Hengdeli will acquire 88.6% stake of Nanchang Hengdeli, adding c.3% to sales in 2014 while beefing up growth potentials in Central China over the medium-term.
Acquisition price of RMB469.5m translates into c.5.7x 2012 PE for the operation plus assets worth RMB400-500m.
While investors might prefer Hengdeli to leave out the asset purchase of the deal, ownership of primely located building in Nanchang City (at c.RMB70,000 per sm) could perhaps be worthwhile to form long-term retail anchor.
Our new TP of HK$1.7 on 2014 10x FD PE (previous TP: HK$1.53 on 10x rolling FD PE) implies a HOLD.