-reaching effects and bring huge investment opportunities.
It is not uncommon that the sale of new energy vehicles continues to surge and the influence on the lithium battery industry just began. XFA reported the prices hikes of lithium carbonates, the materials for lithium batteries, in recent months. It even pointed out that it may continue to rise in 2015. Jiangxi Ganfeng Lithium Co., Ltd. (002460.SZ) and other companies with lithium businesses are likely to be favored by capitals.
The new power reform is widely expected. While the public just focus on the power grid, the electrolytic aluminium and other industries, XFA paid attention to YGSOFT Inc. (002063.SZ), which can help power enterprises reduce costs. The company surged 30 percent after the report. The information highlights in the last week also include: the price rising trend of the 7-ACA due to the implementation of the new environmental protection and the recognition of the “Internet Plus Tourism” based on the financial reports of Ctrip.
 
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