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Digital China Group:Private Placement Plan Demonstrated Confidence,Buy Yunke to Step into Cloud Service

发布时间:2016-06-28    研究机构:兴业证券

Company Profilel

Digital China Holdings was focused on the building of a complete IT service value chain providingend‐to‐end integrated IT services and became China’s largest integrated IT services provider.

Event

Digital China Group Co., Ltd. is going to privately offer no more than 26.64 million shares to raiseCNY 419.1 million to pay bank loans. The Company also establishes its ESOP. And Digital China(51%) and Mr. Guo, controlling shareholder of the Company, spend CNY 10.73 million purchasing100% stakes in Yunke.

Investment Highlights

New investment flowing in through private placement is expected to help the Company save CNY15.7 million interest expense of (after tax) every year. Long lock‐up period (3 years), low offeringprice (CNY15.73/share) relative to market price and high proportion of internal staff subscriptionindicate the management’s confidence in the future.

1466 employees of the Company contributed CNY 297 million (CNY 200 thousand per person) tothe ESOP which will be used to buy the newly‐issued shares. These shares can’t be traded on themarket until two years later per Chinese law. We believe Digital China may enjoy long‐term risewith the strong incentive provided.

Yunke operates a cloud service platform to supply Iaas, Paas and Saas products to enterprises. Ithas reached consensus with giant IT companies (IBM, Microsoft, Cisco and Software AG)worldwide to play together in the field, presenting strong growth potential.l

Earning forecast and investment recommendation: We made EPS forecast for the Company atCNY0.62 in 2016, CNY0.67 in 2017 and CNY0.73 in 2018. Reiterate OUTPERFORM.

Potential risks: transformation generated worse‐than‐expected results, intensified competition,fluctuating exchange rate.

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