Home > News content

Use 31% of available cash to buy back millet to save shareholders or improve performance?

via:CnBeta     time:2019/9/5 18:24:51     readed:72

The total number of shares issued by the company on May 14 this year is not more than 10%. The repurchase period expires at the next annual general meeting of shareholders (mid-2020).

Faced with the frequent stock repurchase of millet, some Hong Kong securities analysts told Sina Finance and Economics that the stock repurchase is only a short-term support for the stock price. It is not fair for millet employees to sell stocks through exercise, but for ordinary shareholders. The combination of repurchase and dividend payout, or the use of the chairman and Executives'own funds to increase stock holdings, can boost stock prices. In 2016, HSBC Holdings stabilized its stock price by repurchasing and dividend paying.

In the first half of the year, 34.921 billion yuan of cash was available on Millet accounts and 12 billion Hong Kong dollars were repurchased. The repurchase amount accounted for 31.5% of the company's cash assets. There were 6.7 billion yuan in short-term loans. A large amount of repurchase may have an impact on the company's financial stability.

At the present stage, the prospects of the main business are not clear, and in the face of strong competitors, the millet management should ponder whether its own capital of HK$12 billion should be spent on capital expenditure of the main business or a huge share repurchase.

Is it wise for millet to throw 12 billion yuan back?

It may be helpless for millet to throw HK$12 billion to buy back its shares, which has been appraised by the outside world as "Chairman Lei Jun is really in a hurry."

On September 2, millet's share price hit a record low of HK$8.28, falling by nearly 36% in the year and below HK$200 billion in the market value. While its share price has fallen by nearly half from the issue price, it has been pushed to the top of the public opinion in the past few days due to the reduction of executive support.

According to the information disclosed by the Hong Kong Stock Exchange, Lin Bin, president of millet, sold shares for three consecutive days after the second quarter's earnings report. From August 21 to 23, he sold 41.334 million shares of millet stock, with an arbitrage of nearly 340 million yuan. On August 27, Lei Jun signed and issued a notice saying that Lin Bin voluntarily promised that he and the entity under his control would not sell shares of the company within 365 days.

So is it wise for millet to throw HK$12 billion to buy back its shares? Wen Tianna, CEO of Boda Capital International Investment Business, told Sina Finance and Economics that "repurchase share price helps stabilize stock price and support irrational decline of stock price. Half of the amount raised by Millet IPO is used for repurchase. It seems that the share is too high. The market will also feel strange, like taking advantage of investors. At present, cash flow of domestic enterprises is more valuable. If repurchases require considerable prudence, cash flows for development or mergers and acquisitions seem to be better."

Wang Hai, a Hong Kong securities analyst, said the move might stabilize investor confidence and millet had a new 5G in the second half of the year.Mobile phoneTo launch, business improvements do not require large repurchases. Although repurchase theory has improved, investors in Hong Kong still pay more attention to the fundamentals and business prospects of the company. This fund can also be used in Internet business. Millet increases Internet and advertising revenue through hardware. The performance in this area is not so good at present, and it has not given investors confidence.

On Aug. 21, the company reported that it had bought 125 million shares in the round at a total cost of HK$1.2 billion, including transaction costs.

HK$300 million stock sent to employees analysts say it may not be an incentive

On the evening of September 4, millet announced that the board of directors planned to award 457 selected participants 34.9917.49 million shares today. Today's closing price is HK$8.65. On this basis, the total value of the shares is HK$303 million. Selected participants included millet employees

Millet insiders told Sina Finance and Economics that this is part of the employee equity incentive, a conventional incentive.

Wang Hai, an analyst at Hong Kong securities firms, said, "Employees do not need to pay the cost to acquire stocks, which may not play an incentive role. If employees are encouraged to issue and purchase shares, the exercise price should be higher than the current price, then the incentive effect can be achieved. Now it is only designated employees to donate stocks."

According to the latest exercise price of millet employees, the highest exercise price of millet employees is only HK$2.67, which is 70% lower than HK$8.96 on the same day. That is to say, there is no possibility for millet employees to be covered by stock price at present.

According to wind data, millet currently has 24 billion shares of total equity, 17.3 billion circulating shares and 6.66 billion restricted shares. Among them, 6.66 billion restricted shares are Class A shares owned by Lei Jun and Lin Bin. Lei Jun currently holds 4.273 billion Class A shares, while Lin Bin holds 2.387 billion Class A shares. Lin Bin sold shares for three consecutive days after the second quarter's earnings report. It is reported that Lin Bin sold shares this time, accounting for 1.48% of his shares, and his share-holding ratio decreased from 11.67% to 11.47%.

In addition to the reduction of core executives, the two lifting of the ban on millet have been reduced by senior shareholders. On January 9, 2019, millet was listed in Hong Kong for half a year. Within two weeks after the lifting of the ban, two large-scale millet stock reduction transactions occurred successively in the market, involving 825 million common stocks of millet B, accounting for about 2.57% of the company's issued equity. One is Apoletto, an investment fund invested by Yuri Milner, an early shareholder in millet.

On July 9, millet ushered in the second ban period. The share capital of the lifting of the ban on millet is 4.387 billion shares, accounting for 25.34% of class B shares. On July 4, Morningxing Capital, the major shareholder of millet, issued 111 million shares of Class B to each GP and LP of the fund on July 4. This allotment can be regarded as the exchange of the rights and interests of each GP and LP into the stocks of the millet group.

Wen Tianna told Sina Finance and Economics: "Millet IPO raised half of the amount for repurchase, it seems that the share is too high, the market will feel strange, like taking advantage of investors."

In June this year, millet frequently repurchased its shares. Since June 3, millet has made 19 stock repurchases in a row, with a total capital of HK$1 billion. From June 15 to July 3, millet was repurchased for 15 consecutive trading days.

"The issuance price is HK$17, and the low-cost repurchase at this time makes millet employees exercise their rights at a very low cost. Although they are compliant, they will also make the outside world suspect that their interests will be transferred to employees." Wang Hai said that the stock market confidence will be boosted by the increase of senior Executives'stock ownership, and from the past year's millet repurchase, employees will exercise their share purchases and cash in the market after each repurchase brings a short rise.

According to the latest exercise price of millet employees, in July, August and September, there are a large number of exercise rights for millet employees. The lowest exercise price is only HK$0.0279, and the highest exercise price is HK$2.67. Many employees exercise rights at a price below HK$1. Employees earn multiple profits.

However, some employees inside millet said that many employees had preemptive rights when they were listed. When millet was just listed, employees bought a lot of company stocks at a higher price. In fact, the low-price options in the report were only a small number of senior and early employees.

Lei Jun is facing the dilemma of capital use: repurchasing share price or developing business?

From the financial data of the first half of the year, the second quarter of millet smartphone revenue accounted for 61.6%, down 5.8%. IoT and life services accounted for 28.8%, up 5.9% year-on-year, Internet services accounted for 8.8%, the same as year-on-year.

"The poor performance of millet stock price can not be separated from the overall poor market drag, but the main factor is the company's main business is not ideal." Wang Hai, an analyst at Hong Kong securities firms, said that investors are also more on the sidelines, and now they are more concerned about millet's business prospects and the company's business fundamentals.

Faced with the continuing decline in stock prices, on May 17, millet reorganized its structure, and Lei Jun was also president of China.

Lei Jun returned to the front line again, Xiaomi business can break through again? In addition to the organizational restructuring, Xiaomi put forward the "mobile AIoT" dual-engine strategy in early 2019 and released an independent brand.Red riceRedmi。 On July 9, Millet released a new series of mobile phone Millet CC, which positioned itself as a young brand and assumed the responsibility of young people's mobile phones. However, the stock price of the new series of mobile phone products did not rise on the day of its release. In September, Millet released Redmi 64 million principal camera thousand yuan machine, Millet has not yet launched a new 5G mobile phone.

In the second quarter of 2016, Lei Jun, known as "desperate Sanlang", was also personally responsible for mobile phone research and development and supplier management. At that time, Xiaomi put down his position to match the target one by one, and the result was a low ebb. In July of the same year, Lei Jun said, "I am working with you to solve the problem. I have no intention of criticism and criticism. I am under great pressure today. Mobile phone is a battle that millet can't lose and can't lose."

Wen Tianna said that the repurchase of millet is only a short-term support for stock prices, and we should pay attention to performance in the future. The negative growth of global smartphones will inevitably have an impact on the future of millet.

At present, global mobile phone sales are declining. According to the latest research report released by Strategy Analytics, Q2 global smartphone shipments dropped 3% year-on-year in 2019, to 341 million units.SamsungMaintaining the first place in the global smartphone market share of 22%.HUAWEIThe unexpected rate was 17%, while the unexpected rate was 17%.AppleIt ranks third with 11% market share.

Q2 Millet remained fourth in 2019, with a 9% share of the global smartphone market, almost equal to the same period last year. This quarterOPPOIt ranked fifth with 9% of the global smartphone market, almost equal to the same period last year.

Millet smartphones shipped 32.1 million units worldwide in the second quarter. By comparison, millet sold about 28 million smartphones in the first quarter of 2019, and millet smartphones shipped slightly longer in the second quarter. Compared with the same period last year, the shipment of millet smartphones has hardly increased.

In the mobile phone business, millet has strong competitors, Huawei, OPPO andVivoMobile phone manufacturers are increasingly integrating online and offline channels. They are also developing overseas markets and layouts of AIoT. At present, Huawei, ZTE and vivo5G have been listed and sold. In addition, Huawei also intends to lay out its products.televisionIn the field, its glory brand has launched TV products, and the pressure on sales of millet TV will increase. But millet still has a big advantage in mobile India market and AIOT supply chain layout.

It is worth noting that Guo Mingpi, an analyst at Tianfeng International, pointed out in his research report recently that Huawei's market share in China is expected to increase from 35-40% in 2019 to 45-50% in 2020. The increase of Huawei's market share will bring the most direct impact on VIVO, OPPO and millet mobile phones.

On August 20, Lei Jun said in the evening performance teleconference that in 2016, Xiaomi had put in a 5G mobile phone rehearsal. It is expected that the second 5G mobile phone will be released in September this year. It is difficult to grasp the time point before the 5G outbreak. Every communication technology replacement will always leave mobile phone manufacturers behind, which is the risk faced by Xiaomi. The company's management is highly aware of this risk, and will discuss relevant topics almost every week. They are confident about the future of 5G mobile phones.

At the present stage, the prospects of the main business are not clear, and in the face of strong competitors, whether HK$12 billion of millet should be spent on capital expenditure of the main business or a huge share repurchase is worth thinking about by the management.

Sina Finance and Economics learned from the millet interior that the 12 billion Hong Kong dollars huge share repurchase is using millet's reserve funds. In the first half of this year, the total cash reserve of millet reached 51.1 billion yuan. At present, the total assets of millet are 158.254 billion yuan. The final balance of millet cash and cash equivalents is 34.921 billion yuan, the short-term debt is 6.7 billion yuan and the long-term debt is 7.1 billion yuan. However, trade payables amounted to 48.799 billion yuan, receivables to 7.337 billion yuan and inventories to 26.675 billion yuan, a decrease of 2.8 billion yuan compared with the same period last year. (Chen Yanxu, Research Institute of Sina Finance and Economics Listed Companies)

China IT News APP

Download China IT News APP

Please rate this news

The average score will be displayed after you score.

Post comment

Do not see clearly? Click for a new code.

User comments