The company's recent situation
The company's stock price continues to fall, mainly because investors have major concerns about the company's business strategy, including: 1) the 2018 annual report did not pay dividends; 2) the chairman of the board reached the age of 60 or retired in 2019.
reviews
The company's stock price continues to fall sharply: 1) Since February 20, the company's stock price has fallen by more than 30%. 2) Currently, PB is only 0.53x, and the company's large assets have value-added value after revaluation. We estimate that the current market value is lower than the value that can be brought by delisting and restructuring. 3) Considering that the company will not be delisted and restructured, investors are more concerned about the company's continued profit growth and stable dividend policy in the future, but both of these points are uncertain.
There were no dividends in the 2018 annual report, far below market expectations: 1) The company's dividend policy over the years was relatively stable, including mid-term dividends and year-end dividends. The payout rate for the full year of 2014/2015/2016/2017 reached 38.80% /39.53 %/ 62.31%/40.34%. 2) Although there were dividends in mid-2018, there were no dividends in the annual report, which was significantly lower than market expectations. 3) Investors believe that the company management's dividend thinking has changed, and there is great uncertainty about future dividend rates.
The company's executives may change in 2019, and there is a high level of uncertainty about future management policies. 1) The current Chairman of the Board, Mr. Fu Zhuoyang, was born in 1959 and has reached the age of 60 this year. 2) Currently, the legal retirement age for men in China is 60 years old. As a large state-owned enterprise, we estimate that Chairman of the Board of Directors, Mr. Fu Zhuoyang, may retire. 3) If the chairman of the board changes, the new leader may adjust the operating policy, so investors are currently unable to reasonably estimate future business conditions.
Valuation recommendations
The company holds a large number of high-quality assets (such as Song Mountain Scenic Area, Shenzhen Window of the World, Splendid China Theme Park, etc.). If it can improve operations and implement a stable dividend policy, it can enhance investors' confidence. We maintain our recommended ratings and maintain the 2019/2020 EPS forecast of HK$0.14/0.15. However, considering that the company's operating policy and dividend policy reduced investor confidence, the target price was lowered by 24% to HK$2.10, corresponding to 15x/14x 2019/20Ep/e, with room for an increase of 31%. The company's current stock price corresponds to 11x/10x 2019/20e P/E.
risks
Risk of change in dividend policy; risk of adjustment of operating policies.