In depth * company * CITS United (600358): actively invest abroad to accelerate the layout of outdoor sports and entertainment

Event: On August 17, CITS United (600358. CH/RMB 11.12, not rated) released its 2016 semi annual report. In the first half of 2016, the company realized an operating income of 43.2022 million yuan, a year-on-year decrease of 4.51%, and the net profit attributable to shareholders of the listed company was - 32.8752 million yuan, a year-on-year decrease of 182.34%, The net profit attributable to shareholders of the listed company after deducting non recurring profits and losses was -32.4869 million yuan, a year-on-year decrease of 26.51%. Basic earnings per share was -0.0711 yuan/share, a year-on-year decrease of 179%.

    Comments:

    1. The hot spring business continued to be depressed, and the loss increased in the first half of the year. At present, the company's main revenue is contributed by Yishang Hot Spring Hotel in Tangshan, Nanjing. In the first half of 2016, the hot spring business achieved a revenue of 38.71 million yuan, a year-on-year decrease of 12.88%, of which the revenue from guest rooms, catering and hot springs declined to varying degrees. The net profit attributable to the parent company in the first half of 2016 was -32.88 million yuan, which was significantly lower than 39.92 million yuan in the same period of the previous year, mainly because of the income from asset disposal such as the transfer of equity in the first half of 2015. 2. Fully transform outdoor sports and entertainment, and accelerate the expansion of extension projects. At the beginning of 2016, the company formulated the strategic development direction of outdoor sports and entertainment. In addition to accelerating the industrial layout of partnerships and subsidiaries, the company also made equity investment in some high-quality projects, and set up a number of industrial M&A funds to accelerate the industrial layout, positioning and control resources through leverage.

    3. It plans to acquire Internet advertising companies to improve the company's sustainable profitability. In July of this year, the company issued a plan for major asset restructuring. It plans to purchase 100% of the equity of New Line Zhongshi by issuing shares and paying cash, and raise supporting funds of no more than 193 million yuan, with the equity priced at 400 million yuan. The main business of New Line Zhongshi is the Internet advertising business for game manufacturers. In 2015, it achieved a revenue of 43.3 million yuan and a net profit of 7.78 million yuan. The counterparty promises that the net profit of New Line Zhongshi in 2016-2018 will not be less than 36 million yuan, 47 million yuan and 61 million yuan.

    4. Investment suggestion: The company's main business of hot spring hotel continues to be depressed and needs transformation urgently. Recently, it plans to acquire Internet advertising companies and invest in equity projects through industry M&A funds to comprehensively transform into outdoor sports and entertainment industry.

    The current market value of the company is 5.6 billion yuan, and the total market value after the acquisition of the new line Zhongshi is 6 billion yuan. It is recommended to continue to pay attention.