Rapid revenue growth in the medium term, stripping Shougang resources to focus on the main business
As of June 30, 2021, the company had operating income of HK $639 million, an increase of 148% over the same period last year; a gross profit of HK $352 million, an increase of 790% over the same period last year; and a net profit loss of HK $1.395 billion, compared with HK $441 million in the same period last year. The gross profit margin was 55.1%, an increase of 39.8 percentage points over the same period last year. The substantial increase in operating income, gross margin and gross profit margin of the company is mainly due to: 1) the rapid growth of parking business revenue; 2) the investment fund business recognized an excess return of HK $258 million. The net profit and loss of ownership is mainly due to the divestiture of Shougang Resources (0639.HK) in order to focus on the main business and the provision for impairment of HK $1.776 billion in the current period. If the impairment loss is excluded, the two main businesses remain profitable. In addition, the company pays an interim dividend of HK $300m and has paid a cumulative dividend of HK $2.4 billion since 2018.
Parking and travel business to maintain rapid development
As of June 30, 2021, the company's parking and travel business achieved income of 273 million Hong Kong dollars, an increase of 75 percent over the same period last year, accounting for 42.7 percent of revenue. The pre-tax profit was 32 million Hong Kong dollars, a sharp decline compared with the same period last year. Mainly because the property rights recognition of new projects will be completed one after another in the second half of the year, the recognized investment income in the first half of the year decreased compared with the same period last year. During the period, the company accelerated the landing of BOT-type projects, significantly strengthened its investment, realized replication in Beijing, Nanjing, Chongqing and other places, and successively completed a number of BOT three-dimensional parking projects. Zhengzhou Airport, Ningbo Airport and Yunnan Zhaotong Airport have won the bid, and the total number of airport projects has reached 9, and the leading position in the field of airport parking has been continuously consolidated. The high-speed railway project won the bid for Beijing-Harbin, Beijing-Zhang high-speed railway and a number of high-speed railway stations along the Jingxiong intercity line; in terms of city-level project cooperation, the Tianjin market was opened and the number of parking spaces on the ground exceeded 10000, and regional cooperation was further strengthened.
Fund management business is growing steadily.
As of June 30, 2021, the company's fund management business income was 357 million Hong Kong dollars, up 248% from a year earlier, accounting for 55.9% of revenue, and pre-tax profit of 280 million Hong Kong dollars, an increase of 264% over the same period last year. The rapid growth was mainly due to the recognition of excess income of HK $258 million from the Fund allocation during the period. During the period, the company participated in the strategic placement of the first six public offering funds REITS, realizing the coverage of property rights public offering REITS such as industrial park and warehousing logistics, which will play a good synergistic effect on the company's two main businesses. In terms of urban renewal, the "six industrial remittances" of the first Olympic Industrial Park
The total construction area of the project is about 224000 square meters, less than 1 km from the venue of the Winter Olympic Games. At present, about 70% of the investment promotion work has been achieved, and it is expected to open before the end of this year. In terms of equity investment, the company revolves around the upstream and downstream of the automotive industry chain, with key projects such as Li Auto Inc., Horizon (domestic self-driving AI chip leading company) and Mo Zhihang (China's leading provider of self-driving software solutions).
Investment advice and profit forecast
The company's medium-term revenue growth has maintained rapid growth, stable and high dividends have continued, and the two major businesses of parking and fund management have progressed steadily, although the disposal of Shougang's resource equity has brought one-off losses. however, we believe that the transfer of Shougang's resource equity will help the company to further focus on its main business. We expect the company to achieve operating income of HK $1.202 billion, HK $1.898 billion and HK $2.488 billion and net profit of-HK $1.056 billion, HK $803 million and HK $1.01 billion respectively, corresponding to EPS of-HK $0.14,0.11,0.14 respectively, in 2023. The company will be given a target price of HK $2.09, corresponding to 19 times PE in 2022, maintaining its "buy" investment rating.
Risk hint
The expansion of parking and travel business and the growth of real estate fund management business are lower than expected.