Contemporary Oriental Transformation seeks dual theater line license M & A target company with three-year performance commitment of 116 million yuan

Yesterday evening, Contemporary Oriental announced in response that Huacai Tiandi's actual profit in 2016 reached 60% of the committed net profit, and the company has the right to regard it as fulfilling its performance commitment for the year, but the performance committers under the contract should still bear corresponding compensation responsibilities.

Original title: Contemporary Oriental's M & A target's net profit last year was 420,000 yuan for 3 years and 116 million

yuan for 3 years. As of yesterday (May 24), Contemporary Oriental's first domestic film,"Beijing Meets Seattle," has achieved a cumulative box office of 763 million yuan.

While filming has achieved a bumper harvest, Contemporary Oriental has attracted the attention of regulators in its acquisition of theaters. On the evening of May 23, the company received a letter of concern from the Shenzhen Stock Exchange regarding Contemporary Oriental's previously announced acquisition of part of Beijing Huacai Tiandi and capital increase.

It is worth noting that according to the audited financial data of Huacai Tiandi, its revenue in 2015 was 69.1086 million yuan and its net profit was only 422,000 yuan. The transaction target made a performance commitment of a three-year cumulative net profit of no less than 116 million yuan. The Shenzhen Stock Exchange's letter of concern requires the company to explain the realizability of the performance commitment.

Yesterday evening, Contemporary Oriental announced in response that Huacai Tiandi's actual profit in 2016 reached 60% of the committed net profit, and the company has the right to regard it as fulfilling its performance commitment for the year, but the performance committers under the contract should still bear corresponding compensation responsibilities.

Seeking dual theater licenses

Recently, Contemporary Oriental announced that the company subscribed for 4.7672 million shares of Huacai Tiandi at a price of approximately 6.383 yuan per share, with a total share transfer price of 30.4293 million yuan; the company subscribed for 19.98 million new shares of Huacai Tiandi in cash, with a capital increase of 12.7672 million yuan. In February 2016, the company signed a "Debt-to-Equity Swap Agreement" with Huacai Tiandi. The company will increase its creditor's rights of 15 million yuan to Huacai Tiandi at a price of 5 yuan/share, and subscribe for 3 million newly issued shares of Huacai Tiandi. The funds for this transaction came from the company's self-raised funds. After the transaction was completed, Contemporary Oriental held 27.747 million shares of Huacai Tiandi, accounting for 51.126%, and became the controlling shareholder.

Huacai Tiandi's main business is sales of digital film projection equipment and equipment and related technical services, as well as cinema distribution, film projection and other services. In the main business theater sector, Huacai Tiandi has used investment and joint ventures to explore multi-hall digital cinemas that meet modern star standards in second-, third-and fourth-tier cities across the country. Currently, Huacai Tiandi has 17 self-owned brand cinemas and 18 Franchise theaters.

In addition, Huacai Tiandi also holds a controlling subsidiary Hongge Theater Company. In other words, if the acquisition of Huacai Tiandi is completed, Contemporary Oriental will have two theater licenses,"Zhongguang Theater Line" and "Shanghai Hongge", which will lay a solid foundation for the construction of the film ecosystem and also allow the preparation of fan social studios to be put on the agenda.

After contemporary Oriental transformed its film and television cultural industry, it has accelerated its layout in the industrial chain. In 2015, the company achieved a turnaround, with revenue of 493 million yuan and net profit attributable to shareholders of 111 million yuan. In terms of revenue contribution, its TV drama business accounted for the largest proportion in 2015, reaching 71.09%.

The three-year performance commitment is high?

There is little difference between the market method results and the income method results of this acquisition evaluation. According to the income method evaluation, the book value of Huacai Tiandi's shareholders 'equity attributable to the parent company on the evaluation benchmark date of December 31, 2015 was 84.9116 million yuan. After evaluation, the value of shareholders' equity attributable to the parent company was 201 million yuan, with a value-added rate of 136.79%. Huacai Tiandi promises that the cumulative net profit from 2016 to 2018 will be 116 million yuan, of which the net profit in 2016 will not be less than 30 million yuan. Under the circumstances recognized by Contemporary Oriental, the performance committer can have reasonable ups and downs in a single year., but the cumulative net profit for three years must not be less than 116 million yuan.

On the evening of May 23, the Shenzhen Stock Exchange issued a letter of concern, requiring the company to explain the realizability of its performance commitments before the 25th. On the evening of the 24th, Contemporary Oriental announced in response that the "Performance Commitment and Profit Compensation Agreement" also stipulated that the target company's net profit for the year will reach 60% of the committed net profit, and Contemporary Oriental has the right to regard it as the performance promisor as having completed the year. Performance commitment goals. However, the performance promisor shall still bear the corresponding performance compensation responsibilities in accordance with the provisions of the Profit Forecast Compensation Agreement.

Contemporary Oriental further disclosed that Huacai Tiandi's unaudited operating income from January to March 2016 was 23.1694 million yuan and net profit of 2.629 million yuan. It is expected to achieve a net profit of about 10 million yuan for the whole year. At the same time, the company's 127 million yuan capital increase in Huacai Tiandi will be used to acquire new theaters, which is expected to generate a net profit of at least 15.8 million yuan. To sum up, the company believes that Huacai Tiandi has greater realizability to achieve its profit commitments from 2016 to 2018.

Regarding the current box office revenue of theaters, analyst Huang Guofeng said,"According to the division ratio, after deducting tax and special film funds, 91.7% of the revenue of a movie is distributed to theaters, theaters, production and distribution. Of this, theaters and theaters are divided. Of the 57%, theaters take most of the 57%, and theaters only have 2% to 5%."

Yien data shows that the top 10 theaters in the country currently monopolize 66% of the national box office, which means that it is difficult for middle and lower reaches to get more cakes in the market. However, Hongge Theater Line, controlled by Huacai Tiandi, only received a box office commission of 3.8624 million yuan in 2015. Therefore, whether Huacai Tiandi's own and affiliated theaters can obtain high profits is crucial to the realization of performance commitments. However, judging from the 2015 financial data of Huacai Tiandi, although the theater box office revenue is not low, the gross profit margin is not high.

Editor: Nancy