Main points of investment:
Asset restructuring was completed in 2015, and Green King China was successfully listed. The company's predecessor is Xinze Holdings, which was founded in 1992, focusing on the Suzhou real estate market. In 2014, Mr. Huang Kangjing became a major shareholder of the company through the acquisition of shares and changed his name to "Green King China". In 2015, Mr. Huang put his holding shares in Greenview Holdings into the listed company at a price of HK $13.785 billion, and allotted 800m shares to complete the listing.
After the completion of asset injection, Green King China has formed a business model of three business sectors: real estate development and sales, commercial property investment and management, and comprehensive services, and strides forward to fine management and standardization.
Real estate investment adheres to the "dual-core strategy", focusing on the layout of the Pearl River Delta. Real estate development and sales is the company's core main business, investment adheres to the "dual-core strategy", that is, "ploughing the core city, focusing on the city core". The company currently has a number of projects in Hong Kong, Shenzhen, Suzhou and Maoming, Guangdong, and several for future development or planned reconstruction or contractual acquisition projects, with a high-quality land reserve of about 4.1 million square meters, most of which are concentrated in the Pearl River Delta region.
Commercial development of two major brands, and real estate to form a synergy. The company's commercial real estate business has "NEO" and "Zuoyi" two major commercial brands, with a total floor area of about 420000 square meters. We expect Suzhou NEO and Shenzhen Mangrove Bay No. 1 Zoo Center to open in 2018-2019. Rental income from commercial property covers more than 60% of financing costs, while recurrent income (rental income plus integrated service income) completely covers financing costs, providing cash flow support for the company's residential development and sales business, forming a synergy.
Together with major shareholders, the mode of soil reserve acquisition is unique. The company has focused on the old reform for more than a decade and has been involved in the urban renewal of Shenzhen since 2002. so far, there have been 10 completed projects and 4 projects under construction or to be developed to obtain land through urban renewal. The company forms a linkage with the Green King Group in the land acquisition mode, and the Green King Group integrates resources for the preliminary work. After the preliminary work is completed, the controlling shareholders will be injected into the listed company at an appropriate time according to the pace of development. Mr. Huang Kangjing, the controlling shareholder of Greenview Group and the listed company, has provided a letter of intent to the listed company to inject its land reserve (including but not limited to 1200 million square meters) into the listed company.
Investment advice: buy rating. The company has ploughed the Pearl River Delta for many years, and the land reserve acquisition model is unique, focusing on urban renewal projects and forming a linkage with the controlling shareholders, resulting in low land costs and high gross profit margins at the level of listed companies. As of November 10, 2017, the company's closing price was 2.50 Hong Kong dollars (corresponding to 2.12 yuan). The company's EPS in 2017 and 2018 was 0.20 yuan and 0.25 yuan, respectively, and the corresponding PE was 10.59 times and 8.47 times. We gave the company a "buy" rating of 13 times PE in 2017, corresponding to a target price of RMB2.60 (HK $3.068). Risk hint: policy regulation risk; project progress is not as expected. The exchange rate is calculated on the basis of Hong Kong dollars: RMB = 1RV 1.18.
