Incident description
On September 11, 2017, Cultural Investment Holdings issued the “Notice on the Progress of Major Asset Restructurings”, announcing that the specific target of suspension of trading on July 5 due to major asset restructuring plans was Hairun Film and Television Production Co., Ltd.
The transaction method for this major asset restructuring is to issue shares and pay cash to purchase shares in the target company and raise supporting capital.
Incident reviews
State-owned holding platforms entered the entertainment market, pioneering movies and games: Cultural Investment Holdings was founded by its parent company, Beijing Cultural Resources Holdings Co., Ltd. in 2014, after acquiring a number of high-quality assets in the cultural media field after the case of ST Songliao. Currently, the main operating entities are Yaolai Cinemas and Duplay Network. The company is mainly engaged in the two major business segments of film, television and gaming, and has expanded its theatrical business through recent investments and acquisitions. Currently, the film and television sector mainly includes cinema operations, film and television investment, production and distribution, and entertainment brokerage; the game sector's main business includes R&D, distribution and platform operation of web games and mobile online games. Since the company completed the restructuring in 2015, its performance has maintained a high growth trend, with sufficient cash.
Hairun Film and Television failed behind the scenes two years ago, with a valuation of over 2.5 billion dollars: Hairun Film and Television is one of the earliest and largest private TV series production companies in China. Representative works include “An Affair of Snow and the Moon”, “Never Quiet Eyes”, “Yu Guanyin”, “Bright Sword”, “Kitakami Guang Doesn't Believe in Tears”, and “Rouge”. The company's official website shows that its artists include Zhao Liying, Gao Yunxiang, etc. The company's shareholders include celebrities such as Sun Li and Lian Yiming. Introduction Shareholders also include Huayi Brothers, Mango Media, etc. In June 2014, Shenke Co., Ltd. announced a restructuring plan. Hairun Film and Television went public behind the scenes at a price of 2,522 million yuan, but in the end, the restructuring failed due to differences of opinion between the two parties.
To fill the gap in the business, you may be able to get on the Internet Drama Express: As a holding enterprise, Cultural Investment Holdings is mainly operated by its wholly-owned subsidiaries. In the field of film and television business, the company's core business used to be movie theaters and movie investment, but the TV drama business has not yet started. However, through the high standards of TV drama production around the world in the past two years, the trend of high-quality and cinematographic adaptation of online dramas has also been shown domestically. The company can effectively cope with the negative impact of changes in viewing channels on traditional entertainment channels such as television and cinema channels by distributing series through the Internet. However, the trend of top filmmakers from around the world making TV/online dramas has also entered China, and companies can also make effective use of the resources of their first-line filmmakers through series filming. Hairun Film and Television's high-quality TV drama production resources and star reserves will give the company a great advantage in developing TV series and online dramas.
Profit forecasts and investment suggestions: We believe that the company's industry position, profit scale and market influence will gradually surpass some established film and television companies. The company's position as an emerging leader in the film industry is being established. As a result, the company has long-term investment value.
Since it is still in the acquisition verification stage, we do not consider future mergers and acquisitions effects. The net profit attributable to the company in 2017-2019 is estimated to be 784 million yuan, 1,158 million yuan, and 1,556 million yuan respectively, with year-on-year growth rates of 30.35%, 47.73%, and 34.42% respectively. Earnings per share were $0.48, $0.70, and $0.94 respectively.
Referring to the valuation levels of companies in the film and television sector and the mobile internet sector, the company was given 52.50 times PE in 2017. Corresponding to market capitalization, the target price for 12 months was 25.2 yuan. Based on the company's current stock price, it was given an “increase in holdings” rating.
Risks indicate post-merger performance such as expectations; major changes in national policies have occurred.