Our reporter Fang Li/wen
On April 3, Wansheng (603010.SH) issued a revised draft of the acquisition plan, which stated that it plans to acquire 100% equity of Zhixin Zhiben with 3.007 billion yuan, all of which will be paid in the form of shares issued.
The earliest date of the acquisition can be traced back to May 26, 2017. On the same day, Wansheng Co., Ltd. issued the acquisition plan and issued a revised draft on July 20, 2017. The transaction price of the underlying asset was tentatively set at 3.75 billion yuan. After 11 months, the purchase price of the company has dropped by more than 20%.
Cross-sector acquisition of loss-making assets
According to Wind Information, Wansheng was originally engaged in the R&D, production and sales of organophosphorus flame retardants. The main products include polyurethane flame retardants (polyurethane soft foam flame retardants and polyurethane rigid foam flame retardants), and engineering plastics flame retardants. There are more than 20 categories of agents, including two major categories, which are mainly used in aerospace, automotive, electronics, construction, furniture, etc., and have added special fatty amine business and polymer polyol business. In October 2014, Wansheng shares successfully landed. The A-share market has maintained rapid growth for several years. In 2016, Wansheng had a revenue of RMB 1,211 million, of which fire-retardant income was RMB 804 million, specialty fatty amine revenue was RMB 292 million, and polymer polyol revenue was RMB 111 million. It can be seen that the flame retardant business is Wansheng's largest income.
The company that is the subject of this transaction is a specialized integrated circuit design company that specializes in the design and sale of high-performance digital-analog hybrid multimedia chips. After years of focused development and development, the company’s high-speed, low-power images and data Transmission and conversion technology has reached the industry-leading level, its high-performance digital-analog hybrid multimedia chip has a strong competitive advantage in the market, has become one of the major international high-performance digital-analog hybrid multimedia chip provider.
After the completion of this merger, Wansheng shares will be changed to fire-retardant research and development, production, sales and high-performance digital-analog hybrid chip design, sales for the two main companies.
The operations of Wansheng Co., Ltd. are completely different from the underlying business. Before this acquisition, Wansheng Co., Ltd. has never entered this field.
Why should Wansheng Co., Ltd. purchase a cross-industry company that is currently losing money at a price of RMB 3 billion for a new area? Is this acquisition really worth the money?
Shixin Zhizhi was established on September 28, 2016. It is an acquisition entity established specifically for the acquisition of Silicon Valley Digital Assets. The underlying asset is a 100% stake in Digital Model, held by Shanhai Semiconductor Ltd. (Cayman). Zhiben did not substantially carry out other business operations. As of the assessment date, the book value of the total assets and net assets of the Zhixin Zhiben (parent company) was 3.301 billion yuan, and the assessed value was 3.007 billion yuan. The amount of impairment was both 2.93 billion yuan, with an impaired rate of 8.90%.
The company's Silicon Valley digital model was established in March 2002. It is incorporated in Delaware, USA, and is mainly engaged in display panel timing controllers, mobile high-definition product chips and other services.
According to the draft revised version, from January to September 2017, the core revenue of Zhixin was RMB 317 million, and the net profit was RMB -3.88 billion.
In the digital income structure of Silicon Valley, China's mainland accounted for only 7.21%, and the rest of the income came from abroad. Among them, South Korea accounted for the highest proportion, from January to September 2017, accounting for 71.88%.
According to the audited consolidated pro forma financial statement, in 2016, the core revenue of Zhixin Zhiben was 535 million yuan, and the net profit loss was -7.77 billion yuan. Is such a company really worth 3 billion yuan?
In the Revised Draft of Wansheng Co., Ltd., the company introduced it in this way: 'The target company is an integrated circuit design company that specializes in the design and sale of high-performance digital-analog hybrid multimedia chips', but the reporter of the "Securities Market Weekly" published the report. According to the Zhiben income structure, from January to September 2017, the total revenue of Zhixin Zhiben was 317 million yuan, of which display panel timing controller revenue was 193 million yuan, accounting for 60.88%; Mobile HD product (chip) revenue Only 81.49 million yuan, accounting for 25.7%; Technology IP license revenue 41.59 million yuan, accounting for 13.11%; Supporting product income is 950,000 yuan. From the above data, the display panel timing controller is the largest piece of the core The business, that is, the core technology Zhiming is a display panel timing controller based, chip-assisted companies, and according to related companies, listed companies, display panel timing controller is a valley of digital analog chip products.
In the revised draft, Wansheng shares have repeatedly emphasized the highlights of the current chip business of Zhixin Zhiben. However, the data show that the digital model of Silicon Valley was established in 2002 until January-September 2017, and mobile HD products (chip business) Income is only 81.49 million yuan.
By comparing with other listed companies, it can be seen that the pace of development of Zhixin Zhiben is rather slow. Zhaoyi Innovation was established in 2005. In 2017, the company’s storage chip revenue reached 1.715 billion yuan; Guoke Micro (300672.SZ) was founded in 2008. In September, 2016, various chip revenues exceeded 400 million yuan.
Although these companies are in different chip areas, Silicon Digital’s development in the chip business has not grown for many years.
In the longitudinal direction, the development of Zhixin Zhizhi in the past three years is also quite slow. The revenues for 2015-2016 and January-September 2017 were 466 million yuan, 535 million yuan, and 317 million yuan respectively. The growth rate was not high; Profits were -2.16 billion yuan, -7.77 billion yuan, - 638 million yuan, and the losses were serious. From the perspective of operating conditions, the core technology is not optimistic, and it is always at a loss.
What's worse is that the main product of Zhixin Zhiben is the commercial model of sales, but the inventory has risen from 41.13 million yuan at the end of 2016 to 83.35 million yuan at the end of September 2017.
Under the slow growth of income, the inventory of the Zhixin Zhiben has been rising, the loss has been increasing, and the cash flow does not seem to have significantly improved.
These signals indicate that the current operating status of Zhixin Zhiben is not only not optimistic but seems to be at the most difficult stage.
Moreover, the target company also has the situation of over-reliance on large customers. Wansheng Co. disclosed in the revised draft that the largest customer of Zhixin Zhiben is LG, and sales of the largest customer, LG, from January to September 2017 It was 173 million yuan, accounting for 54.68%. However, the development of LG in recent years was not optimistic. In the first quarter of 2017, the sales volume of color TV brands released by China Yikang showed that LG TV has fallen out of the top 10. China is the world One of the largest color TV markets, and the fact that the core of the company’s core technology accounted for less than 10% of the revenue in mainland China, it seems to indicate that the current subsidiary product, mobile high-definition business and display panel timing controller business is not at the customer’s core. The first camp, the competitiveness of the company's main products is worrying.
Looking at the company's business, the display panel timing controller business is dominated by mass production, the number of players is large, the market competition is fierce, the technology of the display port chip business advances rapidly, and the product update rate is high. If the future can not continue to develop better products The increase in market competition is likely to lead to a decrease in the profit margin of the display interface chip business of Zhiye Zhizhi. Therefore, the core business of Zhixin Zhizhi is very uncertain.
Under such circumstances, the revised draft has given extremely optimistic expectations for the future. According to the revised draft, the revenue of the digital model in Silicon Valley is estimated to be US$134 million, US$201 million, US$254 million, respectively, in 2018-2020. The party promised that the net profits realized by the target assets in 2018, 2019, and 2020 should be no less than 130 million yuan, 267 million yuan and 372 million yuan, respectively.
Compared with the revised draft of the acquisition plan released in July 2017, this profit commitment has dropped a lot. At that time, the transaction partner promised that the net profit of the target assets in 2017-2020 would be 110 million yuan, 221 million yuan, 334 million yuan respectively. Yuan and 464 million yuan. Compared with July 2017, the promised net profit disclosed in the revised draft has dropped by more than 20%.
In this regard, the relevant person in charge of the listed company told the reporter of the “Securities Market Weekly” that after adjusting for the difference in accounting treatment between China and the United States of the preferred stock, the target company was assigned to the parent company's owner from 2015 to 2016 and from January to September in 2017. The net profits were -62.97 million yuan, 73 million yuan, and -310 million yuan respectively. The losses have narrowed. After the counterparty's IC industry investment fund becomes a 6.13% shareholder of the listed company, it will produce the target company. Business and market development play an active role.
Does the customer really exist?
The company’s main products and businesses include mobile high-definition products, display panel timing controllers (TCON), IP licensing, etc. Its product application areas include smart phones, tablet PCs, notebook computers, LCD monitors, VR/AR display devices and other consumer products. Electronic products, involving many downstream industries.
According to the revised draft, the target company's display panel timing controller products are currently mainly used in notebook computer screens, LCD monitors and tablet computer screens, with ultra-high resolution support, low power consumption, and its main customers include high-definition Leading suppliers of LCD panels, such as LG, Samsung, etc.
In the VR image signal transmission and transformation chip business, the main customers of the target company VR image signal transmission and conversion chip include Microsoft, Huawei, Oculus, Magic Leap, HTC, etc.
However, the “Securities Market Weekly” reporter looked at the top five customer data and found that from 2015 to 2016 and January to September 2017, the percentage of the top five customers of the subject company was 95.71%, 94.35%, and 94.89%, respectively. The company did not disclose specific details. The customer name is just replaced with customer one, customer two, customer three.
From January to September 2017, the target company's sales to the largest customer amounted to RMB 173 million, accounting for 54.68%. The draft revised note states that 'customer one' is LG. This is not only doubtful if With major customers such as Microsoft, Huawei, Oculus, Magic Leap, HTC, LG, Samsung, Microsoft, and Huawei, why did the company not disclose specific customer names? If there are many large customers, why are the top five customers so concentrated? Can not help but question the company's claims that these customers really exist?
In response, the above-mentioned person in charge indicated that the target company's industry customers are more sensitive and therefore it is not convenient to disclose the specific customer names.