Investment highlights

For the first time, it covered the Chinkimpoulos Warehouse Logistics REIT (508056), which gave an increase in holdings rating, corresponding to an expected total return rate of 10.5% over 12 months. The reasons are as follows: The fundamentals of the warehousing and logistics market are in good condition, and the asset transaction level already has a certain degree of marketization. Modern warehousing and logistics facilities are an important type of real estate asset class that accelerated with the development of e-commerce in the 21st century. Demand is still expanding, but due to scarce land supply within China, there is still a structural shortage of high-quality warehousing and logistics assets. This provides good support for asset value on the investment side. Currently, domestic warehousing and logistics assets are gradually heating up in the fields of primary market transactions and secondary market securitization (such as RET's issuance). We believe that they already have a certain degree of marketization.

The quality of the fund's underlying assets is excellent. The fund's underlying assets are composed of 7 properties, all located in the core locations of China's major metropolitan areas, and the distribution is reasonably distributed (the proportion of the Beijing region, the Yangtze River Delta, and the Greater Bay Area measured by the assessed value of assets is 40%/29%/31%). By the end of 2020, the average rental rate of the seven assets was 98.72%, and the effective rent unit price was 40 yuan/month/square meter. The tenant and lease expiration structure was also ideal.

We believe Proros will continue to contribute to asset management and fund development. As an external management agency, Shanghai Prous will continue to manage the fund's underlying assets to ensure management continuity. At the same time, we believe that developing China's REITs also has clear strategic significance for Proros's own asset management business. In the future, we suggest paying attention to the possibility that Proros will further support this REITs product on the asset side.

What's the biggest difference between us and the market? We believe that CICP REIT is operating steadily and capable of achieving long-term steady growth in the amount available for distribution, and that the fair value of underlying assets is also expected to increase in value exceeding market expectations.

Potential catalyst: The fund announces an expansion or other asset acquisition.

Profit forecasting and valuation

We forecast the amount of funds that can be distributed in 2021 and 2022 to 251 million yuan and 253 million yuan respectively (up 0.8% year-on-year in 2022), which is 0.3% and 0.5% higher than the fund manager's forecast, respectively. The 2021 and 2022 cash distribution returns based on our earnings forecasts are 4.30% and 4.33%, respectively.

We calculated the assessed net asset value (NAV) of the fund at the end of 2022 to be 6.194 billion yuan, corresponding to NAV4.13 yuan per share. There is 6.2% upward space compared to the current price. Combined with the current 4.3% dividend yield in 2021, the expected total return for 12 months is expected to reach 10.5%.

risks

Asset management performance may fall short of expectations; future rent growth is lower than expected due to increased competition in the industry; the capitalization rate of warehousing and logistics assets is rising; and there is a risk of changes in fund valuations.