100% of Rituoduo's shares were purchased by issuing shares and paying in cash, with a transaction consideration of 700 million yuan
Black Sesame plans to acquire 100% of Rituoduo's shares through a combination of issuing shares and paying cash. The transaction price is 700 million yuan, of which 538 million yuan will be paid by issuing shares (the price of issuing shares is 688 yuan) and 162 million yuan will be paid in cash. At the same time, the company plans to raise no more than 200 million yuan of supporting capital from the non-public offering of shares to no more than 10 specific investors, of which 162 million yuan will be used to pay the cash portion of the Rituoduo transaction.
Lituoduo is an e-commerce distribution service provider with revenue of 597 million in 2016, +213% year on year
Lituoduo's main business is to provide e-commerce distribution services to brands and operates its own online sales platform. Currently, it has online agency rights for domestic and foreign food brands including Guangming, Mengniu, Ferrero, etc. In 2016, Lituo's revenue reached 597 million yuan, an increase of 213% over the previous year; net profit reached 33.34 million yuan, an increase of 209% over the previous year. According to the profit forecast, the valuation level of the transaction is dynamic PS ± 0.60 and dynamic PE 0,10. The transaction comes with performance commitment clauses. Lituoduo's net profit for 2017-2019 was no less than 60 million yuan, 75 million yuan, and 90 million yuan respectively. Under the assumption that the performance promises can be successfully realized, the company's performance flexibility will increase significantly.
Launch an equity incentive plan to further strengthen the cohesiveness of management and technical core teams
The company launched an equity incentive plan for a core team of 94 people, including the president and vice chairman, and plans to grant 20 million stock options to incentive targets, accounting for about 3.1367% of the company's total share capital when the incentive plan was signed. Among them, the exercise price granted for the first time was 803 yuan per share (the average trading price of the company's stock on the trading day before the incentive plan was announced), and starting in 2017, the four consecutive annual performance assessment targets required to meet net profit of 250 million yuan, 275 million yuan, 300 million yuan, and 330 million yuan respectively. We believe this round of equity incentive plans will further strengthen the cohesiveness of the management and technology core teams.
Selling logistics assets while investing in the field of new energy power batteries
The company plans to transfer 100% of the shares in Guangxi Rongzhou Logistics Industrial Park to Guangxi Rongxian Coastal Real Estate Development Co., Ltd., which is owned by the majority shareholder, at a price of 295 million yuan to avoid the potential negative impact of profit pressure brought on logistics business by changes in the policy environment on listed companies. Furthermore, the company invested 300 million yuan to invest 300 million yuan in Tianchen South (holding 30% of the shares), initially laying out the lithium electronic power battery field, broadening the scope of business, and cultivating new potential growth points for the company in the future.
The acquisition brought about channel collaboration, the company's business blossomed more, and maintained the “buy” rating
Black Sesame is a leading brand in paste products. On the one hand, Liduoduo, which has a competitive advantage in the e-commerce field, will help accelerate the company's channel transformation, and on the other hand, it is also expected to diversify the company's product structure. Considering that the acquisition still requires approval from the shareholders' meeting and the Securities Regulatory Commission, we will not include it in our profit forecasts for the time being. It is estimated that Black Sesame's revenue in 2017-2019 will reach 2,931 billion yuan, 3.43 billion yuan and 3.864 billion yuan respectively. EPS is 0.32 yuan, 0.38 yuan and 0.41 billion yuan respectively. Maintain the target price range of 10.85 yuan to 11.78 yuan, and maintain the “buy” rating.
Risk warning: asset acquisitions are advancing at a pace that falls short of expectations; channel integration results are falling short of expectations; food safety issues.