NEW YORK (TheStreet) -- Shares of 21Vianet Group (VNET) are up 5.57% to $19.87 after it was reported that the Chinese Internet data center services provider entered into a definitive share purchase agreement with Kingsoft Corp., Xiaomi Corp. and Temasek, valued at $296 million.
21Vianet Group announced today that affiliates of Kingsoft, an Internet based software developer, distributor and service provider, Xiaomi, a leading designer, manufacturer and marketer of mobile devices, and Temasek, a Singapore based investment company, will purchase newly issued shares of 21Vianet at $3 per ordinary share.
Kingsoft, Xiaomi, and Temasek will hold 11.6%, 3.4%, and 13.1% equity ownership of the company, respectively, after the closing of the transactions.
"By partnering with Kingsoft and Xiaomi, not only will we be able to expand the scale of our data center footprint, but we will also be able to develop the next-generation infrastructure platform, helping fuel the continued growth of mobile Internet traffic and cloud computing technology in China," 21Vianet CFO Shang Hsiao said.
Separately, TheStreet Ratings team rates 21VIANET GROUP INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate 21VIANET GROUP INC (VNET) a HOLD. The primary factors that have impacted our rating are mixed--some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in stock price during the past year and increase in net income. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- VNET's very impressive revenue growth exceeded the industry average of 28.2%. Since the same quarter one year prior, revenues leaped by 52.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- 21VIANET GROUP INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, 21VIANET GROUP INC swung to a loss, reporting -$0.13 versus $0.15 in the prior year. This year, the market expects an improvement in earnings ($1.29 versus -$0.13).
- Currently the debt-to-equity ratio of 1.71 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with the unfavorable debt-to-equity ratio, VNET maintains a poor quick ratio of 0.85, which illustrates the inability to avoid short-term cash problems.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Internet Software & Services industry and the overall market, 21VIANET GROUP INC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: VNET Ratings Report