Key points of the report Since the beginning of the year, Lingnan shares have risen 17% cumulatively, ranking among the top listed construction companies. We think the reason why the company stands out from the construction sector is that its value is being reassessed — traditional business is recovering, and emerging businesses are booming. Ecological environment: The relationship between supply and demand has been re-established, and refinancing triggers the expansion cycle In the past two years, the company's main ecological environment business has faced two major problems of shrinking market demand and blocked financing, which has led to a decline in revenue and performance in 2019. However, since this year, the above problems have been improving, and the main industry has ushered in a recovery: 1) 2020 is the year the 13th Five-Year Plan and the full construction of a well-off society, and the momentum for steady growth in infrastructure will be more adequate. The company's demand for infrastructure, especially related to the ecological environment, has improved markedly; 2) Represented by garden and palm shares After equity changes have occurred, the enthusiasm of traditional leaders to operate has been greatly reduced, and the company's competitive pattern has been optimized; 3) Recently, a new refinancing policy was introduced, and the company then plans to raise an additional 1.22 billion yuan in capital. Combined convertible bonds are expected to be successfully converted to shares, which is expected to reduce the current high balance ratio of enterprises, thus laying the foundation for a new round of expansion. Cultural tourism sector: More blossoming, jointly helping to raise the valuation of the two cultural tourism subsidiaries to meet the conditions for a spin-off and listing. A successful spin-off will help increase the company's valuation. Hengrun Group, a subsidiary of the company, is a leader in the VR & AR field and has leading comprehensive strength. Demaghi's exhibition business is spread all over the world. The two subsidiaries have been operating steadily in recent years, and both have exceeded their commitment to performance during the gambling period. With the official launch of 5G commercialization in 2019, it is expected to stimulate a new round of demand for AR terminals, and the industry prosperity of the two cultural tourism subsidiaries is expected to continue to rise. Judging from the spin-off and listing conditions recently announced by the Securities Regulatory Commission, both companies have met the spin-off conditions. A successful spin-off will help the company achieve a significant increase in valuation. The participating company's micro-communication is taking advantage of the media trend, and valuations are expected to continue to catalyze. The company participated in 21.86% of its shares in microcommunications, and its main business is Internet self-media marketing and advertising. A-share target companies include Gravity Media and Zhongguang Tianze. Since “Double 12” last year, influencer e-commerce live streaming and diversified content monetization have been popular, and the valuation of influencer economy concept stocks has continued to rise. Microcommunications achieved revenue and net profit of 4.1 million yuan and 110 million yuan respectively in 2018, which have begun to take shape. As the media and influencer concept sector continues to catalyze, it is expected to help the company's overall valuation further improve. The main business recovery+emerging business is booming. The value of the company needs to be reassessed. Considering that the company's traditional main business is experiencing a bottom recovery, the superposition of two cultural tourism subsidiaries meets the conditions for spin-off and listing, the participating enterprise microcommunication benefits from the continuous catalytic valuation of the media sector. The company's value needs to be reassessed. Using the segmented valuation method, the market value corresponding to the company's 2020 performance is estimated at 12 billion yuan, which still has room for 42% improvement from the current market value of 8.5 billion dollars. The company's EPS for 2019-2020 is expected to be 0.28 and 0.33 yuan, corresponding to the 2019/02/25 stock price PE of 19.59 times and 16.95 times respectively, maintaining the “buy” rating. Risk warning: 1. Steady growth in infrastructure falls short of expectations; 2. The debt-for-equity swaps have fallen short of expectations.