Event:
On the afternoon of February 17, 2022, the investment department of the national development and Reform Commission discussed matters related to the pre REITs fund. The participants were mainly from relevant responsible investors of central enterprises, state-owned enterprises and financial institutions.
Comments:
Pre REITs fund is similar to the VC / PE investment fund before the listing of enterprises. It invests in the early stage of the project and participates in the construction and operation of the project. It can alleviate the capital shortage of relevant infrastructure assets before listing, accelerate the improvement of the operation efficiency and income of infrastructure assets, accelerate the listing rhythm of REITs projects, shorten the payment collection cycle, solve the problem of capital term matching, guide the expectation of new investment, attract more funds to participate in new project investment, and then leverage more new infrastructure investment, Better form a virtuous circle of “raising investment management withdrawal reinvestment” and improve the efficiency of financial services to the real economy.
Pre REITs fund takes unlisted REITs projects as its investment target to help improve its quality and efficiency: pre REITs fund is a financial investment product with infrastructure projects that are still under construction or do not form a stable cash flow as its investment target, listing in the public REITs market as the main exit means and obtaining the premium in the secondary market as its investment purpose. On October 26, 2021, Gao Zhan, executive director of Shougang fund, said that he would set up pre REITs fund to focus on “long-term investment, value investment and responsible investment” starting from the acquisition of underlying infrastructure projects, and carry out market-oriented operation of the whole process of improving quality and efficiency, selection and declaration, issuance and transaction, operation management and so on for infrastructure assets in subdivided fields.
Compared with PPP industry fund, pre REITs fund will bring listing opportunities for more infrastructure projects: PPP industry fund is mainly initiated by the government, financial institutions, local state-owned enterprises and social capital with construction and operation capacity. Its main purpose is to invest in PPP project company SPV. Its extensive investment essentially provides opportunities for the establishment of more PPP projects. Compared with PPP industrial fund, the establishment of pre REITs fund has similar effects, which can explore and invest more high-quality infrastructure assets and projects, so as to bring listing opportunities for more relevant projects.
Pre REITs fund is conducive to shortening the payment collection cycle, guiding the expectation of new investment and attracting more funds to participate in new project investment: REITs is equivalent to the IPO of infrastructure assets, while pre REITs fund is similar to VC / PE investment fund before listing. It selects and invests or acquires high-quality infrastructure assets, and operates in a market-oriented manner through operation management, quality improvement and efficiency enhancement, Accelerate the listing rhythm of underlying assets in REITs market, shorten the payment collection cycle, solve the problem of capital term matching, guide the expectation of new investment, and attract more funds to participate in the investment of new projects.
Investment suggestion: embrace the historic investment opportunity of REITs and grasp the opportunity of value 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.
With the intensive issuance of projects, it may bring 1) the expected upward revision of medium-term infrastructure investment growth; 2) The improvement of the statements of construction enterprises (thickening the income statement, improving asset turnover efficiency and improving cash flow) and subsequent expansion will break through the limitation of asset liability ratio. It is suggested to pay attention to: 1) the proportion of intangible assets in the statement is relatively high, which will directly benefit from China Communications Construction Company Limited(601800) , China Railway Construction Corporation Limited(601186) , Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) and China’s energy construction promoted by infrastructure REITs; 2) With the help of infrastructure REITs, subsequent expansion can break through China Railway Group Limited(601390) , China State Construction Engineering Corporation Limited(601668) , Metallurgical Corporation Of China Ltd(601618) , China National Chemical Engineering Co.Ltd(601117) limited by asset liability ratio.
Risk analysis: the operating performance of REITs project is lower than the expected risk, the market liquidity tightening risk, the market performance of REITs is lower than the expected risk, and the reserve / issuance of REITs project is lower than the expected risk.
