State-owned assets restructuring, the company cut into the high-growth tax-free track
The company intends to purchase 100% of the shares of Zhuhai tax-free Group by issuing shares and paying cash at an issue price of 4.3 yuan per share.
According to the transaction plan of CITS acquiring Rishang Shanghai and Hai-free companies, the corresponding PE is 12x and 15x respectively. Assuming that the bead-free pricing refers to the valuation range of the above case, the valuation of bead-free should be between 85 and 10.5 billion (tax-free main business 12-15x PE, investment income 1x PE). At the same time, the company will also introduce general technology groups that have a synergistic effect with duty-free business. In the future, Pearl is expected to rely on the transnational trade network of general technology to enhance its purchasing capacity.
The epidemic reshapes the global tax-free competition pattern, and there is a broad space for tax-free consumption in China to return.
Under the current macro background, in order to expand domestic demand and return overseas consumption, the policy to promote the tax-free industry has sufficient power, and the policy dividend of the tax-free industry is expected to continue to appear. From the perspective of the increase in the conversion rate of duty-free shopping in China and the return of overseas duty-free consumption, we expect the future sales scale of China's duty-free industry to reach a range of 1000-200 billion. The state-owned duty-free operators represented by China exemption and Pearl exemption will enter the golden stage of development.
Zhuhai tax exemption: there are still opportunities for "quantitative change" and "qualitative change" to undertake passenger flow from Hong Kong, Zhuhai and Macao.
The company's stores occupy the entrance to the core traffic of mainland tourists visiting Australia. In 2019, nearly 28 million Chinese mainland tourists visited Macau each year. The main ways of entry include: Gongbei Port (68%), Ludaocheng Border Port, namely Lianhua Bridge Port, Hong Kong-Zhuhai-Macao Bridge (8%), Waterway Terminal, including Kyushu Port (6%). The company's port duty-free shop basically covers more than 80% of the main channels for mainland tourists to enter Macao. Bead free space calculation: with reference to the proportion of US residents visiting Las Vegas each year, we estimate that the annual number of visits by Chinese mainland residents to Macau is expected to reach 70 million in the future, more than double that in 2019. Further, the company is gradually paying more attention to incense purchasing. In the future, with the expansion of store area and the optimization of category structure, the apparent unit price of the company's stores is expected to be close to the current level of Baiyun Airport (RMB 108 in 2019). The long-term sales scale of the company's port is expected to reach 7.5 billion yuan. with the company's current parent net interest rate of 25%, the corresponding profit volume is about 2 billion yuan, if it is valued at 30-40 times PE. The long-term market value is 6-80 billion yuan.
Investment suggestion
We value the company's distribution in 2021 at 396-43.6 billion yuan, which is still more than the market value after issuing shares and paying cash for the acquisition of pearl-free assets. In the long term, as we have analyzed above, there is a broad space for the long-term growth of the passenger flow at Zhuhai's port into Macao, and the competition pattern of the domestic duty-free industry has become moderately open, and Zhujiang Free Company still has the opportunity to further expand its duty-free business in the future. for the first time, give it a "recommended" rating.
Risk hint
The poor tourism environment in Hong Kong may lead to a decline in the number of visitors to Hong Kong and Macao in the future; the risk of policy fluctuations in the tax-free industry.