On February 13, 2018, Riscom Group (01679) issued an announcement of convertible bonds, but the importance of this announcement was submerged in the vast ocean of Hong Kong stock announcements that day.

In this announcement, Riscom Group will issue convertible bonds with a total principal of HK $100 million (equivalent in the following units) to Dongxing Securities (Hong Kong) Financial Holdings (hereinafter referred to as "Dongxing Securities (Hong Kong)"). With an interest rate of 6% per annum, the company intends to settle part of the consideration for the proposed acquisition under the Sale and purchase Agreement and the Supplementary Agreement.

In this announcement, there are two points worth paying attention to:

a. Dongxing Securities (Hong Kong) fully subscribed for 100 million convertible bonds. Prior to this, Dongxing Securities (Hong Kong) already holds a 5.55% stake in Riscom Group and is its major shareholder.

b. The main body of the company that Riskang used to acquire nearly 100 million yuan (note: after deducting expenses, the net proceeds is about 99.15 million yuan) is in fact Beijing Hongteng Weitong Technology Co., Ltd. (hereinafter referred to as "HongtenWeitong"). Prior to this, on December 1 and December 28, 2017, Riscom issued two consecutive announcements in a month, mentioning the acquisition of Hongteng Weitong.

If you analyze it carefully, this is an interesting story: Dongxing Securities, as a major shareholder, spared 100 million yuan to support Riscom for this acquisition, what is the origin of Hongteng Weitong, and can it save the performance that Riscom began to decline?

Of particular concern is that Hongteng Weitong's net profit after tax in 2015 and 2016 was 11.625 million yuan and 11.42 million yuan respectively, and it even gave a guaranteed profit of 50 million yuan in 2018, which increased more than fourfold.

Zhitong Financial APP found that Hongteng Weitong mainly uses its own technology and intellectual property rights to design and implement industrial automation systems and production management for different industries. Behind the main partners are Petrochina Company Limited, China Petroleum & Chemical Corp, CNOOC, including the "three barrels of oil", and the State Grid and other central energy giants.

With the acceleration of digitization, informationization and the Internet of things in China's central energy enterprises, this is the root cause of the sharp increase in the performance of Hongteng Weitong, a service provider for intelligent energy system integration, and the main reason for Dongxing Securities' heavy bets.

Few people know about Hong Teng Weitong.

Following two announcements in December 2017, Riscom issued three additional announcements on January 3, January 10 and February 12, 2018, all related to the acquisition of the entire share capital of Hongteng Weitong.

Under the proposal, the total purchase amount is HK $500m, of which HK $100m is paid in cash and the remaining HK $400m is in the form of acceptance notes with a coupon of 8 per cent.

That's not the point.

According to the data, Riscom's net profit in 2016 was 66.289 million yuan, and it has announced that net profit will decline in 2017. Taking into account Hongteng Weitong's guaranteed profit of 50 million yuan in 2018, the acquisition of Hongteng Weitong is equivalent to adding another Riskang.

So how did Hongteng Weitong achieve it, rising from just over 10 million yuan in 2016 to 50 million yuan in 2018?

Data show that Hongteng Weitong was founded in 2010 to start with the design and engineering implementation of automatic control systems in energy industries, such as petrochemical, electric power, metallurgy, municipal and other industries. After seven years of development, it has become a new generation of enterprises integrating traditional industrial automation system, equipment integrity management, production management system (MES), intelligent distribution and VOCs management.

Data search found that Hongteng Weitong's current customers are mainly central energy companies, including "three barrels of oil", State Grid, Datang Electric Power, etc., which mainly provide customers with three types of services: production management system (MES), asset integrity equipment management system (MSI), VOC comprehensive management of volatile organic compounds.

Take Petrochina Company Limited as an example, it has been deeply bound with the business of various sectors of Petrochina Company Limited, it is: Petrochina Company Limited project information platform system integrator, Petrochina Company Limited refining chemical network integrated solution provider, Petrochina Company Limited sales Internet of things only solution provider, Petrochina Company Limited oil field Internet of things solution provider, Petrochina Company Limited natural gas pipeline Internet of things system solution provider.

Not only with Petrochina Company Limited, but also because of his achievements in the field of the Internet of things, Hongteng Weitong has been granted authorization and strategic cooperation services from several Fortune 500 companies: petrochemical exclusive authorization for condition monitoring of large GE units in the United States in 2016; authorization for Oracle Corp PetroChina and State Grid in 2017; and general petrochemical system integrator in PSI China in 2017, and cooperated with Beidou Petrochemical Corporation.

Looking at the development process of Hongteng Weitong from 2010 to 2017, it is in fact the growth history of an enterprise from selling Internet of things, refining Internet of things, engineering Internet of things, oil field Internet of things, to intelligent energy system integration.

Such a process is also closely related to the process of building "digital oilfields" and "intelligent oilfields" in Petrochina & Johnson chemical industry.

The petrochemical industry is a high-tech-intensive industry, and the effect of information implementation affects the competitiveness of the whole industry to a great extent. In 2010, the first domestic intelligent oilfield project was launched in Xinjiang oilfield, marking the beginning of the intelligent era of domestic oilfields.

Take China Petroleum & Chemical Corp as an example, he put forward the goal of transition to intelligence as early as 2011. After several years of construction, by 2016, its pilot projects such as Zhenhai, Jiujiang, Maoming and Yanshan have successfully realized version 1.0 of intelligent factories. it has been comprehensively improved in productivity, automatic collection rate, safety, environmental protection, energy optimization, big data application, prediction and alarm. Among them, Zhenhai Refining and Chemical Industry and Jiujiang Petrochemical are listed as national intelligent manufacturing demonstration enterprises respectively.

For Petrochina Company Limited, its oil and gas production Internet of things system (A11) has been piloted in Daqing, Tarim, Xinjiang and other oil and gas companies, realizing the dynamic management of production operation, and significantly improving economic benefits and production efficiency. At present, Petrochina Company Limited is building an engineering technology Internet of things system (A12), which will comprehensively enhance the core competitiveness and service capability of engineering technology.

Taking time as the mark of history, Hongteng Weitong participated in all stages of the intelligent process of Petrochina chemical industry: in 2010, he undertook Petrochina Company Limited's first corrosion detection project; in 2010, he signed a contract with Petrochina Company Limited for first and second matching; in 2015, the first phase of the project passed the acceptance; in 2016, Petrochina Company Limited sold the Internet of things platform foundation; in 2012, he undertook the integration of Petrochina Company Limited's refining and chemical corrosion inspection, corrosion detection and safety hidden trouble management system. In 2014, Petrochina Company Limited safety corrosion monitoring platform was established, and 80% of Petrochina Company Limited's corrosion testing was carried out; in 2016, the first VOC project in Karamay was won; in 2017, Petrochina Company Limited invited bids for the refinery Internet of things, and won an oil field Internet of things project.

And if 2010-2016 is the first stage of the development of China's smart oilfields, with the recovery of the global petrochemical industry in 2017, it will be the second and explosive stage of China's smart oilfields from 2017. This is the strength of Hongteng Weitong's development.

Bet on Dongxing Securities

Prior to the acquisition of Riscom, Riskang Group was mainly engaged in the research and development, production and sales of power line carrier products, which is the second runner-up in the field of power line carrier communication products in China, and its assembly and production base is located in Yantian, Shenzhen.

Power line carrier communication is mainly used for the construction and upgrading of automatic meter reading system. More than 95% of the income of Riscom Group comes from automatic meter reading business, and the procurement of State Grid contributes more than 80% of its business income. However, the power line carrier communication products are mainly Zitong meters, and the growth rate of the industry may also slow sharply as the permeability of smart meters tends to be saturated.

In 2015, Riscom's revenue and net profit grew by about 50%. By 2016, the company's revenue grew by only 14% compared with the same period last year, and the net profit growth rate plummeted to 6.6%.

However, after the merger and acquisition of Hongteng Weitong, this situation may be significantly changed, and the two can develop in coordination.

In the view of Zhitong Financial APP, Riscom's strength lies in the data transmission of cable carriers; Hongteng Weitong is better than data collection, classification, integration, intensification and control. Smart oil field is not suitable for the establishment of wireless transmission of base stations, with cable as the main body, Hongteng Weitong has a close cooperative relationship with three barrels of oil, so Riskang can be regarded as one of the solutions.

Take Petrochina Company Limited, which has the best cooperative relationship with Hongteng Weitong, as an example. Its 28 refining and chemical bases, 14 oil fields and more than 100 oil production are all facing the huge demand for digitization. This is a good opportunity for Rhys.

At present, a new generation of information technology such as the Internet of things, big data and cloud computing is in the ascendant, which has a profound impact on the oil industry, and the intelligent oil field has just started. The forward-looking Industrial Research Institute predicts that the investment scale of Petrochina information industry will reach 36.19 billion yuan in 2018, and will continue to increase rapidly.

On the other hand, Dongxing Securities (Hong Kong) can also provide financial and international support for the coordination of the two. Dongxing Securities was established in 2008, the main sponsor is China Oriental Asset Management Co., Ltd., one of the four major asset management companies in China, with a registered capital of 2.758 billion yuan. Dongxing Securities (Hong Kong) was established in July 2015 with a registered capital of HK $300 million.

As the parent company's Oriental assets, its total assets exceeded 800 billion yuan in 2016, with 25 branches and 1 operation department in the central city of China, managing and disposing of all kinds of non-performing assets totaling more than one trillion yuan, and accumulating profound energy industry resources. it can also help Riskang and Hongteng Weitong.

At the same time, the oil field development, logistics and transportation, refining and chemical processing and sales terminals in the oil industry chain all need financial services as an assistant, and there is even the possibility of spin-off and listing of some energy plate businesses. and these two items are valued by Dongxing Securities.

Dongxing Securities also has a unique vision. It does not sell much in the Hong Kong stock market, but it has many wonderful strokes. Take Rongxin China (3301) as an example, it has undertaken the company's refinancing business for many times, and its share price has also performed extremely well, more than doubling from RMB5.60 in January 2017 to RMB12.20 on Feb. 15.

Can Riskang repeat the same story as Rongxin China?