Main points of investment
The annual performance may increase significantly: as of June 30, 2011, the company has settled operating income of 627 million yuan and achieved a net profit of 108 million yuan. It is expected that in the second half of the year, four groups of senior executives from the North District of the Pearl River Garden and Huacheng on the Pearl River will be launched. The company's annual total revenue is expected to exceed 1 billion yuan, an increase of more than 50% over the same period last year.
High-quality projects rise abruptly based on accumulated strength: the three projects that the company has been sticking to for many years have dealt with the problems left over from history and entered the stage of development and operation. The Pearl River Park project opened for sale in 2010 and is expected to bring nearly 4 billion yuan in sales revenue for the company. The S8 project has been submitted for approval and construction, and is expected to be completed in 2014, with a commercial value of more than 1 billion yuan. The Guanglong project in which the company participates has recently started and will bring high investment returns in the future.
The proportion of self-owned properties is increasing: there are two major types of self-owned properties: one is the parking lots and shops accumulated over the years (nearly 50,000 square meters), and the other is the Pearl River New Bank apartments (high-end serviced apartments, a total of 130 units) that were put into operation last year; a large number of high-quality commercial properties will also be retained after the completion of the S8 project in the future. With the continuous increase of self-owned property, the company's business structure will be more reasonable.
Low performance lock-up: due to the special revenue recognition policy (see below for details), the company's performance is volatile and the advance payment is low. As of June 30, 2011, the amount of advance payment is only 23 million yuan, and the performance lock-in is low.
Valuation and expectation: we expect the company's earnings per share from 2011 to 2012 to be 0.74,0.94,1.6 yuan. According to the corresponding closing price of 5.56 yuan on September 1, with a price-to-earnings ratio of 14.85, 11.74 and 6.92 respectively, the company was given a "cautious recommendation" rating considering the company's good growth and the possibility of benefiting from the integration of state-owned assets in Guangzhou.
Risk hint: policy risk, a sharp decline in project sales, completion later than the planned time.