Commentary on major asset restructuring proposal。 Event: The company announced on 4 May: 1) the valuationadjustment mechanism (VAM) for as business performanceindicator, guaranteeing its acquiree Jieer Medical’s cumulative netprofit will be no less than Rmb1.85bn from 2015 to 2020; 2) thechange in composition of the board of directors (the “Board”) byincreasing the number of directors from five to nine, with one newindependent and three non-independent directors. Jieer Medical’s VAM in force for six years。 Jieer Medical is committed to contributing a total net profit ofRmb1.85bn between 2015 and 2020, translating to Rmb130m,Rmb220m, Rmb300m, Rmb370m, Rmb410m and Rmb420m ineach of the six years respectively. In case the target profit asguaranteed is not met, it will pay a compensation equal to:(period-end guaranteed cumulative net profit - actual cumulative netprofit)*1.16. Of which, the factor of 1.16 = consideration(Rmb2.15bn)/ guaranteed net profit (Rmb1.85bn). We believe that although the Affiliated Hospitals of Chongqing ThirdMilitary Medical University under Jieer Medical was newly built, netprofits could be guaranteed under the VAM for the first six years,after which its business model will be well-developed, so profitabilitycan be secured. Homyear enlarged Board composition and integratedbusiness into four segments, aiming to develop as a group。 Homyear’s Board currently consists of a total of five directors,including two independent directors. After the expansion, the totalnumber of director will be increased to nine, including threeindependent directors. The enlarged Board composition favors thecompany’s business expansion. Homyear planned to develop as a health management group withinthree to five years to tap into the upstream and downstream medicalbusinesses. Through the acquisition of Jieer Medical, it will ownmidstream assets including hospitals and equipment distributionbusiness. The yet-to-inject assets of Chongqing Healthy Medicinewill be a highlight, which mainly include the pharmaceutical industry,pharmaceutical commerce and supply chain. The company’sexisting business segments lay a foundation for it to operate as agroup. Strongly optimistic: Annual general meeting (“AGM”) on 25 May tobe Homyear’s turning point。 Homyear will discuss the following key proposals at the AGM: 1) renaming ofthe company; 2) amendments of constitution; 3) assets restructuring plan; and4) approval of Haiso’s investment sum of Rmb5bn. We are upbeat about thecompany’s outlook once the proposals are approved at the AGM and in viewof the improved balance sheet due to the company’s new “health + finance”strategic layout. Taking into account Jieer Medical, we expect the company’s2015-17E EPS to be Rmb0.95/0.80/0.95 respectively, corresponding to2015-17E PE of 18/21/18 times. Risk factor:Asset consolidation may proceed slower-than-expected.

Event: The company published its 2014 annual report. Operatingincome was Rmb120.9bn, up 18.5% YoY. Net profit attributable toparent was Rmb2.51bn, down 6.9% YoY, which was due to theincrease in minority interests. The company’s supply chain and corereal estate business continue to improve. Main business continues to expand; results retreatmarginally due to increase in minority interests。 In 2014, the company’s supply chain business firstly recorded arevenue of more than Rmb100bn, up 16.3% YoY, leveraging on its’sound enterprise resource planning (ERP) system and supply chainmanagement. According to existing growth rate, the scale of itssupply chain business is expected to reach Rmb120bn in 2015.The slump in results was due to the increase in minority interests.However, taking into consideration main business only, net profit(including minority interests) was up by 2.8%, which is reasonable ascompared with the approximately 3% growth in the past. All and all,the company's main business still saw positive growth in 2014despite falling bulk commodities prices and the flagging propertymarket. The company actively engaged in Internet Plus, shifting tosupply chain operation from supply chain financeThe company's original supply chain business mainly involvesbusiness-to-business (B2B) transactions of bulk commodities. Italso strove to promote supply chain trade via supply chain finance.In the 13th five-year plan period, supply chain finance will beupgraded to supply chain operation. As such, the company willenhance its logistics management, e-commerce and cross-bordere-commerce. It is well prepared to cater for the impact of the Internet on traditional industries, and may expand into the relatedfields. As a Fujian-based landlord, the company’s property businessfocuses on online-to-offline (O2O) real estate aftermarket. Ourstatistics showed that GFA sold by the company has reached 6.66mcu m since 2009. Of which, each of Fortune Alliance Group and C&DReal Estate was among China’s top 100 property developers.Meanwhile, customers attain relatively high satisfaction, so a goodcustomer base can be formed. Based on the above, the companyunearths potential upstream and downstream value, aiming toprovide community services, and will make relevant investmentshould the opportunities arise. Champion of offline trading amid Internet Plus; raise TP to Rmb26.0on appealing Rmb120bn turnover。 Traditional industries require strong sales channels and financial support tosmoothen supply chain operation business. The company is an industry pioneerin this area, with strong core advantages as compared with its peers. Emergingindustries need to rely on the Internet to expand channels and financing withoutbeing restricted by geographical barrier. The company is most likely to succeedamong all Internet Plus trading companies given its proactive approach andgood fundamentals. We expect its 2015-17E EPS to beRmb1.00/Rmb1.23/Rmb1.37 respectively, corresponding to PE of 18x/14x/13x.Maintain Buy.n。 Risk factor: Business restructuring proceeds at a slower-than-expectedpace.