(Yicai Global) Aug. 10 -- Chinese radio frequency solutions provider Shenzhen Tat Fook Technology Co. [SHE:300134] has reported a swing from profits of about CNY48 million (USD7.2 million) in the first half of last year to losses of CNY88 million in the same period this year due to declining demand and rising operating costs.

The firm now plans to acquire Guangdong-based Xiang Jiang Xin Precision Technology Co., which makes exterior precision parts for smartphones, for USD374 million (CNY2.5 billion).

Tat Fook will complete the acquisition through an issue of nearly 98.8 million A-shares at CNY21.21 (USD3.18) a share to all shareholders of the target company and a cash payment, the buyer said in a press briefing. The share offering will cover 82.5 percent of the transaction with cash making up the remainder.

Xiang Jiang Xin's CNY2.5-billion valuation puts an almost 639-percent premium on its net assets, which an appraisal values at CNY340 million. The high premium is mainly because the company has excellent prospects for development, and its business scale and profitability are expected to improve significantly in future, the appraiser said.

The acquisition target aims to deliver a net profit of CNY210 million this year, CNY280 million next year and CNY350 million in 2019.

Total operating income at Tat Fook slumped 23.21 percent annually to CNY904.75 million in the first six months. Key factors in the company's decline include dwindling demand for smart devices and cost increases due to business diversification, market expansion and research and development.

Founded in 2001, Tat Fook is a state-level enterprise specializing in research and development, production and sales of precision metal structural parts for smart devices and other consumer electronics products. The firm listed on the Shenzhen Stock Exchange in October 2010.