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China Union Holdings:Cut Holdings to Take Back Cash,Prepare for Cross-border Expansion

发布时间:2016-02-24    研究机构:兴业证券

Company Profilen

China Union Holdings Ltd. manufactures and sells chemical material PTA. Thecompany also provides digital printing and textile dying services, develops and leasesreal estate properties.

Event

n China Union Holdings Ltd. is going to sell out no more than 4.48% stake (20 millionshares) in Sino Great Wall (000018: SZ) via bulk transfer mechanism in the next 6months (March 9-Aug 31).

Investment Highlightsn

We estimate that China Union Holdings will withdraw CNY 1.044 billion in cash afterthis transaction (trading at current price). And considering sales of its residentialproperties in Shenzhen is to contribute another CNY 8 billion (sales revenue hasreached CNY 2.3 billion since the project was open in Nov) benefiting from overallmarket prosperity, we are confident in the success of the Company’s transformationand raised our EPS forecast for China Union Holdings by CNY 0.69 to CNY 1.70 in2016 and CNY 2.10 in 2017.

Sino Great Wall went public through buying Shenzhen Victor Onward Textile Industrialin 2015. China Union Holdings was originally the largest shareholder of ShenzhenVictor Onward Textile Industrial with 25.51% ownership in it. After the restructuringprocess, its stake dropped to 9.65% and became the second largest shareholder.Industrial Securities’ construction research team thinks that overseas constructionworks serve as strong impetus for Sino Great Wall’s earnings performance. And it isseeking for new opportunities in medical service field, which draws investors’ attentionas well. Therefore there should be no major impact on Sino Great Wall’s share pricefrom this move.

Investment Recommendations: (1) Comfortable margin of safety Share pricepresents 37% discount compared to RNAV. Property price in Shenzhen sustains stronggrowth momentum. Reducing deed tax further boost demand for big units. (2) Abundantcapital fuels long-term development and transformation. We made EPS forecast for theCompany at CNY 0.07 in 2015, CNY 1.70 in 2016 and CNY 2.10 in 2017, implying124.6x/4.8x/3.9x PE. Reiterate BUY.

Potential Risks: less-than-expected sales, slower-than-expected progress of projects.

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