Baosheng International: Privatization Is Not, The Stock Price Fell 30%

Others fear me, greed, others greed, I fear, is Buffett's investment motto.

This statement is intended to warn investors to invest more in reverse thinking. They should not be overjoyed when the share price is rising. They should not be too pessimistic when the stock price falls.

In the Hong Kong stock market, there is a ticket that has been voted down by 3 per day because of the rejection of privatization.

(03813).

Can the investment philosophy of "others fear me greed" be applied to Baosheng's investment?

Whether privatization or not, shares fell 30%

According to the world clothing and shoe net, in January 21, 2018, Baocheng industry, Baosheng International (03813) and Yuyuan group (00551) jointly announced that Baocheng asked Baosheng board of directors to submit proposals to plan shareholders to privatize Baosheng.

On the premise of the entry into force of the plan, all planned shares will be cancelled and the cancellation price will be HK $2.03 per share, which is about 31.82% higher than the closing price of HK $1.54 per share in January 19th.

After the announcement, Baosheng's stock price rose more than 29% directly on January 21st, and its share price was pulled up to HK $1.99.

And maintained a narrow range in the following 49 trading days, the amplitude of the period was only 3%, and the cumulative turnover rate was only 9.71%.

Investors are undoubtedly waiting for the announcement of the privatization of Baosheng.

In April 9th, Baosheng announced that it would privatize Baosheng International (Holdings) Limited on the basis of the agreement plan on Baosheng industrial shares. In April 9, 2018, the plan was not approved by the court.

Since the plan has not been approved by the court, the special resolution approved by the shareholders' special meeting will not take effect.

This means that Baosheng's listing status in the stock exchange will not be abolished.

Baosheng continues to remain in the market place. It is the result of a few shareholders who oppose privatization of the company, but it has become the "worst news" of most of the shareholders who favour the privatization of the company.

Baosheng's share price slumped in April 10th. At the close, the world lost 31%, with a turnover of HK $516 million and a turnover of 7.16%.

This situation does not prohibit people's doubts. Even if Baosheng keeps its listing position, will its stock price have a chance to rise again? This problem can only be answered by time, but it can be used as reference for Xingfa aluminum industry (00098)'s stock price trend.

How does Baosheng become the next Xingfa aluminum industry?

It is understood that the largest shareholder of Xingfa aluminum has been privatized in September 2016, but was rejected by minority shareholders in May 2017.

But the company's share price rose shortly after the sharp fall in the short term, and its share price rose more than 9 in less than 2 months.

So, does Baosheng's share price have the same growth potential? To answer this question, we must first start with Baosheng's fundamentals.

According to the information, Baosheng international is the largest in China at present.

One of the products retailers and agents is a company that has been operating for more than twenty years.

And professional products for leisure products.

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More than 8 of its sales revenue comes from Nike and Adidas, and its remaining sports and casual wear brands from Cage, CONVERSE, Puma and Reebok.

By the end of 2017, the company's retail network in China covered 5465 direct retail outlets and 3313 franchised stores.

In 2017, the company achieved sales income of 18 billion 833 million yuan (the same below).

Whether the store scale or sales revenue scale and Anta (02020) are all on the individual level.

But Baosheng's market capitalization is only HK $7 billion 370 million, while Anta is a 100 billion class "aircraft carrier".

The main reason is that the profitability of the two companies is very different.

In 2018, Baosheng realized revenue of 18 billion 833 million yuan, an increase of 16% over the same period last year. Although Baosheng sold an international brand such as Nike and Adidas, the gross profit margin of the company was only 35.01%, which was lower than that of Anta 49.37%, because the cost of sales rose sharply to 12 billion 239 million yuan.

In addition, as the company's sales and distribution expenses and administrative expenses continue to grow, the company achieved a profit of 394 million yuan in 2017, down 29.7% from the same period last year.

The owner should account for only 12.76% of Anta's profits.

After the privatization crisis, Baosheng's share price will depend more on the profitability of the company.

Actually, looking back at Baosheng's revenue data over the years, we can see that the sales growth rate of the company has been kept above 10% for a long time.

The key to the problem now is why the company's sales cost and period cost ratio are much higher than that of the first class enterprises in the industry.

According to Baosheng, the sporting goods industry of Baosheng Group is experiencing unprecedented changes and challenges, especially the rise of online shopping, the rapid growth of e-commerce platform, the integration and collaboration of online and offline operators, and the change of consumers' expectations of online and offline complementary channels to create a good shopping experience.

In addition, market competition has intensified, such as more active and frequent promotional activities among sportswear brands, and active attempts by market participants to form new stores.

In the face of these changes and challenges, Baosheng Group has been exploring and investing in various initiatives to adapt to the changing market dynamics, expand the channel capacity, plan organized promotional activities, strengthen store product supply, and provide sports related content and services.

Baosheng said that the group will be able to pform successfully with the resources of Baocheng group, but the measures that bring these changes are expected to cause stock price volatility to shareholders in the short term, and this is also the biggest intention of the company's privatization.

However, judging from the recent performance of Baosheng company, these measures did not further deteriorate the profitability of the company.

Profit level improved, Nike ADI strong cycle to become the biggest point.

Take Baosheng three quarterly bulletin in 2017 as an example, the company achieved a revenue of about 13 billion 883 million yuan in the first three quarters, an increase of 14.13% compared with the same period last year, and a gross profit of 4 billion 797 million yuan, an increase of 10.17% over the same period last year.

However, due to the increase in promotional activities and provision for inventories, as well as depreciation, amortization costs and staff costs, the company achieved net profit of 337 million yuan, down 35.47% from the same period last year.

The annual report shows that the company's sales revenue grew 16% over the same period last year, and the profit attributable to shareholders decreased by 29.7% compared with the same period last year, indicating that the company's revenue and profitability improved significantly in the four quarter.

In April 10th, Baosheng released the company's operating data in the first three months of 2018, showing that the net profit of the company in March 2018 was 1 billion 975 million yuan, an increase of 21% over the same period last year.

For the 3 months ended March 31, 2018, the consolidated net operating income was 5 billion 509 million yuan, up 18% over the same period last year.

On the one hand, Baosheng's revenue has achieved good results. On the other hand, the demand for Nike and Adidas, which is the two leading brand of the company's distribution, is still strong in China.

It is understood that Nike group achieved revenue in the 2017 fiscal year of 34 billion 400 million dollars, up 6% over the same period last year; net profit was $4 billion 200 million, an increase of 13% over the previous year, and the diluted earnings per share were 2.51 US dollars, up 16% over the same period last year.

In the first three quarters of fiscal year 2017, Nike's sales in the Greater China region increased by 24%.

Adidas group's global sales increased by 15% to 21 billion 218 million euros in 2017.

Operating profit increased by 31% to 2 billion 70 million euros, the net income of the company's continuing operations increased by 32% to 1 billion 430 million euros, excluding the negative impact of one-time tax, attributable to shareholders' net income growth of 15% to 1 billion 173 million euros.

In 2017, the combined sales volume of Adidas brand and Reebok brand in almost all regions increased by two digits.

Excluding the exchange rate factor, Adidas's annual sales in the Greater China region increased by 29.5% to 3 billion 789 million euros.

On the whole, Baosheng although the short-term stock price has a huge earthquake, it does not hinder the long-term growth logic of the company. In the strong cycle of Nike and Adidas, the company is expected to continue to improve its sales performance. In addition, the cost rate of the company after pformation and upgrading is likely to be improved, so as to bring about a rapid rebound in profits.

The company's share price is also expected to re enact the trend of the privatization of aluminium.

Of course, if the company wants to privatize, it is another matter.

More interesting reports, please pay attention to the world clothing shoes and hats net.