23H1's EBITDA was -16% year on year and PATMI was -24% year on year. Performance was lower than expected. Company announcement, 23H1, the company's operating income was 455 million US dollars, +5.5% year on year; PATMI (net profit to parent) was 289 million US dollars, -24.1% year on year; adjusted PATMI was 304 million US dollars, -26.3%; EBITDA 537 million US dollars, year-on-year, -15.6%; adjusted EBITDA550 million US dollars, -18.0%; the company's gross profit margin was 97%, year-on-year -0.6pct, net interest rate -28.3pct; administrative expenses 204 One million dollars, -14% year on year, financing costs of 159 million US dollars, +60% year on year; other revenue of 215 million US dollars, -26% year on year; joint venture revenue of 78 million dollars, -46% year on year. The company's performance declined, mainly due to a decline in fair value earnings and a lack of 22H1 one-time sale revenue.

Fund management EBITDA has increased by double digits, profit margins have increased, and the scale of asset management in the new economy is growing at a considerable rate. The company announced that 23H1, fund management business revenue was 403 million US dollars, +9% year on year; EBITDA was 329 million US dollars, +14% year on year; EBITDA profit margin reached 82%, up 4 pct year on year. The steady growth in the performance of the fund management business stems from the steady increase in the scale of asset management. The increase in scale is conducive to improving the company's management capabilities and expanding the investor base. On 23H1, the company's AUM increased to US$147 billion, +13% year on year; of this, the scale of expense-related asset management was US$78 billion, +10% year on year. The company raised more than 2 billion US dollars through 15 established and added fund projects, of which 80% of the newly raised capital was used in the new economy. On the one hand, it demonstrated excellent fund-raising capabilities, and on the other hand, it helped with asset-light fund management strategies. Additionally, the company has $19.3 billion to be invested that can be allocated to new investment projects.

The investment adheres to an active capital circulation strategy, and the rental rate is high. Company announcement, 23H1, investment business revenue of 40 million US dollars, -34% year-on-year; EBITDA of 120 million US dollars, -43% year-on-year. The year-on-year decline in investment business revenue stemmed from the sale of assets in the second half of '22, which led to a decline in rental income, while 22H1 completed the capital cycle, which led to a decline in one-time investment income. The overall rental rate of 23H1's properties increased to 92%, excluding the rental rate of domestic assets of 98%; the leased area was 2.1 million square meters, and the weighted average rent of the investment portfolio increased by more than 10%.

The development business is growing steadily, and subsequent delivery is guaranteed. Company announcement, 23H1, development business revenue of 13 million US dollars, +8262% year on year; EBITDA of 148 million US dollars, -35% year on year. The year-on-year decline in development business EBITDA was due to a decline in the fair value of the project, an increase in the capitalization rate of Australia and South Korea, and the existence of sales revenue for 22H1. 23H1. The company developed 27.4 million square meters of land, including more than 6.4 million square meters of land reserves, +45% over the same period. The value of the company's 23H1 completed and started projects reached 2.28 billion US dollars, +10% and 9%, respectively, over the previous year; it indicates that subsequent deliveries will increase significantly, driving the company's scale expansion.

Financial stability, manageable leverage, and prolonged debt. The company announced that by the end of 23H1, the company's total assets were US$16.3 billion, -0.4% year on year; cash on hand, -44% year on year; bank loans and other loans of US$5.6 billion, basically the same as at the end of '22; net debt/total assets ratio was 27.6%, compared to +4.8 pct at the end of '22, and reduced to 25.9% after asset sale after sale; net debt ratio was 49.4%, compared to +9 pct at the end of '22; investment property of US$3.2 billion, -5% year on year, joint ventures invested 3.3 billion US dollars, year on year. +11%; the weighted average debt maturing time was about 5.3 years, up 0.2 years from the end of '22. 23H1's comprehensive financing cost was 5.6%, compared to +1.4 pct at the end of '22.

Investment analysis: Performance has declined, the asset-light model has promising prospects, and maintains a “buy” rating. The logistics real estate industry is in a golden age of rapid development. As an Asia-Pacific logistics real estate company, ESR continues to maintain an asset-light strategy of expansion and expand its management scale by acquiring ARA to expand its management scale. We believe the company will maintain long-term and steady growth. Considering the pace of completion of the development business and the uncertainty of the decline in investment income, we lowered net profit from 2023-2025 to US$5.4, 599 million, and 650 million US dollars (the original value was US$630, 70 million, and 760 million US dollars). The current price corresponding to PE in 23/24 was 12.6/11.6 times, respectively, maintaining the “buy” rating.

Risk warning: The company's expansion is falling short of expectations, and the development of the e-commerce industry is falling short of expectations.