Early Bird

Early Bird 11-May-2015

XFA Premium News
2015-05-11 12:59

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[Today’s Guide]
> Central bank cut interest rate for 3rd time in half a year to boost property market recovery
> Policies on medical treatment reform introduced, China, Russia to see breakthroughs in general aviation cooperation
> Fountain Corporation to acquire Bestwa EnviTech, Yongle Film and Television to achieve back-door listing through Kangqiang Electronics
> Heihua to transform into a logistics company, Jingcheng Copper Share plans to acquire ACME
 
[XFA Focus]
○ Central bank cut interest rate for 3rd time in half a year to boost property market recovery
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The central bank of China cut the benchmark one-year lending rate by 0.25 percentage points and raised the ceiling on deposit rates to 1.5 times the benchmark from 1.3 times on May 10. The move is to further reduce the social financing cost and promote the sustainable and sound development of real economy.
Comment: The interest rate cut is widely expected and is only three weeks after last significant cut. Research institutes believe that it will enhance the market expectation on loosening monetary policies and the bullish stock and bond markets are under the way. As it is the third interest rate cut since last November and the reserve requirement ratio also dropped 1.5 percentage points, it is advised to pay attention to the accumulated effects. The real estate and relevant construction industries have shown signs of recovery and will continue to benefit in the future. In terms of listed companies, Huayuan Property Co., Ltd. (600743.SH) admitted that it conducts cooperation with Qihoo 360 (NYSE: QIHU) in intelligent home furnishing in its latest announcement. The contract amount of Poly Real Estate Group Co., Ltd. (600048.SH) hiked 60 percent in April. Sichuan Guodong Construction Co., Ltd. (600321.SH) is principally engaged in the manufacturing of fibreboard products and projects construction.
 
 
[XFA Selection]
○ Chinese Premier Li Keqiang made important instructions on the first Vocational Education Week, pointing out that it is a strategic move in promoting mass entrepreneurship and innovation.
○ Gao Hucheng, the Minister of Commerce, indicated on May 8 in Russia that China will facilitate trade with the Eurasian Economic Union and finally build a free trade zone with it.
○ The China Securities Regulatory Commission (CSRC) has approved the IPO applications of 20 companies, including Juneyao Airlines Co., Ltd. 21 companies, including Ruida Futures, are expected to release their prospectuses.
○ The China Banking Regulatory Commission (CBRC) indicated that it has submitted the amended loan-to-deposit ratio to the Legal Affairs Office of the State Council. If the obligatory assessment is cancelled in the future, it will facilitate banks in expanding the credit scale.
○ The vice minister of the Ministry of Industry and Information Technology indicated at the China Engineering Science and Technology Forum on May 8 that it will fully promote the green transformation of traditional manufacturing industries.
○ Participants at the China Private Equity Summit 2015 are rosy about the after-market ChiNext Board and believe that it represents the trend of social development.
 
 
[Industry Information]
○ Policies on medical treatment reform introduced, medical e-business and private hospitals to see opportunities
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Various policies on medical treatment reform have been introduced recently. The State Council released the opinions on the fully conducting comprehensive reform of county-level public hospitals on May 8 and the key tasks in deepening the medical and health system reform in 2015 on May 9. The State Council also released opinions on accelerating e-business on May 7, requiring that it shall improve the supervision and management of the operation of Internet-based food and pharmaceuticals to promote the development of pharmaceuticals e-business.
Comment: The reform plans are to eliminate seeking profits from drugs by doctors, solving the difficulties in medical access and high costs and achieve the connectivity of medical treatment, medical insurance and pharmaceuticals. As an important part of the drugs distribution system, the pharmaceuticals e-business will receive more policy supports. It is an important channel to increase the supply of medical resources to promote the development of private hospitals and the charges of private hospitals are more negotiable. In terms of listed companies, Jointown Pharmaceutical Group Co., Ltd. (600998.SH) has formed the twin engines of B2C and O2O and the online business of ehaoyao.com under see rapid development and its revenue is expected to double in 2015. Jinling Pharmaceutical Company Limited (000919.SZ) has acquired Yizheng Hospital and Anqing Hospital and the scale of private hospitals has been stably expanded. The chain group of private ophthalmic hospital of Aier Eye Hospital Group Co., Ltd. (300015.SZ) will try to set 200 hospitals in 2020.
 
 
○ China, Russia sign $25 bln deal, general aviation to see breakthroughs
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China and Russia signed 32 major deals with a total value of 25 billion U.S. dollars during President Xi Jinping’s visit to Russia. Breakthroughs are made in the general aviation cooperation. Media reported that the investment consortiums of China and Russia will establish a leasing company to market Russian business aircraft in China and Southeastern markets. The company will be located in the Russian-Chinese industrial park in Shaanxi Province.
Comment: The bilateral cooperation between China and Russia is not limited to the energy industry, which greatly enhanced the cooperation in airline, hydropower, information security and other industries. The joint promotion of 100 Russian aircraft by two sides shows the huge demand in the aviation market. Based on the domestic aviation industrial plan, the aviation industry will see rapid development in the 13th Five-Year period and the value of the industrial chain will reach 1 trillion yuan. In terms of listed companies, Sichuan Haite High-Tech Co., Ltd. (002023.SZ) is principally engaged in aviation repairing and training and enjoys great advantage in domestic aviation technology and service industries. Avicopter Plc (600038.SH) has established a joint venture with China Aviation Industry General Aircraft Co., Ltd. to expand the its business.
 
[Announcement Interpretation]
○ Fountain Corporation to acquire Bestwa EnviTech with RMB449 mln
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Shenzhen Fountain Corporation (000005.SZ) plans to acquire 81 percent equities of Zhejiang Bestwa EnviTech Co., Ltd. with 449 million yuan, among which, 397 million yuan will be paid by issuing 109 million shares at 3.65 yuan per share and the rest will be paid in cash. Meanwhile, the company plans to raise 132 million yuan from Shenzhen Boruiyi Carbon Source Technology Co., Ltd., under Ding Pengqi (actual controller of the company), Shanghai Qinxing Investment Management Center (Limited Partnership), etc. by issuing 35.40 million shares at 3.74 yuan per share through private placement to pay for the cash needed by the transaction, supplement working capital of Bestwa EnviTech, etc.
Bestwa EnviTech is a comprehensive pollution control system solution and engineering contracting service provider in China. The counterparty promises that the net profit of Bestwa EnviTech from 2015 to 2017 will be no less than 43.00 million yuan, 60.00 million yuan and 72.00 million yuan.
 
○ Yongle Film and Television to achieve back-door listing through Kangqiang Electronics, Zexi to participate in private placement
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Ningbo Kangqiang Electronics Co., Ltd. (002119.SZ) plans to acquire 100 percent equities of Zhejiang Yongle Film and Television Production Co., Ltd. with 2.78 billion yuan by issuing shares at 10.09 yuan per share through private placement and in cash. Meanwhile, it plans to raise 850 million yuan by issuing shares at 11.65 yuan per share through private placement from Shanghai Zexi Zengxu Investment Center (Limited Partnership) to pay for the cash needed by the transaction, reorganization fee and to supplement working capital. Upon completion, Yongle Film and Television will achieve back-door listing. According to performance commitment, the net profit of Yongle Film and Television shall reach 220 million yuan, 290 million yuan and 370 million yuan, respectively, from 2015 to 2017.
 
○ Private enterprise to achieve back-door listing via Heihua with RMB3.6 bln, Heihua to transform into container logistics company
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Heilongjiang Heihua Co., Ltd. (600179.SH) plans to sell all of its asset and debts to China Haohua Chemical Group Co., Ltd. with 27.20 million yuan and acquire 100 percent equities of Quanzhou Antong Logistics Co., Ltd. and Fujian Quanzhou Ansheng Shipping Co., Ltd. by issuing 576 million shares at 6.34 yuan per share. The subject asset is estimated as 3.65 billion yuan. Meanwhile, the company plans to raise a supporting fund of 700 million yuan by issuing 96.42 million shares at 7.26 yuan per share to invest in the container and commercial logistics network, the informatization of management system, station storage equipment and cold chain storage equipment.
Upon completion, Guo Dongze and Guo Dongsheng, acting in concert, will hold 50.18 percent equities of the company and become the controlling shareholder and actual controller of the company. Heihua will transform into an intelligent platform of “container logistics”. From 2012 to 2014, the net profit of Antong Logistics recorded 30.63 million yuan, 129 million yuan and 198 million yuan, respectively; the net profit of Ansheng Shipping recorded 36.69 million yuan, 29.46 million yuan and 49.42 million yuan, respectively.
 
○ Jingcheng Copper Share plans to acquire ACME with RMB520 mln
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Anhui Jingcheng Copper Share Co., Ltd. (002171.SZ) plans to acquire 100 percent equities of Advanced Corporation for Materials & Equipment (ACME) with 520 million yuan by issuing shares through private placement and in cash. The company plans to pay 390 million yuan by issuing shares at 11.23 yuan per share through private placement and raise a supporting fund of 130 million yuan by issuing shares to the staff shareholding plan of Jingcheng Copper Share. The counterparty promises that the net profit of ACME from 2015 to 2017 will be no less than 40.00 million yuan, 50.00 million yuan and 60.00 million yuan, respectively.
ACME, principally engaged in intelligent thermal equipment, is the core supplier of domestic aerospace and military customers. It has passed the on-the-spot audit of level-3 confidential qualification, weapons equipment quality system certification and the weapons equipment scientific research and production certification.
 
○ Tongwei to raise RMB2 bln through private placement to develop photovoltaic power generation
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Tongwei Co., Ltd. (600438.SH) plans to acquire 100 percent equities of Tongwei New Energy Co., Ltd. and Sichuan Yongxiang Co., Ltd. with 2.05 billion yuan by issuing shares at 8.84 yuan per share through private placement. Meanwhile, the company also plans to raise a supporting fund of 2 billion yuan at no less than 9.12 yuan per share through private placement to invest in the photovoltaic power generation projects of Tongwei New Energy and to supplement working capital. As promised by relevant parties, the performance of Yongxiang shall reach 90.00 million yuan in 2015; the total performance from 2015 to 2016 shall reach 310 million yuan; the total performance from 2015 to 2017 shall reach 630 million yuan.
Comment: Tongwei is now principally engaged in aquatic feed. New commercial mode can be formed by building photovoltaic power stations on agriculture facilities like fishpond, etc.
 
○ HuBei Energy to raise RMB6 bln through private placement, Three Gorges Corp. to take charge
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Hubei Energy Group Co., Ltd. (000883.SZ) plans to issue 1,143 million shares at 5.3 yuan per share through private placement to China Three Gorges Corporation and Shaanxi Coal and Chemical Industry Group Co., Ltd., among which, Three Gorges Corporation plans to participate in the subscription with 5 billion yuan including 100 percent equities of China Three Gorges New Energy Corp. Lichuan Wind Power Co., Ltd. and China Three Gorges New Energy Corp. Tongcheng Wind Power Co., Ltd., and cash; Shaanxi Coal and Chemical Industry Group plans to participate in the subscription with 1.06 billion yuan in cash.
After completion of private placement, Three Gorges Corporation will directly and indirectly control 39 percent equities of the company, becoming the new controlling shareholder and actual controller of the company. By relying on the strength of Three Gorges Corporation, Hubei Energy will rapidly expand its business scale in electricity investment, natural gas, coal transportation and sales, etc.
 
 
[Financial Reports Express]
○ Woer Heat-Shrinkable Material to expect its net profit in first half year to grow by 800 pct
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Thanks to the increased investment return from Changyuan Group Limited, Shenzhen Woer Heat-Shrinkable Material Co., Ltd. (002130.SZ) largely lifts its forecast on the net profit during 2015 Jan-June period from previously estimated “a year-on-year growth of 70 to 100 percent” to “810 to 840 percent”.
 
 
[Trading Alarms]
○ Tanac Automation starts subscription on May 11
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Tanac Automation Co., Ltd. (300461.SZ), principally engaged in the whole set of numerical control automatic equipment needed by electronic component, issues shares at 7.92 yuan per share with an up-limit per account of 6,500 shares. Maximum subscription needs 51,480 yuan.
 
 
[Weekly Review]
○ Recommendation on stock choice
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The market has just suffered slump and investors do not dare to participate easily. Stocks, which can hike against the trend, are more likely to surge when they see good news. For example, the State Council supported the “going out” of railways last Wednesday and XFA recommended Nanjing Kangni Mechanical & Electrical Co., Ltd. (603111.SH) in its comment to specific listed companies. Though China Railway Group Limited (601390.SH; 00390.HK) and China Railway Construction Corporation Limited (601186.SH; 01186.HK) plummeted by the daily 10 percent limit at the next day, Kangni Mechanical & Electrical still surged largely. The State Council supported e-commerce last Thursday and XFA recommended Better Life Commercial Chain Share Co., Ltd. (002251.SZ) according to the same logic. Another circumstance is that the market is hot and good news keep emerging, and then it will be safer to choose “not so strong” stocks to wait for opportunity for them to surge. A typical example is the Beijing-Tianjin-Hebei guideline released during May Day. Many stocks related to Hebei province hiked at the beginning of the trading hour but dropped later after May Day, but Hebei Iron & Steel Co., Ltd. (000709.SZ), with the largest market share and lowest stock price, still soared to the daily 10 percent limit.
 
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