The controlling shareholders plan to distribute special dividends to increase liquidity and maintain “buy” Yuandong Hongxin (3360 HK), the controlling shareholder of the company, issued an announcement on December 6. They intend to distribute no more than 160 million shares of Hongxin C&D shares to Yuandong Hongxin shareholders on the Yuandong Hongxin shareholder register. For every 27 shares held, Yuandong Hongxin C&D shares will be issued 1 share distributed by Hongxin C&D. We believe this share distribution will help enhance the company's brand strength and liquidity, and maintain the company's net profit forecast of $9.6/12.5/$1.57 billion for the year 23-25. Comparable companies Bloomberg and Wind unanimously expected an average value of 11.9xPE in '24. We believe that the company is the largest equipment operation service provider in China, and is also actively expanding asset-light models and digital empowerment. It is expected to accelerate category expansion in the medium to long term, maintaining the company's 12.5 xPE for 24 years, with a target price of HK$5.36, and maintaining “buying”.
The shares to be distributed account for about 5% of the total number discovered by the company. After the distribution, Yuandong Hongxin's shareholding ratio is about 66.7%. Currently, Yuandong Hongxin plans to distribute 160 million shares of Hongxin C&D shares. For every 27 shares held, Yuandong Hongxin will receive 1 share distributed by Hongxin C&D. As of December 6, Yuandong Hongxin held 2.29 billion shares of the company, accounting for about 6.97% of the shares to be distributed, accounting for about 5.00% of the total shares issued by Hongxin C&D.
After this distribution is completed, Yuandong Hongxin expects to still hold about 2.13 billion Hongxin C&D shares as the controlling shareholder, accounting for about 66.72% of the total number of issued Hongxin C&D shares. Through this distribution, Yuandong Hongxin shareholders can directly participate in the future development of Hongxin Construction Development through the shares obtained through the distribution.
The distribution still needs to be reviewed and approved by Yuandong Hongxin's shareholders' meeting. It is expected that on January 3, '24, the physical distribution will be reviewed and approved by the Far East Hongxin Shareholders' Meeting. The shareholders' meeting will be held on December 22, '23, and the voting results will be announced on the same day. In order to enjoy distribution rights, the registration procedure for Yuandong Hongxin shares will be suspended from January 2 to January 24. The final trading date for Yuandong Hongxin shares enjoying physical distribution rights on the Stock Exchange is expected to be December 27, '23. If the current allocation review is approved, the distributed shares will be recorded on January 3, '24 and sent on January 16.
Equity distribution enhances awareness and liquidity in the capital market, and continues to be optimistic about the company's medium- to long-term development. We believe that this share distribution will help increase the company's awareness and liquidity in the capital market. As the largest equipment operation service provider in China, Hongxin C&D has five core advantages in the field of equipment operation: brand, technology, scale, service, and digitalization. The company is actively expanding overseas markets and is expected to revitalize existing assets and improve asset management efficiency through overseas expansion. At the same time, the company continues to expand the types of downstream customers and application scenarios. Shipyards, chemical plants, office buildings and other fields are expected to bring new volume, and its ability to withstand cycles is expected to improve. We continue to be optimistic about the company's medium- to long-term development.
Risk warning: demand growth has slowed, asset management efficiency has fallen short of expectations, and profitability has declined.