On 16 Feb., 2016, Guizhou Chitianhua Co.,
Ltd. (Guizhou Chitianhua) announced that it was promoting the process of the
major reorganization of assets. And gradual progress has been made in the
related audit, evaluation, etc.
According to CCM research, the major
reorganization of assets which mentioned by Guizhou Chitianhua: acquire 100% of
equity from Salvage Capital Group through private placement and raise
counterpart funds (Guizhou Chitianhua will issue 462,093,000 shares at a price
of USD0.66 (RMB4.30) per share to no more than 10 specific parties to raise a
fund of less than USD303.64 million (RMB1.99 billion)).
These funds will be used into:
Building project of Guizhou Guanshanhu
Cancer Hospital
Building project of Guizhou Shengjitang
Diabetes Hospital
Pay off the bank loan of Guizhou Chitianhua
and its subsidiary corporation
About target corporation
Salvage Capital Group was set up in 1996.
Its main businesses are the R&D, production and sale of antidiabetic
agents. Its main productions include health products, granules, tablets,
capsule, tincture, soft-bag injection, small does injection, powder, film, drug
substance, blood glucose meter, etc.
The reason why Guizhou Chitianhua
energetically promotes the process of reorganization is that it needs strategic
transformation based on the existing business.
The original business of Guizhou Chitianhua
is about fertilizer business like nitrogen fertilizer, phosphate fertilizer,
compound fertilizer, synthesis ammonia, etc., and Guizhou Chitianhua has
already become the local magnate in this field.
But the price of natural gas
rises annually and the supply of it becomes tighter and tighter because of the
policy of natural gas industry and the reform of price mechanism. With the
influence of the former two and the growing overcapacity of fertilizer, the
price has continually decreased and the business performance falls into loss.
But, since Guizhou Chitianhua has run the
business of pharmaceutical in 2014, the situation has been changed. Pharmaceutical business has become a new revenue stream, and its scale has
expanded annually, and it makes a tremendous contribution to improve the
business performance. For example, the net profit of the company:
In 2014: -USD87.69 million (-RMB574.70 million)
In Jan.-Sept. 2015: -USD21.72 million (-RMB142.38 million)
In 2015 (expected): USD3.05–6.10 million (RMB20–40 million)
CCM believes that when Guizhou Chitianhua
finishes the reorganization, it will add pharmaceutical business which has
strong profitability and a wide market foreground, to develop a double-business
operation mode of “Pharmaceutical + Chemical”, which can help the enterprise to
reverse the operation downturn and increase profits.
Guizhou Chitianhua figures that according
to the related estimates, the net profits of Salvage Capital Group in 2016,
2017, 2018 are expected to be at least USD22.89 million (RMB150 million),
USD32.04 million (RMB210 million) and USD39.67 million (RMB260 million)
respectively.
Moreover, Guizhou Province is now
vigorously developing pharmaceutical and health industries. For example, the
local government has formulated and introduced a series of policy documents
like the Development Plan of New Pharmaceutical Industry in Guizhou Province
(2014-2017), the Development Plan of Health Industry in Guizhou Province
(2015-2020), the Opinions on Several Policy Measures of Supporting the
Development of Health Industry and the Guiding Opinions on Advancing
Development of New Pharmaceutical Industry, etc.
Therefore, Guizhou Chitianhua can build a
platform of pharmaceutical and health services through Salvage Capital Group
and corresponding investment projects by seizing the opportunity of developing
in the province.
And it can use the capital operation platform of listed
company to further broaden financing channels, strengthen financing creditability,
perfect and tamp business chain, enhance brand influence, raise unitary
competitiveness, and achieve strategic transformation and rapid growth in
performance.
This article comes from Phosphorus Industry China Monthly Report 1602, CCM
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Tag: Pharmaceutical Chemical