Event: the company announced the announcement on the transfer of 100% equity of the subsidiary Shanghai Xianghong Real Estate Co., Ltd. (referred to as "Xianghong Real Estate").
Sell 100% equity of Xianghong Real Estate and dispose of Shanghai stock property. On February 5, 2021, the company signed an equity transfer agreement with Nantong Hengkang CNC Machinery Co., Ltd. (referred to as "Hengkang CNC"), intending to transfer 100% equity of Xianghong Real Estate to Hengkang CNC at a price of 681.82 million yuan. Xianghong Real Estate owns properties such as 1st floor to 4th floor and ground floor 1st to 2nd floor of 999 Shenbin South Road and Class C warehouse on the 1st floor of 995 Binnan Road in the core district of Hongqiao Business District, Minhang District, Shanghai.
Increase cash turnover to achieve investment income. We believe that this sale will, on the one hand, accelerate inventory turnover and improve the speed of inventory turnover in the real estate business; on the other hand, it will increase the company's cash flow and provide a strong guarantee for the company's future business development. According to the evaluation results on September 30, 2020, the book value of the net assets of Xianghong Real Estate is 560.51 million yuan, the evaluation value is 668.81 million yuan, and the transaction price is slightly higher than the evaluation valuation. we expect that the related income will also have a positive impact on the company's performance in 2021.
The background of the new president is Shanghai Wenguang, which helps the development of cultural industry. The company has announced the appointment of a new president, Mr. Wang Sheng, on June 22, 2020. Mr. Wang Sheng worked as a reporter, editor and host of a TV station, and later served as the director of the Foreign Affairs Department of Shanghai Culture, Radio, Film and Television Group and the vice president of Oriental Pearl New Media Co., Ltd. We believe that the background of the new president of the company will help the company to develop the cultural industry.
The strategic framework agreement has been landed, and the cultural and tourism business has continued to advance. On December 14, 2020, the company signed a strategic cooperation agreement with Tianjin North Cultural Industry Investment Group Co., Ltd., and Enli (Tianjin) Group Co., Ltd., to build a platform for the exchange and cooperation of Chinese and Italian designers' creative industries. In addition, the company has signed a cooperation intention agreement with Mr. Hong Bo, Italy-China United International Investment Management Co., Ltd., and Beijing Lianhe Zhongcheng Medical Technology Co., Ltd., intending to set up a joint venture to set up a limited liability company. to be engaged in the investment, development and construction of the future park project in Liuminying Village, Changziying Town, Daxing District, Beijing, and plans to be implanted into industrial clusters such as culture, tourism, science and technology, art, design, exhibition, finance, etc. The business of literature and travel continues to advance.
Investment advice: maintain a "neutral" rating. According to the company's three quarterly reports, we estimate that the EPS of the company from 2020 to 2021 will be 0.25,0.32 yuan respectively. As of February 9, 2021, the company will close at 3.73yuan, corresponding to 14.75times and 11.57times of PE in 2020 and 2021. We give a valuation of 13-15 times PE according to the company's 2021 EPS, with a reasonable value range of 4.19 to 4.84 yuan, a discount of 41.4% to 49.2% compared to RNAV (8.25 yuan) per share, and a "neutral" rating. Risk tips: 1) the sales and settlement of the real estate development business are not as expected; 2) the promotion of the company's cultural business is not as expected.
