The Shanghai Stock Exchange Asked 6 Questions About The Overvaluation Of The Underlying Assets Of Nanfang Share Purchase.

After receiving a letter of inquiry from the Shanghai Stock Exchange after receiving a letter of inquiry from the Shanghai Stock Exchange, the 51% stake in the acquisition of Qinhuai scenery has disclosed the reply notice on the inquiry letter of the Shanghai Stock Exchange recently, and issued a plan for issuing shares to purchase assets and raising matching funds and related transactions (Revised Version). The company made additional disclosures and explanations on the 6 issues, such as the operation of the bid, the reasonableness of the growth of the valuation, and the feasibility of the performance estimate.

About the acquisition, the reporter called Nanfang shares to ask about the takeover, and the company's stakeholders said they would not accept media coverage.

Contraction trade main industry transformation tourism industry

In June 21st, Nanfang textile issued a notice that it plans to issue additional shares to Confucius Temple Wen brigade with 7.19 yuan / share to purchase 51% stake in Qinhuai scenery, and the transaction price is tentatively set at 272 million yuan. At the same time, the supporting fund for the non-public offering shares of the tourism group of the controlling shareholder of the company is not over 80 million yuan, which is used to supplement the working capital and pay the intermediary fees.

Statistics show that the main business of this acquisition target is to provide tourists with sightseeing tour services in the Qinhuai River waters, while the Qinhuai River, a subsidiary of the controlling group's tourism group, operates in the Qinhuai River, and operates jointly with Wuding Wuding gate, a three km estuary section with a length of about 12.5 kilometers, and Nanjing Yangtze River Binjiang section. The following companies will further integrate the related tourism resources in Nanjing City, which may involve surface tour business.

Less than half a month after the disclosure of the plan, in July 4th, the Shanghai Stock Exchange issued a letter of inquiry concerning the issue of shares purchased by the company and matching funds raised, requiring the company to make further adjustments to the water tour business in the city of Nanjing under the circumstances of the controlling shareholders. If the business consideration of the acquisition of Qinhuai's scenery is in line with the relevant regulations on the independence of the forty-third major asset reorganization management measures of the listed company, a written reply shall be made. In accordance with the requirements, the time for recovery will be before July 11, 2019, and the company's application will be postponed until July 18, 2019.

On the evening of July 17th, the company disclosed the reply letter of the inquiry letter. Because the above 3 companies are engaged in surface tour business in Nanjing, referring to whether their services constitute direct or indirect competition relationship, the company said that the 3 companies' waters and operation lines are different, and the operation waters are not interlinked. There is substantial difference between the services provided by the target company and the the Qinhuai River construction and the cooperative tourism, and it does not constitute direct or indirect competition relationship.

On the other hand, when controlling shareholders will further integrate the water tour business in Nanjing, when the company takes the business consideration of Qinhuai scenery, Nanfang shares in the reply letter said that before the transaction, the main business of the company was import and export trade and domestic trade business. Under the influence of the former market environment and competition situation, the company's profitability is weak, so it is urgent to transform the current severe business situation through transformation. The company's controlling shareholder Tourism Group has been the integrated platform of Nanjing's tourism assets resources by the Nanjing municipal Party committee and the municipal government, while Nanfang shares are the only listed companies under the tourism group. The tourism group will gradually inject all the operating tourism assets resources or operation rights to Nanfang share.

"Based on the current transformation needs and strategic positioning, the company has clearly defined the development strategy of cultural tourism industry transformation." Nanfang shares said that after the completion of the transaction, the scenic water tour business will become one of the main business of the company. At the same time, with the help of the operation experience of sightseeing tour business in the scenic and mature scenic spots of Qinhuai, the company will gradually integrate the sightseeing tour business in Nanjing scenic area and build a business tour of sightseeing tour covering the waters of the main scenic spots in Nanjing.

In the current trade business, the reporter noted that the trade income of Nanfang shares accounted for more than 85% of the company's revenue. In order to promote the transformation of business, the company has gradually disposed of some high-risk, low efficiency and non main businesses before the transaction. The specific measures include comprehensive reform of main business, contraction of the trade business with larger risks, the settlement of trade to subordinate subsidiaries, and transfer of shares of some subsidiaries. Through these measures, the company's revenue has been reduced from 5 billion 166 million yuan in 2013 to 1 billion 12 million yuan in 2018. The company said that the follow-up will be further adjusted and disposed according to the progress of the integration of tourism assets.

Insiders told reporters in an interview with the Securities Daily, "trade is mainly a mode of earning price difference, the internal and external economic downturn, trade frictions intensified, and exchange rate changes have greater impact on Nanfang share business. Now many trade oriented companies are indeed transforming, and the market value of Nanfang textile is less than 2 billion yuan, and transformation does not exclude the possibility of shell resources."

Trading valuation is doubtful.

According to the plan, the benchmark date of assets evaluation of the transaction is April 30, 2019. The estimated value of all the shareholders' equity value is 533 million yuan, the estimated increment rate is 456.94%, and the corresponding assets are valued at 272 million yuan. In April of 2017, the total amount of capital contribution of the Qinhuai scenic shareholder Confucius Temple cruise ship to the rival Confucius temple Confucius temple was 25%, and the total value of the shareholders' equity was 62 million 79 thousand and 600 yuan, and the corresponding assets were valued at 15 million 519 thousand and 900 yuan. Why does the valuation of the two transaction differ greatly?

In response to this, Nanfang stock said in reply to the inquiry letter: first, the evaluation method is different; the previous assessment method is the asset based method and adopted its assessment results. As a result of the Qinhuai scenery as light assets company, the assessment value in 2017 is small, and this assessment selects two methods, namely asset based method and income method, and adopts the evaluation method of the income method. Qinhuai has strong profitability and high valuation value. The two is the different state of the core business elements. In 2017, the target company has not yet obtained the franchise right, the future prospect is not clear, and the evaluation company has obtained the franchise right, and the future prospect is better.

According to the performance pledge, the net profit of Qinhuai scenery from 2019 to 2021 is not less than 48 million 252 thousand and 200 yuan, 51 million 71 thousand and 300 yuan and 60 million 97 thousand and 300 yuan. During the performance commitment period, when the net profit of each year is less than 90% of the corresponding annual net profit, the Confucius Temple brigade should compensate for the difference in proportion to the proportion of shares sold. According to historical performance, the net profit of the target companies in 2017, 2018 and January 2019 -4 was 38 million 905 thousand and 300 yuan, 44 million 235 thousand and 300 yuan and 15 million 484 thousand and 400 yuan respectively. Based on the historical performance, existing capacity and utilization ratio, new capacity plan of the target company, is the performance prediction reasonable?

Regarding this, Nanfang Textile Co., Ltd. said: "the main parameters of this forecast are based on the historical and operational achievements of Qinhuai, taking into account the Qinhuai's scenery and capacity plan, the market environment it faces, the future development prospects and potential, and it is reasonable."

Reporters learned that, in terms of existing capacity and new capacity, when assessing the benchmark date, Qinhuai scenery has 54 kinds of cruise ships. It is expected to add 5 cruise ships by the end of 2020, and will be operational in 2021. In addition, after the lithium battery was rebuilt in 2019, the efficiency of the cruise line of the target company was increased, which could meet the needs of the whole day. During the 2019 and 2020 holidays in Qinhuai, we will continue to tap potential productivity through improving operational efficiency.

It is reported that this transaction is the first step that the company takes to the scenic water tourism business and even the cultural tourism industry transformation and upgrading. When it comes to whether the company plans to set up the main industry, Nanfang shares said: "according to the company's strategic planning, the cultural tourism industry will be the medium and long-term direction of transformation, but taking into account the volume of business and the integration cycle, the company will retain its original business and maintain stable operation within a certain period of time."