Investment highlights:
Incident: Recently, the company announced plans to issue shares to acquire assets and raise supporting capital and related transactions; trading of the company's shares resumed on December 4, 2015.
The company plans to issue shares to Luo Weiguang, Qianhai Sino, and Zhishang Investment to acquire 100% of Sino Technology's shares after the acquisition; issue shares to Naland Fund to acquire 36% of OMG Singapore's shares. After the transaction is completed, the company will directly and indirectly hold 100% of OMG's shares. The target asset OMG Company's 100% equity price is 3 billion yuan, and the company's share issue price is 14.53 yuan/share.
At the same time, the company plans to raise supporting capital from Luo Weiguang, Jiahe Asset (Jiayi Investment), and Zhuhai Qianheng's non-public shares to cover the intermediary fees of this transaction and the construction of target company fund-raising projects in the direction of WIFI controllers and authentication, virtual reality and augmented reality, and big data analysis. The total amount of supporting financing did not exceed 600 million yuan, the issue price was 20.14 yuan/share, and the lock-up period was 3 years.
Reviews:
The company's outreach is involved in the CDN field, and the intention to build a dual “special glass and internet” business is clear. Traditional businesses have continued to be under pressure since this year, and there is an urgent need to develop new growth points. The company is a leader in deep glass processing in China; its main specialty glass is mainly used in large-scale public construction facilities, special vehicles, ships, rail transit and other industries, and demand is being dragged down by cyclical downward investment in large-scale infrastructure.
Profits will be significantly boosted when the company acquires OMG and successfully enters the CDN business. OMG is committed to providing customers with peer-to-peer streaming solutions. The core products are OTT end-to-end solutions tailored to the needs of network video operators. Currently, customers are mainly in Southeast Asia such as Malaysia, Taiwan, Indonesia, etc. In the future, they will vigorously develop domestic business with their core competitiveness in innovative technology and business models, and have now reached cooperation intentions with many large domestic enterprises; OMG's profit promises from 2016 to 2018 are 4,500, 50 million US dollars, and 55 million US dollars respectively (according to 11, 2015) (On January 29, the central foreign exchange price of the country was converted to about 290, 320 million yuan, and 350 million yuan respectively).
Supporting financing is invested in launching the VR concept, and progress is worth focusing on. The company's supporting financing is invested in OMG's WIFI hotspots, virtual reality and augmented reality, big data analysis, etc.; OMG already has mature and rich technology accumulation in the field of video distribution and real-time transmission. It is expected that in the future, it will use capital platforms to carry out technical cooperation with experts in related fields, and enter the virtual reality field from data transmission/video source processing.
The actual controller of the company will be changed to Luo Weiguang, and diversification strategies can be expected to advance. After the transaction is completed, Luo Weiguang and its Naland Fund will hold a total of about 28.7% of the company's shares. The former will become the actual controller of the company, which is expected to add further impetus to the smooth progress of the subsequent diversification strategy of the company.
Giving a “buy” rating for the first time. The company is vigorously promoting transformation and upgrading in the direction of the Internet, and the launch of the VR concept is worth looking forward to; at the same time, changes in the equity structure are conducive to the advancement of the company's diversification strategy. After the transaction is completed, the company's EPS (full dilution) from 2016 to 2018 is expected to be around 0.66, 0.73, and 0.80 yuan/share, respectively. Referring to the valuation level of Wangsu Technology, a leading domestic CDN business, and considering the company's future expansion expectations in hot fields such as VR, the company was given 60 times PE (corresponding to full dilution of EPS) in 2016, with a target price of 39.32 yuan/share.
Risk warning: The company's diversification towards the Internet has fallen short of expectations.