[Today's Guide]
○Local governments make every effort in SOEs reform and explore reform opportunities by 3 ways
○Plan on medium- and long-term development of Chinese football introduced, industrial chain to see opportunity for expansion
○Huangshan Jinma to acquire Zotye Auto, Scimee Sci. ＆ Tech. to acquire Sitong Environmental Engineering
○Junzheng Energy ＆ Chemical and other companies propose high share conversion and dividend, Zhongtong Bus Holding forecasts great growth in first quarterly report
[SSN Focus]
○Local governments make every effort in SOEs reform and explore reform opportunities by 3 ways
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As authorizing more decision-making powers of state-owned enterprises (SOEs) reform to the locals is included into this year's government work report, local SOEs reform accelerates significantly. The number of companies suspending trading keeps increasing since the beginning of this year. As of last weekend, 53 local state-owned asset listed companies suspended trading due to significant matters, of which 35 carried out trading suspension after March. Several state-owned asset firms with small market value such as Xi'an Tourism Co., Ltd. (000610.SZ), Fujian Mindong Electric Power Limited Company (000993.SZ) and Fujian Longxi Bearing (Group) Co., Ltd. (600592.SH) also suspended trading on April 11.
◆Statistics by SSN shows that more than 25 provincial administrative regions across China have introduced SOEs reform proposals and nearly 40 municipal State-owned Assets Supervision and Administration Commission (SASAC) have released plan on SOEs reform for this year, some of which put forward quantitative targets and key enterprises list. For example, the SASAC of Hubei province proposes in the work focus for 2016 to reorganize Chaozhou Three-Circle (Group) Co., Ltd. (300408.SZ) to be an investment company engaged in machinery, cars and automobile components industries. Xiangyang Automobile Bearing Co., Ltd. (000678.SZ) under Three-Circle (Group) has gained approval from China Securities Regulatory Commission for its private placement proposal and management will buy the stocks worth nearly 100 million yuan. Another example is that the official website of the SASAC of Jiangsu province recently released general trends of local state-owned assets. Wuxi city will carry out mergers and acquisitions and investment cooperation with Wuxi Huaguang Boiler Co., Ltd. (600475.SH) and other listed companies as major body. Indirect controlling shareholder of Huaguang Boiler is Guolian Group and managerial financial assets amounts to more than 440 billion yuan.
◆The superior SASAC departments make frequently grass-root inspection, which usually is able to direct the reform development in the future. Head of the SASAC of Chongqing municipality visited Chongqing Chemical ＆ Pharmaceutical Holding(Group) Company in February, requiring the group to strive to vitalize existing assets through reorganization and other methods. Soon after that, Chongqing Jianfeng Chemical Co., Ltd. (000950.SZ) under the group suspended trading. Public information shows that the Financial and Economic Affairs Committee of the National People's Congress inspected the situation of state-owned assets management and system reform of Xuzhou city in March and visited Xuzhou Construction Machinery Group Co., Ltd. (XCMG). Soochow Securities Co., Ltd. is rosy about XCMG improving management efficiency through introducing strategic investment and other proposals. Xcmg Construction Machinery Co., Ltd. (000425.SZ) will benefit from follow-up capital operation. In March, Chen Jian, chief accountant of the SASAC of Guizhou province, inspected Guizhou Steel Rope (Group) Co., Ltd., substantial shareholder of Guizhou Wire Rope Co., Ltd. (600992.SH), requiring the group to seek supports from various aspects during the process of reform and restructuring so as to attract various assets as much as possible.
◆Some state-owned asset firms also show their outlook for reform development trend through annual reports. Chongqing Yukaifa Co., Ltd. (000514.SZ), held by Chongqing City Construction Investment (Group) Co., Ltd., reveals at its annual report that it will give full play capital market, make the best of platform resources to improve business operation capability and market value management level, and embark on eco tourism, services for the elderly, environmental protection and other industries at proper time.
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[SSN Selection]
○Premier Li Keqiang presides over a conference on economic situation with heads of some provinces and cities on April 11, proposing to gradually lower enterprise leverage ratio through market-oriented debt-to-equity swap and other ways.
○China Securities Regulatory Commission approves and issues IPO official documents of 7 companies on April 11, whose total fundraising amount is expected to be no more than 2.8 billion yuan.
○China's producer price index (PPI) saw the first positive month-on-month growth in March over the past 27 months, indicating the trend of economy getting stabilized is assured.
○The State Council approves Zhengzhou, Louyang and Xinxiang, Shandong Peninsula, and Shenyang and Dalian national high-tech industrial development areas to construct a national innovation demonstration zone. It requires actively carrying out pilots for innovation policies.
○The Ministry of Education indicates on April 11 that it will activate work on memorandum signing of aesthetic education reform development in this year. The first batch of seven provinces and cities will sign the memorandum in May.
[Industry Information]
○Plan on medium- and long-term development of Chinese football introduced, industrial chain to see opportunity for expansion
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Four ministries and commissions including General Administration of Sport issued the plan on the medium- and long-term development of Chinese football (2016-2050). The plan proposes that there will be 20,000 football schools across China and every 10,000 Chinese own 0.5-0.7 football field during 2016 and 2020; every 10,000 Chinese own 1 football field and it requires building the first-class professional league and matches in Asia during 2021 and 2030 and realizes the target making China a first-class football power by 2050. The plan also requires deepening management system of Football Association, strengthening football matches, football equipment and other service industries and actively promoting and issuing football lottery guessing on Chinese professional football league matches.
Comment: The plan covers development for 35 years, indicating that the football business development is a long-term systematic work and that the state attaches great importance to the development of football industry. The output value proportion of football industry, which is the biggest project of sports industry, is more than 40 percent. The football market potential will reach 2 trillion yuan according to the target of achieving more than 5 trillion yuan of sports industry size by 2025. Shenzhen Aoto Electronics Co., Ltd. (002587.SZ), a provider of overall proposal on LED, is aggressively making deployment in football and other sports industries. Lander Sports Development Co., Ltd. (000558.SZ) has been embarking on such businesses as football school construction and operation, training young football players, professional training, matches and market development and promotion.
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[Announcement Interpretation]
○Huangshan Jinma to acquire Zotye Auto with RMB11.6 bln, stepping into vehicle manufacturing industry
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Huangshan Jinma Co., Ltd. (000980.SZ) proposes to issue shares and pay cash to acquire 100 percent equities of Zotye Auto Co., Ltd. with 11.6 billion yuan. Partially, Huangshan Jinma will issue shares at 5.44 yuan per share to pay 9.6 billion yuan, and pay the resting 2 billion yuan with cash. Meanwhile, the company proposes to raise 10 billion yuan through private placement. Zotye Auto is an automobile manufacturer mainly engaged in the automobile R＆D, manufacturing and sales, and promises that its net profit in 2016 to 2018 will be no less than 1.21 billion yuan, 1.41 billion yuan and 1.61 billion yuan respectively.
○Scimee Sci.＆ Tech. to acquire Sitong Environmental Engineering
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Sichuan Scimee Sci. ＆ Tech. Co., Ltd. (300425.SZ) proposes to issue shares with a price no less than 30.35 yuan per share through private placement and pay 107 million yuan in cash to acquire 65 percent equities of Zhejiang Sitong Environmental Engineering Co., Ltd. with 215 million yuan. The company, at the meantime, proposes to raise 174 million yuan. Sitong Environmental Engineering is an enterprise mainly engaged in the investment ＆ operational management on municipal sewage treatment, and it is also a main contractor for sewage treatment engineering. Based on performance commitment, Sitong Environmental Engineering will gain a net profit of 70 million yuan accumulatively from 2016 to 2018.
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○Kaishan Compressor to acquire Singaporean energy company with RMB388 mln
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Zhejiang Kaishan Compressor Co., Ltd. (300257.SZ) proposes to acquire the 100 percent equities of OTP Geothermal Pte. Limited, a Singaporean energy company, with 60 million U.S. dollars (equivalent to 388 million yuan) through its overseas holding subsidiary. An Indonesian subsidiary held by the OTP has geothermal field with development right for 240MW Sorik Marapi Geothermal Field Project authorized by Indonesian government. This project is one of the largest geothermal field projects in Indonesia now, and its geothermal resource is expected to support power generation potential of 350MW to 460MW.
Comment: The said acquisition project is expected to be fully built up and put into production before the middle of 2019. According to electricity price of 0.081U.S. dollar/kWh specified in the current PPA (Power Purchase Agreement), the annual operational revenue will be 155 million U.S. dollars after reaching design capacity.
○Restructuring of Hotision ＆ Monsod Drought-resistance Greening approved
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Restructuring issues of Inner Mongolia Hotision ＆ Monsod Drought-resistance Greening Co., Ltd. (300355.SZ) have been approved unconditionally by the China Securities Regulatory Commission, such as issuing shares to acquire assets; those of Zhejiang Jinke Peroxides Co., Ltd. (300459.SZ) approved conditionally.
[Financial Report Express]
○Junzheng Energy ＆ Chemical and other companies propose high share conversion and dividend
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Inner Mongolia Junzheng Energy ＆ Chemical Group Co., Ltd. (601216.SH) announced an annual performance growth of 10 percent, proposing a 10-for-10 conversion of capital surplus into shares combined with 0.2 yuan dividend according to the annual report; Shenzhen Inovance Technology Co., Ltd. (300124.SZ): annual growth of 21 percent and 10-for-10 with 5 yuan dividend; Guangdong Qtone Education Co., Ltd. (300359.SZ): net profit growth of 109 percent and 15-for-10 with 0.58 yuan dividend; Suzhou TFC Optical Communication Co., Ltd. (300394.SZ): annual growth of 16 percent and 15-for-10 with 5.6 yuan dividend; Stanley Fertilizer Co., Ltd. (002588.SZ): annual net profit growth of 25 percent and 10-for-10 with 2 yuan dividend.
Xiamen Sunrise Group Co., Ltd. (002593.SZ) reported annual performance decline of 11 percent, proposing a 20-for-10 conversion of capital surplus into shares combined with 1 yuan dividend according to the annual report; Jiangsu Yitong High-tech Co., Ltd. (300211.SZ): annual net profit growth of 12 percent and 9-for-10 with 0.12 yuan dividend; Sichuan Goldstone Orient New Material Equipment Co., Ltd. (300434.SZ): annual performance decline of 27 percent and 10-for-10 with 1 yuan dividend; Titan Wind Energy (Suzhou) Co., Ltd. (002531.SZ): annual performance growth of 73 percent and 8-for-10 with 0.5 yuan dividend.
○Zhongtong Bus Holding forecasts great growth in first quarterly report
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Zhongtong Bus Holding Co., Ltd. (000957.SZ) forecasts a growth of 1,437 percent to 1,460 percent in its first quarterly report, mainly as the sales of its new energy bus soared; XJ Electric Co., Ltd. (000400.SZ): growth expectation of 220 percent to 270 percent in the first quarterly report, mainly due to increase in revenue from UHVDC power transmission project.
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Jiangxi Zhengbang Technology Co., Ltd. (002157.SZ) revises a profit growth forecast of 200 to 250 million yuan from previous 150 to 200 million yuan in its first quarterly report, mainly as sales price of pig soared out of the expectation. Shandong Minhe Animal Husbandry Co., Ltd. (002234.SZ): from 40 to 60 million yuan to 65 to 75 million yuan, mainly due to declining feed cost and increased profit.
○Performance of 15 listed securities companies greatly improved in March
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Up to the news deadline, 15 listed securities companies in total have disclosed their financial statements in March. Based on combined statistics of data from parent companies and their corresponding subsidiaries, the net profit of these 15 securities companies totally recorded 7,991 million yuan, up by 114 percent month on month.
Comment: Compared to situation in February, the market risk preference improved in March on the whole, and brokerage business improved, benefiting from great rebound in daily turnover and increase in trading days. Additionally, securities companies were forced to hold the stocks during the market crash in the third quarter of last year, and they are likely to share the benefit from rising stock market directly.
[Trading Trend]
○Wuhan Iron and Steel bought through three institutional seats
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The trading volume ranking list on April 11 shows that Wuhan Iron and Steel Company Limited (600005.SH) was bought through three institutional seats with a total of 219 million yuan, accounting for 38.16 percent of its intraday turnover. Another institutional seat sold it with 51.61 million yuan.
Comment: The growth rate of steel sector ranked high on April 11. Institutions pointed out that steel price continued to increase by 30 yuan to 100 yuan per ton last week, referring to iron ore as the raw material, its price dropped by 1.5 U.S. dollars to 53.6 U.S. dollars per ton, the gross profit of steel further expanded to 60 to 230 yuan per ton, and the profit has recovered among the high range since 2012. Furthermore, spokesman of Ministry of Foreign Affairs indicated in the routine press conference on April 11 that China is willing to work together with the international community including the UK to push the world to solve the overcapacity of steel industry.
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