LeTV Pictures may inject it into LeTV with a valuation of 10 billion yuan and gain a market value of approximately 30 billion yuan

On December 5, 2015, Le.com issued the "Announcement on Planning for Suspension of Major Asset Restructuring", announcing the official launch of the "Le Pictures" injection and promising to disclose the plan within 30 natural days (i.e. before January 5, 2016). How much will LeTV Pictures be valued and how will it be injected? What impact will it have on the overall valuation of LeTV?

Original title: LeTV Pictures injected into LeTV. How much do you know about the valuation?

On December 5, 2015, Le.com issued the "Announcement on Planning for Suspension of Major Asset Restructuring", announcing the official launch of the "Le Pictures" injection and promising to disclose the plan within 30 natural days (i.e. before January 5, 2016).

How much will LeTV Pictures be valued and how will it be injected? What impact will it have on the overall valuation of LeTV?

The background of LeTV Pictures LeTV Pictures

was founded in 2011 and is a brother company of LeTV. The ultimate controller of both is Jia Yueting.

In 2012, LeTV Pictures produced or distributed 6 films with box office revenue of 625 million yuan; in 2013, it produced or distributed 9 films with box office revenue of 1.05 billion yuan. By the end of 2014, LeTV Pictures had produced and distributed a total of 28 films, with box office revenue of approximately 4.07 billion yuan, including high-box-office films such as the "Tiny Times" series,"Old Boy", and "Bear Infested".

It should be said that Jia Yueting is not soft in recruiting talents. Hu Xian once took stock of "What big company executives has LeEco hired in recent years?"

Similar to LeTV Zhixin and LeSports, the rise of LeTV Pictures is closely related to the joining of outstanding filmmakers:

CEO Zhang Zhao, who served as president of Enlight Pictures, joined LeTV Pictures in 2011: In May 2013, Jia Yueting "tricked" Zhang Yimou into becoming artistic director; later, he signed Lu Chuan; in April 2015, Tsui Ke, another famous director in the Chinese circle,"got on board". No matter what LeTV Pictures ultimately achieves, Jia Yueting has no regrets in talent allocation.

Together, this group of big names certainly hope to become an independent listed company, just like Huayi, Light and Bona. CEO Zhang Zhao has expressed Le Pictures 'ambition to go public independently on different occasions.

From the perspective of capital operation, Jia Yueting should also prefer Le Pictures to go public independently. The first is to facilitate valuation in the capital market. If a listed company has a website and produces mobile phones, even if it does e-commerce and makes movies, it will drive analysts crazy. In the end, it was myself who suffered because the valuation of each business was discounted by analysts. Secondly, it enriches the possibilities of capital operations. Each company can coordinate with each other in business and jointly attack each other, and can also raise funds, refinance, and merge in the capital market separately. Especially the big shots in China, they like to form departments very much, such as the Delong system, the Tomorrow system, the Fosun system, etc.

In August 2013, Series A raised 200 million yuan, and Series B raised 340 million yuan. Looking at the "posture" LeTV Pictures is aiming to go public independently.

Dream of independent listing shattered

In the second half of 2014, Jia Yueting was stranded overseas and "rumors" spread. LeTV's share price was "losing ground" and even close to the warning line of pledged stocks. During that time, LeTV continued to suspend trading for various reasons to delay the stock price's slide into the abyss.

In early December, Le.com was in the process of suspending trading on October 27 on the grounds of "planning to disclose major matters." Although Jia Yueting has returned to China and met with investor representatives, people have not regained confidence in LeTV's next step.

At a critical moment, Jia Yueting played his "trump card": Vision Music announced on December 6, 2014 that it had received a promise from its controlling shareholder that it planned to initiate the transfer of related party LeTV Pictures in a reasonable manner at an appropriate time within the next year. The investment equity was transferred to a listed company.

The capital market responded enthusiastically, and LeE.com experienced a long-lost daily limit after resuming trading. Since then, LeTV has been "resurrected with full blood". Various businesses such as TV, mobile phones, automobiles, bicycles, sports, and film industry have competed for each other. Its share price hit a record high in mid-May 2015 (the reinstatement price exceeded 1000 yuan)

. Is it reluctant?

Those who understand the background of LeTV Pictures feel sorry that it cannot be listed independently. Everyone can see that "LeTV Pictures 'sacrifice is also LeTV's broken arm." However

, the announcement at that time was a little vague about injecting LeTV Pictures.

The above paragraph means: Jia Yueting promises to inject, but LeTV still has to evaluate whether to accept it. If you do not plan to inject, you can say that "the film industry has a large gap with the company's main business","the film industry's performance fluctuates greatly, which is unfavorable to the company's valuation", and "the cost of obtaining a controlling stake in the film industry is too high"... That is to say, even if you don't inject, you have not violated the promise. For example, Zhang San promised to marry his daughter to Li Si within a year, but Li Si refused to marry her. Zhang San did not breach the contract.# # The

promise date is getting closer and closer, but LeTV has been silent. Some people can't help but speculate that Jia Yueting will use word games to avoid fulfilling his promise.

In fact, despite his reluctance, Jia Yueting will not go back on his word. First,"cherishing feathers" will not lose big because of small things. Second, Jia Yueting pledged 507 million shares on October 26 and could not bear the plunge caused by non-fulfilling his promise (Note: LeTV's share price was at the top line of 45 yuan at the time, and this pledge can be raised. 9 billion to 13.6 billion yuan).

On December 5, 2015, on the last day when the promise expired, LeTV finally issued an announcement.

LeTV Pictures Valuation Clues

1. Historical Track and Box Office

In 2012, LeTV Pictures produced/released 6 films with box office of 650 million yuan, and the box office next year is expected to be 1.2 billion yuan. In August 2013, Le Pictures raised 200 million yuan in its first round, with a valuation of 1.55 billion yuan. This valuation is approximately equal to 85% of the sum of the previous year's box office plus the estimated box office for the year of financing.

In 2013, LeTV Pictures produced/distributed 9 films with box office of 1.05 billion yuan, and is expected to reach 3 billion yuan in 2014. In October 2014, Series B financing reached 340 million yuan, with a valuation of 4.8 billion yuan. The valuation is approximately equal to 118.5% of the sum of the previous year's box office plus the estimated box office of the year of financing. Although the box office target of 1.2 billion yuan was not achieved, investors still view LeTV Pictures as high as the top line.

In 2014, LeTV Pictures produced/distributed 9 films with box office of 1.9 billion yuan, far from reaching the expected target of 3 billion yuan. The box office targets for 2015 and 2016 have been set at 5 billion yuan and 7.5 billion yuan respectively.

In 2015, at the April 2015 shareholders meeting, LeEco disclosed that "Series C financing is coming to an end," but there was no further comment.

There is no reliable relationship between box office and valuation from historical trajectory. Moreover, LeTV has long proposed the concept of "film companies in the Internet era". The psychological prices of Jia Yueting and Zhang Zhao have risen, and external institutional investors may not be able to get it. The Series C financing originally scheduled to be injected into listed companies may have been cancelled.

It is estimated that LeEco's psychological price will exceed 10 billion yuan, but private equity investment institutions believe that they have overdrawn the room for growth in the next 6 to 18 months, so the negotiation has not been completed.

2. Huaer Film and Television

In October 2013, Le.com announced that it would acquire 100% equity of Huaer Film and Television in cash and share issuance. The total consideration is 900 million yuan. Among them, 30% was paid in cash, and the remaining 70% was paid in 21.3054 million LeEco shares (unit price was 29.57 yuan/share).

Data shows that Huaer Film and Television was established in November 2006. He has starred in film and television dramas such as "Happiness Like Flowers","Golden Wedding","Legend of Zhen Huan" and "The Story of the New Editorial Department".

Huaer Film and Television's revenue model sells TV drama rights. LeTV is one of the main customers. "Legend of Zhen Huan" and "Story of the New Editorial Department" were purchased by LeE.com for exclusive online rights in 2011 and 2013 respectively.

In 2012, Huaer Film and Television's revenue was 234 million yuan and its net profit reached 97.05 million yuan. In the first half of 2013, revenue and net profit were 162 million yuan and 59.44 million yuan respectively.

Although the main businesses are different (Huaer Film and Television mainly focuses on TV series, LeTV Pictures includes TV series and movies), the same valuation method is very, very likely to be used for LeTV Pictures.

The core of Huaer Film and Television's valuation is discounted cash flow (DCF). That is, forecast future net cash flow according to the trend shown by historical operating conditions, and discount it to obtain the value of operating assets.

At the time, it was predicted that Huaer Film and Television's revenue from 2014 to 2017 would be 94 million, 1.3.8 million, 126 million and 186 million respectively. Net cash flows for the same period were 58.6 million, 100 million, 100 million, and 110 million respectively. In 2018 and 2019, it will reach 127 million and 118 million respectively.

In 2016, LeTV Pictures 'box office target has been set at 7.5 billion yuan. If LeTV predicts an annual growth of 2.5 billion yuan, it will be 10 billion yuan in 2017 and 12.5 billion yuan in 2018 respectively. Regardless of the TV drama business, LeTV Pictures 'revenue is already 10 times that of Huaer Films. Therefore, according to LeEco's mentality and algorithm, LeEco Pictures 'valuation must be more than 10 billion yuan.

3. The total box office value of Huayi and Light

finally reached 29.6 billion yuan in 2014, of which domestic films grossed 16.2 billion yuan. The five major private film companies, Enlight Media, Bona Films, LeTV Pictures, Huayi Brothers, and Wanda Films, contributed 58% of the domestic box office. LeTV Pictures has a market share of 11%, ranking third after Light and Bona, surpassing Huayi and Wanda.

In 2014, Enlight Media released 12 films with a cumulative box office of 3.14 billion yuan and film business revenue of 647 million yuan, accounting for 53% of revenue. Television program production and advertising revenue was 477 million yuan, accounting for 39% of revenue.

Based on yesterday's (December 21) closing price, Enlight Media's market value is 49.9 billion yuan. If we simply calculate based on the proportion of revenue, Enlight Media's film business is valued at 26.4 billion yuan.

In 2014, LeTV Pictures 'box office accounted for 60.5% of Enlight Media's. By the same standards, Le Pictures is valued at approximately 16 billion yuan. However, Enlight Media's box office growth rate in 2014 was 35% year-on-year, and LeTV Pictures 'rate was 81%. It should receive a higher valuation, such as 24 billion yuan.

4. In

addition to its blockbuster box office, LeTV also has two magic weapons: virtual and real:

virtual is the concept of "Internet film and television company". In 2012, Zhang Zhao proposed the "Butterfly Theory" of PGC+O2O; in 2013, he launched the "Certain Three Guides"(positioning, navigation, diversion, shopping guide) market system; in 2014, he sang "The first year of the Internet Generation is here", announcing that the company will complete the complete transformation from a film company to an Internet company in the next three years.

The real thing is the ability to issue. Zhang Zhao has long been in charge of film distribution at Enlight Pictures and has invested in the distribution of more than 20 films. After managing LeTV Pictures, Zhang Zhao quickly built a "ground force" of more than 300 people.

A-shares attach great importance to concepts, not to mention Le Pictures 'bonus points are not just concepts. Therefore, after being injected into LeTV, LeTV Pictures should be valued at more than 30 billion yuan. To sum up, LeTV Pictures will be loaded into LeTV at a valuation of about 10 billion yuan and gain a market value of about 30 billion yuan in the secondary market.

Editor: vian