Blue Flame Holdings (000968) Quick Comment on Major Events: Shanxi Gas Group Launches Controlling Acquisition and Waits for Provincial Resource Integration

Blue Flame Holdings (000968) Quick Comment on Major Events: Shanxi Gas Group Launches Controlling Acquisition and Waits for Provincial Resource Integration
Event: The company issued an announcement that the controlling shareholder Jinmei Group will use its held Jinmei Group to hold Lanyan Holdings.05% shares, Shanxi Mingshi Coalbed Methane Utilization Co., Ltd. 98.55% equity, 60% equity of Jincheng Tianyu New Energy Co., Ltd., 52% equity of Shanxi Energy Coalbed Methane Co., Ltd., 100% equity of Yi’an Lanyan Coal and Coalbed Methane Co-production Technology Co., Ltd., Shanxi Jincheng Coalbed Methane Gas TransmissionCo., Ltd. 60% equity, Shanxi Chenguang Logistics Co., Ltd. 54.85% equity, 30% equity of Shanxi Yigao Coalbed Methane Co., Ltd., and 100% equity of Shanxi Jinmei Group Zhaozhuang Coal Industry Co., Ltd. will increase the capital of Shanxi Gas Group and determine the added value to be RMB 1,280,549.620,000 yuan.After the implementation is completed, Shanxi Gas Group will directly hold 387,490,182 A shares of Lanyan Holdings. Guoxin’s point of view: Shanxi Gas Group’s acquisition of the controlling interest was pushed forward as scheduled before the end of March, and the timing was in line with expectations, proving that the asset reorganization went smoothly.In the future, the provincial-owned natural gas upstream assets will be injected into the company’s new controlling shareholder, and Lanyan Holdings will be the group’s only largest CBM development performance subsidiary, which is expected to become the absolute main force to undertake the group’s gas production.Based on the provincial government’s neutral conversion of Shanxi Gas Group’s gas volume planning, the company’s potential for additional equity income may reach 5-7 times the current income.Considering that there are still many procedures for the gas asset group’s subsequent asset integration and the uncertainty of the new blockchain forecast mining, the long-term profit forecast is temporarily maintained. It is estimated that the net profit will be returned to the mother in 18-20 years.43/8.06/10.24 ppm, corresponding to a dynamic PE of 19.5x / 15.5x / 12.2x, maintain “Buy” rating. Comment: Shanxi Gas Group’s restructuring schedule is in line with expectations. The company issued an announcement in February this year, announcing its intention to make Shanxi Gas Group the new controlling shareholder of the company.And step by step to promote the asset restructuring of the gas group.It was mentioned that by the end of March 2019, the assets injection 返回码: 404 网站打不开?重查 in the province and the appointment of strategic investors of provincial coal enterprises will be completed.This announcement of the company is in line with the expected timetable of democracy, which verifies that the integration of Shanxi Gas Group is progressing smoothly. Shanxi Gas Group intends to complete the asset injection announcement This time, the company further fully announced the proposed assets of the future new controlling shareholder Shanxi Gas Group. In addition to the supplementary assets injected by Jinmei Group by means of equity capital increase, there are still a large number of Shanxi provincial heritage gasSector assets will be injected successively. After the completion of the acquisition, Shanxi Gas Group will officially become the company’s controlling shareholder. After the China Securities Regulatory Commission waives the tender offer obligations, Shanxi Gas Group will formally complete the acquisition of the shares of the listed company belonging to Jinmei Group and become the controlling shareholder of Blue Flame Holdings.By combining the shares of other listed companies held by the Coal Gas Group and Shanxi Jingjian Investment, the total proportion of Lanyan holdings held by the Gas Group and its concerted parties will be 54.48%, the transfer of equity has not caused the actual controller of the listed company to change. The provincial government has high hopes, and the company with a large space for gas production planning announced in February that after the establishment of Shanxi Gas Group, it will adhere to the new principles of tapping potentials and expanding gas production capacity.Realize ownership cooperation and business synergy with midstream pipeline network enterprises.Expand the city gas market and increase terminal sales.Strengthen technological innovation to help the rapid development of the gas industry. Among them, the company specifically pointed out that in 2020, Shanxi Gas Group’s own coalbed methane drainage scale will reach 4.3 billion cubic meters, and cooperate with central enterprises to form a 10 billion cubic meters drainage scale. The province’s coal mine underground gas extraction of 6.5-7 billion cubic metersScale, striving to achieve the output target of 20 billion cubic meters, and supporting the construction of a gas power generation project and a coal bed gas extraction equipment manufacturing base. The “Thirteenth Five-Year Plan” for the development and utilization of coalbed methane (coal mine gas) released in November 2016 states that by 2020, the “coalbed gas (coal mine gas) extraction volume will reach 24 billion cubic meters, of which the surface coalbed methane production will be 100 billionCubic meters, utilization rate is more than 90%; coal mine gas extraction is 14 billion cubic meters, utilization rate is more than 50%.“The Shanxi Province Coalbed Methane Resource Exploration and Development Plan (2016-2020)” released in August 2017 requires that “the annual output of ground-level coalbed methane increase by 13 billion cubic meters and increase production capacity by 230?33 billion cubic meters per year, of which coalbed methane production capacity in coal goaf has increased by 1?200 million cubic meters / year.The completed high-standard coal mine gas drainage demonstration project, the annual coal mine gas drainage volume reached 115?13.3 billion cubic meters, with a utilization of 65?8.5 billion cubic meters.By 2020, strive to achieve a CBM extraction volume of 20 billion cubic meters and a surface mining capacity of 300?At 40 billion cubic meters per year, the output value of coal-bed methane exploration, extraction, transportation, and transformation of the entire industrial chain reaches about 100 billion.The “Notice of Deepening the Reform of the Coalbed Methane (Natural Gas) System in Shanxi Province” issued in January 2018 states that “We will strive to reach 1 in the province’s proven geological reserves of coalbed gas by 2020.1-1.4 trillion cubic meters; total coal-bed methane (gas) extraction capacity reaches 40 billion cubic meters / year; output reaches 20 billion cubic meters / year; total mileage of gas pipelines exceeds 10,000 kilometers, and the gas population coverage rate reaches 70%about.Correspondingly, in 2018, the national coal-bed methane surface extraction output was 5.5 billion cubic meters, of which we expect Shanxi to account for about 5 billion cubic meters, and Lanyan Holdings’s 2017 production capacity14.3.3 billion cubic meters, with an output of 10.900 million cubic meters, we judge that the output in 2018 increased slightly compared to 2017.We estimate that 90% of the current CBM tenement area in Shanxi Province belongs to the three major oils, and Lanyan’s holding area accounts for about 5-8%. For the sake of caution, we will not consider the target time point of 2020 for the time being, and only consider the target extraction volume proposed by the provincial government, which will be regarded as the long-term crop space of Shanxi Province through specific block inspection planning.That is, the ground drainage volume of provincial enterprises reached 4.3 billion cubic meters, and the drainage volume of cooperation with central enterprises reached 10 billion cubic meters.About the current actual output, provincial enterprises still need to extract about 3 billion cubic meters, and the cooperation between central enterprises and enterprises still needs to extract about 7-8 billion cubic meters.As Lanyan Holdings will be the Group’s only subsidiary with the largest coalbed methane exploration and mining experience, we expect it to be the absolute main force in the future to undertake the exploration and mining work of the controlling shareholder.Assume that 90% of the provincial-state-owned enterprise’s cooperation with central SOEs will add up to 90% of their production tasks and be completed by Lanyan. The proportion of Lanyan ‘s cooperation with central SOEs will be 50% (Asia-American Energy ‘s current cooperation with central SOEs is 70% and 80%), The long-term crop of Lanyan Holdings will increase by approximately 5.6-7.7 billion cubic meters on the basis of approximately 1.1 billion cubic meters in 2017, which is an increase of 5-7 times the equity output space. After the completion of the initial asset restructuring, follow up on the cash replenishment and replenishment of new capital. According to the timetable announced earlier, before the end of March 2019, Datong Coal Mine Group Co., Ltd., Yangquan Coal Industry (Group) Co., Ltd., Shanxi Coking Coal GroupShanxi Xishan Coal and Electricity Co., Ltd., a subsidiary of the limited liability company, and Shanxi Lu’an Mining (Group) Co., Ltd. will each contribute 50 million in currency and increase capital to the Gas Group through non-public agreement. We believe that if this step of cash increase can be successfully advanced, it will be expected to provide new funds for the company’s subsequent well expansion and gas production capital expansion.The company has 4 new blocks in the early stage of exploration and mining, and several other old blockchains require technological transformation and gas production and potential expenditure. If increased capital is injected into the company’s controlling shareholder, it will gradually participate in supporting listed companies’ well production through subsequent capital operations.Gas, improving the company’s performance prospects. Investment suggestion: The reorganization of the controlling shareholder’s assets is progressing smoothly and the rating of “Buy” is maintained. Shanxi Gas Group’s acquisition of a controlling interest was pushed ahead of schedule by the end of March as expected, and the timing was consistent with expectations, proving that the asset reorganization went smoothly.In the future, the provincial-owned natural gas upstream assets will be injected into the company’s new controlling shareholder, and Lanyan Holdings will be the group’s only largest CBM development performance subsidiary, which is expected to become the absolute main force to undertake the group’s gas production.Based on the provincial government’s neutral conversion of Shanxi Gas Group’s gas volume planning, the company’s potential for additional equity income may reach 5-7 times the current income.Considering that there are still many procedures for the gas asset group’s subsequent asset integration and the uncertainty of the new blockchain forecast mining, the long-term profit forecast is temporarily maintained. It is estimated that the net profit will be returned to the mother in 18-20 years6.43/8.06/10.24 ppm, corresponding to a dynamic PE of 19.5x / 15.5x / 12.2x, maintain “Buy” rating. Risk reminder: Subsequent asset restructuring fails to meet expectations, gas production falls short of expectations, and upstream gas prices fall