Event: on October 29, 2016, Dalian Friendship released its 2016 Quarterly report. According to the report, Dalian Friendship achieved 1.5 billion yuan in operating revenue in the first three quarters of 2016, down 27 percent from the same period last year.
Wuxin Investment holding Co., Ltd. takes ownership to ensure the development of the company.
(1) Wuxin invests in Dalian Friendship. On June 28, 2016, Wuxin Investment Holdings signed a "share transfer Agreement" with Friendship Group, which transferred a total of 100 million shares of Dalian Friendship held by Friendship Group (the price is 13 yuan per share). It accounts for 28.06% of the total share capital of Dalian Friendship, and has become the controlling shareholder of Dalian Friendship. The registration procedures for the relevant shares were completed on July 20. According to the company announcement, Wuxin Investment Holdings plans to improve the company's operating level and enhance its profitability through various effective ways such as asset restructuring or mergers and acquisitions.
(2) Wuxin Investment Holdings is backed by Wuhan Financial Holdings. Wuxin Investment Group (40%), Kaisheng Economic and Trade (38%) and Hang Seng Jiaye (22%) all hold 100% of Wuxin Investment Holdings. Among them, Wuxin Investment Group is controlled by Wuxin Air duct (25%), which is a wholly-owned subsidiary of Wuhan Financial Holdings. Therefore, Wuxin Investment Group is actually controlled by Wuhan Financial Control. The actual controller of Dalian Friendship is also Wuhan Financial Control.
Wuhan Financial Control is controlled by SASAC and has many financial platforms.
(1) Wuhan Financial Control is controlled by SASAC and has strong strength. Wuhan Financial Control, 100% controlled by Wuhan State-owned assets Supervision and Administration Commission, is the first financial control group in Hubei, with a business scope of guarantee, financial asset exchange, bill brokerage, fund, micro-loan, pawn, etc., with more than 50 holding enterprises and more than 10 secondary companies under direct management. In 2014, the group's profits totaled 944 million yuan, of which the financial sector realized profits of 935 million yuan, accounting for 99% of the total profits.
(2) there are many financial platforms in Wuhan. Wuhan Financial Control owns many financial companies, including Hankou Bank, Wuhan Rural Commercial Bank, Wuhan Credit risk Management Co., Ltd., Wuhan Financial assets Exchange Co., Ltd., Donghu Industrial Investment Fund Management Co., Ltd., founder East Asia Trust Co., Ltd. Dalian Friendship, as a listed company actually controlled by Wuhan Financial Control, may realize resource integration and development with the help of Wuhan Financial Control in the future.
The performance of the main business declined. In the first three quarters of 2016, Dalian Friendship achieved operating income of 1.5 billion yuan, down 27% from the same period last year. In the first half of 2016, commodity sales and real estate accounted for 79% and 14% of the company's total revenue, respectively, and were the company's main sources of income. With the rapid development of e-commerce, the physical retail industry has been greatly impacted, and the growth rate of the industry has slowed down obviously. in the first half of the year, the company's commodity sales business dropped by 10% compared with the same period last year; the real estate industry entered a period of adjustment. The inventory pressure in the real estate market in small and medium-sized cities is greater, and the decline in revenue and profits is inevitable. In the first half of the year, the company's real estate business fell by 69% compared with the same period last year.
Investment advice: buy-An investment rating, 6-month target price 16.5 yuan. We estimate that the EPS of the company from 2016 to 2018 is 0.02,0.04 and 0.06 yuan respectively.
Risk hints: macroeconomic downside exceeding expected risk, credit risk, traditional business downturn exceeding expected risk