The company issued a plan to increase the number of shares, which will raise 1.1 billion yuan per share.
The company issued a plan for a fixed increase of 36.96 million shares at a non-public offering of 30 yuan per share, raising a total of 1.109 billion yuan, of which 580 million yuan is used to buy 10% equity in Zhongwobang, 179 million yuan is used to repay the loan of Jichuan Holdings, 148 million yuan is used to repay bank loans, and 202 million yuan is used to supplement liquidity. The lock-up period of this additional issue is 18 months. After the completion of this rights issue, the company's share capital will increase from 123 million shares to 160 million shares, with a total shareholding ratio of about 23% for new shareholders.
The company also shows that the performance of China Haiwobang has increased significantly in 2019, and the future performance growth is expected.
The company announced its 2019 results, KuaiBao, with annual revenue of 1.54 billion yuan, an increase of 355% over the same period last year, and net profit of 74.01 million yuan, an increase of 1219% over the same period last year. EPS was 0.713 yuan per share, up 693% from the same period last year.
The substantial increase in the company's performance is mainly due to the fact that the company took a controlling stake in Zhongwa Bang after the acquisition of its stake in 2019, and the equity ratio also increased to 48.32%. According to the evaluation report of Zhongwobang, it achieved operating income of 1.225 billion yuan and net profit of 490 million yuan in 2019. The west block of Shilou developed by Zhongwobang is currently in a period of gas growth, and gas sales and profitability are expected to continue to rise in the next two years.
Zhongwobang tight gas is subsidized and the policy supports the development of the industry.
In 2019, the Ministry of Finance issued a supplementary notice on the interim measures for the Administration of Special funds for Renewable Resources Development (Caijian [2019] No. 298), and tight gas incremental gas will be included in the scope of subsidies. Recently, the Shilou West Project has received a total of 90.26 million yuan in tight gas subsidies from the central government, including 18.52 million yuan in 2018 and 71.74 million yuan in 2019. The subsidy will be distributed in accordance with the PSC contract, with 13 per cent of coalbed methane in Petrochina Company Limited and 87 per cent in Zhongwa.
According to the company announcement, the company's gas sales in 2017 and 2018 are 63,700 million square meters respectively, and it is expected that the gas sales volume in 2019 and 2020 will be 9.2 billion square meters and 1.07 billion square meters respectively. With the increase of gas sales volume, the company is expected to continue to receive incremental gas subsidies.
Investment advice: cover for the first time and give recommended rating. We estimate that the return net profit of the company from 2019 to 2021 is 0.74,1.17 and 198 million yuan, corresponding to EPS 0.73,0.95 and 161 million yuan. If the company succeeds in this increase, the company's profitability is expected to be further improved after the increase in the share capital of the company.
Risk tips: falling natural gas prices; policy risks
