[Today's Guide]
> State Council to support franchise mode, projects like water conservancy to see more guarantee
> New energy cars increase sharply in Shanghai auto exhibition, multistep water pricing intensively executed
> Hoperun Software to acquire UISF Tech, CSG Smart to fully control Zhengxin Electric Automation with RMB187 mln
> Bohai Water Industry to acquire Jia Cheng Environmental Protection, Shunxin Agriculture to develop beef and mutton food through private placement
[XFA Focus]
○ State Council to support franchise mode, projects like water conservancy to see more guarantee
------
The Management Methods on the Franchise of Infrastructure and Public Utilities, proposing to stimulate civil investment vitality through institutional innovation, was approved on the executive meeting of the State Council hosted by Chinese Premier Li Keqiang on April 21. The meeting points out that franchise can work together with popular entrepreneurship and innovation as twin engines to drive economic development; franchise will be developed in infrastructure and public utilities areas including energy, traffic, water conservancy, environmental protection, municipal administration, etc.; pricing mechanism of franchise will be improved with financial subsidy and differentiated credit support; franchise projects will be allowed to develop expected-return-based hypothecated loan.
Comment: Franchise, a new-type financing cooperation mode, helps to solve the capital investment problem of significant projects. Multi departments, commissions and local governments have offered encourage and support toward it recently. As the Management Methods is approved by the State Council, franchise mode will be promoted and projects aiming at maintaining growth like water conservancy will see accelerated launch. As for listed companies, Shenyang Blue Silver Industry Automatic Equipment Co., Ltd. (300293.SZ) and Fujian Newchoice Pipe Technology Co., Ltd. (300198.SZ) are involved in urban underground pipe network construction; Chengdu Xinzhu Road & Bridge Machinery Co., Ltd. (002480.SZ) and Xiandai Investment Co., Ltd. (000900.SZ) have signed franchise projects with local governments in rail traffic and environmental protection areas.
[XFA Selection]
○ As the funds outstanding for foreign exchange of financial institutions saw the biggest drop in seven years in March, experts indicate that the recent reduction of Reserve Requirement Ratio (RRR) aims to hedge the decrease of the funds outstanding for foreign exchange.
○ CSI500 futures index has surged by 6.81 percent since listed and gained premium for the first time. Information of turnover and position shows that the incentive for short hedging is not strong.
○ China Minsheng Investment Corp., Ltd. announces to guide China’s private enterprises to invest 5 billion US dollars in Indonesia to meet local demand on infrastructure construction.
○ XFA learns that China Xinjiang Production and Construction Corps will launch policies to support textile and garment industry so as to attract employment.
○ The price of monosodium glutamate has surged for three times within the year. Market concentration of the industry has been enhanced to as high as that of the dye industry.
○ The ethylene glycol device in the plant of Sinopec Yangzi Petrochemical Co., Ltd., Nanjing City explodes in the early morning of April 21. The electronic trading price of ethylene glycol soars to the daily limit.
[Industry Information]
○ More new energy cars shown in Shanghai auto exhibition, lithium battery, etc. to see more flexible performance
------
The Shanghai International Automobile Industry Exhibition will be open to the public on April 22. According to data from sponsor, 103 of the 109 new cars launched on the exhibition are new energy cars. All cars showed by BYD Company Limited (002594.SZ; 01211.HK) on this exhibition are new energy cars.
Comment: Car exhibition usually shows direction of the car market. The sharp increase of new energy cars indicates that more traditional car enterprises are exploring new energy car market. Institutions believe that the new energy car market, previously driven by policy, now is driven by both policy and performance. The domestic output of new energy car sees an increase of 300 times in the first quarter. Explosive growth just begins. Upstream material including lithium battery will see more flexible performance during this process. As for listed companies, Cangzhou MingZhu Plastic Co., Ltd. (002108.SZ) is in full production of lithium battery diaphragm and its production expansion project invested through fundraising is under construction; Do-Fluoride Chemicals Co., Ltd. (002407.SZ) is a leading domestic enterprise in producing lithium hexafluorophosphate. The company plans to raise 600 million yuan through private placement at the beginning of the year to further invest in lithium battery industry.
○ Multistep water pricing intensively executed, water affairs enterprises expect growth
------
Xinhua Net reports on April 21 that in northern cities with scarce water resource including Urumchi, Jinan City, Zhangjiakou City, Langfang City, etc., multistep water pricing is intensively executed during April to May. The surge of water price is widely seen. Some places even see an average comprehensive water price surge of more than 70 percent.
Comment: Xu Kunlin, director of the price department of the National Development and Reform Commission (NDRC), recently indicates to speed up pricing reform and fully stimulate market vitality. The Water Pollution Prevention and Control Action Plan released recently by the State Council also proposes to speed up pricing reform. Future water price will fully reflect market demand and supply, environmental cost and resource nature, therefore, it is a trend to increase water price and it will benefit water affairs industry in the long run. As for companies, Chengdu Xingrong Investment Co., Ltd. (000598.SZ) sees continuously increasing output of tap water and actively expands nationwide water affairs projects; Beijing Capital Co., Ltd. (600008.SH) is a leading enterprise in water affairs in Beijing area and the company’s private placement scheme for production expansion has been approved by China Securities Regulatory Commission.
[Announcement Interpretation]
○ Hoperun Software to acquire UISF Tech with RMB2.2 bln
------
Jiangsu Hoperun Software Co., Ltd. (300339.SZ) proposes to acquire 100 percent equities of UISF Tech at 2,198 million yuan by issuing 48.12 million shares at 22.49 yuan per share through private placement and paying 1.12 billion yuan in cash. Besides, the company also plans to raise a supporting fund of 549 million yuan at the same price to pay part of the cash consideration in the transaction. The counterparty committed that the net profit of UISF Tech from 2015 to 2018 will be no less than 130 million yuan, 166 million yuan, 188 million yuan and 226 million yuan, respectively.
UISF Tech is a software provider which first conducted the development of bank cores and relevant business systems with the business structure and program criteria of enterprises with open systems in China. The acquisition is in line with the development strategy of the company in developing the financial industry.
○ CSG Smart to fully control Zhengxin Electric Automation with RMB187 mln
------
CSG Smart Science & Technology Co., Ltd. (300222.SZ) plans to acquire 49 percent equities of Yantai Zhengxin Electric Automation Co., Ltd. with 187 million yuan by issuing 10.71 million shares at 17.45 yuan per share through private placement. Zhengxin Electric Automation will be a fully-owned subsidiary of the company after the acquisition. The counterparty committed that the net profit after extraordinary items of Zhengxin Electric Automation from 2015 to 2017 will be no less than 25.50 million yuan, 33.15 million yuan and 43.10 million yuan, respectively. The products of Zhengxin Electric Automation include intelligent integrated and simple distribution automation products and intelligent integrated switches.
CSG Smart unveiled a restricted stock incentive plan on the same day. The evaluation indicator will be based on the net profit of 2014 and the net profit of the company from 2015 to 2017 will be no less than 60 percent, 100 percent and 140 percent, respectively.
○ Bohai Water Industry to acquire Jia Cheng Environmental Protection to expand sewage treatment business
------
Bohai Water Industry Co., Ltd. (000605.SZ) intends to raise 1.4 billion yuan by issuing 88.70 million shares at 15.75 yuan per share through private placement, of which 798 million yuan will be used in acquiring 55 percent equities of Jia Cheng Environmental Protection Co., Ltd., 335 million yuan will be used in repaying bank loans and 260 million yuan will supplement working capital. Jia Cheng Environmental Protection enjoys strong customer basis, business channels, technology, research and development advantages and competitiveness in the sewage treatment industry. It recorded a net profit of 46.27 million yuan and 63.16 million yuan in 2013 and 2014, respectively.
○ Shunxin Agriculture to acquire Qingheyuan to develop beef and mutton food
------
Beijing Shunxin Agriculture Co., Ltd. (000860.SZ) proposes to acquire 70 percent equities of Linxia Qingheyuan Halal Food Co., Ltd. at 1,075 million yuan by issuing shares at 20.72 yuan per share. It also plans to raise a supporting fund of 250 million yuan by issuing shares at 18.65 yuan per share through private placement to pay part of the consideration and supplement the working capital of Qingheyuan. The counterparty committed that the subject company will see a compound annual growth rate of 25 percent, 20 percent, 15 percent and 10 percent in the net profit after extraordinary items from 2015 to 2018. The company recorded a net profit after extraordinary profit of 120 million yuan in 2014. Qingheyuan is a key leader in agricultural industrialization in Gansu Province and its industrial chain covers the breeding and slaughtering of flocks and herds and the processing of meat products.
[Financial Reports Express]
○ Nanjing Gaoke and Beyondsoft see high performance growth
------
Nanjing Gaoke Company Limited (600064.SH) saw a year-on-year growth of 447 percent in its net profit in the first quarter. Beyondsoft Corporation (002649.SZ) recorded a year-on-year growth of 212 percent in its net profit in the first quarter and expects its net profit to increase 10 percent to 40 percent in the interim report. Shenzhen Fenda Technology Co., Ltd. (002681.SZ) saw a year-on-year growth of 78 percent in its net profit in the first quarter and expects its net profit to increase 80 percent to 100 percent in the interim report. Wanda Cinema Line Co., Ltd. (002739.SZ) recorded a year-on-year growth of 59 percent in its net profit in the first quarter and expects its net profit to increase 40 percent to 70 percent in the interim report.
○ Titan Wind Energy proposes high share conversion and dividend
------
Titan Wind Energy (Suzhou) Co., Ltd. (002531.SZ) recorded a growth of 1.39 percent in its 2014 net profit and proposes a 10-for-10 conversion of capital surplus into shares combined with 1 yuan dividend for every 10.
[Trading Trends]
○ Institutions buy sub-new shares heavily
------
The trading volume ranking list on April 21 shows that two institutes totally bought Estun Automation Co., Ltd. (002747.SZ) with 97.50 million yuan, two institutes totally bought Guangdong Guanghua Sci-tech Co., Ltd. (002741.SZ) with 26.96 million yuan and two institutes totally bought Suzhou Sushi Testing Instrument Co., Ltd. (300416.SZ) with 47.65 million yuan.
Comment: Institutes believe that most sub-new shares belong to emerging industries and are quite scarce among A shares. For example, Estun Automation operates in the robot industry and Guanghua Sci-tech is a leader in the PCB chemical products. Despite the relatively high growth after their listing, the valuation of certain sub-new shares is acceptable to institutes. Historical statistics show that sub-new shares are active in trading upon the listing of new shares. The new shares issued in April will start trading on April 22.
> State Council to support franchise mode, projects like water conservancy to see more guarantee
> New energy cars increase sharply in Shanghai auto exhibition, multistep water pricing intensively executed
> Hoperun Software to acquire UISF Tech, CSG Smart to fully control Zhengxin Electric Automation with RMB187 mln
> Bohai Water Industry to acquire Jia Cheng Environmental Protection, Shunxin Agriculture to develop beef and mutton food through private placement
[XFA Focus]
○ State Council to support franchise mode, projects like water conservancy to see more guarantee
------
The Management Methods on the Franchise of Infrastructure and Public Utilities, proposing to stimulate civil investment vitality through institutional innovation, was approved on the executive meeting of the State Council hosted by Chinese Premier Li Keqiang on April 21. The meeting points out that franchise can work together with popular entrepreneurship and innovation as twin engines to drive economic development; franchise will be developed in infrastructure and public utilities areas including energy, traffic, water conservancy, environmental protection, municipal administration, etc.; pricing mechanism of franchise will be improved with financial subsidy and differentiated credit support; franchise projects will be allowed to develop expected-return-based hypothecated loan.
Comment: Franchise, a new-type financing cooperation mode, helps to solve the capital investment problem of significant projects. Multi departments, commissions and local governments have offered encourage and support toward it recently. As the Management Methods is approved by the State Council, franchise mode will be promoted and projects aiming at maintaining growth like water conservancy will see accelerated launch. As for listed companies, Shenyang Blue Silver Industry Automatic Equipment Co., Ltd. (300293.SZ) and Fujian Newchoice Pipe Technology Co., Ltd. (300198.SZ) are involved in urban underground pipe network construction; Chengdu Xinzhu Road & Bridge Machinery Co., Ltd. (002480.SZ) and Xiandai Investment Co., Ltd. (000900.SZ) have signed franchise projects with local governments in rail traffic and environmental protection areas.
[XFA Selection]
○ As the funds outstanding for foreign exchange of financial institutions saw the biggest drop in seven years in March, experts indicate that the recent reduction of Reserve Requirement Ratio (RRR) aims to hedge the decrease of the funds outstanding for foreign exchange.
○ CSI500 futures index has surged by 6.81 percent since listed and gained premium for the first time. Information of turnover and position shows that the incentive for short hedging is not strong.
○ China Minsheng Investment Corp., Ltd. announces to guide China’s private enterprises to invest 5 billion US dollars in Indonesia to meet local demand on infrastructure construction.
○ XFA learns that China Xinjiang Production and Construction Corps will launch policies to support textile and garment industry so as to attract employment.
○ The price of monosodium glutamate has surged for three times within the year. Market concentration of the industry has been enhanced to as high as that of the dye industry.
○ The ethylene glycol device in the plant of Sinopec Yangzi Petrochemical Co., Ltd., Nanjing City explodes in the early morning of April 21. The electronic trading price of ethylene glycol soars to the daily limit.
[Industry Information]
○ More new energy cars shown in Shanghai auto exhibition, lithium battery, etc. to see more flexible performance
------
The Shanghai International Automobile Industry Exhibition will be open to the public on April 22. According to data from sponsor, 103 of the 109 new cars launched on the exhibition are new energy cars. All cars showed by BYD Company Limited (002594.SZ; 01211.HK) on this exhibition are new energy cars.
Comment: Car exhibition usually shows direction of the car market. The sharp increase of new energy cars indicates that more traditional car enterprises are exploring new energy car market. Institutions believe that the new energy car market, previously driven by policy, now is driven by both policy and performance. The domestic output of new energy car sees an increase of 300 times in the first quarter. Explosive growth just begins. Upstream material including lithium battery will see more flexible performance during this process. As for listed companies, Cangzhou MingZhu Plastic Co., Ltd. (002108.SZ) is in full production of lithium battery diaphragm and its production expansion project invested through fundraising is under construction; Do-Fluoride Chemicals Co., Ltd. (002407.SZ) is a leading domestic enterprise in producing lithium hexafluorophosphate. The company plans to raise 600 million yuan through private placement at the beginning of the year to further invest in lithium battery industry.
○ Multistep water pricing intensively executed, water affairs enterprises expect growth
------
Xinhua Net reports on April 21 that in northern cities with scarce water resource including Urumchi, Jinan City, Zhangjiakou City, Langfang City, etc., multistep water pricing is intensively executed during April to May. The surge of water price is widely seen. Some places even see an average comprehensive water price surge of more than 70 percent.
Comment: Xu Kunlin, director of the price department of the National Development and Reform Commission (NDRC), recently indicates to speed up pricing reform and fully stimulate market vitality. The Water Pollution Prevention and Control Action Plan released recently by the State Council also proposes to speed up pricing reform. Future water price will fully reflect market demand and supply, environmental cost and resource nature, therefore, it is a trend to increase water price and it will benefit water affairs industry in the long run. As for companies, Chengdu Xingrong Investment Co., Ltd. (000598.SZ) sees continuously increasing output of tap water and actively expands nationwide water affairs projects; Beijing Capital Co., Ltd. (600008.SH) is a leading enterprise in water affairs in Beijing area and the company’s private placement scheme for production expansion has been approved by China Securities Regulatory Commission.
[Announcement Interpretation]
○ Hoperun Software to acquire UISF Tech with RMB2.2 bln
------
Jiangsu Hoperun Software Co., Ltd. (300339.SZ) proposes to acquire 100 percent equities of UISF Tech at 2,198 million yuan by issuing 48.12 million shares at 22.49 yuan per share through private placement and paying 1.12 billion yuan in cash. Besides, the company also plans to raise a supporting fund of 549 million yuan at the same price to pay part of the cash consideration in the transaction. The counterparty committed that the net profit of UISF Tech from 2015 to 2018 will be no less than 130 million yuan, 166 million yuan, 188 million yuan and 226 million yuan, respectively.
UISF Tech is a software provider which first conducted the development of bank cores and relevant business systems with the business structure and program criteria of enterprises with open systems in China. The acquisition is in line with the development strategy of the company in developing the financial industry.
○ CSG Smart to fully control Zhengxin Electric Automation with RMB187 mln
------
CSG Smart Science & Technology Co., Ltd. (300222.SZ) plans to acquire 49 percent equities of Yantai Zhengxin Electric Automation Co., Ltd. with 187 million yuan by issuing 10.71 million shares at 17.45 yuan per share through private placement. Zhengxin Electric Automation will be a fully-owned subsidiary of the company after the acquisition. The counterparty committed that the net profit after extraordinary items of Zhengxin Electric Automation from 2015 to 2017 will be no less than 25.50 million yuan, 33.15 million yuan and 43.10 million yuan, respectively. The products of Zhengxin Electric Automation include intelligent integrated and simple distribution automation products and intelligent integrated switches.
CSG Smart unveiled a restricted stock incentive plan on the same day. The evaluation indicator will be based on the net profit of 2014 and the net profit of the company from 2015 to 2017 will be no less than 60 percent, 100 percent and 140 percent, respectively.
○ Bohai Water Industry to acquire Jia Cheng Environmental Protection to expand sewage treatment business
------
Bohai Water Industry Co., Ltd. (000605.SZ) intends to raise 1.4 billion yuan by issuing 88.70 million shares at 15.75 yuan per share through private placement, of which 798 million yuan will be used in acquiring 55 percent equities of Jia Cheng Environmental Protection Co., Ltd., 335 million yuan will be used in repaying bank loans and 260 million yuan will supplement working capital. Jia Cheng Environmental Protection enjoys strong customer basis, business channels, technology, research and development advantages and competitiveness in the sewage treatment industry. It recorded a net profit of 46.27 million yuan and 63.16 million yuan in 2013 and 2014, respectively.
○ Shunxin Agriculture to acquire Qingheyuan to develop beef and mutton food
------
Beijing Shunxin Agriculture Co., Ltd. (000860.SZ) proposes to acquire 70 percent equities of Linxia Qingheyuan Halal Food Co., Ltd. at 1,075 million yuan by issuing shares at 20.72 yuan per share. It also plans to raise a supporting fund of 250 million yuan by issuing shares at 18.65 yuan per share through private placement to pay part of the consideration and supplement the working capital of Qingheyuan. The counterparty committed that the subject company will see a compound annual growth rate of 25 percent, 20 percent, 15 percent and 10 percent in the net profit after extraordinary items from 2015 to 2018. The company recorded a net profit after extraordinary profit of 120 million yuan in 2014. Qingheyuan is a key leader in agricultural industrialization in Gansu Province and its industrial chain covers the breeding and slaughtering of flocks and herds and the processing of meat products.
[Financial Reports Express]
○ Nanjing Gaoke and Beyondsoft see high performance growth
------
Nanjing Gaoke Company Limited (600064.SH) saw a year-on-year growth of 447 percent in its net profit in the first quarter. Beyondsoft Corporation (002649.SZ) recorded a year-on-year growth of 212 percent in its net profit in the first quarter and expects its net profit to increase 10 percent to 40 percent in the interim report. Shenzhen Fenda Technology Co., Ltd. (002681.SZ) saw a year-on-year growth of 78 percent in its net profit in the first quarter and expects its net profit to increase 80 percent to 100 percent in the interim report. Wanda Cinema Line Co., Ltd. (002739.SZ) recorded a year-on-year growth of 59 percent in its net profit in the first quarter and expects its net profit to increase 40 percent to 70 percent in the interim report.
○ Titan Wind Energy proposes high share conversion and dividend
------
Titan Wind Energy (Suzhou) Co., Ltd. (002531.SZ) recorded a growth of 1.39 percent in its 2014 net profit and proposes a 10-for-10 conversion of capital surplus into shares combined with 1 yuan dividend for every 10.
[Trading Trends]
○ Institutions buy sub-new shares heavily
------
The trading volume ranking list on April 21 shows that two institutes totally bought Estun Automation Co., Ltd. (002747.SZ) with 97.50 million yuan, two institutes totally bought Guangdong Guanghua Sci-tech Co., Ltd. (002741.SZ) with 26.96 million yuan and two institutes totally bought Suzhou Sushi Testing Instrument Co., Ltd. (300416.SZ) with 47.65 million yuan.
Comment: Institutes believe that most sub-new shares belong to emerging industries and are quite scarce among A shares. For example, Estun Automation operates in the robot industry and Guanghua Sci-tech is a leader in the PCB chemical products. Despite the relatively high growth after their listing, the valuation of certain sub-new shares is acceptable to institutes. Historical statistics show that sub-new shares are active in trading upon the listing of new shares. The new shares issued in April will start trading on April 22.
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