BEIJING HUALIAN DEPARTMENT STORE CO.LTD

Public (Shenzhen 000882)

Company’s Fact

Beijing Hualian Department Store Co, Ltd (BHDS) is a major engaged in department store and supermarket industry. This involves range of services and products starting from wholesale and retail of food, soft & hard drinks, tobacco and home wares. Supermarket, departmental stores, and commercial property investments are their three major fields BHDS focuses on.

BHDS was previously known as Zhong Shang Shareholders Co. Ltd, which was approved by China Domestic Trade Bureau and established in 1997. Zhong Shang Shareholders Co., Ltd issued shares on 16 June, 1998, and during the third shareholders conference in 2002, it got approved by Beijing Economic and Trade Commission and the company officially changed its name into Beijing Hualian Department Store Co., Ltd.

In recent years, BHDS emphasized on building up effective supermarket chain-stores, sales of everyday fresh food and home appliances which varies to more than 60,000 items, in most middle-size and big cities all over China. BHDS promotes their products as ‘good stuff at cheap price’. BHDS continuously improved their products and services, as well as target high-end market by opening up ‘BHG market place’ in Beijing, which sells mainly organic vegetables from local organic farms and food of international flavors imported from Italy, France, and Japan. BHG market place venture has been very successful so far.

Ever since BHDS opened their first department store in 1996 in Beijing, its continuous development of 20 years’ in trade has help them evolve as one of the biggest department chain-store in China.

The company mainly focuses in domestic market (Mainland). Stating that more than half of its revenue comes from the capital itself, as they are one of the biggest player their, well the name reflects the idea already.

<u>Financial Overview</u>

Related companies (Subsidiaries/Shareholder/collaboration) of Beijing Hualian Department Store Co. Ltd

Beijing Zhong Shang Huatong Technology Trading Co. Ltd. Biggest Shareholder, Capital investment: 6265.58 (10,000Yuan), Percentage of shares: 25.14%,

Huhehaote Hualian Shopping Mall Co., Ltd, Subsidiaries, Capital investment: 5000.00 (10,000 Yuan), Percentage of shares: 100%

Henan Hualian Shopping Mall Co., Ltd, Subsidiaries,   Capital investment: 7000.00(10,000yuan), Percentage of shares 100%

Hualian Financial Co., Ltd, Colabration, Percentage of shares: 37%

Beijing Hualian Hypermarket Co. Ltd, Colabration.

Yangpu Xinlongyuan Real Estate Development Co., Ltd., Subsidiaries like (Actual controller), percentage of shares: 53.85%

Beijing Hualian Commercial Trading Development Co. Ltd, Invested by same investor.

Shan xi Hualian Hypermarket Co., Ltd. Same shareholder, percentage of share 51%

<u>Stock Health </u>

As on 11-Jul-2008 8.92 +0.22 (2.53%)

Open 8.53     High 9.14       Low: 8.53       Vol: 3,833,499

CAPITAL MARKET VALUE: 2.223 billion Yuan (RMB)

<u>Key Stats & Ratios</u>

 
Project (RMB）         2007                                 2006                                Volatility
Net Income                1,338,169,601.94           1,336,687,967.97                        0.11% 
Profit margin       52,457,057.05             40,157,086.93                           30.63% 
Net Profit margin 25,585,774.92             23,252,868.88                         10.03% 

Note: The increase in profit margin is mainly due to the increase in investment benefits, and the reduction in financial spending.

<u>Daily Stats (last one month): </u>

Date               Open High Low     Close     Volume

7-Jul-08         8.82    9.57     8.82    8.90    8,000,000

4-JUL-08        8.32    8.97    8.23    8.73    6,195,400

3-JUL-08        7.78    8.57    7.70    8.42    6,201,200

2-JUL-08        7.89    8.24    7.75    7.96    3,762,100

1-JUL-08        8.13    8.19    7.61    7.82    5,040,100

30-JUN-08     7.38    8.10    7.13    8.06    4,853,700

27-JUN-08     7.71    7.89    7.32    7.39    4,844,400

26-JUN-08     8.10    8.30    7.85    8.13    6,304,800

25-JUN-08     7.56    8.20    7.50    8.18    7,767,400

24-JUN-08     6.70    7.55    6.66    7.55    5,378,100

23-JUN-08    6.91     7.15    6.69    6.86    4,530,300

19-JUN-08     7.25    7.79    6.59    6.66    6,032,500

18-JUN-08     6.66    7.32    6.30    7.32    4,473,400

17-JUN-08     7.16    7.37    6.55    6.65    2,694,100     

16-JUN-08    7.58     7.90    7.10    7.11    2,569,500

13-JUN-08    7.11     8.31    8.43    7.70    1,716,100

12-JUN-08    7.72    8.68     8.80    7.89     2,159,200 

11-JUN-08    8.77     9.03    8.15    8.75    2,315,600 

10-JUN-08    9.70     9.70    9.05    9.05    2,088,700 

6-JUN-08      9.81     10.26 9.78    10.06 2,326,300 

5-JUN-08      9.75     10.18 9.70    9.85    1,706,400 

4-JUN-08     10.18    10.27 9.75    9.87    2,594,000 

3-JUN-08      9.65     10.48  9.42    10.23 4,027,300 

2-JUN-08      9.65      9.87   9.40    9.75    1,928,900

Interestingly, after seeing reasonable growth in this sector, the company after the third temporally shareholder conference 2008, announced that the company will gradually leave retailing business and shift its main business to commercial real estate development and management. And the initial movement of the company to fulfill this objective is the deal which they have already signed is to sell 6 of their departmental stores to their parent company Hualian Group Corporation Co. Ltd. on an agreed price of 0.16 billion Yuan (RMB), simultaneously purchasing two shopping mall properties costing 0.2 billion Yuan (RMB). Among the above mentioned six departmental stores, four were suffering capital losses.

It is believed that the decision is based on the total benefits of the Group Corporation by eliminating the same-field competition between BHDS and Beijing Hualian Hypermarket Co., Ltd,( Public SHA: 600361), which is also their subsidiary engaged in the same field.  For the same, Hualian Group Corporation has promised to eliminate the competition in commercial real estate field and promote three new commercial real estate projects for BHDS beside the purchase made by BHDS for two commercial properties, Da’lian Hualian and Qinghai Hualian located in Dalian and Qinghai Province, respectively.

Therefore, after restructuring of the company’s main business, on the stage of commercial real estate development and management, BHDS is expected to bring a new era of boosting their newly laid plans. Empowering it by rich experiences in commercial real estate management and strong support from Hualian Group Corporation, BHDS has gained long-term developing power in professional field for the future.

Moreover, it seems like BHDS took the right step at the right time as, it is believed that, Beijing Olympic Games 2008 has already boosted retails, tourism industry and similar industries into commercial property field which has gained momentum and has attracted capital investment from foreign and native source in China which will give them leverage for sustainable growth now and in the future.

The company has shown its clear and aggressive strategy, in my personal opinion; it is a good chance for investors to buy their shares at a reasonable price at this juncture, to avail good returns in coming future. The present shareholders should also hold the stock for long-term and possibly increase their share holding at proper rate, so as to expect a fruitful and hefty reward. However, investors should not expect to enjoy immediate result over the market trend as it will pick up but in due course of time.