Dinglong Culture is a film and television industry
based in Guangzhou. Dinglong Culture was previously a toy company, and recently
this company has gained attention from the Regulatory Agency of Guangdong
because of its plan to extend its business to the mining industry.
According to the company's plan, Dinglong
Culture will invest USD 76.86 million (RMB 540 million) in Zhongtai Technology
and ultimately will acquire 51% shares of Zhongtai Technology. This plan is the
first foreign investment plan laid out by the company since Mr. Long Xueqin
became the primary shareholder of Dinglong Culture last year. However, Zhongtai
Technology has still not generated any revenue after the plan; in fact, the net
profit during the first three quarters in 2018 and 2019 in Zhongtai Technology
was RMB -3.01 million and RMB -2.77 million, respectively. Despite the fact
that the company's earnings are decreasing, Zhongtai Technology is still evaluated
at RMB 1.06 billion. Dinglong Culture also promises that the cumulative profit
of Zhongtai Technology will reach RMB 1.5 billion between 2020 and 2024.
Zhongtai Technology a Young Titanium
Mining Company
Zhongtai Technology was founded in May
2017, with 98% of shares owned by Zhongtai Resources and 2% of shares owned by
Shanghai Chaonian Technology Research Center. Zhongtai Resources and Shanghai Chaonian
Technology Research Center will only hold 48.02% and 0.98% respectively, after
Dinglong culture increases its investment in Zhongtai Technology.
Recently, Zhongtai Technology has acquired
68% of shares in Kunming Wuxin Huali Mining Co., Ltd and owns the mining right
of ilmenite ore in Qingshuitang, Kunming.
Zhongtai Technology also holds 98% of shares in Maitreya Zhongtai
Technology Co., Ltd and 88% of shares in Yunnan Wanyou Mining Co., Ltd, with
the mining right of ilmenite in Panzhiyi located in Maitreya City, Yunnan
Province and the mining right of Ilmenite ore and lead zinc ore in Xiaoma
street located in Luquan County, Yunnan Province. Ilmenite is an oxide of titanium
and iron from which elemental titanium can be extracted.
Dinglong Culture and Zhongtai Technology
Both Struggle to Earn Profits
The Shenzhen Stock Exchange has raised
questions about Dinglong Culture's acquisition of Zhongtai Technology and has required
Dinglong Culture to explain whether the acquisition of Zhongtai Technology will
help the company's business development in the film and television industry,
and whether the acquisition will cause any loss for the listed company and for
investors. Dinglong Culture launched a series of mergers and acquisitions before
its investment in Zhongtai Technology. In 2018, Dinglong Culture had a deficit
of RMB 127.7 million, and during the first three quarters of 2019, the company
still had a deficit of RMB 46.6 million. Some investors question whether
Dinglong Culture's investment of RMB 540 million will simply exacerbate
Dinglong Culture's financial losses.
Furthermore, a reporter from Changjiang
Daily noticed that Zhongtai Technology has not yet generated any revenue, and
the company is still in a phase of reckless spending. The financial data of
Zhongtai Technology shows that the company earned zero income during 2018 and
the first nine months of 2019, with net profits of RMB -5.7 million and RMB –
3.05 million. The net profits attributed to the parent company were RMB -3.01
million and RMB -2.77 million in 2018 and the first nine months of 2019. The
net cash flow from operating activities was RMB -32.3 in 2018 and RMB -9.01
million in the first nine months of 2019. By the end of third quarter in 2019,
the total assets of Zhongtai Technology amount to RMB 15.5 million, with RMB
12.3 million of debt.
For more information on China's titanium market, please check our Titanium
Dioxide China Monthly Report.