Event: the company announced 2017 semi-annual report, the total operating income in the first half of the year was 369 million yuan, an increase of 57.50% over the same period last year. The net profit belonging to shareholders of listed companies was-78.84 million yuan, up 41.91% over the same period last year; basic EPS-0.11 yuan, an increase of 38.89% over the same period last year.
The Tianjin and Beijing projects completed in the first half of the year are expected to contribute 500 million in investment income by the end of the year:
1) Tianjin Yangliuqing project: the company sold Tianjin Yangliuqing project to Blu-ray Development holding subsidiary in May, with a total recovery of 2.13 billion yuan, and the company's inventory balance decreased by 21.63%. As of the middle of the year, the company had only 79000 unsold projects.
2) Beijing Sunshine Tower project: as of mid-2017, the company's original 9 investment real estate were valued at 5.103 billion yuan, of which Sunshine Tower was valued at 968 million yuan. In March, the company signed a transfer agreement with Daye Trust to transfer the company's rights and interests in the project where Sunshine Tower is located at a price of 316 million yuan, of which the estimated value of Sunshine Tower in the transaction is about 1.388 billion yuan, which is 43% higher than the book value of investment real estate.
3) if you try your best, the annual performance is expected to reverse. By the end of 2017, 100 per cent stakes in Yang Liuqing and Beijing Ruiteng had been classified as holding assets for sale, with a total book value of 3.08 billion yuan. The above-mentioned industrial and commercial registration changes have not yet been completed, and the profits and losses have not yet been recognized in the statement, but the transfer price has been received, which is expected to bring investment income of about 294 million yuan and 212 million yuan respectively for the company's 2017 consolidated statement.
We estimate that the real heavy valuation of the property held is nearly 6 billion, and the potential exit income is considerable: as the Sunshine Building project is already in a state of disposal, the corresponding assets are adjusted to hold assets for sale. The balance of the company's investment real estate in 2017 was 4.136 billion yuan, down 8.7% from the same period last year. After deducting Sunshine Mansion, the leasable area of the company's rights and interests is 177000 square meters, with a comprehensive occupancy rate of 88.9% (81.4% at the end of 2016). We believe that the company's existing properties are undervalued. Combined with the capitalization rate of nearby properties and the transaction premium rate of two exits this year, it is estimated that the true revaluation value of the properties held by the company is about 6 billion yuan.
Reduce the long-term debt by 900 million yuan, and reduce the financial burden: with the withdrawal of the Yangliuqing and Sunshine Mansion projects in Tianjin, the company recovered 674 million yuan in cash received from the investment in the first half of the year. At the same time, long-term loans at the end of the period totaled 2.433 billion yuan, down 964 million from the same period last year and 16.23% from the same period last year. As a result, the company's financial expense rate fell to 35.4% in the first half of the year (61.62% in the same period last year).
Investment suggestion: the company has formulated a new development direction and light asset business model, and formed a new organizational structure with asset investment, transformation, operation and withdrawal as the main line, and is reshaping the asset management capability at the top of the industrial chain of the real estate industry. We maintain our previous judgment that the worst year for the company is over. We estimate that the company's EPS for 2017-2019 will be 0.36,0.47,0.62 respectively, maintaining the buy-A rating and giving it a target price of 10.16 yuan within 6 months.
Risk hint: there is uncertainty about the timing of the company's asset disposal.
