Company profile
Hejing leisurely living is a comprehensive property management service provider in China, ploughing the Dawan area, covering the Yangtze River Delta, the central and western regions, Hainan and the Bohai Economic Circle. According to the 2020 top 100 Chinese property service enterprises released by the China Index Research Institute, the company ranks 17th in terms of comprehensive strength. By the end of April 2020, the company managed 109 residential properties with a total floor area of 18.9 million square meters, contracted management of 161residential properties with a total contract floor area of 29.7 million square meters, and 30 commercial properties with a total construction area of 3.3 million square meters and 34 commercial properties with a total contract floor area of 4.8 million square meters.
Sino-Thai viewpoint
Backing HK brings significant growth opportunities: the company's parent company, Hop King Pacific Group (1813), ploughs its business in the Great Bay area and the Yangtze River Delta region, focusing on first-tier, new first-tier and second-tier cities. By the end of 2019, Hejing Pacific Group has business in 39 cities, including Guangzhou, Beijing, Shanghai and Hong Kong, involving 156 projects with a total floor area of 17 million square meters, including 6.7 million square meters in the Greater Bay area. in addition, the Group has been developing commercial property projects in recent years, with 15 separate or jointly developed shopping malls and office buildings at the end of April 2020, all of which are currently managed by Hejing leisurely. Benefiting from the parent company's land reserve and its continued expansion, the company's future performance growth will be firmly supported.
In terms of operating performance: in the fiscal year 2017-2019 and the first four months of 2020, the company's total revenue was 460 million yuan, 660 million yuan, 1.12 billion yuan and 430 million yuan respectively, of which the income from residential property management services accounted for 74.5%, 64.9%, 67.5% and 68.5%, respectively. The income from property development of 1813 HK and other affiliated companies accounted for 100,100,91.8 and 90.2 per cent of the property management income, respectively. The total contract floor area from properties in the Greater Bay area is about 6.4 million square meters, 8.1 million square meters, 14.2 million square meters and 14.2 million square meters respectively, accounting for 36.3%, 32.9%, 41.6% and 41.2% of the total contract floor area in the same period, respectively. The gross profit margin is 22.5%, 27.8%, 37.3% and 39.2%, respectively. The subcontract cost accounts for 13.7%, 16.5%, 17.1% and 18.7% of the total cost of sales respectively; the net interest rates are 9.5%, 12.1%, 16.4% and 17.8% respectively; the collection rates of property management fees receivable from independent third parties are 85.3%, 87.6%, 88.9% and 83.4% respectively; and the turnover days of trade receivables of third parties are 79, 76, 63 and 83 days respectively. Trade receivables were $220 million, $330 million, $580 million and $710 million respectively.
Valuation: based on 2 billion shares after the global public offering, the company's market capitalization is HK $141-16.4 billion. In terms of valuation, the company's price-to-earnings ratio in 19 years is about 66.8-77.6 times, and the price-to-book ratio is about 5.04-5.08 times, which is higher than the industry average.
This time the price stabilizer is Agricultural Bank of China International, with a total of three projects in 2020, with a performance of 2 increases and 1 draw on the first day. The cornerstone brought in eight investors, including Hillhouse, and subscribed for a total of about $120 million. We review that a total of 15 new shares have been issued in the property management industry since 2019, with only one time neighborhood (9928 HK) broken. Considering the rapid growth of the company's contract floor area and net profit at an annual compound growth rate of 38.5% and 104.8% respectively from 2017 to 2019, it was given 76 points and rated as "purchase".
Risk hints: (1) market competition risk, (2) over-reliance on Hop King Pacific Group