Description of the event
On the evening of May 14, 2024, the company announced a major asset restructuring plan. It plans to issue A-shares to purchase 100% of Minsheng Securities held by 46 entities including Guolian Group and Shanghai Fengquanyu Enterprise Management Co., Ltd., and raise no more than 2 billion yuan (including capital) of supporting capital. Trading of A-shares resumed on May 15.
Analytical judgment:
100% equity acquisition is expected to facilitate subsequent integration
Earlier, on April 25, the company announced a preliminary plan for Guolian Securities to acquire a total of 10.87 billion shares of Minsheng Securities held by 45 counterparties such as Wuxi Guolian Development (Group) Co., Ltd. by issuing A shares to purchase assets, accounting for 95.48% of the total share capital. According to the latest announcement, a 100% acquisition intention has been reached with 46 shareholders including the League of Nations Group. Compared with the previous 95.48% share acquisition plan, the 100% acquisition will facilitate subsequent integration; the restructuring method is to purchase assets by League of A shares, and the share issuance price is 11.31 yuan (the stock price was 10.46 yuan before suspension of trading, which was 8% higher), but the transaction consideration has not yet been determined; the supporting capital raised will not exceed 2 billion yuan, and no more than 250 million shares will be issued.
This transaction helps Guolian Securities to achieve leapfrog development
1) Helping the integration of Guolian Securities into a platform for collaborative development between Wuxi and Shanghai, it is another major step for Wuxi to integrate into the Yangtze River Delta integration strategy; 2) Helping Guolian Securities achieve leapfrog development; 3) Achieve complementary advantages in terms of business and geography: Minsheng Securities has outstanding investment banking strength, and also has strong advantages in institutional research and sales business, equity investment business, etc.; and Guolian Securities has distinct characteristics and advantages in wealth management, fund investment, asset securitization, and derivatives business. In terms of regional advantages, Minsheng Securities branch outlets focus on covering the Henan region, and Guolian Securities has a high market share in Wuxi and southern Jiangsu. For specific data, refer to our external report “Guolian Securities (601456.SH): Regulatory Approval of the League of Nations Reviews as the Major Shareholder of People's Livelihood and Optimism about the Prospects for the Integration of People's Livelihood by the League of Nations”.
Follow up on transaction consideration
In March 2023, Guolian Development Group won a 30.3% share in Minsheng Securities at a price of 1.98 times PB. The consideration for this transaction has not yet been determined.
Investment advice
While the A-share trading of Guolian Securities was suspended, its H shares (1456.HK) rose 51% over 12 trading days. In view of changes in the market environment, we adjusted the company's 24-25 revenue forecast of 41.25/4.887 billion yuan to 36.94/4.270 billion yuan, and increased the 26-year forecast to 5.287 billion yuan, adjusted the 24-25 EPS forecast of 0.38/0.46 yuan to 0.28/0.34 yuan, and increased the 25-year forecast value of 0.41 yuan to correspond to the closing price of 10.46 yuan/share on May 14, 2024. PB was 1.64/1.59/1.56 times 1.56 times, respectively, maintained The company “gained” the rating.
Risk warning
The progress of the restructuring fell short of expectations; the equity and bond market fluctuated sharply and the income from proprietary investment declined; market transactions shrank; management rates were drastically raised due to competition for talent in the industry; in November '20, the company was issued a warning letter by the Securities Regulatory Commission due to problems in major asset restructuring.