Main points of investment:
Event: Jiuqi Software announcement, on February 10, 2018, the board of directors and the board of supervisors examined and passed the "motion on terminating the company's rights issue plan and withdrawing the rights issue application document". It is agreed that the company intends to terminate the rights issue plan and apply to the China Securities Regulatory Commission (hereinafter referred to as "CSRC") to withdraw the rights issue application documents.
According to the announcement, the rights issue acquisition changed to cash acquisition, the target is the same, the actual risk is lower. It was announced on November 17, 2017 that the total amount of funds raised did not exceed 1.2448 billion yuan. Invest in: 1) acquire 49% stake in Shanghai Mobile held by its technology for a long time. 2) pay the second phase consideration for the acquisition of 51% of the shares of Shanghai Mobile. 3) replenishing the working capital, it can be seen that the previous rights issue mainly focused on the acquisition of shares in Shanghai Mobile. This announcement "choose the opportunity to acquire 49% stake in Shanghai Mobile Network Co., Ltd by means of self-financing", it can be seen that the target is the same. On the one hand, the 2016-2018 pro forma profit is 0.80,1.04,100 yuan (100% valuation), the proposed increase in equity shows that the capital operation is good; on the other hand, the rights issue acquisition has the CSRC audit uncertainty, and the uncertainty of cash acquisition is reduced.
Profits may increase by 20 million yuan in 2018. As the acquisition process of the rights issue is more complex than the cash acquisition, the additional time span is expected to exceed 3 months. The committed performance in 2018 is 135 million yuan, and the 49% shareholding in three months is expected to correspond to a profit of about 20 million yuan.
The value lies in the stickiness of enterprise users, continuously selling new products to customers and meeting the needs of customer information upgrading. Management software manufacturers sold financial software from 2004 to 2008, sold supply chain management after 2008, became popular after 2010, and became popular with innovative businesses (MES, business intelligence, cloud, mobile office, etc.) after 2013. Jiuqi software adopts a similar development approach, selling financial software and business software from 2000 to 2008, experimenting with cloud business from 2013 to 2014, developing Internet marketing business from 2014 to 2016, and developing big data business after 2015. These essence is to sell different products for 40 ministries and commissions, 80 central enterprises and 1 million end customers. Customer stickiness is eternal, but different times have different information pain points, which is the essence of this kind of business.
The essential reason for the low risk of acquisition is business coordination and meticulous plan, and the target subsidiary is similar to part of the parent company. 1) the company acquired Yizilian in 2014 and Huaxia Dentsu in 2015 in the Internet bull market. Program requirements: a) the annual net operating cash flow of the subject matter is not negative. B) the proportion of net accounts receivable to operating income within the scope of the consolidated statement is less than 15%. C) the natural person of the underlying shareholder is dominant, or there is a strict classified valuation for different shareholders. 2) clear synergy (parent company customer resources into subsidiaries), which is the secret that there is little goodwill risk. There is a strong integration between parent and subsidiary companies, and subsidiaries become the way to realize the profits of the customer resources of the parent company.
In 2017, 20X PE, low valuation and steady growth, there are value opportunities to maintain the "buy" rating unchanged. Keeping the profit forecast unchanged, the growth rate of operating income in 2017-2019 is expected to be 77%, 30%, 25%, and the net profit is 4.62 / 575 million yuan, respectively, and the corresponding stock price PE is 20X/16X/13X. PE, which was 20X in 17, is now undervalued, leaving its "buy" rating unchanged. In fact, the goodwill that investors are worried about is that they do not carefully examine the details and cooperation of acquisition and gambling, and do not realize that subsidiaries are already part of the value of customer resources of the parent company after the betting period.