Event:
Recently, the national development and Reform Commission, the CSRC, the Ministry of finance, the State Administration of Taxation and other departments have successively issued documents or policies related to public offering REITs of infrastructure. Among them, on January 27, 2022, the national development and Reform Commission said that there are nearly 100 projects in the country that are substantially promoting the preparation for the issuance of infrastructure REITs; On January 28, the CSRC issued the legislative work plan for 2022, including the measures for real estate investment trust funds (hereinafter referred to as the measures); On January 29, the Ministry of Finance and the State Administration of Taxation issued the announcement on the pilot tax policy of real estate investment trusts (REITs) in the field of infrastructure (hereinafter referred to as document No. 3).
Comments:
Nearly 100 projects are in the substantive promotion stage, and the issuance of public infrastructure REITs is expected to accelerate in 2022: on January 27, 2022, the national development and Reform Commission said that since 2021, while actively improving the pilot rules of infrastructure REITs and strengthening the system construction, it has carried out REITs project recommendation in an orderly manner and made great efforts to reserve the project. By the end of 2021, a total of 15 projects have been recommended, of which 11 have been officially listed and 4 are under review; At the same time, there are nearly 100 projects in the country that are substantially promoting the preparation for the issuance of infrastructure REITs. We judge that the public offering REITs of infrastructure this year is expected to accelerate the issuance, or solve the problem of capital source of infrastructure investment.
It is expected that the measures of the CSRC will be issued within this year to promote the transformation of REITs from “audit system” to “registration system”: the CSRC issued the legislative work plan for 2022 on January 28, 2022, pointing out five “projects that need to be studied and introduced at an appropriate time”, including the formulation of the measures for real estate investment trust funds. After the formulation of the measures, it is conducive to the accelerated development of public raised REITs in infrastructure. We judge that the issuance of REITs projects is expected to change from the current “audit system” mode to the “registration system” mode in the future; In addition, it will also make the “raising” of existing REITs possible, and the asset securitization of infrastructure projects is expected to speed up.
The tax policy reduces the tax cost in the issuance process and further improves the declaration willingness of original equity holders: the Ministry of Finance and the State Administration of Taxation issued the announcement on the pilot tax policy of real estate investment trusts (REITs) in the field of infrastructure (hereinafter referred to as No. 3 document) on January 29, 2022. As the pilot tax policy of public offering REITs for infrastructure construction, Document No. 3 supplements the lack of relevant tax rules before: 1) it is clear that the tax basis for the project company to obtain infrastructure assets and the tax basis for the original equity holder to obtain the equity of the project company are determined based on the original tax basis of infrastructure assets. 2) The original equity holder transfers the equity of the project company to the infrastructure REITs to realize the asset transfer evaluation value-added, which can realize the “double deferred” of enterprise income tax. Document No. 3 reduces the tax friction cost in the issuance process and effectively improves the original equity holders’ willingness to apply for infrastructure REITs projects.
Investment suggestion: grasp the opportunity of revaluation of central construction enterprises. The recent policy warm wind is blowing frequently, which is consistent with the judgment of “it is expected that there will be more supporting policies in the future and refine the rules of tax preference” in our infrastructure public offering REITs special series report and annual strategy report in the early stage. At present, the core restriction of infrastructure investment is not willingness, but capital. In 2022, the issuance of public REITs for infrastructure will probably accelerate, and will effectively solve the problem of capital source of infrastructure investment.
The continuous implementation of infrastructure public offering REITs will lead to the revaluation of the value of construction companies. With the improvement of laws and regulations, the listing attribute of REITs will be strengthened, or 1) the expected upward revision of medium-term infrastructure investment growth; 2) The improvement of the statements of construction enterprises (thickening the income statement and reducing the asset liability ratio), and the subsequent expansion will break through the limitation of asset liability ratio. Suggestions: 1) intangible assets in the statement account for a high proportion of total assets, which will directly benefit from China Communications Construction Company Limited(601800) , Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) and China’s energy construction promoted by infrastructure REITs; 2) Benefit from the expected uprevision of infrastructure investment; With the help of infrastructure REITs, subsequent expansion can break through the asset liability ratio limit of China State Construction Engineering Corporation Limited(601668) , China National Chemical Engineering Co.Ltd(601117) , China Railway Group Limited(601390) , China Railway Construction Corporation Limited(601186) , Metallurgical Corporation Of China Ltd(601618) .
Risk analysis: infrastructure project operation risk, fund price fluctuation risk, liquidity risk, tax and other policy adjustment risks.
