Ored backdoor, Southwest Pharmaceutical has hit daily limit for 7 consecutive days

After more than four months of trading suspension, Southwest Pharmaceutical released a reorganization plan for the backdoor listing of Harbin Orade Optoelectronics Technology Co., Ltd. on August 11. It plans to achieve the backdoor listing of Orade Southwest Pharmaceutical through a series of transactions such as major asset replacement, issuance of shares to purchase assets, and share transfers.

　

The reorganization plan disclosed that Southwest Pharmaceutical plans to price all its assets and liabilities (excluding accumulated undistributed profits) at 427 million yuan and exchange them for the equivalent part of the shares held by Zuo Hongbo, one of the actual controllers of Oridian. After the replacement is completed, Southwest Pharmaceutical will issue 498 million shares to all Orred shareholders at 7.42 yuan per share, thereby obtaining 100% of the equity of Orred. The latter's overall estimated value is 4.12 billion yuan.

　

The announcement shows that compared with the book net assets of Oridian’s parent company of 596.3794 million yuan on the base date of April 30, 2014, Oridian’s value has increased nearly 6 times. Industry insiders said that this is equivalent to a price-to-earnings ratio of more than 50 times at the end of 2013, and a premium of 6 times in terms of net assets. There is still a question mark as to whether the valuation is reasonable.

　

Such a high valuation may be related to the "market prospects" of Oridian's sapphire production being good. Sapphire products are considered the material of choice for next-generation mobile phone screens. It is reported that Southwest Pharmaceutical raised another 1.03 billion yuan at a base price of 7.42 yuan per share, and the amount raised did not exceed 25% of the total transaction amount for related sapphire projects. After the reorganization is completed, Southwest Pharmaceutical will transform into a sapphire crystal material supplier.

　

The value of Yongjin’s stock holdings increased 25 times

　

Orade’s successful backdoor listing has benefited the institutions lurking in it. The transaction plan shows that Orred currently has 35 natural person shareholders and 12 investment institutional shareholders. Among them, Shanghai Xianghe and Shanghai Hongcheng are both companies under the "Yongjin Group", and each hold 9.02% and 16.07% of Orred's shares. Their respective values ​​are 370 million and 660 million yuan, totaling 1.03 billion yuan.

　

When the concept of sapphire became popular, the price of Ored also increased. According to the announcement issued by Taiji Medicine, on April 30, 2014, the estimated value of 100% equity of Orred was 4.12 billion yuan, the book net asset value of the parent company was 596 million yuan, the estimated value-added was as high as 3.52 billion yuan, and the estimated value-added rate was 590.84%.

　

Behind the high premium is a capital feast for Orred’s 33 shareholders and 12 institutions. If the issuance is successfully completed, the total equity value of 16.07% and 9.02% held by the two Yongjin companies lurking in Orred, Shanghai Hongcheng and Shanghai Xianghe, will be as high as 1 billion yuan. If compared with its initial investment of 26.52 million yuan and 14.89 million yuan, each has increased nearly 25 times.

　

The popularity of the sapphire concept stems from market rumors. It is reported that ORG’s (21.44, -0.16, -0.74%) sapphire products are considered to be the preferred material for next-generation mobile phone screens and have good market prospects. It is reported that the new generation of iPhone network will be launched next month, but it is unclear whether Apple will use sapphire products. Analysts from TrendForce said that they have not yet seen any supply chain orders for sapphire glass from Apple, which indicates that Apple may still use the existing Corning Gorilla Glass panel on the iPhone 6.

　

As a new product, the market prospects of sapphire are full of great uncertainties. In 2012, Ored's operating income increased by 89.14% year-on-year, but its net profit fell by 57.22% year-on-year to 17.5019 million yuan. Allred said this was due to significant price cuts on the product. As the demand for sapphire crystal materials in the LED substrate industry did not grow as expected and the increase in demand was smaller than the increase in sapphire supply, the sapphire market price continued to decline in 2012.

　

Although the price of sapphire fluctuates greatly, the industry still has high expectations for this new product. Qilu Securities analyst Zhang Jun said that after a series of expansions in 2014, Ored's production scale has reached 2.5 million mm/month and will reach 5.5 million mm/month by the end of the year. In addition, on August 1, 2014, Orred started construction of a sapphire window material project with a total investment of 1.56 billion yuan in Qitaihe, Heilongjiang. 950 sapphire growth furnaces were invested in the two phases of the project. After completion, the production capacity will reach 9.5 million mm/month.