Events:

On June 17, the CSRC approved the application for the initial public offering of SAIC shares. Before this issue, the total share capital of SAIC shares is 237 million shares, this time it is proposed to issue 79 million shares, the total share capital after the issue is 316 million shares.

The company holds 5925 shares of SAIC, accounting for 25 per cent and 18.75 per cent of its total share capital before and after the issue.

Comments:

1. Hainan Province is an expressway enterprise, and the real estate company is the first listed expressway operation and management company in the country, and it is also one of the largest state-controlled listed companies in Hainan. By the end of the first quarter of 2016, Hainan Transportation Investment Holdings Co., Ltd. holds 25.21% of the company and is the company's controlling shareholder, and the actual control is the Hainan Provincial Department of Communications.

The strategic goal of the company's development is: road-oriented, comprehensive management, development along the road, focusing on the north and south ends, focusing on Haikou and Sanya, and gradually developing into a "road, Hong Kong, industry, transportation, trade, tourism, information network"

As one of the diversified large joint-stock group companies. Taking advantage of the spring breeze of the construction of Hainan International Tourism Island, the company, relying on the construction and management of transportation infrastructure, has expanded and strengthened the tourism hotel and real estate plate, gave full play to its own advantages, and made an exploration and extension to the first-level land development and financial industry.

In 2015, the company achieved operating income of 212 million yuan, down 29% from the same period last year, and its net profit was-227 million yuan, down 550% from the same period last year. In the past 15 years, the company achieved 50.9 million yuan in real estate business income, down 70.29% from the same period last year, which is the main reason for the decline in revenue. On the other hand, the company made a loss of 168 million yuan on the real estate inventory, while the real estate project produced 64 million yuan in compensation, resulting in a huge loss for the company for 15 years.

2. The listing of SAIC shares ushered in asset revaluation.

On June 17, the CSRC approved the application for the initial public offering of SAIC shares. Before this issue, the total share capital of SAIC shares is 237 million shares, the proposed issue of 79 million shares, the total share capital after the issue is 316 million shares. The company holds 59.25 million shares of SAIC, accounting for 25 per cent and 18.75 per cent of its total share capital before and after the issue.

Take Yichang Transportation of the same plate as an example, the latest market value of Yichang Transportation on June 17, 2016 is 2.67 billion yuan, and the 15-year net profit is about 48 million yuan, corresponding to PE (LYR) 55.9X. The net profit of SAIC in 2015 is about 69 million yuan. Considering the premium of new shares, its reasonable market value after listing should be 40-4.5 billion yuan, corresponding to the share price of 12.66-15.82 yuan per share, and the equity value of Hainan Expressway is 7.5-840 million yuan.

At present, the company uses the equity method to value the 25% equity of SAIC shares, and by the end of 2015, the 25% equity valuation of SAIC shares is 190 million yuan.

3. Hainan Aerospace Investment Management Co., Ltd. was established in November 2008, with a registered capital of 1.2 billion yuan and four shareholders.

Aerospace Hainan holding Co., Ltd., Aviation Science and Technology Development (Shenzhen) Co., Ltd., Hainan Expressway Co., Ltd., China Great Wall Industrial Group Co., Ltd. Hainan Expressway holds a 25% stake in Hainan Aerospace Investment Management Co., Ltd.

Hainan Aerospace Investment Management Co., Ltd. is the carrier of comprehensive strategic cooperation between China Aerospace Science and Technology Corporation and Hainan provincial government, and is the main developer of Hainan Space launch site matching area project.

1) Project background

According to the approval of the State Council and the Central military Commission, China has built a new space launch site, the Hainan Space launch site, in Wenchang City, Hainan Province. After the completion of the new launch site, it will mainly undertake the launch tasks of spacecraft such as geosynchronous orbit satellites, high-mass polar orbit satellites, large tonnage space stations and deep space exploration satellites.

The Hainan Space launch site is designed, built and managed by the General Armament Department of the Chinese people's Liberation Army. China Aerospace Science and Technology Corporation is responsible for the development and launch related technical work of carrier rockets, satellites and spaceships. The Hainan provincial government and the China Aerospace Science and Technology Corporation take the opportunity of the state to build a new generation carrier rocket launch site in Hainan, relying on the launch site to create a comprehensive matching area with aerospace as the theme, tourism as the guidance, science and technology and local characteristics. It has become the preferred destination for Chinese tourism and a must-see project for Hainan tourism.

2) location area

The matching area of the space launch site is located in the coastal area in the northeast of Dongjiao Town, Wenchang City, Hainan Province, extending about 4 kilometers along the southwest of the coastline, covering an area of about 6100 mu.

3) overall functional layout

The matching area of Hainan space launch site includes three characteristic areas: the theme park, the central lake area and the ecological coconut forest area. The theme park and the space botanical garden form a mutually opposite axis through the central lake area; the commercial and entertainment area around the lake is connected to the beach through the lake-sea commercial corridor; a series of coastal hotels and resorts are arranged along the coast; the hinterland provides ecological and lake-view accommodation.

4) the potential space for cooperation is huge, and Hainan Expressway is expected to continue to benefit from it. According to the data disclosed in the Hainan Expressway Annual report, Hainan Aerospace Investment Company has not carried out substantive business yet. With reference to the huge business opportunities brought by Walt Disney Company Paradise, we believe that with the continuous progress of the Hainan Space launch site matching area project, Hainan Expressway can cooperate with Hainan Aerospace Investment in real estate and tourism.

4. Risk warning: the real estate market is declining and the progress of the project in the matching area of Hainan Space launch site lags behind.