occurrences

1.53 billion dollars to acquire 100% of the shares of Singapore Airlines Technology

Oreed plans to purchase 100% of the shares of Singapore Airlines Technology jointly held by Zheng Wenjun, Wen Liantang, Fan Longsheng, and Chen Zijie through Orede Limited, a wholly-owned subsidiary of Oreed Limited.

Brief review

Strategy: raw material supplier+processing equipment supplier

Oreed is the world's leading sapphire crystal leader. Most of SIA Technology's customers are glass processing and sapphire processing companies. Among them, the main customers partially overlap with Orede's customers. The future development of sapphire is expected to be good. Sapphire long-crystal technology is difficult, and the market entry threshold is high. More companies will enter the sapphire processing process, and there is a high demand for sapphire processing equipment. After the acquisition is completed, Oreed and Singapore Airlines Technology will form a synergistic effect to jointly sell sapphire crystals and sapphire processing equipment.

Deal: Installments+Supplemental Consideration+Cash Rewards

Shareholders of Singapore Airlines Technology promised performance of 160 million, 205 million yuan, and 255 million yuan respectively for 16-18 years. The compensation method was cash compensation. The original shareholders and executives will no longer hold shares in Singapore Airlines Technology, and Oreed will use supplementary consideration and cash rewards to motivate the management team.

Profit forecasting and valuation

Following the M&A targets, we adjusted the company's 2015-2017 EPS forecast to 0.48, 0.75, and 1.73. The target price is 49.6 yuan, maintaining the “buy” rating. The corresponding 2016-2017 PE is 66X and 29X respectively.