Foshan Lighting “cleans up” non-LED related assets, and investment income exceeds main business net profit

Foshan Lighting (000541) released an announcement on the progress of the transfer of the equity of Qinghai Fozha Lithium Energy Development Co., Ltd. yesterday evening. The board of directors of the company agreed to transfer 38% of the equity of Qinghai Foshan Lithium Energy Development Co., Ltd. (hereinafter referred to as “Qinghai Fozhao Lithium Energy”) held by the company at a price of 190 million yuan.

The company signed the "Equity Transfer Agreement" with Guangdong Keda Jieneng Co., Ltd. (hereinafter referred to as "Koda Jieneng"), and the company will transfer 38% of the shares of Qinghai Fozha Lithium Energy to Keda Jieeng.

The company said that the transfer of Qinghai Fozhao Lithium Energy's equity will help reduce the risk of foreign investment and revitalize the company's stock assets. According to preliminary calculations, the equity transfer is estimated to increase the company's total profit in 2017 by 181 million yuan.

According to the 2016 annual report released by Foshan Lighting, the company's net profit reached 1.072 billion yuan, a 19-fold increase over the same period last year.

Behind the skyrocketing profits, Foshan Lighting's net income from the sale of Guoxuan Hi-Tech stock was 729.59 million yuan. Subsequently, Foshan Lighting further announced that it will reduce all shares of Guoxuan Hi-Tech according to the company's own development needs.

From November 15th, 2016 to December 7th, 2016, Foshan Lighting reduced the holding of Guoxuan High-tech stock by 29.27 million shares through the block trading method, accounting for 3.34% of the total share capital of Guoxuan Hi-Tech. The total transaction amount was 96,524,460 yuan. After deducting the cost and related taxes and fees, the company obtained an investment income of 853.261 million yuan.

The asset sales for Foshan Lighting's 2016 net profit increased by 72,523,700 yuan, accounting for 67.57% of the total net profit. As of the end of the reporting period, the company still holds 43,736,150 shares of Guoxuan Hi-Tech, accounting for 4.98% of the current total share capital of Guoxuan Hi-Tech.

In fact, while the main business of lighting has been transformed into LED, Foshan Lighting has focused on the electrical sector. In October 2016, Foshan Lighting established the electrician subsidiary Foshan Lighting Zhida Electrical Technology Co., Ltd. However, the company has not yet achieved profitability in 2016.

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