The company is the largest wholesale market specializing in textiles in the country. In 2017, the controlling shareholder Development and Management Group injected two major markets into the listing platform. After the acquisition was completed, the company covered a total area of about 350,000 square meters in the textile trading area. It has specialized markets such as Dongsheng Road Market, East Market, Union Market, North Market, Beilian Market, Tianhui Market, Fabric Market, Clothing Market, and Old Clothing Market in the textile trading area of Textile City. The construction and business areas are about 1,251 million and 700,000 square meters respectively, with more than 20,000 shops.
The company's leases in its main markets all use a contract signing system. Basically, they use a six-year contract, and a large amount of cash will be charged when the lease is renewed every year. The last round of lease renewals was 2012-2013. Net operating cash inflows reached 980 million yuan and 790 million yuan respectively in the two years. 2018 will also be a big year of cash flow — more than 7,800 business leases have expired in the Old Market, East Market, North Market, Beilian Market, and Clothing Market. Preliminary estimates suggest that in 2018, the North Union Market will receive about 1.4 billion yuan of rent renewals, and the North Market lease renewal account will be about 500 million yuan. It is estimated that the total rental renewal cash flow in all markets will reach 2.2 billion yuan in 2018.
The company's assets are well worth, and the market value is seriously undervalued. The company's equity investment company is worth 2.9 billion (Huijishan's 1.2 billion, Zheshang Bank and Pudong Development Bank's total equity of 1.7 billion). In addition, book cash was 600 million in early 2018, investment real estate and land were worth 6.3 billion dollars (calculated at cost prices), and 2.2 billion dollars in cash will be credited in 2018. The current market capitalization is only 6 billion dollars. If you exclude the investment company's 2.9 billion shares, the company's main market value is only 3.1 billion. The net non-investment profit in 2017 and 2018 was 250 million and 350 million respectively (estimated based on the company's business goals in 2017), and the corresponding valuation of the main business portion was only 10x PE.
The company's cash flow generally pays a large percentage of dividends every year, and the 2012-2014 dividend ratio was above 50%. It is expected that there will also be considerable dividend income in 2018. Judging from asset value and operating value, the company was seriously underestimated, and for the first time it covered a “Highly Recommended” rating!
Risk warning: The rate of renewal contracts has declined, rents have declined, and losses from equity investment companies have led to a sharp decline in the company's investment income.