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GRG Banking Equipment:Steadily increasing stake in DCH;investment in environment technology

发布时间:2016-08-03    研究机构:瑞银证券

GRG holds 17.29% of DCH stake; already the largest shareholder

On Aug 3, GRG announced that it had increased stake in DCH (Digital China Holdings,0861.HK) to 17.29%. The company has been DCH's largest shareholder since Mar2016. We estimate that GRG has enough cash reserve to buy another 5-10% of DCH'sstake. GRG defines itself as a friendly investor. It believes that synergy can be createdbetween DCH's financial software business and GRG's hardware business.

Will GRG gain control on DCH's strategy and operations

In Jun 2016, GRG announced that as the largest shareholder, it cannot control theoperations of DCH. In the annual shareholder meeting held that month, two nonexecutivedirectors of DCH resigned and the vacancies have not been filled so far. Wewill continue to watch the board vacancy filling progress.

Rmb216m investment in environment technology business

GRG announced on Aug 2 that it would invest up to Rmb216m to GRG Metrology, theenvironment technology subsidiary of its parent company Guangzhou Radio Group.GRG Metrology will list separately on the New Third Board. Although environmenttechnology is not related to GRG's core business, it has big growth potential and maybe a good financial investment target, in our view.

Maintain Buy, PT Rmb23.75

Trading at 20x/16x 2016E/2017E P/E, GRG's valuation is significantly lower than themean level of A-share software and hardware companies. Our 2016-18E EPS are muchhigher than market consensus. Our price target of Rmb23.75 is derived from DCFmodel (WACC=8.1%) and implies 24.7x 2017E P/E. Maintain Buy rating.

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