Major issues:
Ruyi Group (000626) announced a major asset restructuring plan in the morning of January 19. The company intends to purchase 48 per cent of the vast property held by 25 natural persons, including Zhizheng Investment and Jinbo, by issuing shares and paying cash. And raise 1.316 billion yuan from the company's controlling shareholder, Broad Group.
Comments:
The holding subsidiary will be upgraded to a wholly owned subsidiary. The target of this acquisition, Broad property, was originally a controlling subsidiary of Ruyi Group, with a controlling stake of 52%. Through this acquisition, it will achieve 100% holding.
Why 100% holding?
Since 2014, Broad products has transformed and reshaped its business model. Ruyi Group has tasted the benefits of Broad products, is more optimistic about the future opportunities of the new business model, and is determined to achieve full control.
Broad products is an enterprise engaged in integrated commodity circulation services, mainly engaged in petrochemical, metals, agricultural products and other commodities trade. The company is the core member of Ruyi Group, contributing most of its revenue and profits. Financial data show that from 2012 to 2014, the operating income of Broad property was 36.307 billion yuan, 45.194 billion yuan and 45.637 billion yuan respectively, with a net profit of 69 million yuan, 156 million yuan and 601 million yuan.
What is the new business model? Broad products has been engaged in commodity trade for many years, and is well aware of the commodity trading market, has the customer resources of both commodity traders, and has an information advantage in the commodity industry chain. the information advantage will be transformed into futures self-management and futures financial services, and on this basis to provide multiple financial services for upstream and downstream enterprises. The commodity market is not only an important market for large types of asset allocation, but also an important market for industrial enterprises to hedge. As a veteran trader, Broad products has an important influence in the market. Financial services that participate in this market have unique advantages. Financial transformation has opened up a broad space for the development of the company.
Profits are likely to double in 2016 and EPS is expected to grow by 70 per cent.
After the completion of this transaction, the number of shares in Ruyi Group will increase by about 97 million shares, bringing the total number of shares to 300 million shares.
The natural person shareholders and Zhizheng Investment of the other party jointly promise that the audited net profit attributable to the parent company realized by Broad property in 2015,2016 and 2017 will not be less than 558 million yuan, 646 million yuan and 751 million yuan respectively after deducting the income generated by the matching funds raised.
It is conservatively estimated that the company's net profit will be no less than 600 million yuan in 2017 and 300 million yuan in 2015, and maintain a growth rate of no less than 16% in 2016 and 2018.
Taking into account equity dilution, EPS is expected to grow by 70 per cent (100 per cent) in 2016 and 16 per cent in 2017 and 2018. The EPS from 2016 to 2018 was 2.00,2.32,2.69 yuan respectively. The target price is 100 yuan, corresponding to 50 times PE in 2016.
