Investment Overview On June 14, Huazainian Holdings issued an announcement proposing the spin-off of “Color Life Group”, which is mainly engaged in property management and community services, to be listed on the Hong Kong Stock Exchange, and expects the spin-off to be completed by the end of 2013. “Color Life” was established in early 2008 and completed restructuring in early 2011. It is a professional platform for property management and community services under Huazanian Holdings. The biggest difference from many property management companies is that in addition to providing ordinary property services, “Color Life” also provides integrated community services such as hotel management, building intelligence, asset management, and community value-added services. At present, “Color Life” has managed more than 500 service projects, and the management service area has exceeded 50 million square meters. A strategic layout for regions such as Northwest China, North China, Northeast China, Southwest China, and South China has been initially formed. “Color Life,” a property management service business owned by Huazanian Holdings, increased 48% in 2012 from RMB 125 million in 2011 to 185 million. With a gross margin of over 40% and a net profit margin of over 14%, “Color Life” is at a high level within the industry. This is the core advantage of the company's light asset operation. The property V2.0 model promoted by “Color Life” focuses on value-added services for community residents and provides commercial services to community residents through intelligent and networked platforms. This new model has changed the traditional man-intensive characteristics and is an innovative real estate business model. What “Color Life” is currently doing is improving the business model and service platform, introducing residents' needs through activities such as the “Happy China Tour”, and implementing commercial operations from there, which is very much worth looking forward to. Seen from another perspective, the current main business income of “Color Life” still mainly depends on traditional property management business, and revenue growth is also more dependent on the expansion of management scale rather than endogenous growth. Although the company has made some breakthroughs in community asset management, etc., the future core growth point, value-added services, is still in its infancy, and there are no conditions for substantial growth in the short term. Overall, we are looking forward to the “Color Life” property V2.0 model. Although there is still a long way to go, the real estate V2.0 model upgrades the management of goods to personal service, which is undoubtedly a kind of progress. This model is expected to launch new community demand and has considerable commercial potential. According to information from recent capital increases and stock expansion, the market valuation of “Color Life” is approximately HK$1.25 billion, which is roughly equivalent to exceeding the expected price-earnings ratio for 2013 by 20 times. We believe that this higher static valuation includes a good expectation of the growth potential of the new model of “color life”. Intelligent and networked operations can help investors provide a higher level of valuation. We believe that the “Color Life” spin-off will help increase the corporate value of the Year of Flowers. The substantial progress of the spin-off listing of “Color Life” can be seen as a catalyst for the stock price of Huayanian Holdings. Due to predictable regulatory risks, we maintain the “collection” rating of Huazanian Holdings. The 12-month target price was raised to HK$1.4, which is equivalent to 4.7 times the expected price-earnings ratio for 2.13.