Upgrading the rating to buying - We upgraded the rating of Five Mines Construction from selling to buying, and raised the target price by 58% to HK$1.33, mainly because of the three reasons described below, we anticipate that it will narrow the net price of Five Mine Construction's stock price versus asset value. Currently, the company's stock price has a large discount of 76% on the net asset value, providing an opportunity for investors to buy the company's shares. In fact, in terms of market account ratio, the company's valuation is also lower than that of other small and medium-sized domestic housing stocks. I believe there will be conditions to catch up.

Reason 1: Contract sales continued to record an increase of more than 20% — in the first half of 2015, Wukang Construction's contract property sales amount increased 28% year-on-year to RMB 3.35 billion. Looking at past performance, contract sales of Mines Construction have maintained year-on-year growth of more than 20% over the years. In 2011, 2012, 2013 and 2014, contract sales increased by 42%, 37%, 20%, and 25% from year to year. We acknowledge that the current valuation does not reflect the excellent performance of the company's continued sales growth.

Reason 2: Core earnings are expected to increase 98% year-on-year in 2015 — We expect the core profit for the construction year of the five mines to soar 98% to HK$604 million year-on-year, and another 44% to HK$8.7 billion in 2016. The company's core profit fell 13% year-on-year to HK$305 million last year. The resumption of rapid profit growth this year and next two years is expected to narrow the discount between stock prices and net asset values.

Reason 3: The parent company will invest money — the parent company has 9.94 million square meters of land reserves. Since the capital injection is beneficial to the parent company to revitalize capital and also helps Five Mines Construction expand the size of the company, it is expected that the investment opportunity will progress within this year. We believe that the price of the asset injected is somewhat discounted compared to the market value, and is one of the catalysts for the rise in the stock price of Five Mines Construction.