Tongfang shares 900 million yuan into the main Zhen Mingli LED lighting expansion pace accelerated

  GLII Comments: Tongfang's LED lighting is mainly in the domestic market, and the contribution from the export market is relatively small, only around 30%. In order to further expand and strengthen the lighting business, Tongfang’s aggressive entry into the overseas market is imperative and urgently needed. However, in major overseas markets such as Europe and the United States, in the face of China’s LED lighting products, “there is no brand”, it is obviously difficult for Tongfang to fight its own channels and brands in a short time, but after the acquisition of Zhen Mingli, It seems easier.  

[High- tech LED reporter / Wang Cairong ] On the evening of March 25, Zhen Mingli (01868.HK) announced that it would allocate 1 billion shares to the subscription party Tsinghua Tongfang Energy Saving Holdings Co., Ltd. (hereinafter referred to as “Tsinghua Tongfang Energy Saving”). After the expansion of the total number of issued shares of 51.6%, the subscriber will subscribe for shares in cash at a price of 0.9 yuan per share, a discount of approximately 50% to the closing price of 1.8 yuan on the last trading day prior to the suspension.

Upon completion of the transaction, the subscribers, affiliates and individuals will hold 52.28% of the shares of Zhen Ming Li, becoming the company's largest shareholder, and the shareholding of the former major shareholder and chairman Fan Banghong and related parties will be diluted from 38.7% to 18.7%; China Environment Fund's shareholding is diluted from 10.3% to 4.99% and will no longer become a major shareholder; other public shareholder holdings will be diluted from 49.53% to 23.99%.

Mr. Zhen Mingli said that after the rights issue, the amount will be 900 million yuan, and the net amount will be about 896.8 million yuan, of which about two-thirds will be used as working capital for the future development of the scale of business in the LED lighting market in China and the world. And expansion to capture the opportunities brought by the rapid growth of the LED market; about one-third of the net amount will be used as potential investment or acquisition opportunities in the future.

Zheng Mingli's shareholding structure change chart before and after being subscribed
Number of shares before subscription Percentage of holdings Number of shares after subscription Percentage of holdings
Tsinghua Tongfang Energy Saving and Related Companies and People 14,000,000 1.49% 1,014,000,000 52.28%
Fan Banghong and related parties 363,366,000 38.68% 363,366,000 18.74%
China Environmental Protection Fund 96,731,000 10.30% 96,731,000 4.99%
Other public shareholders 465,222,694 49.53% 465,222,694 23.99%
total 939,319,694 100.00% 1,939,319,694 100.00%

However, as Tsinghua Tongfang Energy was subscribed at a discount of 50%, the closing price of Zhen Mingli was 1.65 Hong Kong dollars, down 8.33%.

An industry source said that the acquisition of Tongfang shares was really bright, and many people said that they could not understand. From the financial data of Zhen Mingli alone, the short-term benefits that may arise after the acquisition are not optimistic. However, if we compare the successful model of Tongfang’s previous capital operation, Zhen Mingli’s overseas channels, lighting brand assets and laboratory resources will not lose a “fat” for its capital operation.

Lu Zhicheng, chairman of Tongfang's shares, also said in an interview with the media that Zhen Mingli now has an annual income of around 800 million Hong Kong dollars, and the business coverage is exactly what the same party needs.

He believes that Zhen Mingli's performance is not good, mainly because there are some flaws in management in the early stage. This is our strength. Otherwise, the other party will not sell the controlling stake at this price. "Like microelectronics, Zhen Mingli can become the capital operation platform for Tongfang LED lighting. As it is a listed company in Hong Kong, the financing of LED business will be more efficient. The price of Tongfang's acquisition of Zhen Mingli is only 50% of the secondary market, only From the valuation point of view, it is very cost-effective." Lu Zhicheng said.

In fact, Tongfang’s shareholding in just a few months has completed the holding of Zhen Mingli. It may be felt that the LED lighting market will enter a full start-up phase in 2014. Tongfang’s shares may need to take this opportunity to accelerate the LED lighting overseas. The market is especially the layout of patents.

For Tongfang shares, Zhen Mingli started with the brand Christmas lights, and its resources in the overseas market in terms of patents, word of mouth and channels are precisely that it is difficult for Tongfang shares to be established quickly in a short period of time.

However, a source close to Zhen Mingli said that although Zhen Mingli has many subsidiaries or offices in overseas markets, many people have already left, and in terms of overseas channels, Zhen Mingli and agents or distributors The relationship is fragmented and not strong, and its advantages in terms of channels have been basically lost.

Therefore, for the entry of Tongfang shares, the follow-up capital operation and the integration of advantageous resources between the two companies will enable Zhen Mingli to “return to life” and still have to wait for the market to observe.

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