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Tuesday 21 October, 2014 | TEXT_NEWS_RSS_FEED

Ocean King listed targeting high margin dependent on direct acquisitions

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Scheduled for October 22, 2014 to determine the issue price, the 24th issue of purchase of Ocean King, October 21 conducted an online roadshow.

"The company did not arrange this release site promotion." Ocean King Deputy General Manager Chen Hui said.

According to the prospectus, Ocean King initial public offering of 50 million shares, the proportion of the total share capital of 40,000 shares issued after accounting for 12.5% of its equity investment for the production line construction project, R & D center construction projects and domestic marketing center expansion project, with a total investment of 550 million yuan, plans to invest 399 million yuan fund-raising.

"If the actual fund-raising project can not meet the investment needs, the funding gap in part by the company's own funds or through other financing methods to solve, if the actual fund-raising has a surplus will be used for other main business-related working capital." Ocean King director, finance director, said Li Caifen.

According to its said Ocean King Industry for electrical machinery and equipment manufacturing, as of October 17, the industry's recent one month, three months, six months and one year of average earnings were 27.58 times, 26.18 times , 26.18 times, 24.47 times and 25.87 times, while the ocean King in 2011 to the first half of this year, earnings per share of non-deduction were 0.5007 yuan, 0.4116 yuan, 0.4434 yuan and 0.0743 yuan.

"At present, the concentration of the domestic industry, special ambient lighting is low, except for Philips and other internationally renowned lighting companies, larger enterprises less." Ocean King, chairman and general manager ZHOU Ming-jie said, "the time is ripe in the future, the company will give full consideration to their own conditions, based on the implementation of foreign investment and mergers and acquisitions. "

"To implement the set goals, you need a lot of money before the fund-raising in place, the shortage of funds is the biggest constraint for future development." China Merchants Securities investment bank headquartered directors, sponsor representative high-Chuan Fu said.

Indeed Ocean King in special ambient lighting equipment industry, has faced increasingly fierce market competition. However, ZHOU Ming-jie, said sales volume of marine-funded enterprises, including the king in a leading position, cultivating a vast customer base, more than 90% of customers for existing customers. "The company established a direct sales network throughout the country, from the two thousand salespeople grassroots out single." ZHOU Ming-jie said.

Direct skip the middleman, bringing high margin after cost savings channels. Prospectus shows that from 2011 to 2013, gross margin Ocean King were 70.48%, 71.77% and 71.84%, while the industry average gross margin of listed companies was 27.52%, 26.62% and 25.86%.

But direct sales model and marketing network requires a large fixed labor, rent utilities and travel expenses to bring a significant impact on business performance. Prospectus shows that from 2011 to 2013, cost of sales ratio Ocean King were 42.35%, 41.55% and 39.54%, while the industry's cost of sales was only listed companies compared to 6.69%, 7.47% and 7.28%.

"The company uses direct sales model to sell directly to end-users, more than 65 percent of employees for the sales staff, the number and proportion of listed companies were higher than in the same industry, so travel expenses, marketing costs, communication costs higher." Li Caifen think "139 service centers and more than 780 service office space and staff quarters mainly for leasing the property, which lead to higher rental costs."

In addition, the Ocean King's management fee was also found increasing trend year by year, from 2011 to the first half of this year, the management expenses as a percentage of revenue proportion was 11.34%, 13.68%, 15.24% and 15.67%.

But still bring a higher gross profit margins. Prospectus, ocean king from 2011 to 2013 net profit margin was 13.25%, 13.12% and 13.72%; listed companies in the same industry, but net profit margin of 13.91% over the same period, 10.87%, 9.22%, has been declining.

In addition, it is worth noting that the prospectus shows that the status quo overwhelmed IPO, Ocean King actual control ZHOU Ming-jie, 徐素夫 women "dominance" has not changed, before the IPO, two total stake to 83.62% after starting down to 73.17%.

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