Description of the event
Changhang Phoenix issued the “2010 Annual Performance Forecast” and the “Notice on Receipt of Relocation Compensation and Other Matters”:
The company had a pre-profit of 20-25 million yuan in 2010, equivalent to 0.03 yuan to 0.037 yuan in EPS. In 2010, the company received 40 million yuan in relocation compensation and 11.9087 million yuan in financial refunds. After deducting related expenses and losses, the company increased its 2010 non-operating income by a total of 36.28 million yuan and increased its capital reserve by 1.28 million yuan.
Excluding the increase in non-operating income of 36.28 million yuan from this announcement, the company's main operating performance in 2010 was a loss of more than 10 million. We judge that it was mainly due to losses in the Yangtze River transportation business and the ocean transportation business in the second half of the year. The 2010 annual results turned a loss into profit mainly due to non-recurring income. The company's EPS for the 1st to 3rd quarter was -0.07 yuan, 0.06 yuan and -0.07 yuan respectively.
The company also announced the disposal of old ships twice in the fourth quarter of 2010, which may also bring in some non-recurring revenue.
The company has implemented a strategy to expand into coastal and offshore businesses in recent years. International bulk freight prices fell sharply in the fourth quarter of 2010, and the huge pressure to invest capacity in the international dry bulk market in the next 2-3 years will cause the actual profit of the ocean transportation business to fall short of our previous expectations. Due to improvements in the internal and external environment, the Yangtze River transportation business will gradually reduce losses until break-even is achieved. As the next small-capitalization company of Sinotrans Changhang Group, the anticipated integration of companies under the State Assets Administration Commission may bring about some changes in the company's future operations; we maintain a “careful recommendation” rating.