Event: First Journey Holdings announced its results for the 1st quarter of 2024. With 2024Q1, the company achieved revenue of HK$350 million (yoy +9.0%) and achieved net profit of HK$120 million (yoy +7.0%) in asset operation business: scale & efficiency have steadily improved, and the performance moat continues to be strengthened. 2024Q1, the company's asset operation business achieved revenue of HK$200 million (yoy +42.2%). The sharp increase in the company's asset operation revenue was mainly due to the company's continuous acquisition of heavyweight projects: due to the company's leading position in the industry, the company continuously won bids for heavyweight transportation hub parking lot projects such as “Guangzhou Baiyun Airport Parking Lot Management Rights” and “Beijing Fengtai Station Parking Lot” during 2023, and efficiently completed operation and handover in early 2024. The company's continuous acquisition of industry benchmark projects confirms the company's specialized asset operation capabilities. Combined with the continuous recovery of China's economy, passenger traffic at transportation hubs is expected to continue to grow. The steady growth of the company's asset operating business revenue is highly certain, and it has formed a relatively stable performance moat.

Asset financing business: There are frequent favorable policies related to REITs, and the financing business has room for growth. The company adheres to REITs as the cornerstone and continues to promote a closed loop of “fund-raising, management and withdrawal” ecology. 2024Q1's asset financing business achieved revenue of HK$150 million. There are many favorable REITs market policies in 2024: ① The China Securities Regulatory Commission issued “Guidelines for the Application of Regulatory Rules - Accounting Class No. 4”, which further clarifies the equity attributes of REITs; ② the State Council issued “Certain Opinions on Strengthening Supervision and Risk Prevention to Promote High-Quality Development of the Capital Market”, which proposes to include eligible REITs from the Mainland and Hong Kong in the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect goals. Thanks to the support of the policy environment, the company helped customers issue and expand the China Airlines E-Commerce Logistics REIT and Jingneng Photovoltaic REIT were successfully submitted to the Shanghai Stock Exchange for acceptance. China's REITs market is advancing at an accelerated stage of high-quality development. Relevant rules and regulations have been closely introduced. The company's asset financing business has good policy soil, and the future development space is worth looking forward to.

Backed by Shougang Group, strategic shareholders are rich in resources, and high dividends show confidence in the future. The company relies on Shougang Group and has successively attracted strategic shareholders such as ORIX, Jingwei China, Beijing Guoguan, and Sunshine Insurance to invest in shares. Shareholders' capital and resources are abundant, providing strong support for the long-term steady growth of the company's scale. The company plans to have an annual dividend payout rate of not less than 80% from 2023 to 2027, with a dividend payout rate of 100% for the full year of 23. On the one hand, it shows the company's steady financial strength, and also shows the company's full confidence in future development.

Profit forecasting and valuation. The company's asset operation business has formed a stable performance moat. The development of the asset financing business has a good policy environment. At the same time, the company will maintain a dividend payout rate of no less than 80%, demonstrating the company's full confidence in future operations. We expect the company to achieve operating income of HK$1.44 billion, 16.0 billion and HK$1.78 billion in 2024-2026; net profit to mother of HK$6.6, 740, and HK$83 million respectively. The corresponding PE was 15.8x, 14.2x, and 12.7x respectively, and the first coverage gave a “recommended” rating.

Risk warning: Project expansion is not going well; REITs market development falls short of expectations; competition in asset management business intensifies.