Main points of investment
The real estate business is stagnant and the main business is in urgent need of clarity.
In September 2000, after Shanghai Zhongsheng Hongqiao Real Estate Development Co., Ltd. became the controlling shareholder of the company, Tianchen shares gradually became a listed company with real estate and transportation and logistics as its main business. But since 2011, due to lack of funds, the company has stopped taking land, the land reserve is not enough, and the real estate business has gradually stagnated. At present, the company does not have a clear main business, in recent years, the main operating income comes from taxi business, property management and property leasing, not only a small scale of income, but also no profit contribution to the company. Therefore, there is an urgent need for the company to adjust its strategy and clarify its main business.
Good financial situation, strong demand for transformation
At present, the company's net profit mainly comes from investment income, that is, it depends on the dividend of holding Greenland holding shares and the sale of shares of listed companies participating in the fixed increase. By the end of the first quarter, the company had 320 million in cash on hand, and Greenland Holdings shares could cash 2.9 billion yuan in cash (based on the latest closing price of Greenland Holdings). At present, the company has no long-term and short-term liabilities, the only liability is deferred income tax, which is incurred only when Greenland shares are sold. The company's asset-liability ratio is only 22% (basically deferred income tax), and the financial structure is healthy.
Change the management team and actively seek transformation
In April 2015, the company established the Investment Management Department, and in November 2015, the company appointed Zhang Zhenbin, former director of Tianan China Capital Co., Ltd., as the new general manager. At the same time, managers with professional investment background were introduced as the heads and senior managers of the investment management department to pay more attention to "Internet +", medical technology and other emerging industries, and actively look for investment opportunities, with a view to cultivating new profit growth points for listed companies. We believe that on the one hand, this move shows the company's urgent demand and determination for transformation, on the other hand, it also establishes a professional and international investment team for the company, which helps to invigorate the company's stock resources and smoothly achieve the transformation.
Multiple security margins, valuation potential can be expected
At present, the company still has two pieces of land reserve: the southern logistics park plot in Minhang District, Shanghai (covering an area of 2604 million square meters), and the agricultural land on the south side of Pudong Airport (covering an area of 2648 million square meters). At the same time, the ban on the company's Greenland stake was lifted at the end of June, providing financial support for the company's future development. According to our estimates, the NAV of the southern logistics park and other equity investments held by the company is 5.28 billion yuan and 670 million yuan respectively, plus the market value of the greenfield stock held by the company is 2.9 billion yuan, with a total value of about 8.85 billion yuan, which constitutes a strong support to the company's market capitalization.
In July 2015, Zhongsheng Hongqiao, a major shareholder of the company, continuously increased its holdings of about 9.16 million shares of the company, and its shares rose from 25.08% to 27.08%. Subsequently, in December 2015 and January 2016, major shareholders increased their holdings of the company many times again. By January 28, 2016, its holding proportion has risen to 29.04%, with an average increase price of 16 yuan, excluding the right price of 10.69 yuan. At the same time, Guohua Life Insurance also raised its shares in the company three times between July and August 2015, accumulatively increasing its shareholding by 15%, with an average increase price of 15.4 yuan, except for the right price of 10.3 yuan, which can be regarded as a safety pad for the company's share price.
Valuation floor + triple potential catalyst = a call option:
According to our estimates, the company's RNAV per share is 12.18 yuan, which is almost the same as today's closing price, and the company is currently in an undiscounted state.
There are three potential catalysts for the company's stock price in the future: 1) the continuation of insurance holdings of real estate stocks; 2) the emergence of Shanghai Xindi King and the re-emergence of land revaluation logic; 3) the company transforms new business and realizes asset injection.
Investment advice:
Tianchen stock real estate business has been stagnant for many years, and there is a lack of clear main business at present. The company's newly introduced investment management team and 15-and 16-year restructuring all show its strong determination to transform. The company's financial structure is healthy. By the end of the first quarter, the company has 323 million yuan in cash on hand, and Greenland Holdings can cash 2.9 billion yuan in cash (calculated on the basis of the latest closing price of Greenland Holdings). The cash flow is abundant, and the asset-liability ratio is only 22% (basically deferred tax). Provides a good transformation potential for the company. At the same time, according to our estimates, the NAV of the southern logistics park and other equity investments held by the company is 5.28 billion yuan and 670 million yuan respectively, plus the market value of the greenfield stock held by the company is 2.9 billion yuan, with a total value of about 8.85 billion yuan. These resources not only provide a strong support for the company's market capitalization, but also provide a solid financial foundation for the company's future transformation and development. Finally, major shareholders Zhongsheng Hongqiao and Guohua Life Insurance have increased their holdings of the company's shares several times in the past year, with a cumulative increase of 3.96% and 15% respectively, providing multiple safety margins for the company's share price. We believe that the company's share price is currently undiscounted and that there are three potential catalysts in the future, which are equivalent to an undiscounted call option. We predict that the EPS of Tianchen shares in 2016, 2007 and 2018 will be 0.11,0.14,0.19,108,84,65 times, respectively, and the first coverage will be given "overweight" rating.
Risk hint: the progress of the transformation is not as expected, and the return on investment is not as expected.
