-The mid-term performance of Wanda Commercial Properties indicates that in the first half of 2014, Wanda Commercial Properties has raked in about 88,700,000 HKD, a decrease of 92.26% on a year-on-year basis. Earnings from property sales, property leasing and property administration are respectively 26,700,000 HKD, 53,600,000 HKD, and 8,400,000 HKD. While the profits of the company shareholders are -57800000 HKD. The figure for the same time last year was 0.204 billion HKD;

-There are two primary reasons behind the marked decrease in the company profits: first, the company gained 0.88 billion HKD in the first half of 2013 by selling the affiliated company. Second, 0.189 billion HKD shrank in the profits from selling the Fuzhou Property because of the cool-down of the Fuzhou real estate market in the first half of the year;

-In the end of June, the cash and the total balance of the company were around 2.8 billion HKD, with 61% and 35% of the cash and the total balance calculated by HKD and RMB. The 4% left was calculated by pound and dollar. Currently, the company is in the state of net cash;

-The convenience of financing is the very purpose of Wanda group¡¦s holding Hong Kong listed company. In the future, Wanda Commercial Properties will raise capitals through issuing foreign currency debentures and dim sum bonds, whose financing efficiency and cost enjoy a salient advantage than those in the mainland. While in terms of the business orientation, the company will focus on commercial property development in South China in a short term, at the same time, it will expand to foreign countries.

How we view this

We hold that the change of the company name has something to do with the news about the parent company¡¦s IPO in Hong Kong. The total assets of Wanda Commercial Properties parent company are around 500 billion. The scale of financing may well exceed 5 billion dollars, which suggests that Wanda is likely to become the biggest real estate company ever listed in Hong Kong. In the future, Wanda will have two financing platforms in Hong Kong stocks, one for the operation of domestic business, the other for overseas business. We hold that Wanda parent company or its main assets is more likely to go public in Hong Kong, which will become its major financing platform in the future. While Wanda Commercial Properties will be a supplementary part of its overseas business, which means that there will be no overt competition between these two sectors¡C

Investment Action

We hold that from 2014 to 2015 Wanda Commercial Properties will be in the state of consistent capital input and restricted cash flow. Hengli Town will remain its primary source of earnings for these two years. Equity expansion potentially brought by continued financing will have a continued dilution effect on earnings per share. In our opinion, the company is more worth being financed than being invested, and the company has restricted view on its business position and future development visibility in the short and medium term. We decide to maintain ¡§Accumulate¡¨ rating for Wanda Commercial Properties, whose 12 months` target price is 2 HKD, 15.6% higher than the present price.

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