Events:
On July 11, China Travel Service United (600358.CH/ RMB13.50, not rated) issued an announcement to buy a 100% stake in the new line CCTV by issuing shares and paying cash, and raise matching funds. The trading price of the 100% stake in the new line is 400 million yuan, of which the listed company will pay 180 million yuan in the transaction consideration in cash, 220 million yuan in the transaction consideration by issuing shares, and 10.97 yuan per share. The total amount of matching funds raised by listed companies to invest in the north, Yingtan contemporary and south is no more than 193 million yuan, and the offering price is 10.97 yuan per share. This transaction constitutes a major asset restructuring and does not constitute a backdoor listing. The shares of the company will not resume trading for the time being.
Comments:
1. The main business of CITS United Hot Spring Hotel is in the doldrums, and the strategy is transformed into outdoor sports and entertainment. The company achieved revenue of 88.33 million yuan in 2015, down 0.26% from the same period last year, with a net profit of 12.73 million yuan, compared with a loss of 166 million yuan in the same period last year. The company's net profit in the first quarter of this year continued to lose 11.57 million yuan. The company began its strategic transformation in 2015, taking outdoor sports and entertainment as a new development direction, and successively involved in the "Zhaojun out-sai" performing arts project, the market development of the Winter Games, and the Thai Boxing Sports and Sports Comprehensive Park project. and set up a number of industrial M & A funds (sports, outdoor, cultural and entertainment), there are few new projects that can produce performance.
2. The business overview of CCTV on the new line.
The main business of new line China Television is Internet advertising business, which mainly carries out advertising promotion and marketing for customers through websites, self-media, mobile APP applications and other channels. Customers are mainly concentrated in the game industry, and have directly or indirectly established cooperative relations with many famous game companies, such as Perfect World, NetEase, Inc, Tencent, etc., and have carried out efficient and accurate product promotion for a number of popular games, such as Dota2, carving hero hand-passing tour, question-and-ask mobile game, etc. The main business of CCTV on the new line can be divided into:
1) Advertising
Through cooperation with websites, self-media, mobile APP applications and other media, and according to the product promotion needs of advertisers, CTV carries out customized and diversified advertising display to achieve efficient and accurate advertising delivery.
2) Strategic creative business
Mainly for advertisers' product promotion to provide copywriting, pictures, audio or video and other promotional content production.
3. Profit model
For the advertising business, the main profit model of the new line is to provide customers with value-added services such as overall marketing programs based on the analysis of the characteristics of customers' products, the development trend of the game industry, the target audience and other factors. Through the procurement of Internet media resources and sales to advertisers, to obtain advertising revenue.
For strategic creative services, the main profit model of the new line is to rely on the creative and strategic capabilities of the core team, produce customized and high-level promotional materials according to the marketing needs of customers, and sell promotional materials to customers to gain revenue from material production.
The important customers and suppliers of the new line are more concentrated. In 2015 and the first quarter of 2016, revenue from advertising services provided by New Line China Television to Perfect World's game companies accounted for 41.8% and 55.75% of operating revenue, respectively. Procurement channel resources from Perfect World's Internet media accounted for 31.82% and 13.75% of the total purchases in 2015 and the first quarter of 2016, respectively.
4. Financial situation
The new line, founded in February 2013, was dedicated to providing strategic and creative services for game manufacturers. In September 2015, it began to launch the Internet advertising business in the game industry, with rapid growth in operating income and profitability. The net profit in the first quarter of 2016 reached 4.8679 million yuan, far exceeding the level of the same period in 2015. The broadening of the business channel of the new line not only contributes directly to the advertising performance, but also promotes the income level and profitability of the strategic creative business, which leads to a substantial increase in the overall net profit level of the new line. The other party promised that the net profit of the new line from 2016 to 2018 would not be less than 36 million yuan, 47 million yuan and 61 million yuan.
The strategic creative business has a high gross profit margin and is the main source of profit for CTV on the new line. Among the new line China Television's business, the gross profit margin of the advertising business is relatively low, only 4.9% in the first quarter of this year, mainly because the new line China Television's advertising business is still in the business development period, the purchase volume is small, the cost is high, and it is also taking advantage of low prices to win business.
The balance of accounts receivable is growing rapidly, mainly because the company is still in the period of business development. At the end of 2014, 2015 and the end of the first quarter of 2016, the final balance of accounts receivable accounted for 52.10%, 56.00% and 116.23% of the current operating income, respectively.
5. The core competitiveness of CTV on the new line.
1) customer resource advantage. New line China Television has established a stable cooperative relationship with domestic first-class game manufacturers or their advertising agencies such as Perfect World, NetEase, Inc and Tencent.
2) the advantage of media resources. The new line of China Television has obtained the exclusive agency of the carrier related to the game vertical media Star Tour Media, and is discussing the exclusive agency with other vertical media. At the same time, the new line of China Television continues to develop other well-known websites, self-media, mobile APP applications and other channel resources in the industry, and has established direct or indirect cooperative relations with Jinri Toutiao, Baidu, Inc., iQIYI, Inc., NetEase, Inc and other well-known terminal media, thus forming the ability to provide a full range of advertising services for advertisers.
3) professional team and service advantages. The existing core team is a group of early Internet advertising marketing practitioners in the game industry in China, with rich experience, strong professional ability and good reputation in the industry. Familiar with the development characteristics and trends of the industry, it can better grasp the market development trends, integrate media and customer resources, and meet the specific needs of advertisers in the game industry.
6. the concerted actors participate in supporting financing, and the proportion of the actual controller increases slightly after the reorganization. Before this reorganization, contemporary capital management and its concerted actors, contemporary tourism and Jinhui Fengying held a total of 29.01%, and Wang Chunfang was the actual controller of the company. The supporting financing targets of Northern Investment, Yingtan Contemporary and Southern Investment are all concerted actors of controlling shareholders. After the completion of the reorganization, the holding proportion of the actual controller has been raised to 30.24%.
Investment suggestion: the main business of the company's hot spring hotel remains in the doldrums and is transforming into outdoor sports and entertainment. This acquisition of the Internet advertising company will improve the layout of the outdoor sports and entertainment industry through extension expansion and will enhance the company's sustainable profitability. The market value of the company before suspension is 6.8 billion yuan, considering the total market value of 7.3 billion after this acquisition, it is recommended to continue to pay attention to it.
