On December 9, the company announced a special dividend to be distributed in the form of physical shares of GD LAND.
According to the Zhito Finance APP, SWHY released a research report stating that they maintain a "Buy" rating for GUANGDONG INV (00270). Given that the separation plan still requires approval from a special shareholder meeting (to be held on January 8, 2025), the profit forecast for the company from 2024 to 2026 remains at 4.003/4.101/4.12 billion HKD. The bank thinks that the company's Water Affairs core business is developing steadily, with high-quality core Dongjiang water assets, and with the separation of its real estate business, both company performance and valuation are expected to improve significantly. In addition, on December 9, the company announced a special dividend to be distributed in the form of physical shares of GD LAND.
The main points from SWHY are as follows:
The planned special dividend will separate the real estate business, and in the future, GUANGDONG INV will no longer hold any shares in GD LAND, focusing instead on the Water Affairs core business.
Before this proposed distribution, the company held a 73.72% stake in GD LAND. According to the announcement, the company will distribute a special dividend through the direct distribution of 1.262 billion shares of GD LAND (approximately accounting for 73.72% of GD LAND's equity) held by GUANGDONG INV. The specific distribution ratio will be 0.193 shares of GD LAND for each share of GUANGDONG INV. Through this distribution, the major shareholder, GUANGDONG HOLDINGS, will maintain a 58.26% stake in GUANGDONG INV, while GUANGDONG INV will no longer hold any equity in GD LAND, making GD LAND a sister company of the corporation.
After the separation from GD LAND, the operating performance and overall value of GUANGDONG INV are expected to significantly improve.
According to the company's announcement, in 2023, the company's net income attributable to shareholders significantly declined by 34% year-on-year to 3.12 billion HKD, mainly affected by a real estate impairment of 1.81 billion HKD under GD LAND. If excluding the impact of the real estate impairment, the company's core business profit for 2023 would reach 4.93 billion HKD. With the completion of the separation, the company's future performance will no longer be affected by fluctuations in the real estate business.
After the divestment of GD LAND, the company's debt ratio is expected to decline significantly.
According to the company's announcement, as of the first half of 2024, GUANGDONG INV has total assets of 139.8 billion HKD, total liabilities of 80.6 billion HKD, net assets of 59.3 billion HKD, and a debt-to-asset ratio of 58%; GD LAND has total assets of 46.9 billion HKD, total liabilities of 40.7 billion HKD, net assets of 6.2 billion HKD, and a debt-to-asset ratio of 87%; in the future, with the divestment of GD LAND, which has higher liabilities, the company's debt ratio is expected to decline significantly.
Excluding GD LAND, the company's operating cash flow is steadily improving.
According to the company's announcement, in 2023, the company's cash flow from operating activities was 10.71 billion HKD, of which the net cash flow from GD LAND's operations was 3.61 billion HKD. Excluding GD LAND, the company's operating cash flow was 7.1 billion HKD. In the first half of 2024, the company's cash flow from operating activities was 4.88 billion HKD, of which the net cash flow from GD LAND's operations was 1.29 billion HKD. Excluding GD LAND, the company's operating cash flow was 3.59 billion HKD, continuing to improve steadily.
In the first half of 2024, the company's dividend payout ratio was 65%, maintaining stability compared to the 2023 dividend payout ratio.
According to the company's announcement, in 2023, the company adopted a new dividend policy, reducing the payout ratio from 84% in 2022 to 65% in 2023. In 2024, the company announced it plans to declare an interim dividend of 23.97 HK cents, with an interim cash dividend payout ratio of 65%, which is the same as in 2023.
Risk warning: The special dividend plan has not been approved, along with risks related to risk, renewal of the Dongshen project, and foreign exchange risks.