China Holdings announced that Beijing Intel Software, the core arm of the smart city business, has brought in two investors.
The valuation of the deal means that China Holdings' stake in Beijing Intel Software will be worth 6.2 billion yuan, compared with its market capitalization of about HK $10 billion.
As financial institutions and local governments continue to invest in IT, China Holdings (also through holding interests in China Information (000555.CH)) is one of the beneficiaries.
Revaluation of Smart City Business
China Holdings announced yesterday that it and Beijing Intel have reached a capital investment agreement with Changchun Financial Holdings and Changchun Jingyue, according to which Changchun Financial Holdings and Changchun Jingyue have conditionally agreed to subscribe for about 6.45% and 4.84% of Beijing Intel's expanded registered capital at a consideration of 400 million yuan and 300 million yuan, respectively. After the completion of the capital injection, China Holdings's stake in Beijing Intel will be reduced to 71.54%, and Beijing Intel will remain a subsidiary of China Holdings. At present, shareholders of Interrua in Beijing are interested in successfully listing the company by December 31, 2025.
According to the announcement, Beijing Intel is a high-tech enterprise specializing in digital technology, mainly providing big data software products and services to government and enterprise customers, and has been committed to the construction and operation of digital China for a long time to promote the development of digital industry.
Its core product, Yanyun DaaS, won the first prize of national technological invention issued by the State Council at the National Science Award Conference in 2018, and was awarded as the "World Internet leading Scientific and technological Achievement" in the Fifth World Internet Congress in 2018. Beijing Interrui is the core unit of China holding Smart City business, and Yanyun DaaS has been used as part of the smart city solution. According to the unaudited comprehensive financial information of Beijing Intel and its subsidiaries, Beijing Intel's consolidated net asset value as of June 30, 2020 was approximately 312.2 million yuan, and the company's net profit in 2019 was 85.1 million yuan.
Grant put options to new investors
China Holdings and Beijing Intel also reached an agreement on the put options for Changchun Financial Holdings and Changchun Jingyue. If any of the events listed in the agreement occur during the period when the investor is holding a stake in Beijing Intel, Shenzhou Holdings will buy back Beijing Intel shares from Changchun Financial Holdings and Changchun Jingyue according to the put price. The put price is based on an annual return of 6%.
China Holdings (also through holding interests in China Information (000555.CH)) is the beneficiary of continued IT investments by financial institutions and local governments. We believe that Beijing's independent listing of Intel is relatively far away. But the valuation given by investors means that China Holdings' stake in Beijing Intel Software will be worth 6.2 billion yuan, compared with its market capitalization of about 10 billion Hong Kong dollars.
When using asset valuation methods, some investors may use the valuation of Beijing Intel as a benchmark.