Incidents:
The company issued an announcement stating that it signed a strategic cooperation framework agreement with a strategic investor in Kuwait (the “Investor”) and 1) issued 459,005,021 “convertible preferred shares” to investors as consideration for the acquisition of 41% of its shares in the Parklings Real Estate Project in Central Park South of New York. The convertible preferred stock can be converted to common stock at a ratio of 1:1 after 3 years of issuance and when the company's 6-month average share price is equal to or above HK$5. If the shares are successfully exchanged, investors will become the company's second largest shareholder.
2) The Silk Road Real Estate Comprehensive Fund (“Silk Road Real Estate Fund” for short) was jointly established with investors, with a target scale of 8 billion US dollars for a period of 8 years. It is mainly used to invest in the world's top real estate, real estate in prime locations in major cities around the world, and diversified real estate fields.
Comment:
The role of Dat Xanh Group's overseas business platform is beginning to be reflected: Dat Xanh Hong Kong introduces strategic investors in the form of issuing convertible preferred shares and acquires high-quality projects in New York, enhancing the company's overall strength. The Silk Road Real Estate Fund that was established will later introduce more Middle Eastern sovereign funds, investment will be oriented towards globalization, and the company will become a comprehensive platform for international real estate development, investment, financing, and management.
The value of the acquisition project is high: The project is located on 59th Street South in Central Park, New York, between Fifth Avenue and Sixth Avenue in Manhattan. It covers an area of 2425.6 square meters and has a GFA of 34,000 square meters. The project is positioned as the world's top luxury home. It is expected to be put into sale in 2018, with sales reaching US$36-4.3 billion.
Our opinion: We still maintain the view that Dat Xanh Hong Kong is Dat Xanh Group's overseas listed business platform. This time, it has become the main target of cooperation between the Group and overseas strategic investors, and the role of the platform is beginning to be reflected. The injection of new projects expanded the company's scope of business to the US. The establishment of the Silk Road Fund will also bring room for imagination to the company's future performance. The domestic real estate industry is still fully recovering under the leadership of the “de-inventory” policy. The company's contract sales in January-March were 3.79 billion yuan, an increase of 34% over the previous year. The annual sales target was no less than 20 billion yuan. The Dat Xanh Financial Services business progressed smoothly. This strategic cooperation exceeded expectations, but the improvement brought to the company's performance is difficult to reflect in the short term. Investors are advised to continue to pay attention.
Risk warning: strategic cooperation falls short of expectations, real estate sales do not meet targets, and financial business is progressing slowly.
