GUOXING RONGDA REAL ESTATE(000838)：PRIVATE PLACEMENT AND NEW BOARD MEMBERS FUEL FASTER EXPANSION

Company Profile

Guoxing Rongda Real Estate Co., Ltd. (000838: SZ) (the company) designs,manufactures, installs, and sells chemical machinery equipment. The company'sproducts include chemical containers, sphere products, and oxygen.

Event

Guoxing Rongda Real Estate Co., Ltd and its subsidiary Chongqing Guoxing PropertyCo., Ltd jointly found Shenzhen Qianhai Casin Pangoo E-commerce Property Co., Ltd(CNY 200 million) and Meishan Casin Pangoo E-commerce Property Co., Ltd (CNY 20million) with Pangoo Technology Co., Ltd and Chongqing Kuoye Trade Limited.

Chongqing Casin Group increased its stake in Guoxing Rongda Real Estate Co., Ltdfrom 29.90% to 59.65% upon the completion of private placement and changed the companys name into Casin Guoxing Real Estate Development Co., Ltd.

Investment Highlights

Guoxing Rongda Real Estate effectively implemented its strategy of developingindustrial parks characterized by “Internet + E-commerce” and built up Meishan CasinPangoo E-commerce Property to speed up negotiation process with Meishan municipalgovernment in a month. We expect the company to buy land plots around MeishanInternet and E-commerce Industrial Park at comparatively low price in the near future,which will benefit the growth of its residential business and supply sufficient cash flowand profits.

Guoxing Rongda Real Estate privately offered 133 million shares at the price of CNY7.87 per share to Chongqing Casin Group, taking in about CNY 1.5 billion. Lock-upperiod of these shares is three years. Becoming the absolutely controlling shareholderwill make its parent company (Chongqing Casin Group) invest in more resources into it.Chongqing Casin Group has already integrated contract energy management businessinto the only public company under it in August 2015.

Investment Recommendations: Without considering contributions from newbusinesses, we made EPS forecast for the company at CNY 0.38 in 2015, CNY 0.49 in2016 and CNY 0.56 in 2017, implying 43.9x/34.6x/29.9x PE. Reiterate BUY. Potential Risks: worse-than-expected sales results.

行情