Event: Gree Real Estate plans to buy 100% shares of Zhuhai Free Group from Zhuhai State-owned assets Supervision and Administration Commission and Urban Construction Group for 12.215 billion yuan, issue 2.655 billion shares to Zhuhai State-owned assets Supervision and Administration Commission and Urban Construction Group at 4.30 yuan per share and pay 800 million yuan in cash. 2) the company plans to raise funds from GM Investment at 4.30 yuan per share, the total amount is expected to be no more than 800 million yuan and no more than 186 million shares.
Transaction analysis: ① issued shares to Zhuhai SASAC. Gree Real Estate plans to issue 2.187 billion shares to Zhuhai State-owned assets Supervision and Administration Commission at 4.30 yuan per share, paying a consideration of 9.406 billion yuan. ② issues shares and pays cash to the Urban Construction Group. Gree Real Estate plans to issue 467 million shares to the Urban Construction Group at 4.30 yuan per share, paying 2.009 billion yuan for the shares and 800 million yuan for the cash consideration, totaling 2.809 billion yuan. ③ raised funds from the strategic investor GM Investment and issued shares. Raise no more than 800 million yuan in matching funds and issue no more than 186 million shares from them in the form of non-public issuance of shares. Overall, the consideration for the transaction is 12.215 billion yuan, of which 11.415 billion yuan will be paid by issuing shares; 800 million yuan will be paid in cash, and the total share capital of Gree Real Estate will increase to 4.902 billion shares after the transaction: after the transaction, Gree Real Estate will hold a 100% stake in Zhuzhou Free Group. Zhuhai SASAC's shareholding in Gree Real Estate will rise to 71.44 per cent.
Analysis on the rationality of transaction price: Zhujiang exemption is one of the few state-owned enterprises approved to operate duty-free goods business at ports in China. Duty-free business is mainly distributed at Zhuhai ports and Hong Kong-Zhuhai-Macao Bridge Port. Business covers tobacco, alcohol, incense and other categories, duty-free shops have a total operating area of more than 10,000 square meters. The static PE of this acquisition relative to Zhu Mong's 2019 performance is 17.93 times: 1) for the target retail listed companies, the corresponding PE of this transaction is lower than the average level of comparable companies. 2) acquisition transactions related to the target retail industry, this transaction corresponds to the average price-to-earnings ratio of PE and comparable transactions is close.
According to the report, taking into account only the company's existing tax-free business, it is estimated that the tax-free business revenue in 21-25 is 24.49,27.77,29.94,33.02 and 3.302 billion yuan respectively, and the net profit is 6.21,7.31,8.64,9.66 and 966 million yuan respectively. The forecast is relatively conservative. Only considering the company's existing duty-free business, the performance commitment made by Zhu exemption is also relatively conservative, and the future Hainan outlying island duty-free policy + Hengqin outlying island duty-free shop may be expected to further enrich the company's performance.
After the acquisition, the company's shares are expected to increase from 2.061 billion to 4.902 billion shares. based on Gree Real Estate's current 9.67 yuan per share, the company's total market capitalization after the acquisition will reach 47.401 billion yuan. If the net profit of the duty-free business in 21-23 is not less than 5.50,6.41 and 747 million yuan respectively, the valuation of the secondary market share price corresponding to the performance commitment of the duty-free business is 66.3,56.9,48.9 times respectively.
The tax-free industry is in a period of rapid development. Under the background of favorable policies and the return of overseas consumption, the future growth space is worth looking forward to. Zhufen, as a leading enterprise of duty-free shop in southeast port, is located in Zhuhai, an important hub city of Guangdong-Hong Kong-Macau Greater Bay Area, with a superior geographical location. The passenger flow at Gongbei Port reached 145 million in 2019, and the huge passenger flow at various ports in Zhuhai will provide long-term support for the income growth of Zhuhai. Duty-free business, mall leasing and management business will complement the existing consumer sector of Gree Real Estate. Injecting the duty-free business with strong profitability, scarce resources and broad development prospects into Gree Real Estate will become an important profit driver for the company in the future, which will help to enhance the company's sustainable operating ability and sustainable profitability.
Risk hints: systemic risk, policy risk, intensified market competition and so on.
