Xingfa Aluminum (00098)
Xingfa’s performance and dividends are as expected, and they are satisfied. The only dissatisfaction is the stock price performance.
Revenue increased by 37% to nearly RMB 10 billion, and gross profit increased by 33% to RMB 1.35 billion. The overall gross profit margin decreased slightly by 0.4% to 13.6%, mainly due to the 2% decrease in gross profit margin of construction aluminum profiles. By maintaining existing customers and attracting new customers, the processing costs were reduced, and the revenue of this business segment increased by 32%, and the price reduction achieved the expected results.
Feng’s frankly stated that the number of shares he accepted for scrip dividends would not increase his holdings by more than 1.99% of the “enlarged share capital”, thus avoiding the potential mandatory offer obligations, and therefore the minority shareholders if they choose to scrip dividends. There will be no offer to protect the reserve price. To make such a major change, it is estimated that the key reason is that the CSRC asked Feng to make a clear disclosure on the stock dividend interest intention on March 14. It is not ambiguous. It will not be announced until March 28 after the stock scrip dividend plan is closed. Therefore, if Feng said on March 14 that he would break the dividends in full, it is believed that most of the minority shareholders feel that they will follow the stock exchange scrips because of the potential offer relationship. The end result is a large number of new shares. The net asset value per share was significantly diluted, but Feng could not achieve the goal of increasing the shareholding of the shares. It would be better to announce that it would not increase its holdings by more than 1.99% of the enlarged shareholders, so that the minority shareholders would not follow suit.
The performance of Lifestyle China for 2018 can be summed up in four words: “but not lost”. Excluding foreign exchange gains/loss factors, earnings increased by approximately 10%. The source of growth was attributable to the increase in profit of associates and its business was slightly retrogressive.