Main points of investment:
Event: the equity fund acquired 47.92% of the shares in Shanda Games. On April 28, Huacan Fund, which is a limited partner of the company (60.24% in the first phase), joined the company as a limited partner (96.39% in the first phase). According to the previous agreement signed with five counterparties on January 7, Yao Yuanru will own a total of 47.92% of Shanda through acquisition.
Huacan Fund aims at state-owned enterprise reform and industrial mergers and acquisitions. On March 10, 2017, Volkswagen Public and Shanghai Hualin, Guosheng assets, Oriental International and Huayi Investment signed the "share transfer and admission Agreement" and the "Partnership Agreement", through the transfer of 90 million yuan of subscribed capital shares, and a new currency subscription of 910 million yuan to join Huacan Fund and become a new limited partner of Huacan Fund, accounting for 60.24% of the amount raised in the first phase. The total target size of Huacan Fund is 2 billion yuan, and the initial fund-raising scale is 1.66 billion yuan. Guosheng assets, Oriental International and Huayi Investment are all state-owned assets system enterprises in Shanghai. Huacan Fund plans to actively participate in the reform of mixed ownership of state-owned enterprises and market-oriented industrial M & An investment. Through this participation in Huacan Fund, Volkswagen can enhance its investment capacity with the help of the professional advantages of investment institutions, and expand its layout in the field of venture capital.
Public utility accelerates the layout of the capital market. Prior to this, Volkswagen participated in 13.93% of Shenzhen Venture Capital and 12.82% of the Chinese Cultural Industry Fund, all of which were the top venture capital platforms in China. Among them, Shenzhen Venture Capital is the largest venture capital company in China, and its successful cases include more than 80 domestic and foreign listed companies, such as Leeco and ZTE. In 2016, the investment income contributed by Shenzhen Venture Capital totaled 182 million yuan, an increase of 43 percent over the same period last year. The Chinese Cultural Industry Fund is the first cultural industry private equity fund approved by the National Development and Reform Commission. Successful investment cases include Star TV, Oriental DreamWorks, IMAX China and Guevara. It is a well-deserved giant in the field of cultural and entertainment investment, contributing 77 million yuan in cash dividends to the company in 2016. In December 2016, the company completed the listing of H shares, raising a net amount of HK $1.445 billion. This overseas financing will help accelerate the company's future expansion of gas, sewage and other businesses, and build an international financing platform for the company. In early 2017, the company contributed to participate in the independent investment portfolio of the US dollar fund, Xinhua Innovation Fund.
In the context of A-share IPO acceleration, venture capital earnings are expected to accelerate growth in the future. The company's high-quality venture capital financial projects reserve rich resources for the company's high growth in the future. At the same time, the company's four public utility sectors, namely, urban pipeline gas, sewage treatment, public infrastructure and urban transportation, contribute to stable cash flow and provide a better safety cushion for performance growth.
Profit forecast and investment advice. It is estimated that the net profit of the company belonging to the parent company in 2017 and 18 is 7.03 yuan and 864 million yuan, respectively, and the corresponding EPS is 0.24,0.29 yuan per share. With reference to the valuation of the comparable company, taking into account the future growth of the company's gas, water and other businesses, as well as the valuation premium of the financial venture capital business, the company was given a buy rating of 35 times PE in 2017, corresponding to the target price of 8.4 yuan per share.
Risk hint. (1) the gas price changes and the company's gross profit margin decreases; (2) the competition in the water industry intensifies; (3) the financial venture capital business is greatly affected by the capital market and the income fluctuates greatly.