Perspective of Chinese stock market: The prospect of China resources land injection is causing concern

BOC International Resources Land (1109) through Credit Suisse to 14.34 Hong Kong dollars per share of the price allotment 300 million shares, raise capital of 4.3 billion Hong Kong dollars. This would eliminate the uncertainty of the allotment and further strengthen the company's balance sheet. The issue of CRC after Shimao (0813) and Greentown China (3900) may raise concerns about a renewed rights issue in the sector. While we are still bullish on the company's long-term development prospects, we believe that the short-term valuation increase is limited in view of the 15% per cent discount to the estimated net asset value of 09. 　　We downgraded the stock to hold. China Resources is placing 300 million shares in the price of HK $15.26 per share, raising 4.3 billion Hong Kong dollars, and selling the price of HK $15.26 from the last trading day to 6%. Net income of HK $4.24 billion will be used mainly for further expansion of land reserves and supplementary operating funds. The 300 million shares allocated are equivalent to 6.35% of the existing share capital, accounting for 5.97% of the enlarged total equity. If the placement is successfully completed, the rights of China Resources group will be diluted from 67.21% to 63.19%. The debt rate will be reduced from 46% at the end of 08 to 29.7%. The expected net asset value of 09 will also be reduced from HK $18.13 to HK $17.97. 　　On the basis of a discount of 15% (from 28%) of the expected net asset value for 09, we have raised the target price of the unit from HK $12.40 to HK $15.30. The first April sales revenue ideal April, China Resources Land property sales monthly growth of 14%, year-on-year growth of 5.9 times times to 6.6 billion yuan, contracted construction area of 250,000 square meters. Among them, Beijing business sales reached 1.3 billion yuan, contracted construction area of 77,000 square meters, accounting for the company's total sales revenue of 52%, accounting for the total contract building area of 31%. This is mainly due to the early April, the West Bank of Red Hill opened (sales of 1 billion yuan, contracted construction area of 61,000 square meters). 　　09 January-April, sales revenue reached 6.6 billion yuan, accounting for our annual sales revenue forecast of 54%. The improvement of debt ratio, the use of placing proceeds, and especially whether it will be used for potential asset acquisition projects and pricing will be the main factor affecting the performance of recent stock prices. However, we believe that the parent company China Resources Group will gradually inject eight projects (total construction area of 4.3 million square meters) of the listed company resources to expand the company's land reserve and help to increase rental income. At present, China Resources Holdings is negotiating with the Shenzhen municipal government on a 2.8 million-square-metre fetching project of a building area. Once the project is available, China Resources Holdings will become a real estate developer with the most land reserves in Shenzhen. Any further asset injection project (and pricing) will become a new focus after placing the impact on the share price performance. Extract)