Event: the company released its 2015 annual report, with revenue of 2.409 billion yuan, an increase of 13.43% over the same period last year (previous value-10.99%), net profit of shareholders belonging to the parent company of 128 million yuan, up 12.40% (previous value of 9.07%), and earnings per share of 0.33 yuan, up 13.79% from the same period last year.
Steady progress was made in real estate plus international projects and dual main industries: in the past 15 years, the operating income of real estate business reached 1.389 billion yuan, an increase of 13.43% over the same period last year, and 106.85% of the annual plan was completed; 20 newly signed international project contracts totaled 1.974 billion yuan, realizing business income of 925 million yuan, down 23.43% from the same period last year. The profitability of the main business has improved significantly. The 15-year average ROE9.5%, has increased by 1.4pc compared with last year, the highest level in recent years, and the net profit rate of sales has rebounded to 5.4%, 0.8% higher than last year.
Acquisition of high-quality land reserves and overseas real estate development: the company has a total land area of nearly 1.5 million square meters for projects under construction and sale in the mainland, and some of the projects are geographically advantageous. Among them, the wholly-owned subsidiary Beijing Wuyi in Tongzhou will be the cornerstone of the company's future revenue and profits; at the same time, the company will continue to look for land in the center of Nairobi, Kenya, for overseas layout.
Optimization of financial structure and implementation of 1.1 billion rights issue: the company's asset-liability ratio is 86.2% higher than that of the same period last year, and the net debt ratio is as high as 368.7%. This shows that the company is under great financial pressure; the company successfully raised 1.1 billion yuan in rights issues, raised 490 million yuan in medium-and long-term corporate bonds, increased loans by 1.838 billion yuan in the current period, replaced short-term loans with bonds or long-term loans, improved financial structure, and reduced the risk of short-term debt repayment.
Overseas business development and Belt and Road Initiative's new opportunities: at present, the company has 25 international contracted projects under construction, with a total contract value of 4.497 billion yuan; in the future, the company will be based on international project contracting business, expand to real estate, trade, steel and other upstream and downstream businesses to promote overseas investment, mergers and acquisitions, foreign trade export and other business development.
Fujian State-owned assets Reform and Business Integration accelerated: the introduction of "opinions on deepening the implementation of State-owned Enterprise Reform" promoted the asset and business integration of the company and major shareholders; Fujian Construction Group increased its stake in the company by 3.4 million shares during the reporting period. Fujian Energy Group, the second largest shareholder, increased its shareholding by 0.81 million shares, which shows shareholders' confidence in the future operation of the company.
Investment suggestions: opinions on the implementation of Fujian state-owned assets reform to promote the business integration of the company and major shareholders; acquisition of high-quality land storage, Tongzhou 600 mu project to promote the company's real estate business to a new level, overseas real estate expansion is imminent; international project contracting has developed steadily, there is still room for expansion in the upper and lower reaches of the industry. After the rights issue and bond issuance, the financial structure has been significantly optimized. We expect the company's EPS to be 0.31,0.39 and 0.51 from 2016 to 2018, with a PE valuation of 52.0X, 41.3X and 31.9X, maintaining the "buy-A" rating and a six-month target price of 19.9 yuan.
Risk tips: overseas contracts and exchange risks, high pressure on real estate destocking in second-and third-tier cities.