Since the development of the company's business model, after two upgrades (2008 and 2014), it has also reflected the two transformation directions of traditional Chinese department stores in terms of business format and operation model, namely shopping centers (especially community-based) and asset-light operations such as REITs (others such as Haiyin Co., Ltd. and Suning Yunshang have also explored this). We recently followed up on the company and mainly understood its business progress, particularly the operation of a community shopping center and the asset-light REITs model being explored. The main content. 1. The company is the only listed company in China that focuses on the operation and management of shopping centers. Starting in 2008, the company gradually changed to shopping center operation and management, and completely withdrew from the department store business in November 2010. By the end of 2014, it had a total construction area of 1.42 million square meters, a business area of 820,000 square meters, and 16 own properties, each accounting for about 51% and 49% of the construction and business area; the company is expected to open 10 new stores in 2015 (including shareholding and commissioned stores), maintaining a normal pace of opening around 4 stores in 2016. The company achieved revenue of 1,094 million yuan in 2013, attributable net profit of 65.72 million yuan, and CAGR of about 24% and 6% for 2009-2013, respectively. Hualian Group, the majority shareholder of the company, holds 29.58% of the shares. The actual controller is the Hainan Cultural Promotion Council. Hualian Group also holds 29.17% of the shares in Hualian Comprehensive Super (2013 revenue of 12.7 billion yuan, net profit attributable to 40.56 million yuan). The ban on the company's fixed increase of 813 million institutional shares in January 2014 was lifted on 2015/1/23, and 150 million shares have been traded in bulk until 2015/2/16. We judge that there is still a possibility that the shares that have already been lifted will continue to be reduced in the future, but the trading method is mainly bulk. 2. Business format upgrade: Focus on the community shopping center business format, less affected by e-commerce, and excellent value of outlets and services. The growth rate of commercial real estate investment in China has declined in recent years, but it is still higher than the overall real estate industry. Among them, shopping centers are sought after by commercial real estate developers, but the region may face structural saturation; while community-based shopping centers have advantages such as being more friendly to the people, meeting convenience consumption needs, avoiding competition in core business districts, and a short cultivation period, etc., there are broad prospects for development. With Beijing as the key development area, the company expanded to key cities across the country under the premise that capital and management levels are guaranteed. Currently, about half of the shopping center stores are located in Beijing, while the rest are distributed in Jiangsu, Sichuan, Liaoning, Qinghai, Anhui, Gansu and other provinces. Excluding stores that have already been announced for sale, the average store age of the company's 27 stores is about 4.4 years, of which the number of stores and operating area during the second new+growth period both account for 63%. The excellent store age structure is conducive to safeguarding revenue and profit growth over the next three years. The business environment in the Beijing area where the company mainly operates is good, and shopping center stocks have continued to increase, but the vacancy rate has been declining for the past two years; the trend of shopping center communalization has been established and is expected to continue, mainly distributed in the second and third level business districts and suburban areas. However, the company has accumulated rich experience and high-quality merchant resources in the field of community shopping center operations, and has gradually explored a set of professional and standardized management processes through cooperation with professional management consultants such as Cade and Simon. It is highly replicable, which is where it is difficult for competitors to surpass in the short term. 3. Operational transformation: Explore asset-light REITs operations, using property value-added plus rent as a source of revenue. The company established a wholly-owned subsidiary in Singapore Commercial Company in October 2013, and its business is still in the preparation stage; in February 2015, it increased its capital by 80 million Singapore dollars, increasing the registered capital to 90 million Singapore dollars, providing a guarantee for the company's future expansion of overseas business, optimization of international brand resources, and promotion of strategic layout. Considering that the transferee of the company's asset sales in September and October 2014 was also a Singaporean company, we believe that it is not ruled out that the company will use its Singaporean subsidiary as a carrier to participate in the transferee's REITs in the future, thus achieving an effective connection with domestic commercial property asset monetization and forming a virtuous cycle of investment, financing and commercial operations. The company is expected to shift from an asset-heavy model with a single rental income and high operating expenses to an asset-light model of “rolling development, operation, sale, and management,” thereby obtaining value-added property income and property management rental income. Profit forecasting and valuation. The net profit attributable to the company in 2014-2016 is estimated to be 76.36 million yuan, 506 million yuan and 328 million yuan, respectively, up 16.19%, 562.9% and 35.16% from the previous year, while EPS is 0.03 yuan, 0.23 yuan and 0.15 yuan respectively; the current stock price of 3.62 yuan corresponds to about 105.5 times, 15.9 times and 24.6 times PE in 2014-2016. The company has more of its own properties and has a good property value monetization mechanism, and is given a target price of 4.81 yuan according to the RNAV valuation; considering the scarcity of the company as the only listed company in China that specializes in shopping center operations, the good development prospects of shopping center communalization, the company's strong operating capacity and possible overseas capital operation space, it is given 20 times PE in 2015, corresponding to the target price of 4.55 yuan (but there is still some uncertainty about whether the company will sell stores to contract operations every year and the investment benefits brought about by this). For the first time, an investment rating of “increased holdings” was given. Risk and uncertainty. Shopping center development competition risk; risk of lengthening of new store incubation period; uncertainty about the company's asset sales behavior.