Main points of investment:
Tianjin real estate development leading enterprises, the strength is strong. The company is the largest real estate development enterprise in Tianjin, with obvious regional competitive advantages and strong project acquisition ability and resource integration ability. Tianfang Group, the major shareholder, is the largest housing enterprise in Tianjin, which has the competitive advantage of the whole industry chain and abundant government resources.
The shareholders of the top ten tradable shares of Q3 have changed greatly in the past 16 years. Eight of the top 10 tradable shareholders are new shareholders, and Skyroom is the only listed company that has entered QFII throughout the third quarter and has significantly increased its holdings to more than 5 per cent of QFII's total outstanding shares. Among them, UBS Group (UBS AG) held 4.03% of the outstanding shares of Tianfang Development at the end of the third quarter.
Property sales are strong and revenue and earnings are diverging. In the first three quarters of 16, the operating income was 1.78 billion yuan, an increase of 5.0 percent over the same period last year, the contract sales area was 500000 square meters, an increase of 458.5 percent over the same period last year, and the contract sales amount was 8.98 billion yuan, an increase of 485.8 percent over the same period last year. Revenue is significantly less than contract sales, and we believe that this difference will be recognized as the company gradually delivers projects in 2017. Because the company mainly settled the projects with low gross margin in the first three quarters, the amount of financing was larger while increasing the land reserve, and the financial expenses were more, resulting in losses, realizing the net profit belonging to the owner of the parent company-270 million yuan.
The company has carried out debt financing on a large scale for two years in a row, and its financial expenses have risen rapidly. The company issued 4 billion yuan of bonds in 15 years, and increased financing by 3.11 billion yuan from 16 years to September. As of 16 years, the asset-liability ratio of Q3 has reached 82.5%, and the real asset-liability ratio deducting the amount received in advance is 79.3%. The financial cost is 160 million yuan in 15 years, and the financial cost of Q3 in 16 years has reached 325 million yuan. This is due to the fact that the company has carried out large-scale land reserves in 2015 and 2016, and the corresponding financing costs have not yet been capitalized.
Rich in projects on hand, continue to promote the strategy of remote reserves. The company has actively implemented the remote project reserve plan since 15 years. At present, there are seven reserve projects, six in Suzhou and one in Tianjin. They are all second-tier cities with excellent market structure and good supply and demand structure, which can meet the development of the company in the next two years. It reflects the good continuity of the business and reduces the risk of concentration in the business area, but we are concerned that the company still needs a large scale of investment in the projects under construction and the subsequent reserve land development. Suzhou has restarted the loan restriction policy, and the company has purchased a large scale of land in Suzhou, so it is necessary to pay attention to the uncertain impact of policy changes on the company's business in the future.
Investment rating and valuation: covering for the first time, giving a neutral rating. RNAV estimates 6.23 yuan per share, and the current price is 6.69 yuan, with a premium rate of 7.4%. Considering the hot real estate markets in Suzhou and Tianjin this year, we expect the company's operating income to grow by 12.8%, 66.3% and 10.0% from 2016 to 2018, and the net profits attributed to the parent company are-359 million yuan, 268 million yuan and 684 million yuan respectively, and the corresponding EPS are-0.32 yuan, 0.24 yuan and 0.62 yuan respectively.
