Seriously undervalued high-end property management companies
Since its establishment in 1995, Binjiang Service, a well-known high-end property service provider in China, has gradually grown from a local residential property management company in Hangzhou, Zhejiang Province to a leading provider of quality property management services in the Yangtze River Delta. In 2018 and the first six months of 2019, the company's operating income was 509 million yuan and 317 million yuan (RMB, the same below), up 46% and 43% respectively over the same period last year, and realized profits of 70 million yuan and 49 million yuan respectively, up 23% and 37% respectively. As of the first half of 2019, the company has an area of 1310 million square meters under management, a contract area of 1030 million square meters, and 88 properties under management.
Property fees are much higher than those of their peers: as the company's high-quality services are recognized, the company's average property management fees are higher and rising. From 2015 to 2018, the total average property management fee of the company increased from 3.39 yuan per square meter per month to 4.07 yuan per square meter. among them, the average property management fee of residential property increased from 2.88 yuan per square meter to 3.92 yuan per month, and the average property management fee was higher than the industry average. Take the top 100 property service enterprises in China as an example, the average property management fees of residential properties in the past three years were 2.24 yuan, 2.31 yuan, 2.30 yuan and 2.25 yuan per square meter respectively.
Rich in cash: the company was listed on the main board of the Hong Kong Stock Exchange on March 15, 2019. A total of HK $462 million was raised on the first day of listing, and as of the first half of 2019, cash and cash equivalents were 855 million yuan, with no bank loans.
Target price of HK $15.9, given buy rating: 70% of property management income from Binjiang Group in the first half of 2017, and contract sales of Binjiang Group from 2019 to 2019 were 61.5 billion yuan, 85 billion yuan and 112 billion yuan, which will bring a stable management area for the company in the next two or three years. in addition, the company actively expand third-party business and develop value-added services by virtue of its high-end service level. We expect the company's sales revenue from 2019 to 2021 to be 690 million yuan, 880 million yuan and 1.25 billion yuan, an increase of 35%, 28% and 31% respectively, and net profit of 110 million yuan, 160 million yuan and 207 million yuan, up 58%, 44% and 29% respectively. At present, the average valuation of the property sector in the market is 25.2 times 2020-2021 and 19 times earnings. We value the company at 24 times earnings in 2020, with a target price of HK $15.9, which is 64% higher than the current price, with a buy rating for the first time.