Summary of results in the first three quarters of 2009: from January to September 2009, the company achieved operating income of 21.84 million yuan, a decrease of 13.53% over the same period last year; an operating loss of 6.35 million yuan, a year-on-year reduction of 25.59%; a net loss of 3.95 million yuan belonging to the parent company, a year-on-year reduction of 32.47%; and earnings per share of-0.017 yuan. In the third quarter, the company achieved operating income of 8.22 million yuan, a decrease of 20.36% compared with the same period last year; a net loss of 1.62 million yuan, thanks to 124.40% year-on-year; and earnings per share of-0.007 yuan.
The basic situation of the company: the company was originally a Tibetan medicine production enterprise, and the company intends to acquire 100% of the Northern City Investment Company owned by the State-owned assets Supervision and Administration Commission of Zhabei District in the form of additional shares, so as to transform it into a real estate development enterprise. After the completion of the transaction, the company will no longer engage in Tibetan medicine business. The additional issuance plan was approved by the Securities Regulatory Commission on September 25.
Summary of the proposed transaction: the company intends to issue 347 million additional shares at a price of 2.92 yuan per share to acquire the 100% stake in Beicheng Investment held by Zhabei District State-owned assets Supervision and Administration Commission. Northern City Investment is one of the key enterprises in the reconstruction and indemnificatory housing construction of the old district of Zhabei District, Shanghai, with secondary development qualification. As of the date of signing the acquisition report, the construction area of real estate projects under construction by Northern City Investment and its subsidiaries is nearly 120000 square meters. the main developments are "Heyuan residence", "Helan Garden Phase II" and "Yuexiu Court Phase II" and so on. We expect to complete a total of 4 million square meters of housing renovation by 2010. However, due to indemnificatory housing price restrictions, the company's profit margin is expected to be low.
Performance commitment: Zhabei District SASAC promised that if the reorganization is completed in 2009, the net profit of shareholders belonging to the parent company in 2009 will not be less than 68.44 million yuan; if completed in 2010, the cumulative net profit of shareholders belonging to the parent company in 2010 and 2011 will not be less than 352 million yuan. Otherwise, the major shareholders will make up with cash. Calculated in terms of post-IPO equity, the corresponding EPS in 2009 is 0.12 yuan, and the total EPS in 2010 and 2011 is 0.61 yuan.
According to the closing price of 8.20 yuan on November 2, assuming that the 2010 EPS is 0.30 yuan, then the corresponding price-to-earnings ratio is 27 times, the valuation is basically in a reasonable range.
We will pay attention to the acquisition of the company's subsequent land resources after the completion of the additional issuance.
