Main points of investment:
The company is diversified in business and is a leading supplier of integrated management services in the country. The company focuses on middle and high-end properties, including property management services, pre-delivery and consulting services, community value-added services and smart solution services. Property types include residential, commercial, office, municipal, sports and so on. The controlling shareholder of the company is Ye Chang Investment Co., Ltd., which holds 73.95%, and the actual control is Kaisa Group holding Co., Ltd. On December 6, 2018, the company was listed on the main board of the Hong Kong Stock Exchange. In 2019, the company ranked 11th among Chinese property service enterprises and 8th among the top 50 property service enterprises of Guangdong-Hong Kong-Macau Greater Bay Area in 2020.
The company's parent net profit rose rapidly, rising to 46.207 million square meters on the management and construction level. In 2019, the company's total operating income and return net profit were 1.262 billion yuan and 164 million yuan respectively, an increase of 40.91% and 203.2% respectively over the same period last year. In 2019, the company's property management services, pre-delivery and consulting services, community value-added services and smart solution services accounted for 44.34%, 37.04%, 9.63% and 8.99%, respectively. By the end of 2019, the construction surfaces of the company's managed properties in Dawan area, Yangtze River Delta, Bohai Rim, West China and Central China are 12.39 million, 20.94 million, 3.78 million, 5.98 million and 3.12 million respectively. By the end of 2019, the total construction area of the company's property management was 46.2 million square meters, and the total number of property management was 304, including 164 residential areas and 140 non-residential properties.
Company characteristics: 1) relying on Kaisa Group and third-party acquisitions, the company has achieved high growth. In recent years, the land reserve of Kaisa Group, the company's controlling shareholder, has continued to grow. With the exception of 2019, Kaisa Group delivered more than 80% of the property management to the company. In 2019, the company increased its total floor area under management by more than 16.3 million square meters through third-party acquisitions. 2) relying on Kaisa Group's strong strength in the old reform, the company is rich in service formats. By the end of 2019, Kaisa Group has successfully converted nearly 12.81 million old renovation projects. As the old renovation projects are mainly distributed in the urban central area of the Great Bay area, the types of property management projects and corporate services delivered by the group to the company are relatively rich.
The various business types of the company show an interactive promotion relationship. We believe that the company's property management service is a basic business, and the accumulated management experience gained by the company and the resources of the parent company will help it to further obtain pre-payment and consulting services upward. Downward around the "people, money, cars, housing" extension of diversified value-added services. Considering that the diversification of services will increase the cost of the company's services, the company will further reduce the cost of services through smart solution services on the premise of improving service quality. The above three types of auxiliary services all provide profit feedback to the company's property management services.
Fair value range is 45.28-52.82 Hong Kong dollars, "better than the market" rating. We estimate that the EPS of the company from 2020 to 2022 is 1.38,1.88 and 2.54 yuan respectively. With reference to the valuation of similar comparable companies, the company is given a dynamic price-to-earnings ratio of 30-35 times in 2020, with a reasonable value range of HK $45.28-52.82 (RMB41.40-48.30, the midpoint of the Hong Kong dollar exchange rate is 0.91435 RMB / HK $) and rated as "better than the market".
Risk hint. The risk of rising labor cost; the risk of excessive concentration in the region; the risk of value-added business expansion is not as expected.