Main points of investment:
Event: recently, the company issued a preliminary plan to issue shares to acquire assets and raise supporting funds and related party transactions; the company's shares resumed trading on December 4, 2015.
The company intends to acquire 100 per cent of Sinovel's shares from Luo Weiguang, former Hai Xi Nuo and Zhi Shang Investment after the acquisition of shares, and to issue shares to Naland Fund to acquire its 36 per cent stake in OMG Singapore.
Upon completion of the transaction, the company will directly and indirectly hold 100% equity interest in OMG. The 100% equity of the underlying asset OMG Company is priced at 3 billion yuan, and the issuing price of the company's shares is 14.53 yuan per share.
At the same time, the company plans to raise matching funds from Luo Weiguang, Golden Harvest assets (Jiayi Investment) and Zhuhai Qianheng non-public offering shares to cover the intermediary fees of the transaction as well as the construction of the underlying company in the direction of WIFI controller and certification, virtual reality and augmented reality, and big data analysis. The total amount of supporting financing does not exceed 600 million yuan, and the issue price is 20.14 yuan per share, with a lock-up period of 3 years.
Comments:
Company extension involved in the field of CDN, to create a "special glass, Internet" double main business intention is clear.
Since the beginning of this year, traditional business has been under constant pressure, and it is urgent to open up new growth points. The company is the leader of domestic glass deep processing; its main special glass is mainly used in large public construction facilities, special vehicles, shipping, rail transit and other industries, the demand is periodically dragged down by large-scale infrastructure investment.
The company's acquisition of OMG, successful intervention in the CDN business, profits will be significantly boosted. OMG is committed to providing customers with peer-to-peer streaming media transmission solutions. The core product is OTT end-to-end solutions tailored to the needs of network video operators. At present, customers are mainly in Malaysia, Taiwan, Indonesia and other Southeast Asian regions. In the future, they will vigorously develop domestic business by virtue of their core competitiveness in innovative technologies and business models. At present, they have reached cooperation intentions with a number of large domestic enterprises. The profit commitments of OMG from 2016 to 2018 are US $4500, US $5000 and US $55 million respectively (about 2.9,3.2 and 350 million yuan respectively based on the national foreign exchange midpoint on November 29th, 2015).
Supporting financing investment to start the concept of VR, the progress is worth paying attention to. The company's supporting financing invested in OMG's WIFI hot spots, virtual reality and augmented reality, big data analysis and other projects; OMG has relatively mature and rich technology accumulation in the field of video distribution and real-time transmission, and is expected to enter the field of virtual reality with the help of capital platform, technical cooperation with experts in related fields, data transmission / video source processing and other links in the future.
The actual controller of the company will be changed to Luo Weiguang, and the diversification strategy can be promoted. After the completion of the deal, Luo Weiguang and his Narendra fund will hold a total of about 28.7% of the company, and the former will become the actual controller of the company, which is expected to add impetus to the smooth progress of the company's diversification strategy.
Give a "buy" rating for the first time. The company vigorously promotes the transformation and upgrading to the Internet, and the launch of the concept of VR is worth looking forward to; at the same time, the change of ownership structure is conducive to the promotion of the company's diversification strategy. After the completion of this transaction, it is estimated that the company's EPS (fully diluted) from 2016 to 2018 will be about 0.66,0.73,0.80 yuan per share, respectively. With reference to the valuation level of the leading CDN business in China, and considering the company's subsequent expansion expectations in hot areas such as VR, the company will be given a 60-fold PE (corresponding to fully diluted EPS) in 2016, with a target price of 39.32 yuan per share.
Risk tip: the company's diversification to the Internet is not as expected.