The grand ceremony of DOBE International Community Festival has been held on July 1st with one-week activities (from July 1st to 8th). Many professional forum activities of We Talk have been held with VIPs from various industries, professional teams formed by investment companies, law firms and CPA firms gathered here to bring a knowledgeable and cultural feast of financial and investment field for enterprises and white-collar workers in the circle.
Keynote Speech Entitled Reflection on the Investment in China's Cultural and Media Industry
Chen Hang, president of China Culture Industrial Investment Fund Management Co., Ltd. has delivered a keynote speech entitled Reflection on the Investment in China's Cultural and Media Industry on July 4th which has attracted many employees from various cultural and innovative industries as well as investors who are interested in cultural and innovative industries.
Before the formal speech, Chen Hang has collected questions related to cultural innovation and scientific innovation from all the attended audience. And white-collar workers of cultural and technological innovation enterprises attending the meeting have also raised questions centered on IP, the development and investment of cultural and innovative industries enthusiastically combined with their own working experiences. Chen Hang has also integrated these questions into his speech and answered them one by one throughout the entire lecture.
At the beginning of his speech, Chen Hang has directly shown the prosperous development of China's cultural and media industries through groups of data and analyzed the reasons behind this prosperity: great support of national policies, development of Chinese economy, innovation in media technology and backup from financial assets. He has predicted that the next ten years will be a gold age for the development of China's cultural industries.
Later, he changed his topics by warning employees from cultural innovation and scientific innovation industries attending the forum that though everything goes successfully currently, they should not let down their guard because amid the rapid development of cultural media industries, they still face challenges brought by the slowdown of macroeconomic growth, increasingly tightened policies over media monitoring and management as well as the shrinkage of bonus from mobile traffic, especially careful of risks resulted from increasingly tightened policies over media monitoring and management.
Taking online movie mentioned by the onsite audience as an example, Chen Hang has expressed his positive attitude toward such an industry. Currently, an online film costs about 2 to 3 million RMB. Compared with conventional film, online film costs much cheaper with much wider audience. Online video platforms represented by iQIYI.com have all played lots of online films through membership system. However, good and bad are mixed together in online film industry with little restrictions, monitoring or management of the review mechanism over what to be played on the platform. Taking several hit online operas were order to go offline and be revised as a reference, it's possible that the State Administration of Radio Film and Television (SARFT) will enhance their monitoring and management over online large films according to the same standard imposed on conventional movies and TV dramas through increasingly tightened policies over media monitoring and management. Therefore, it’s imperative for employees to pay attention to the restrictions and limitations during film making. And as for investors, they should also choose reliable companies and projects when investing industries of these fields.
As for questions most intriguing to the audience like how to engage in the investment of cultural media industries, Chen Hang has analyzed the 3+1+1 standard in investment judgment over cultural media industries through a case study of Kaixinmahua.com. The so-called “3+1+1” is to conduct a comprehensive evaluation over the project with three evaluative criteria of industry, business mode and team as well as two extra indexes of price and value added during analysis over the project investment.
He also pointed out that of all three evaluative criteria, industry is of the most importance. Even the best business mode and the most excellent team could not save the doomed fate of the enterprise if it is not grown in an industry with great potential. "Investment means to invest in sunrise industry of about 4 or 5 o'clock in the morning which enjoys the peace before dawn but will soon be thriving. We shall never invest in sunset industry since they will soon fall into darkness! We'd rather invest more money in an appropriate race track than in enterprises walking on the wrong industrial trajectory.
Chen Hang, president of China Culture Industrial Investment Fund Management Co.,Ltd.
Keynote Speech of Estimated Value of an Enterprise in Its Early Stage
Mr.Deng Yaohua, director of Corporate Mergers and Acquisitions of Price Waterhouse Coopers (PWC) has delivered an elaborate keynote speech entitled Valuation of an Enterprise in Its Early Stage through abundant cases and well-planned discussion over exercises for all the audience present here on the afternoon of July 5th.
He enumerated successful and failed cases of enterprises in their early development both at home and abroad and pointed out that enterprises may be subject to various factors including changes in the market and polices which will then lead to corresponding adjustment of their original development plans. Therefore it's imperative for investors to see much more uncertainty and risks in enterprises in their early development compared with that of maturely developed enterprises from the perspective of investment and valuation. Entrepreneurs should pay attention to market dynamics and adjust their strategies in time to keep up with the changes in the market.
Mr. Deng Yaohua has introduced major methods of valuation for maturely developed enterprises. While for enterprises in their early stage, common methods of valuation may not reflect all these uncertainties of market acceptability and development arisen due to lack of historical financial information and unverified business mode and therefore become inappropriate. Currently the valuation of enterprises in their early stage is still in exploration period and lacks a valuation system with theoretical foundation. Mr. Deng Yaohua has conducted a periodic reorganization and summary for current methods in accordance with reference to common ideas of the market and related operational instructions published by American Institute of Certified Public Accountants (AICPA).
Appropriate methods of valuation of enterprises in their early development should be determined in accordance with the development stage of an individual enterprise and the availability of related information. In seed round and Angel round period, investors mainly focus on founder's intended input of cost or information about financing in the last round (if any), determine the amount of financing and its corresponding ownership ratio in accordance with their industrial experiences and at the same time deduce the underlying valuation before investment to analyze its rationality related to the development stage of the enterprise. In A round financing period, generally there are revenue and operational data for enterprises, hence it's reasonable to conduct valuation with appropriate financial index and market multiple, for example, predicted sales revenue and price-to-sales ratio（P/S）. While in B round or C round period, enterprises will usually have increases in their revenue and profits; hence if the enterprise can provide reliable financial predictions, it's feasible to conduct valuation through income approach, i.e. the method of discounted cash flow and cross check this result with that gained through market approach, i.e. results gained through value multiples like price earning ratio（P/E）.
In order for audience present here to have a profound understanding of and apply different methods of valuation, Mr. Deng Yaohua has deliberately prepared onsite exercises and elaborate selection of case examples for them. The audience replied half-jokingly, saying that it was as if they've backed to school times with a sense of urgency when asked by the teacher to answer certain questions. These "students" responded to each question carefully through enthusiastic discussion and free exchange of ideas.
He advised that before confronting investors, entrepreneurs should think about whether their products are capable to solve pain spots in the industry, their profit model, targeted group of customers, market size, comprehensive consideration over product pricing, willingness to pay and operational cost, professional team building, financing planning and available successful cases in overseas market. Meanwhile, entrepreneurs should pay attention to their compliance in financial and legal affairs as soon as possible, conduct tax planning and design incentive systems for employees and be familiar with common investment terms so as to maintain control power over the company, lower operational risks, maximize revenue and create high valuation to achieve successful listing or exit for mergers and acquisitions.
In the end, Mr. Deng Yaohua has also introduced his company, "China's Innovation Platform of Price Waterhouse Coopers (PWC) has been officially established which will build a bridge of connectivity and interaction for Chinese and international innovation and entrepreneurship circle through integration with Center for Financial Services Innovation (CFSI), Enterprise Accelerator and Experiencing Center in Beijing, Shanghai, Hong Kong so as to provide customized professional services, resources docking platform and capital operating support for the development of Chinese enterprises as well as to promote the internationalized development of Chinese innovation and entrepreneurship."
Mr.Deng Yaohua, director of Corporate Mergers and Acquisitions of Price Waterhouse Coopers (PWC)
Forum Session of Setting Out on the Road of National Equities Exchange and Quotations (NEEQ)
Forum Session of Setting Out on the Road of National Equities Exchange and Quotations (NEEQ) has specially invited Liu Runzhao, general manager of Financial Securities Department for Small and Medium-sized Enterprises and Mergers and Acquisitions Financing Department of Shanxi Securities Co.,Ltd., Su Zheng, director of Shanghai Wenyue Investment Management Co., Ltd., visiting professor of Shanghai Finance University and Shanghai Customs College, Chen Yu, partner of TGS Nortex, Mo Fei, senior partner of Dacheng Law Offices, Deng Wei, lawyer of Dacheng Law Offices, keynote lawyer of Lawyer Training Camp for National Equities Exchange and Quotations (NEEQ) in Lawspirit, specially employed law lecturer of Financial College of Price Waterhouse Coopers (PWC), Ouyang Qun, managing director and member of policy-making committee of Shanghai Yude Baojian Investment Co. Ltd., which provide enterprises intent to listing on the National Equities Exchange and Quotations (NEEQ) with lectures on financial affairs, law and investment, etc.
Liu Runzhao, general manager of Financial Securities Department for Small and Medium-sized Enterprises and Mergers and Acquisitions Financing Department of Shanxi Securities Co., Ltd. Has conducted a detailed analysis over the development trend for China's capital market, opportunities and values for enterprises brought by National Equities Exchange and Quotations (NEEQ) and its specific requirements for listed companies from micro perspective.
He pointed out that the National Equities Exchange and Quotations (NEEQ) is the third national stock exchange venue besides Shanghai and Shenzhen stock exchange markets which will play a transitional role in multilevel capital market. It serves micro-, small- and medium-sized enterprises featuring innovation, entrepreneurship and growth by establishing small, convenient, flexible and diversified investing or financing mechanisms to support their development, enrich their debt financing instruments and enlarge their size, promote innovation and entrepreneurship, restructuring and the healthy development of our society and economy.
Liu Runzhao, general manager of Financial Securities Department for Small and Medium-sized Enterprises of Shanxi Securities Co., Ltd.
Su Zheng, director of Shanghai Wenyue Investment Management Co., Ltd., visiting professor of Shanghai Finance University and Shanghai Customs College has analyzed the advantages brought by enterprises listing on the National Equities Exchange and Quotations (NEEQ) for all the audience present here:
Transfer of IPO - companies listed on National Equities Exchange and Quotations (NEEQ) which has fulfilled all requirements for the listing of shares can hand their applications for listing of trading directly to stock exchange; Increase in wealth - the evaluation of enterprises' value should focus on the long-term with currently the average price earning ratio of NEEQ being 18 times or so; convenience for financing - listing on NEEQ equals to gain hidden business credit assurance from securities traders, accountants, lawyers and stock transferring companies; liquidation of value - after listing if the enterprise needs money, it can sell a part of its stock right. What's more, with price earning ratio, it will also gain quite a lot of premium during trading. And the NEEQ has also provided its original shareholders with convenience in exit.
Su Zheng, director of Shanghai Wenyue Investment Management Co., Ltd.
Chen Yu, partner of TGS Nortex has offered his analysis centered on the Financial Problems of Enterprises Listing on National Equities Exchange and Quotations (NEEQ) from professional perspectives.
He warned all onsite enterprises men that during the auditing for listing on the NEEQ, it's imperative to confirm their revenue recognition principle and differences in closing date which means to confirm revenue through issued invoice rather than goods delivered and through form rather than substance. Additionally, it's of great importance to differentiate commissioner and proxy in business involved in Internet services and collecting and paying Services.It's important to pay attention to the transferring mode of financial management method whether the company is in the growing stage, mature period or after mergers and acquisitions.
Chen Yu, partner of TGS Nortex
Deng Wei, lawyer of Dacheng Law Offices, keynote lawyer of Lawyer Training Camp for National Equities Exchange and Quotations (NEEQ) in Lawspirit, specially employed law lecturer of Financial College of Price Waterhouse Coopers (PWC) has analyzed the legal review of the compliance of NEEQ from legal perspective for all business men attended the meeting.
He has listed various professional legal terms and regulations and relevant punishment to remind all enterprises present at the meeting that since legal supervision and regulations over enterprises listing on NEEQ has become much more stringent, enterprises should pay more attention to avoid these legal risks while trying to be listed on NEEQ. They should make enterprises legal and compliant with special attention to legal risks aroused by problems in connected transaction, defective capital contribution, possession of funds and environmental protection.
Deng Wei, lawyer of Dacheng Law Offices
Ouyang Qun, managing director and member of policy-making committee of Shanghai Yude Baojian Investment Co. Ltd. has offered a comprehensive analysis over the influence of policies toward enterprises listed on NEEQ from the perspective of investment: problems like underestimated valuation of enterprises and ambiguous exit due to no threshold in the early stage; overestimated valuation of enterprises and trapped capitals due to market maker rule. Meanwhile, private market maker has also led to injustice and inequality, which makes it difficult to guarantee the rights and interests of retail private investors and hence becoming the scapegoats; stratification system mainly focuses on the control over market risks with little attention to its mobility; mergers and acquisitions are like beautiful pitfall which has trapped many rash enterprises with great ambition; public funds entering the market will not only pave the way for retail private investors to invest into enterprises listed on NEEQ but also stimulate new mobility into stagnant trading market.
Ouyang Qun has provided fair advice on the basis of his knowledge and analysis of current situation of investment into enterprises listed on NEEQ: investors should abide by value investing while enterprises should make their operation and business compliant and wait patiently for visionary investors and industrial capital.
Ouyang Qun, managing director and member of policy-making committee of Shanghai Yude Baojian Investment Co. Ltd.
A great wave of entrepreneurship has swept across China in recent years with the call for mass entrepreneurship and innovation. There has been altogether 22,000 Internet Startups in China until 2015, with a total of 50 million small- and medium-sized enterprises. Correspondingly, 75% of small- and medium-sized companies lack basic financing knowledge and over a half of startups have insufficient awareness in risk prevention during capital operation and lack experiences in crisis management. Against this background, such kind of professional, practical and constructive forum and activities hosted by DOBE are of great importance for small- and medium-sized enterprises and startups in which they can not only see farther standing on the shoulder of giants, i.e. access to the best development mode of the industry and investment but also facilitate themselves to avoid risks effectively and grow rapidly.
DOBE will host such kind of professional forum regularly in the future based on the needs of enterprises in the circle covering a wide range of professional areas, including Finance, law, business management, brand promotion, etc. so as to provide more professional services for these enterprises.