Core views:
Guangzhou's assets plan to increase its holdings of Yuexiu Real Estate by no more than 2%. On June 3, '24, Yuexiu Capital (000987.SZ, Yuexiu Group holds 44% of shares) issued an announcement authorizing its subsidiary Guangzhou Assets to acquire Yuexiu Real Estate (00123.HK) shares through the secondary market with its own capital, with a total scale of no more than 556.5 million yuan, accounting for no more than 2% of Yuexiu Real Estate's total share capital, with a licensing period of 1 year.
Based on the average closing price of Yuexiu Real Estate in the past 20 trading days of HK$5.04 per share and an exchange rate of RMB 0.91 per share, the capital required to acquire 2% of the shares was RMB 369 million, accounting for only 66% of the total planned amount. The capital reserves for this acquisition were sufficient, and sufficient room for price growth was taken into account.
Strengthen shareholder ties and deepen win-win cooperation. Guangzhou Asset is mainly engaged in the non-performing asset management business. On the one hand, the acquisition is optimistic about the development prospects and investment value of Yuexiu Real Estate. On the other hand, it aims to promote the “bad+real estate” business model through strategic investment and explore win-win cooperation with Yuexiu Real Estate.
As a local state-owned enterprise in Guangzhou, Yuexiu Real Estate, with shareholders' support, “6+1 diversified land acquisition” has become an important guarantee for the company's investment strength and quality in the current market environment. This increase in holdings further deepens Yuexiu Real Estate's ties with shareholders and the Guangzhou State-owned Assets Administration Commission, with complementary advantages and win-win cooperation.
Yuexiu Real Estate operates steadily and has outstanding capabilities. Yuexiu Real Estate is the only real estate company in the top 30 that has maintained a positive growth in sales scale since 21 years of market decline. In recent years, it has expanded actively, has sufficient and high-quality land storage, the “517 New Deal” and subsequent core city policy follow-up, combined with strong shareholders' support and excellent operation and management capabilities, and the company's size, revenue, and performance are highly flexible.
Profit forecasting and investment advice. Net profit due to mother is estimated to be 3.5 billion yuan/40 billion yuan in 24-25 years, corresponding to PE of 6.5x and 5.7x. Maintaining a reasonable valuation corresponds to 0.6 times PB of net assets due to mother at the end of 23, corresponding to a reasonable value of HK$9.12 per share, maintaining a “buy” rating.
Risk warning. The impact of fluctuations in the single market; the recovery in the industry sentiment falls short of expectations on sales and profit margins; insufficient housing price expectations put pressure on gross sales margins; and the policy environment has not improved as fast as expected.