Overview: The performance for the first half of the year fell 68% year on year, and there was an improvement in the second quarter. The company's revenue and net profit in the first half of the year were 1.24 billion yuan and 14 million yuan respectively, down 19.79% and 68.22% from the previous year, respectively, and achieved an EPS of 0.025 yuan. The decline in the company's revenue was mainly due to a decrease in revenue from the product sales business, while net profit declined sharply from the same period last year. It was mainly affected by the reduction in basic commissions for airlines, which reduced the gross profit of the business travel ticket booking business. Furthermore, differences in revenue confirmation for the company's purchases of bank wealth management products and differences in financial subsidies received also had a significant impact on changes in net profit. In terms of profitability, the company's gross margin and net profit margin for the first half of the year were 14.6% and 1.1% respectively, up 3.1 percentage points and 1.7 percentage points from the previous year, respectively. Among them, the increase in gross margin was mainly due to the increase in gross profit in the product sales business, while the decline in net profit was affected by the decline in the airline ticket commission rate. The cost rate for the first half of the year was 12.53%, up 2.81 percentage points from the previous year. Among them, the management fee rate rose significantly to 12.21%, an increase of 2.79 percentage points over the previous year. The increase in management expenses was mainly due to the corresponding increase in expenses brought about by the company's business expansion. On a quarterly basis, the company achieved revenue of 588 million yuan in the second quarter, a year-on-year decrease of 36.22%, and net profit for the same period of time was 0.08 million yuan, a year-on-year decrease of 74.99%, but there was a recovery from net profit of 60 million yuan in the first quarter, an increase of 32.16% over the previous quarter. By business: The development trend of point redemption is good. E-commerce and hotel business growth is weak. In the first half of the year, corporate credit exchange, hotels, e-commerce, and other businesses achieved revenue of 287 million yuan, 266 million yuan, 192 million yuan and 422 million yuan respectively, accounting for 23.1%, 21.4%, 15.5% and 34.1% of revenue, respectively. Among them, point exchange increased dramatically, achieving revenue of 287 million yuan, growth rate as high as 381%, and net profit of 6.13 million yuan. However, due to the severe situation in the industry, hotels and e-commerce businesses all experienced negative revenue growth, down 1.7% and 30.7% year-on-year respectively, of which the net profit of hotel subsidiaries was 13.26 million yuan. The main focus: spending 3.9 billion yuan on mergers and acquisitions of entertainment platforms, and business collaboration to create innovative momentum to acquire subsidiaries of the Group. The target is involved in the entire entertainment industry chain: the company plans to use 3,896 billion yuan to acquire 100% of Tianyi Video, Colorful Interactive, Tianyi Reading, and Aidong Animation, of which a cash valuation of 169 million yuan and a stock valuation of 3.726 billion yuan. The target is mainly engaged in online video, games, reading, and animation, and is involved in the entire entertainment industry chain. It promises to deduct non-return net profit of 214/2.61/308 million yuan in 16-18, respectively. Business collaboration creates innovation momentum, and sector integration promotes state-owned enterprise reform: the target of this acquisition is in the video, game, reading, and animation markets, and is in the same field of leisure culture as the company's original e-commerce and hotels. After the transaction, the new and old business segments will exert a synergistic effect, break through barriers to IP cross-platform cooperation, spawn innovation momentum, and accelerate performance growth. Furthermore, this plan will inject high-quality innovative business under Telecom into the company. After the transaction, it can stimulate innovative business vitality, accelerate the integration of the Telecom Group's Internet entertainment business sector, and expand the influence of state-owned capital in the Internet field, so as to preserve and increase the value of state-owned assets. The transformation built an Internet entertainment ecosystem and actively expanded new growth points in performance. For the first time, it was given a “prudent increase in holdings” rating. In the first half of 2016, the company's original main business was still under pressure, and net profit fell 68% year on year. Among them, in addition to the relatively good performance of the point exchange business, hotel and e-commerce revenue fell 1.7% and 30.7% year on year, respectively, and profit growth was weak. The company's future focus is on: (1) this fixed increase plans to inject the group's pan-entertainment business into the Internet entertainment ecosystem on the basis of the original business, and the injection of asset growth and profitability is good, which is expected to significantly improve the company's performance; (2) at the same time, it is expected that the company will leverage the synergy between various business sectors and actively expand new performance growth points; (3) Furthermore, the company is expected to become an innovative business integration platform under the Telecom Group. The medium- to long-term development is promising. It is estimated that the company's EPS for 16-18 will be 0.06 yuan, 0.07 yuan, and 0.10 yuan, respectively. Consider merging asset acquisitions: Assuming the acquisition is completed and consolidated by the end of 2016, the estimated net profit attributable to the parent company in 2017 is 290 million yuan. According to the market value of the share capital after the increase of the issuance of about 17 billion yuan, the corresponding PE is 58 times higher, giving it a “prudent increase in holdings” rating for the first time. Risk warning: There is uncertainty about regulatory approval, progress in state-owned enterprise reform is below expectations, and post-merger synergies are lower than expected.