Company News: Jiangxi Changyun announced the transfer of the operating assets of Changyun in Pingxiang, Jiangxi for 55 million yuan. Comment: New progress has been made in regional expansion, and the purchase price is reasonable. The acquisition is in line with the company's regional expansion strategy, and Pingxiang's location will help strengthen the company's existing “linear” passenger transport network layout (Chart 2) and enhance synergies. In terms of market share, Pingxiang is under the administration of six districts and counties with a population of 1.85 million. Preliminary estimates suggest that this acquisition will increase the company's market share in the province by about 5% to about 55%, helping the company strengthen its dominant position in the province. Judging from the purchase price, the company's current acquisition is priced according to the assessed value of the asset (9.9% discount from the book value due to unclear property rights of some assets), corresponding to the 2008 price-earnings ratio of 15 times, and the purchase price is relatively reasonable. The positive significance is limited, and the dispute with the railway is about to intensify within the year. The company's regional expansion has still not been able to get out of Jiangxi Province, and the company immediately intended to acquire Changyun, Pingxiang, from 03 to 04, and new ideas for expansion in this subregion were limited; judging from the disclosed data, the revenue of Pingxiang Changyun in 2008 was 4.5% of that of Jiangxi Changyun, and the business growth brought about by the acquisition was also quite limited. Furthermore, we still believe that the company's regional expansion strategy will not be sustainable, judging from the external environment faced by the company as it promotes episodic expansion: improvements in the profitability of road passenger transport companies after the reform of passenger transport taxes and fees such as road maintenance fees, which increase the company's acquisition costs, and internal constraints: the company's already high balance ratio is insufficient to support large-scale external acquisitions (58% in 3Q09). Meanwhile, with Jiangxi Province commencing major railway construction in 2009 (with a planned investment of 214 billion dollars in 4 years) and the first of these, the Changjiu Railway, is expected to be officially put into operation in June (Nanchang-Jiujiang is currently one of the company's best passenger routes), the company will soon begin to face the challenge of increasing road and railway competition within the year. Investors are advised to pay attention to and track the impact of related railways on road passenger traffic after they are put into operation. The profit forecast for 2010 to 2011 was slightly raised. There was a slight increase in the company's revenue from 2010 to 2011 by about 5% and net profit by about 4%, respectively, to reflect that the acquisition has already taken effect and brought about an increase in business. Investment suggestions: After adjustments, the company's EPS forecast for the years 09 to 11 was 0.47 yuan, 0.57 yuan, and 0.61 yuan respectively. The current stock price corresponds to the company's price-earnings ratio of 26.3x, 21.6x, and 20.1x respectively. The valuation is reasonable and maintains a neutral rating. Stock price catalysts: oil prices have fallen sharply; passenger flow has increased beyond expectations; and extended mergers and acquisitions have continued to advance.