Optimistic about synergy effects and pay attention to transaction consideration
On the evening of May 14, 2024, the company announced plans to issue shares to purchase assets and raise supporting capital and related transactions. Trading of A-shares resumed on May 15. At present, the total consideration for the transaction to issue shares to acquire Minsheng Securities has not been confirmed. The plan clearly states that the issue price of the shares in this restructuring is 11.31 yuan/share, which is 8% higher than the current price, and that the supporting fixed capital increase will not exceed 2 billion yuan to develop the Minsheng Securities business. In March 2023, the League of Nations Development Group competed for 30.3% of Minsheng Securities's shares with 1.98 times PB. Considering changes in the regulatory environment and market environment, it is concerned about the valuation of this transaction. While the A-share trading of Guolian Securities was suspended, its H shares (1456.HK) rose 51% over 12 trading days. We are optimistic about the synergy of the company's acquisition of Minsheng Securities and maintain the company's 2024-2026 net profit forecast of 80/9.8/1.19 billion yuan, corresponding to the 2024-2026 EPS of 0.3/0.3/0.4 yuan, respectively. The current stock price corresponds to 1.7/1.6/1.5 times PB, maintaining a “buy” rating.
Issuing shares to purchase assets: The total consideration for the transaction has not yet been determined, and the issue price is 8% higher than the current price (1) Plan: Guolian Securities plans to purchase 100.00% of their total shares in Minsheng Securities from 46 counterparties, including the League of Nations Group and Fengquanyu, by issuing A-shares, and raise supporting capital. (2) Transaction price:
The audit and evaluation of Minsheng Securities has not yet been completed, and the underlying asset evaluation results and transaction price have not yet been determined. The calculation method for the number of shares issued to purchase assets in this issue is: number of shares issued to each counterparty = transaction consideration paid to each counterparty in the form of issued shares/current issue price, total number of shares issued = sum of the number of shares issued to each trading partner. (3) Number of shares issued and issue price: Since the transaction price has not yet been determined, the number of shares issued has not been determined. According to the relevant provisions of the “Administrative Measures on Major Asset Restructuring of Listed Companies”, the price of shares issued by a company must not be lower than 80% of the market reference price; the market reference price is one of the average trading prices for the previous 20/60/120 trading days. The price of shares negotiated by the parties is 11.31 yuan/share, which is 8% higher than the latest closing price, corresponding 1.79 times the company's PB (LF) (current price PB-LF is 1.65 times). Higher pricing reduces the degree of dilution of the original shareholders' shares to a certain extent.
Raise supporting capital: Raise no more than 2 billion yuan in fixed capital to develop Minsheng Securities business (1) Fixed increase scale: The total amount of supporting capital raised shall not exceed RMB 2 billion, and the number of A-shares issued shall not exceed 250 million. (2) Fixed increase price: The fixed increase price has not been determined, but it is not less than 80% of the average stock trading price for 20 trading days before the pricing benchmark for raising supporting capital, and not less than the net assets per share of common shareholders of the parent company that have been audited in the most recent phase of the company before this issuance. (3) Purpose: The capital raised was used to develop the Minsheng Securities business.
Risk warning: The progress and results of the integration are uncertain.