What's new

Bright Oceans Inter-Telecom announced it would placeRmb1.11143bn shares at Rmb17.065/sh, above thecurrent share price （last close: Rmb16.51）； theplacement will mostly be subscribed to by largeshareholders （Rmb1.1bn by Bright Oceans Corp. and the restby ESOP） with a three-year lock-up period. After the privateplacement, large shareholders will hold a 32.89% stake （vs. theprevious 25.29%）。 The placement at a premiumdemonstrates large shareholders' confidence in thecompany's future growth.

Comments

Placement to strengthen technical competitiveness,thus consolidating the company's competitiveness in bigdata, information security and net optimization.

Network optimization “service + product” modelbacked by telecom operators' mobile networkexpansion.

Big data business on fast track.

Modifications to Articles of Incorporation to expandoperation scope.

Valuation and recommendation

We maintain our 2016/17e net profit forecasts ofRmb146mn/184mn （+38.3/25.9%）； lift TP by 14.7% toRmb19.24, implying 66x 2017e P/E （after dilution from privateplacement）。 Maintain BUY.

Risks

Telecom operators cut investment in network optimization; bigdata and information security operation disappoint.