Conjecture Of CICC A-Share IPO Increase: Raising Funds By Adjusting The Amount Or Over 30 Billion Of Merger And Acquisition

The economy continues to recover, and the A-share market has a long-term positive momentum. In this context, CICC, which is about to return to the A-share market, announced an increase in issuance.

CICC announced a few days ago that it would expand the original plan of no more than 459 million shares to no more than 1.438 billion shares, accounting for 24.77% of the share capital from 9.5%.

This means that CICC's issuance scale will be expanded to nearly three times the original plan. According to the plan, CICC's issuing scale is likely to exceed 30 billion yuan.

It should be noted that in the IPO process, such a large-scale increase in issuance is rare. In addition, the proportion of shares issued by IPO projects in the total share capital after issuance is usually no more than 10%, and the proportion of initial shares of 24.77% is even more rare.

CICC explained that the revised issuance scale was because the original size could not fully meet the urgent demand for capital.

Analysts from securities companies close to the regulatory level said that the adjustment rate of CICC's issuance scale has been communicated with the regulatory authorities, and has been recognized and encouraged by the latter.

Other industry insiders close to CICC believe that CICC's increase in issuance scale at this time may be related to strike while the iron is hot in the current market, the internal needs of the expansion of the securities industry, and the potential integration expectation of Huijin system.

The amount raised may exceed 30 billion yuan

After the adjustment and expansion of issuance, the potential fund-raising scale of CICC's A-share IPO may be significantly larger than market expectations.

According to wind data, the reporter of 21st century economic report found that, no matter according to the P / E ratio or P / E ratio, once CICC's fund-raising scale reaches 1.438 billion yuan, the final fund-raising amount will be as high as tens of billion yuan.

If the price to book ratio method is used to calculate, as of July 21, the average price to book ratio of the industry index of China Securities Company index is 1.77 times. According to the estimation of the net assets per share of CICC at the end of the first quarter, assuming that the issuance price of CICC is 20.14 yuan / share, the issuance scale of 1438 million shares may reach 28.961 billion yuan.

If calculated by the rolling P / E ratio, according to CICC's earnings per share of 0.99 yuan in 2019 and the 22.98 times limit price of new shares on the main board, the issuing price of CICC under this mode may reach 22.75 yuan / share, and the final issuance amount of CICC will reach 32.715 billion yuan.

"Based on this issuance scale, and taking into account the premium brought by CICC's advantages in investment banking business, shareholders' background and resource endowment, its issuance scale is expected to exceed 30 billion yuan." Beijing a PE organization pointed out.

So far, it has been the largest IPO of a securities company since 2015, and it has become the largest fund-raising company in history.

In the view of industry insiders, if CICC successfully completes the IPO, it is not ruled out that CICC may surpass Guotai Junan and become the largest brokerage stock in the A-share market.

"CICC itself has a lot of aura, such as the head advantage of investment banking business, the halo of Tencent and Alibaba's shareholders background, and the adjustment of fund-raising scale, it is not ruled out that further premium may be obtained in the valuation." "And since the second half of this year, the valuation of securities companies has been rising, and CICC is a new stock."

As a matter of fact, some leading securities companies with late listing and high roe level tend to have higher valuations. For example, as of July 21, the price to book ratio of CITIC was still as high as 7.82 times.

However, "it is uncertain whether such a large amount of fund-raising is likely to have an impact on market sentiment in the future." An investment manager of a private equity firm in Shanghai said, "generally, when a large number of stocks are IPO, the market emotional pressure is not small. For example, when SMIC was listed a few days ago, A-share also experienced a substantial adjustment."

Foreshadowing of integration and merger?

CICC, which raised the IPO scale, further revealed its machinations to expand its capital strength.

"In the first half of 2020, CICC's various businesses continue to maintain a stable and balanced development, with strong demand for capital. The expected scale of raised funds under the original A-share IPO scheme has been unable to fully meet the urgent needs of the company's business development for capital. The adjustment of the A-share issuance plan is to grasp the industry development opportunities, meet the needs of the group's rapid business development and better serve customers. " CICC said.

An analyst close to CICC pointed out that there may be three reasons behind CICC's expansion of A-share issuance scale.

First, the more active trading market environment is more conducive to large-scale IPO project issuance, and expanding the issuance scale at this time has the advantage of good timing.

"The activity of the A-share market has been significantly improved compared with that before. This time is particularly conducive to the expansion of the issuance scale of some IPO projects, so this time point is conducive to making itself bigger and stronger." The above non bank financial analysts pointed out.

Second, the securities industry itself has the inherent needs of horizontal merger and integration. Expanding the amount of fund-raising is conducive to CICC's merger and integration in the industry.

Encouraging the industry to carry out spontaneous restructuring and merger is indeed the direction of encouragement of the regulatory authorities. A few days ago, the CSRC issued a notice to support the implementation of organizational management innovation in the securities and fund industry, including encouraging industry institutions to realize market-oriented merger and reorganization according to law, and to achieve rapid development in capital strength, management level and information technology.

"In recent years, the company has established a more significant differentiated competitive advantage in the comprehensive use of balance sheet and the high-end and complex business needs of customers." CICC also said, "by making full use of the opportunity of A-share IPO, the company is expected to speed up the replenishment of capital strength, quickly make up for the short board of capital scale, and consolidate its competitive advantage. This is also in line with the policy direction of the state to encourage the securities industry to become bigger and stronger and achieve rapid development in terms of capital strength and other aspects. "

Third, under the background of the management building aircraft carrier level securities companies, Huijin securities industry assets still have certain integration expectations, and expanding the capital scale is conducive to enhancing CICC's voice in Huijin system.

In Huijin system, there is a certain gap in volume between CICC and other Huijin securities companies. For example, by the end of 2019, the net assets of CICC were RMB 48.532 billion, ranking No.13 in the industry; the net assets of Shenwan Hongyuan and Yinhe securities companies, both Huijin system, were more than 70 billion yuan, and Everbright Securities was 500 million yuan higher than that of CICC.

In the same period of last year, the net capital of Hongjin and Guangyuan reached RMB 690.78 billion, respectively, which were more than RMB 690.78 billion yuan from Zhonghe and Guangyuan securities. If the company's net capital is expected to increase by 3 billion yuan.

"If Huijin is expected to integrate, CICC will further enhance its own volume and capital strength, and will have a greater voice in potential integration." A securities trader close to Huijin said, "make a bolder assumption. If we can promote the merger of CICC and Shenwan Hongyuan, Huijin will have a securities company with a net capital of 100 billion yuan, and there will be another" CITIC "in China."