[Today's Guide]
○ Positive factors expected to return as stock indexes bottom out
○ National V standard implementation speeds up, exhaust treatment and octane manufacturers to benefit
○ Kingsun Optoelectronic to acquire Kingsun Optoelectronic, Hithink RoyalFlush Information Network forecasts over ten times growth of net profits
○ Tianguang Fire-Fighting proposes high share conversion and dividend, Netsun was bought by four institutions
[SSN Focus]
○ Positive factors expected to return as stock indexes bottom out
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The SSE Composite Index today opened lower than 2,850 points, a low record set earlier, and then rebounded rapidly to close up 0.44 percent, while the ChiNext Board Index moved up 2.94 percent. On Jan. 15, the financing balance in Shanghai and Shenzhen bourses fell below 1 trillion yuan, yet at a much slower pace than the stock index. Its proportion in the total value of the A-share market has even risen, and no positions were automatically closed like during last year's market rout. In addition, according to the data released by capital flow tracker EPFR Global, in the week ending at Jan. 13, offshore Chinese equity funds which are mainly qualified foreign institutional investors (QFII) saw net capital inflow for a second week; the total amount of net inflow capital hit a a record high in three months.
Comment: The plunging U.S. stocks and crude oil on last weekend did not cause a continuing panic in the market; instead some capital even bought Chinese equity funds at lows. This suggests that s the panic on the renmibi exchange rate recedes and substantial shareholders do not reduce their shareholding, the market sentiment has touched the bottom. All kinds of positive factors - the time has come for the government to cut reserve requirement ratio; state-owned assets reform is advancing in all areas; virtual reality and other new technologies have been making progress; a great number of small-cap companies forecast profit to surge in their annual report by acquisition and reorganization - are expected to again become the spotlight of the market.
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[SSN Selection]
○ The China Securities Regulatory Commission (CSRC) said in a statement late on Jan. 18 that Reuters' report on the resignation of CSRC chairman Xiao Gang did not conform with the facts.
○ Shanghai Stock Exchange held the Party Committee (Expansion) Conference on Jan. 18, proposing that it will focus on key tasks, including the registration-based IPO system reform and the Board of Strategic Emerging Industries.
○ China's central bank, the People's Bank of China, confirmed that it will allow foreign financial institutions to deposit at regular reserve requirement ratio in China. The renmibi exchange rate closed marginally higher on Jan. 18.
○ The meeting of the chief negotiation representatives of the ninth round negotiation on the China-Japan-R.O.K. free trade zone is held on Jan. 18 and 19 in Tokyo.
○ You Jun, Vice-Minister of Human Resources, required on Jan. 8 that the timetable and road map for the integration of urban and rural medical insurance should be made before the end of June.
[Industry Information]
○National V standard implementation speeds up, exhaust treatment and octane manufacturers to benefit
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The Ministry of Environmental Protection (MEP) recently released the announcement on the implementation of standards on automobiles emission in the fifth stage, proposing that all light-duty gasoline vehicles, light-duty diesel passenger vehicles and heavy-duty diesel vehicles (only for buses, environmental sanitation and mail purposes) imported, sold and registered in 11 provinces and municipalities in eastern regions, including Beijing, Tianjin, Hebei, Liaoning, Shanghai, Jiangsu, Zhejiang, Fujian, Shandong, Guangdong and Hainan, shall meet the National V standard. According to the plan, China will implement the National V standard across the country from 2017. Beijing, Shanghai, Nanjing City as well as certain cities in Guangdong Province have implemented the National V standard.
Comment: It means that the implementation of the National V standard across the country will speed up, which will bring huge market potentials for enterprises engaged in vehicles exhaust treatment and other related businesses. For example, Sino-Platinum Metals Co., Ltd. (600459.SH) produces exhaust purification catalysts. Besides, the upgrading of gasoline quality will result in losses in octane value of gasoline and isooctane is needed for balance. Relevant enterprises include Zibo Qixiang Tengda Chemical Co., Ltd. (002408.SZ).
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○ Low altitude reform to speed up and boost general aviation development
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SSN learnt that Cai Jun, deputy director of the office of the State Air Administration Committee, indicated at the work conference of the civil aviation and air administration system in 2016 that it will speed up in the reform of the air administration system and arrange tasks in the establishment of the air administration during the 13th Five-year Plan period. Meanwhile, it will actively make innovations in the administration and use of airspace resources, plan and adjust the national airspace structure and solve the tight airspace resources in busy areas.
Comment: The advancing of the low altitude reform will provide airspace resources guarantees to the development of general aviation. Institutes believe that the demand in the general aviation market will exceed 600 billion yuan in the following decade with an average annual growth of nearly 30 percent. Radar equipment for air administration and other industries will see opportunities in market expansion. In terms of listed companies, Sichuan Jiuzhou Electronic Co., Ltd. (000801.SZ) is a leader in the military aviation market for its air administration products and is actively developing in the civilian market. As a leader in the domestic air administration automation, Wisesoft Co., Ltd. (002253.SZ）ranks high in the industry in terms of the market share.
[Announcement Interpretation]
○ Kingsun Optoelectronic to acquire Kingsun Optoelectronic with RMB2 bln
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Dongguan Kingsun Optoelectronic Co., Ltd. (002638.SZ) proposes to acquire 100 percent equities of Guangzhou Longwen Education Technology Co., Ltd. with 2 billion yuan by issuing 106 million shares at 14.17 yuan per share through private placement and with 500 million yuan in cash. Meanwhile, it plans to raise a supporting fund of 1.8 billion yuan by issuing shares at 14.17 yuan per share to special objects including the employees shareholding plan through private placement. The proceeds will be used in the overall strategic development in the educational services market by Longwen Education.
Longwen Education is principally engaged in extra-curricular tutoring for middle and primary school students. It is an information and consultancy services provider of K12 Education, a leading platform in China. The counterparty committed that the total net profits of Longwen Education from 2015 to 2018 will be no less than 560 million yuan.
○ Boomsense Technology to launch phase-II employees shareholding plan
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Boomsense Technology Co., Ltd. (300312.SZ) intends to introduce the phase-II employees shareholding plan to raise 100 million yuan to subscribe the secondary portion of the assets management plan, which plans to raise no more than 250 million yuan. It will divide the preferred and secondary shares on the proportion of 1.5:1.
○ Palm Landscape Architecture to hold Qiankun Cultural Tourism
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Shengcheng Investment, wholly owned subsidiary of Palm Landscape Architecture Co., ltd. (002431.SZ), proposes to acquire 41 percent equity of Qiankun Cultural Tourism at the valuation of 82 million yuan. Upon completion of the transaction, Shengcheng Investment will hold 51 percent equity of Qiankun Cultural Tourism, and get the control over Qiankun Cultural Tourism. Qiankun Cultural Tourism is primarily engaged in real estate development and investment and operation of cultural tourism industry project, and has conducted early stage overall planning and land consolidation work for "Yangshuo Xingping holiday resort", which is conform to the company's eco-town transformation strategy.
○ Several companies to see increase of shareholding
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The second biggest shareholder and some senior management members of Keda Clean Energy Co., Ltd. (600499.SH) will increase shareholding in the company in the next six month with no less than 60 million yuan. Li Yunchun, the biggest shareholder and chairman of the board of Walvax Biotechnology Co., Ltd. (300142.SZ), will increase shareholding in the company in the next three months with no less than 180 million yuan.
[Financial Reports Express]
○Hithink RoyalFlush Information Network forecasts over ten times growth of net profits
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Hithink RoyalFlush Information Network Co., Ltd. (300033.SZ) forecasts 12 to 15 times increase of net profits in its annual report, primarily due to substantial growth in sales. Anhui Shengyun Environment-Protection Group Co., Ltd. (300090.SZ) forecasts 245 to 275 percent increase of net profits in its annual report, primarily due to the reorganization carried out by its equity participation company Fenghui Leasing realized return on investment.
Jiangsu Lugang Science And Technology Co., Ltd. (601599.SH) forecasts 85 to 119 percent growth of net profits in its annual report, primarily due to its acquisition of S＆C Pictures Co., Ltd and Tangshan Tianyi Film and combiend these two companies in its consolidated financial statements. Xiamen King Long Motor Group Co., Ltd. (600686.SH) forecasts 90 to 120 percent growth of net profits in its annual report, primarily due to significant growth of new energy vehicles, and Xiamen Crefuture Guarantee, which acquired by the company, was combined in its financial statements.
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○Tianguang Fire-Fighting proposes high share conversion and dividend
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Chen Xiuyu, actual controller Tianguang Fire-Fighting Co., Ltd. (002509.SZ) proposes a 12-for-10 conversion of capital surplus into shares combined with 0.5 yuan dividend for every 10 shares.
[Trading Trends]
○Netsun was bought by four institutions
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The trading volume ranking list on Jan.18 shows that Zhejiang Netsun Co., Ltd. (002095.SZ) was bought through four institutional seats with a total of 427 million yuan, representing 42.62 percent of its intraday trading turnover.
Comment: public information shows that Netsun has been closely researched by institutions since January. The company indicates that transformation from traditional sales to online sales has become one of the core competitiveness of the company, and it is an irresistible trend. The company has signed cooperation agreement on corporate proprietary transaction plan with over 100 of companies, and provided corporate proprietary transaction platform construction for its clients, to push forward online sales plan for enterprises, as well as promote corporate sales online financialization strategy.
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