Company advantages

(1) occupy a leading position in the residential property development industry in the Yangtze River Delta region and have a nationalized strategic layout; (2) use a “rapid asset cycle” model and systematic management methods to maximize economic returns and optimize cash flow; (3) a customer-driven model targeting first-time buyers or improved residents; (4) establish high-quality land reserves through highly standardized land acquisitions and very strict business development strategies; (5) management team experience, and has a high degree of strict compliance with corporate governance rules.

Industry Overview

The Yangtze River Delta region includes Shanghai, Jiangsu and Zhejiang provinces, covering a total area of about 2,000,000,000 square meters, making it one of the richest regions in China. It is widely recognized as the largest regional economy in China. According to data from the China Index Research Institute, the total industrial product value of the Yangtze River Delta region accounts for about 25% of the gross national product.

The State Council announced the “Yangtze River Delta Regional Plan” in 2010. The regional plan defines 16 core cities based on various factors such as economic conditions, location and population, divided into Shanghai, Nanjing, Suzhou, Wuxi, Changzhou, Zhenjiang, Nantong, Yangzhou and Taizhou in Zhejiang Province, and Hangzhou, Ningbo, Shaoxing, Huzhou, Jiaxing, Zhoushan and Taizhou in Zhejiang Province. Based on this regional plan, the 16 core cities, starting with Shanghai, are expected to further develop into world-class urban agglomerations.

The overall economic statistics of the 16 core cities are generally better than national statistics. For example, according to data from the China Index Research Institute, the total value of nominal local production contributed by these 16 cities accounted for about 17.3% of the total nominal domestic production value in 2012. Based on the total value of local production, 12 of the 16 core cities ranked in the top 50, and Shanghai ranked first. The total population of the 16 core cities reached 106 million in 2012, accounting for about 7.9% of China's total population, and the current average urbanization rate of these cities has reached over 60%. In 2012, based on the per capita disposable income of urban households, all 16 core cities ranked in the top 50, of which 11 core cities ranked in the top 20. In 2012, the per capita disposable income of urban households in these 16 cities reached RMB 34,033, which is about 1.4 times the per capita disposable income of urban households in the country. Furthermore, according to data from the China Index Research Institute, the total balance of renminbi and foreign currency deposits in financial institutions in the 16 core cities reached RMB 178 trillion at the end of 2012, accounting for 18.9% of the country's total deposit balance at the end of 2012, while the total outstanding loan balance at that time was RMB 137 trillion, accounting for 20.4% of the country's total loan balance.

Driven by growing demand for housing and purchasing power, according to data from the China Index Research Institute, the average sales price of residential properties in the Yangtze River Delta region climbed from RMB 4,914 per square meter in 2006 to RMB 8,751 per square meter in 2010, to RMB 9,053 per square meter in 2011, and further increased to RMB 9,367 per square meter in 2012, with a compound annual growth rate of 11.3% from 2006 to 2012. In 2012, the average sales price of residential property in China was 5,430 yuan per square meter, which is only 58.0% of the average sales price of the 16 core cities in the Yangtze River Delta region.

Property sales fluctuated from 2006 to 2012. The total residential construction area sold in the Yangtze River Delta region declined between 2008 and 2010, mainly due to the global financial crisis and the introduction of new regulations to curb the overheated property market. Despite such unfavorable market conditions in 2008, 2010, and 2011, compared with China's total residential construction area of 554.2 million square meters in 2006, the total residential construction area sold in the Yangtze River Delta region in 2006 was 92.1 million square meters, and increased to 97.1 million square meters in 2012, while China's total for the same period was 984.7 million square meters. The total amount of corresponding property transactions in the Yangtze River Delta region increased from 452.4 billion yuan in 2006 to 999.7 billion yuan in 2012, a compound annual growth rate of 12.4% from 2006 to 2012, while the total volume of property transactions in China increased from RMB 1,728.8 billion in 2006 to RMB 5,346.7 billion in 2012.

Property construction activity was also relaxed in 2008 and 2010 due to changes in property industry laws, regulations and policies, but recovery began in 2010. Compared with China's total residential construction area of 1,517.4 million square meters in 2006, the total residential construction area in the Yangtze River Delta region in 2006 was 297.1 million square meters, and increased to 493.4 million square meters in 2012, while China's total for the same period was 4,289.6 million square meters. The total residential construction area completed in the Yangtze River Delta region increased from 89.4 million square meters in 2006 to 96.2 million square meters in 2012, a record high, while the total residential construction area completed in China during the same period increased from 454.7 million square meters in 2006 to 790.4 million square meters in 2012.

Profitability and financial figures

Revenue increased 14.3% from RMB 1,073.8 million for the six months ended June 30, 2012 to RMB 1,227.1 million for the six months ended June 30, 2013, mainly due to the increase in revenue from the company's property development business and property management services. Revenue from the sale of properties increased 14.3% from RMB 1,048.1 million for the six months ended 2012/6/30 to RMB 1,197.7 million for the six months ended 2013/6/30, mainly due to an increase in the total floor area sold and delivered to customers, but was partly offset by a decrease in the average sales price of properties sold and delivered during the same period. Sales costs increased 24.8% from RMB 773.1 million for the six months ended June 30, 2012 to RMB 965.1 million for the six months ended June 30, 2013, mainly due to increased property costs. Gross profit decreased 12.9% from RMB 300.8 million for the six months ended 2012/6/30 to RMB 262.0 million for the six months ended 2013/6/30. Gross margin decreased from 28.0% to 21.4% over the same period. The company increased 98.8% from RMB 53.7 million for the six months ended 2012/6/30 to RMB 106.8 million for the six months ended 2013/6/30.

Fundraising purposes

Approximately 90% (or approximately HK$1,279 million) of the proceeds from this fund-raising of HK$1,421 million (calculated at the median sale price of HK$4.84 per share) will be used to acquire new projects or development sites in Nanjing, Suzhou, Hangzhou, Ningbo and Shaoxing. No acquisition targets have been identified or committed to at the last feasible date; no more than 10% of the agreed amount (or approximately HK$142 million) will be used for working capital and other general corporate purposes.

valuations

According to the prospectus price of HK$4.20 to 5.48, Jingrui Holdings' price-earnings ratio in 2012 was 14.7 to 19.2 times, and the market account ratio was 1.6 to 1.9 times. Among similar stocks, Shimao Real Estate (813.HK) has a price-earnings ratio of 8.9 times and a market account ratio of 1.5 times. Jingrui Holdings' valuation is slightly higher, but the company adopted rapid construction and development procedures and a quick pre-sale/sale strategy. It believes that profit growth will be higher. Coupled with the recent positive market atmosphere, it has made speculative purchases.

Risk Factors

(1) The business and prospects are largely dependent on the performance of the Chinese property market (especially many major cities in the Yangtze River Delta region), and may be adversely affected by the market expression; (2) operations are regulated by a large number of government policies and laws and regulations, and are particularly susceptible to unfavorable changes in policies related to the Chinese property industry and the regions where it operates; (3) it may not be possible to acquire land reserves at commercially acceptable prices at favorable locations suitable for development; (4) obtaining loans that are not necessarily financing through bank loans, trusts or other arrangements sufficient funding for property development projects, and Relevant financial resources may not be obtainable, on commercially reasonable terms; (5) financing costs may increase due to changes in interest rates; (6) operations may be adversely affected if the required government approval or license for the development and operation of the property is not obtained, or if there is a major delay in obtaining such approval or license; (7) growth and expansion into new cities or regions that are not necessarily manageable and manageable to new cities or regions; (8) development may not be completed on budget or in a timely manner, or projects cannot be completed at all, This may lead to loss or delay in confirming revenue or returns when confirming revenue Reduction and customer claims; (9) Reliance on third party contractors, where any such contractor fails to deliver quality services or products on time, or worsens relationships with any of them may adversely affect reputation or business operations.