The company's stock reform plan is 10 get 3 free + major asset replacement, 10 get 3 free, 43% delivery rate ranks in the forefront of A shares and real estate industry share reform companies in the second half of 2006, but the exciting point of the share reform plan lies in the replacement of high-quality land resources and secondary land acquisition privileges. The generous share reform plan has nothing to do with performance, but comes from the compensation that listed companies have undertaken for major shareholders in many policy functions of the development zone.
Asset replacement makes the company's main business from relying on financial subsidies of electricity, greening to real estate development, asset quality and profitability significantly improved. Before and after the share reform, the company added high-quality land with an area of 8.1 million square meters, a construction area of 10.32 million square meters and a value of at least 3.1 billion yuan. The second-class land acquisition privilege makes the company have full primary and secondary development profits, so that the company really has the advantage of real estate resources.
According to the 6 per cent average increase in land prices, the first-level development profit and first-level transfer value-added income of 4.5 million square meters of land generated by the share reform is expected to reach 0.92 yuan (EPS).
The real estate market in Changchun and the development zone is on the rise, and the southern new town and development zone where the company's project is located will be the hot spot and high-end market in Changchun in the future. Wanda, Vanke, China Shipping, Poly, Singapore G Insurance and other powerful developers have increased the layout of projects in Changchun.
The neutral forecast company revalues the RNAV to 10.50 yuan. The improvement of asset quality and land resources make the company can use the PB method, and the stock price should return to the net assets per share of 6.46 yuan. It is estimated that the EPS in 2007 and 2008 is expected to reach 0.28 yuan and 0.39 yuan. The current stock price is 4.9 yuan, in 2007 dynamic PE is only 17.5 times, PB is only 0.76 times, RNAV discount is 53%, the valuation is very advantageous, the company is a real estate stock with a very high margin of safety.
With reference to similar development zone companies, it is reasonable to give companies 20.5x PE,1.5 PB and 15% RNAV discount, corresponding to the target price range of RMB5.77.For companies that have just completed a major restructuring that has undergone a turnaround in the endogenous growth mechanism, the PE valuation should be the stock price bottom line. The company has a 6-month target price of 6.46 yuan and a 12-month target price of 8.93 yuan.