Yide International's share price has been weak this week, down 21.6% as of yesterday. In order to give investors a better understanding of the company's situation, we held a conference call with the management of the company yesterday. The following are the main points of the conference call and our analysis.
The lifting of the ban on the shares of cornerstone investors has caused market concern. Through our discussion with management, we believe that the recent decline in the company's share price has not only been affected by the overall weakness of the real estate sector due to the tightening of liquidity and poor sales in March, it is also related to the lifting of the ban on shares of the company's cornerstone investors earlier this week, thus affecting the investment atmosphere.
The fundamentals have not changed. Nevertheless, management believes that the fundamentals of the company have not changed. Yide International is not a residential developer, so it is not affected by the adverse factors of the residential sector. The success of the company's business model such as better financial stability (net cash), strong demand from the relocation of SMEs and strong support from local governments have been maintained. After a recent survey of the company's Ganzhou project, we are more convinced of the company's mature business model. We have learned that many SMEs operating in the old wholesale market (developed by the company 20 years ago) bought shops during the pre-sale of the first phase of the new project in Ganzhou last year. The company's project has won the participation of SMEs, which will help its project to become a new leading wholesale market in the future.
The layout continues to expand. In addition, the company further confirmed that it is confident of accomplishing the goal of about 3 new projects this year. In fact, the company signed a framework agreement for the Tianjin and Bengbu (Anhui Province) projects in April this year. The land acquisition of the Bengbu project is expected to be completed in the second and third quarters of this year, and the land cost is expected to be equal to or even lower than the current average level (280 yuan / square meter). The actual operation phase of the Tianjin project is also expected to begin in the second half of this year. On the other hand, the management also mentioned that the company will continue to be involved in the field of e-commerce in the future. Valuation attracts; maintains a "buy" rating. Considering that the fundamentals of the company have not changed and its operational development is going according to plan, we maintain a positive view of the company and expect the company's net profit to grow at an average annual rate of ~ 30% + from 2014 to 2016. Valuations are attractive at the moment, especially after the recent fall in share prices.
At present, the company's stock price has risen to ~ 61% relative to our forecast NAV discount, corresponding to ~ 3.6x / ~ 2.8x 14-year / 15-year price-to-earnings ratio, which is at a very low level similar to that of small developers with financial difficulties. We believe that the current valuation of the company does not reflect its sound fundamentals. We maintain our buy rating on the company.
