Furi Electronics will be holding a shareholders’ meeting on Sept. 2 to decide on the company’s private investments to acquire 92.8% of MR LED Photoelectricity Co. stock shares.

“If all goes well, the MR Photoelectricity’s acquisition will be completed in Sept. this year, and the company’s financial reports will be included in 4Q,” said Xu Zhengsheng, VP of Furi Electronics. “This acquisition will bring positive effects to the company’s future income and operation development.”

According to the transfer of stock rights agreement, once the deal is sealed MR Photoelectricity’s 2013-2015 financial reports will belong to the parent company. Excluding non-recurring profits and losses, MR Photoelectricity’s earnings cannot be less than RMB 30 million (US$ 4.9 million), RMB 35 million and RMB 39 million throughout the three years, and total net profit cannot be lower than RMB 12,000. 

Furi’s Electronic’s acquisition of 92.8% of MR Photoelectricity stock shares has been approved by Fujian Province’s State-owned Assets Supervision and Administration Commission, and does not require approval from China’s Securities Regulatory Committee since the acquisition does not involve large capital redistribution, sources pointed out. MR Photoelectricity is a company that is in the process of being listed on the bourse.

“In the LED monitor field, MR Photoelectricity’s 2012 exports reached top three nationally, and oversea orders accounted for more than 50% of operations,” said Xu.

According to public announcements, MR Photoelectricity revenues from 2011 till first half of 2013 was about RMB 2.48 billion, RMB 3.20 billion and RMB 1.77 billion respectively. Net profit from the same period was RMB 22.64 million, RMB 25.42 million and RMB 10.46 million.

“MR Photoelectricity financial results from first half of 2013 is already an indicator for future sales performance, and is already very outstanding in the LED industry,” said a stock trader.

Public information showed another manufacturer with a focus on LED monitors, Unilumen’s, net income for 1H13 was RMB 11.29 million. While an LED monitor die manufacturer, HC SemiTek Corporation, net income for 1H13 is expected to reach about RMB 12 million-RMB 20 million.

“Calculated from the promised 2013 sales goal, the acquisition’s price-earnings ratio (P/E ratio) is eight times lower than that for the same type of listed companies,” said Xu.

Research showed previously Elec-Tech International Co., Ltd. acquired 8.24% stake of NVC Lighting Technology Corporation, and Tongfang Guoxin Electronics Co. transferred 96.5% of shares to State Microelectronics. In relation to 2013 profit predictions, the stock acquisition P/E ratio is 15.08 times and 13.95 times respectively. 

“The signed sales goal is more conservative than MR Photoelectricity’s management’s estimated profits,” said Xu. “MR Photoelectricity’s current management team will stay on after the transfer of stock shares.”

“Acquiring a mature asset is much more effective than establishing or expanding a new facility,” said Xu. 

In reality, Furi’s obvious entry in the LED industry is closely related to Fujian Province’s release of “Fujian Province’s promotion and application of LED lighting products and related facilities” in May this year. The document states all public lighting in general should use LED lighting products by 2015, and has stimulated the LED industry in Fujian. The LED industry’s newly added product value increased to more than RMB 50 billion that year.

As for first half of 2013, Furi Electronics project constructions in LED include Min Riverbanks night lighting constructions, Industrial Bank Co. headquarters and branches interior LED lighting makeovers, and 

At the same time of declaring its  acquisition of MR Photoelectricity’s 92.8% stock shares, Furi Electronics promoted a project of RMB 6.41/share, and an increase of no more than 50 million shares. This is also the company’s first time of financing since it was listed in 1999. 

From 2013-2015, the company will be giving MR Photoelectricity financial support of no less than 10% of its sales revenue from the year before to enhance the effects from the agreements, said Furi Electronics.

“The company will be fulfilling leapfrog development in the LED industry through new constructions, expansions, joint ventures, and acquisitions,” said Furi Electronics.

From the above mentioned conditions, a stock broker believed after adding stocks to a certain level, Furi Electronics might be merging other companies in related fields in the future. 

“For Furi Electronics, the purchase of MR Photoelectricity and the promotion of additional stock shares is fully utilizing the capital market and optimizing company assets. By acquiring assets at a lower P/E ratio to raise funds, it will become the last step for creating capital conditions for mergers,” the stock broker pointed out.