Orient Securities has reiterated its "Buy" rating on CHINA RES MIXC (01209) with a target price of HK$52.55. The report highlights that the company benefits from its parent China Resources Land's premium property assets without bearing the heavy capital expenditures or development risks. This grants CHINA RES MIXC access to scarce luxury retail resources and prime locations.
Backed by strong brand pricing power, an exceptional operational team, and expanding management scale, the company has achieved above-industry same-store growth. Its operational leverage continues to enhance profit margins, demonstrating low-risk, high-profit resilience. Key points from Orient Securities include:
1. **Asset-Light Model with Parent Support**: Unlike peers such as Longfor Group's Tianjie and Seazen Holdings' Wuyue Plaza—which combine development, ownership, and operations under one entity—CHINA RES MIXC operates under a split structure. Parent China Resources Land handles development and ownership, while CHINA RES MIXC focuses on management. This model eliminates heavy capital burdens while leveraging large-scale, high-quality projects, yielding superior profitability.
2. **Pricing Power and Competitive Edge**: The company’s core strength lies in its growing merchant pricing power, driven by parent-backed contracts for stable, large-scale premium malls. As an early mover in China’s mall sector, China Resources Land has secured prime locations and maintains a top-tier portfolio with expanding reserves. This provides CHINA RES MIXC with exclusive luxury retail partnerships, brand loyalty, and lease-adjustment leverage. Coupled with its innovative team optimizing market dynamics, the company sustains a virtuous cycle of footfall-sales-brand appeal, outperforming broader retail trends.
3. **Operational Leverage and Margin Expansion**: Fixed costs at individual malls (or inflation-linked increases) allow same-store rent growth to boost NOI margins. At the corporate level, as new malls are added, centralized leasing and marketing teams manage more projects efficiently, transferring expertise to lift overall margins.
**Risks**: Potential weaker-than-expected consumer demand, delays in parent-delivered projects, slower third-party expansion, data inaccuracies, or model assumption changes.
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