After half a year, Infront Micro (000670. SZ) major asset restructuring ushered in new progress.
On the evening of May 15, Infront Micro announced its intention to purchase assets by issuing shares and paying cash to raise matching funds and related party transaction report (draft), the company intends to spend 733 million yuan to purchase 49% of the shares of Shenzhen Huaxinke Technology Co., Ltd. (hereinafter referred to as Huaxinke) and WORLD STYLE TECHNOLOGY HOLDINGS LIMITED (hereinafter referred to as World Style).
At the beginning of November last year, Infront Micro announced that it was planning a major asset restructuring and suspended the stock trading, that is, to acquire 49% of the equity of the above-mentioned target. Half a month later, the company disclosed a major asset restructuring plan, but in view of the fact that the audit and evaluation of the target company has not been completed, the transaction price has not yet been determined. Now, the relevant audit work has been completed, and the restructuring has ushered in new progress.
In the secondary market, on May 16, the company's stock price opened higher and hit the daily limit. As of the close, the company's share price closed at 5.42 yuan, an increase of 9.94%, and the current total market value is 4.603 billion yuan.
The target company was a major contributor to Infront's resumption of listing
It should be noted that in September 2020, Infront Micro acquired 51% of the shares of Huaxinke and World Style at a price of 601 million yuan, becoming the controlling shareholder of the target company, and the company's business has increased the distribution of electronic components on the basis of the R&D, design and sales of the original SOC chip.
At that time, due to Infront's insolvency in 2019 and negative net profit for three consecutive years, the company's shares were suspended from listing in April 2020 and suspended until the date of the acquisition. After the injection of new assets, Huaxin Technology and World Styl not only contributed more than 9% of the company's revenue, but also successfully helped Infront Micro turn losses into profits. As a result, the company withdrew the delisting risk alert and other risk alerts on August 22, 2022, and resumed listing.
At that time, Zhejiang Shunyuan Enterprise Management Co., Ltd. (hereinafter referred to as "Zhejiang Shunyuan"), the largest shareholder of Infront, pledged to continue to fully support and assist the listed company in promoting the acquisition of the remaining 49% shares of Huaxinke and World Style within two years after the resumption of listing.
Since then, Infront has been moving forward with the acquisition. Unfortunately, the acquisition was halted twice.
On 21 November 2022, the CSRC rejected the acquisition on the grounds that Infront Micro failed to adequately explain that the transaction did not harm the legitimate rights and interests of the shareholders of the listed company. Then, in July 2023, Infront Micro announced the termination of the acquisition on the grounds of "long history".
ON NOVEMBER 8, 2023, INFRONT MICRO TRIGGERED THE SUSPENSION OF TRADING DUE TO THE THIRD PLANNED MAJOR ASSET RESTRUCTURING AND INITIATED THE ACQUISITION OF THE REMAINING SHARES OF HUAXINKE AND WORLD STYLE. Subsequently, on November 22, Infront Micro disclosed the restructuring plan, but the transaction price has not yet been determined because the audit and evaluation of the target company has not yet been completed.
It was not until May 15 this year that the transaction price for the restructuring was finally finalized - Infront Micro intends to purchase 39% of the shares of Huaxin Technology and World Style held by Yuxin Investment by issuing shares and paying cash, and purchase 10% of each of Huaxin Technology and World Style from Shanghai Ruiyan by issuing shares.
Huaxinke and World Style are mainly engaged in the distribution of electronic components, of which Huaxinke is mainly responsible for domestic business, and World Style is mainly responsible for overseas business, and the two belong to the same industry. As a result, Infront Micro included Huaxin Technology and World Style as the same asset group (the "Target Company") in this transaction.
This assessment is based on December 31, 2023, and the total appraised value of all the equity of the shareholders of the target company is 1.496 billion yuan. It is worth noting that the appraised value increased by 869 million yuan compared with the net book assets of 627 million yuan on the base date, with an appreciation rate of 138.73%. After negotiation between the two parties, it was determined that the transaction price was 733 million yuan, and no performance compensation was set.
The profitability of the target company declined
Titanium Media APP noticed that during the period of promoting the restructuring, Infront Micro, which had finally turned around its losses, fell into losses again.
Specifically, from 2021 to 2023, Infront's micro revenue will be 2.89 billion yuan, 3.124 billion yuan, and 3.467 billion yuan respectively; the net profit attributable to the parent company was 3.2377 million yuan, 14.9047 million yuan and -60.0575 million yuan respectively; The net profit after deduction was 2.7132 million yuan, -25.3162 million yuan and -60.528 million yuan respectively.
It should be noted that in 2022, Infront Micro relied on 29.7699 million yuan of performance commitment compensation to maintain profitability, which is also the reason why the company's non-net profit was negative in that year.
In terms of assets and liabilities, although Infront Micro came out of the predicament of insolvency in 2020, its asset-liability ratio remained high. As of December 31, 2023, the company's asset-liability ratio was 83.2%, which was at a high level, and the monetary funds on the account were only 16.6471 million yuan.
Against this backdrop, Infront is still working on completing the acquisition of the remaining stakes in Huaxinke and World Style, both to fulfill the commitments made at the time of resumption of listing, and to help Infront Micro get out of trouble. At the same time, in order to promote the implementation of the reorganization, the company intends to raise matching funds of no more than 220 million yuan, and the company's largest shareholder, Shunyuan Enterprise Management, participated in the subscription.
At present, Infront Micro is losing money, and the operating ability of the target company is becoming more and more important.
From 2022 to 2023, the revenue of the target company will be 3.113 billion yuan and 3.466 billion yuan respectively, although the operating income will show an upward trend as a whole, but due to the impact of the industry cycle, the overall sales gross profit margin of the target company will decline from 6.49% in 2022 to 4.7% in 2023. In terms of net profit, from 2022 to 2023, the net profit attributable to the parent company of the target company will be 100 million yuan and 59.2007 million yuan respectively, which will decline by 41% year-on-year in 2023.
From the perspective of spin-off, from 2022 to 2023, Huaxinke's operating income will be 841 million yuan and 1.274 billion yuan; The net profit attributable to the parent company was -13.8957 million yuan and -1.8343 million yuan respectively, and the company has been losing money for two consecutive years. In the same period, World Style's operating income was 2.394 billion yuan and 2.431 billion yuan respectively; The net profit attributable to the parent company was 121 million yuan and 60.6235 million yuan respectively, and the company's net profit in 2023 fell by 50.1% year-on-year.
In addition to the decline in net profit, the target company also has the risk of a high concentration of downstream customers and product application fields, and a large net accounts receivable.
It is reported that the target company's customers are mainly smartphone brands or ODM manufacturers such as Xiaomi, Wingtech Technology, Longqi Electronics, and module manufacturers such as OFILM and Xinli Optoelectronics, and the above customers are mainly concentrated in the field of consumer electronics such as smartphones. From 2022 to 2023, the target company will sell 2.123 billion yuan and 2.07 billion yuan to its top five customers, accounting for 68.18% and 59.7% of the current operating income, with a high customer concentration.
In terms of accounts receivable, at the end of the reporting period, the net accounts receivable of the target company were 1.188 billion yuan and 1.062 billion yuan respectively, accounting for 80.28% and 70.84% of the total assets respectively, accounting for a relatively high proportion.
Titanium Media APP noticed that despite the decline in the profitability of the target company, its valuation has only increased.
Specifically, the appraised value of the target company in 2020, 2021 and 2023 will be 1.289 billion yuan, 1.295 billion yuan and 1.496 billion yuan respectively. Among them, the valuation at the end of 2023 will increase by 200 million yuan compared with the previous time, with an appreciation rate of 15.5%. Infront Micro said that the main reason is that the target company's operating income continued to rise, the scale of the operating asset group increased, and the market position and competitiveness were improved. (This article was first published in Titanium Media APP, author|Li Ruohan)