Main points of investment:

Event: Tibet City Investment announced on November 26 the acquisition of 100% stake in Tibetan Investment Hotel, 14.99% stake in Quanzhou Real Estate, and 41.21% stake in Shaanxi Guoli.

The transaction plan consists of two parts: purchasing assets and raising matching funds. 1) issue shares and pay cash to purchase assets: the company plans to purchase three underlying assets by issuing shares and paying cash: 100% equity in Tibetan Investment Hotel, 14.99% equity in Quanzhou Real Estate and 41.21% equity in Shaanxi Guoli. The total value of the assets is about 1.198 billion yuan. The consideration is about 1.178 billion yuan, accounting for 97.43%, by issuing shares, and about 31 million yuan, or 2.57%, by cash. The share purchase assets of this issue are priced at 90% of the average stock trading price of listed companies for 120 trading days before the pricing benchmark, that is, 12.92 yuan per share. The number of shares issued is about 90.3771 million shares. 2) issue shares to raise supporting funds: the company intends to raise funds from no more than 10 specific investors for non-public issuance of shares at a price of not less than 14.52 yuan per share by way of inquiry, with a total amount not exceeding 1.165 billion yuan and the number of shares issued not exceeding 80.234159 million shares. The matching funds raised are intended to be used to pay the cash consideration of the underlying assets, the intermediary fees, the construction of the Quanzhou Real Estate Cmur3-2 project and the construction of the World Trade Capital project.

The impact of this transaction on the company's business, equity and finance. 1) impact on the company's business: before the reorganization, the company's main income was residential real estate sales. After the reorganization, as Quanzhou property plans to enter the field of commercial real estate in the future, the company can diversify its business operation through reorganization, optimize and improve the company's existing business structure and profitability, disperse the company's operating risks, and improve the company's cash flow. 2) impact on the company's equity: after this restructuring, the company will hold 100% equity in Tibetan Investment Hotel, 100% equity in Quanzhou Real Estate and 100% equity in Shaanxi Guoli. The controlling shareholder and actual controller of the company remain unchanged and remain the State-owned assets Supervision and Administration Commission of Jing'an District. 3) Financial impact on the company: according to the announced trading plan, if we take the exam data of June 30, 2016 as reference, the owner's equity belonging to the shareholders of the listed company after the reorganization will increase by 69.79%, and the asset-liability ratio will be reduced from 73.20% to 63.24%. Operating income will increase by 1.52%. As the target company of this reorganization holds a large number of physical assets, including land, hotel houses, commercial housing under construction, etc., after the reorganization, the company will increase the reserve of physical assets and thicken the net assets per share belonging to the shareholders of the company. from 3.45 yuan per share to 4.75 yuan per share.

Investment advice: "increase holdings". After this restructuring, Tibet Holdings still focuses on real estate, adding hotel, commercial and property elements in addition to traditional residential buildings, so as to realize the diversified development of real estate business. The company's main development projects are located in Jing'an District and Zhabei District of Shanghai, which are high-quality lots in first-tier cities and have a certain value-added and anti-risk ability. After the completion of the lithium power park in the future, we can share the upstream opportunities of the new energy automobile industry. The corresponding PE of comparable real estate companies in Beijing Hi-Tech in 2016 and 2017 was 90.7 and 73.9 times, respectively. The suspension price of the company on June 29, 2016 is 15.67 yuan, corresponding to 156.7 times the PE in 2016 and 71.2 times in 2017. Considering the diversified development of the company after restructuring, the valuation of Shibei high-tech with similar asset location and the concept of new energy, the company is given 75 times PE in 2017, corresponding to a target price of 16.50 yuan, giving the company investment advice to "increase its holdings". Risk Tip: transaction execution risk.