China Merchants Shekou (001979): Qianhai Joint Venture Cooperation Plan Announces Speeding Up of Resource Development
China Merchants Shekou announced on the morning of December 9 that it intends to establish a joint venture with 100% equity of China Merchants Chidi held by Qianhai Industrial, a controlling subsidiary of China Merchants, and 100% equity of Qianhai Hongyu held by Qianhai Investment Control’s wholly-owned subsidiaryThe company has invested in Qianhai Free Trade. After the capital increase is completed, both parties will hold 50% equity of the joint venture.
Comment on the land consolidation in Qianhai has entered the final stage.
In May this year, the company announced that Qianhai Land Preparations had been completed.
The preliminary plan marked an important progress in the joint cooperation phase, and the land preparation work in Qianhai area gradually entered the final phase.
China Merchants Shekou and Qianhai Administration will increase the capital of Qianhai Free Trade Investment (Joint Venture) with 100% equity of their grandsons, China Merchants Chidi and Qianhai Hongyu. At the same time, China Merchants Shekou will increase the capital to 50% of the equity of both parties:50%.
The valuation of China Merchants Chidi and Qianhai Hongyu’s equity is tentatively set at 643.
68 ppm and 729.
RMB 08 million (the benchmark date for equity evaluation is September 30, 2019, which is different from the asset valuation value in 2015), so China Merchants Shekou will make up approximately RMB 8.5 billion in cash consideration (the final transaction price is yet to be determined).
The rights and interests of the land in Shekou, China Merchants are further clarified, which is conducive to the acceleration of the development and construction of Qianhai Area.
We believe this transaction will further clarify the land rights of China Merchants Shekou in Qianhai Area, which will help speed up the development and construction of Qianhai Shekou Free Trade Zone.
The joint venture company will co-ordinate 南京夜网 the development and construction activities of the Qianhai area and will be consolidated by China Merchants Shekou.
We estimate that the land in Qianhai area will increase the company ‘s net asset value by US $ 47.4 billion, accounting for about 25% of the company ‘s total net asset value before its implementation. In the long run, it will support the company ‘s continued growth in performance.
The sales target was completed ahead of time, and the recommendation logic of the resource-based leading central enterprise was reset.
The company’s contracted quota / sale area from January to November increased by 32% / 42% to 1970 ppm / 10.13 million square meters, respectively, and it has basically completed the sales target of 200 billion US dollars per year (10% growth rate in ten years).
From January to November, the 杭州桑拿网 newly-added land reserve increased by 15% annually to 12.98 million square meters, corresponding to a gradual decline in land prices by 17% to 6559 yuan / square meter.
Looking ahead, the company has rich soil reserves in Qianhai Shekou Free Trade Zone, high revaluation of resources, and the advantages of diversified land acquisition. It actively reforms and improves quality and efficiency.
At the same time, we believe that the reorganization of China Merchants Property and the listing of AVIC Sunda and China Merchants Housing Fund will also drive the company’s asset value to continue to increase.
Estimates suggest that we keep the company’s 2019 / 2020e profit forecast unchanged.
Currently leading trades at 9.
7x 2019 / 2020e PE ratio (corresponding to 7.
8 times forward price-earnings ratio) and 45% NAV discount are at the bottom of history.
Maintain Outperform rating and target price of 24.
82 yuan / share, corresponding to 12.
0x 2019/2020 target price-earnings ratio and 30% upside.
The carry-over progress of risky real estate projects was less than expected; the adjustment policies of major layout cities tightened more than expected.