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Event

On December 30, the company plans to sign the "Equity transfer Agreement on the transfer of the Equity of Shenzhen World Union Collection House Asset Management Co., Ltd." with wholly-owned subsidiaries World Union Holdings and Huayan Zhihui. It is proposed to transfer its 100% equity and corresponding rights and interests after the asset reorganization to Huayan Zhihui at a transfer price of 530 million yuan.

Within seven working days from the signing date of the above-mentioned "Equity transfer Agreement", the company intends to sign several "equity transfer agreements" with the World Union House in respect of 43 subsidiaries under the control of the World Union House, the company will transfer the relevant shares of 43 subsidiaries at a consideration of RMB 220 million.

DaHengqin Innovation, a wholly-owned subsidiary of DaHengqin, the controlling shareholder of the company, plans to establish a Zhuhai Hengqin Huaqin Industrial Investment Partnership ("Huaqin Industry") with "Hua Yan Zhihui" and other limited partners. As the main body to undertake all the rights and obligations of Huayan Zhihui under the Equity transfer Agreement. Among them, DaHengqin Innovation subscribed 49.5% of the capital contribution share of the above-mentioned subjects.

Comments:

The company plans to transfer the World Union House with 530 million yuan and divest the long-term rental apartment business:

(1) this transaction scheme strips off the loss-making business of long-term rental apartments. According to the plan, the World Bank intends to transfer 100% of its equity and all its corresponding rights and interests to Huayan Zhihui after the asset reorganization, with the transfer price of the target rights and interests being 530 million yuan. The target of the transaction "100% equity of World Union House after asset restructuring" is mainly the company's original chartered apartment project, and the business scope of the counterparty, "Hua Yan Zhihui", is industrial investment, with a registered capital of 2 million yuan.

(2) DaHengqin Innovation, a wholly-owned subsidiary of DaHengqin Group, will set up a subsidiary "Huaqin Industry" with "Hua Yan Zhihui" as the main body to undertake the rights and obligations of this equity transfer. Among them, "Da Hengqin Innovation" holds 49.5% of the shares, and "Da Hengqin Innovation" as the priority limited partner, and "Hua Yan Zhihui" as the general partner. Other limited partners act as inferior limited partners.

(3) Hualian Zhihui will hold and operate 114 projects (excluding the 43 companies proposed to be spun off by agreement) after the reorganization of the assets of the World Union House. The World Union Bank will sign a "equity transfer agreement for 43 subsidiary companies" with World Union House, which will transfer the relevant shares of 43 subsidiaries under the control of World Union House at a consideration of 220 million yuan.

With the divestiture of the loss-making business of long-term rental apartments and the recovery of funds, the company's sustainable development and profitability will be improved in an all-round way.

Losses in the long-term rental apartment business have dragged down the company's performance over the past few years, and the divestiture will significantly improve profits. The net profit from January to September in 2019 and 2020 is-320 million yuan and-210 million yuan respectively. It is estimated that the impact of this transaction on the company's current consolidated net profit is about 6500-75 million yuan (reflected in next year's investment income, without taking into account the relevant tax impact, specifically subject to the financial report of the year of performance).

In addition, the divestiture will recover funds, which will help the company improve its cash flow, reduce its debt ratio, and comprehensively enhance the company's sustainable development and profitability.

Travel light, continue to transform, and the fundamentals are in a difficult situation. Through this transaction, the company stripped off the company's original chartered apartment project and retained the apartment project with light assets trusteeship and operation services. Prior to this, the company announced on December 9 that it would divest 800 million small loan assets. From a series of actions of the company, we can see that the company continues to unload the burden, continue to transform, travel light, and refocus on the professional service ability of light assets, the fundamentals of the company will reverse the predicament.

Investment advice: the company spun off the long-term rental apartment business, light to continue to transform, the fundamentals to achieve a reversal of the predicament.

The company's "big transaction + big asset management" main business positioning is clear, backed by Dahengqin Group resources, "state-owned platform + listing platform" obvious advantages. Due to the divestiture of the loss-making business and investment income, we raised the company's profit forecast of 2021. It is estimated that the EPS for 20-21 years will be 0.05yuan and 0.23yuan respectively. According to the closing price on December 30, the PE will be 94 times and 21 times respectively, maintaining the "buy" rating.