The property sector is undoubtedly a "rich mine" in the Hong Kong stock market, whether it is old stocks or new stocks.

Recently, affected by the epidemic, the Hong Kong stock market is volatile, but the Hong Kong stock property management sector has bucked the trend. On February 18, while the Hang Seng Index fell 1.54%, Binjiang Services rose 8.47%, Kaisa rose 7.81%, and Olympian Health rose 6.20%.

In fact, as a hot sector of the Hong Kong stock market, property stocks have been highly sought after by funds. For example, since its listing in 2015, the share price of China Shipping property has risen by more than 500%, including 116.3% for the whole of 2019; the share price of Greentown Service has risen nearly 400% since its listing three years ago; Yongsheng Life Services, Kaisa Beautiful and elegant Life Services rose 198.9%, 187.3% and 161.1% respectively in 2019. Poly property, the leader in the property sector with a multiple of 221.7 times oversubscribed, rose 29.2% on its first day of trading on the Hong Kong Stock Exchange on December 19, and has increased by 87.6% since its listing, a gratifying increase in a short period of time.

These data show that the property sector is undoubtedly a "rich mine" in the Hong Kong stock market, whether it is old stocks or new stocks.

Today, a number of property stocks enter the Hong Kong stock capital market at any time. Will the property management industry still have investment value in 2020? Should investors participate in the opportunity for the listing of property stocks in 2020? What kind of property stocks will have greater growth potential in the future? This article will answer the above questions one by one.

2020年，Three reasons to be optimistic about the property management industry

1. Short-term catalyst: subsidy policy + market preference enhancement + value-added business growth opportunity

The sudden epidemic affects all kinds of industries, and the property management industry is no exception. Recently, many local governments have introduced tax cuts and preferential policies to encourage property companies to deal with the impact of the epidemic.

For example, Shenzhen, Hangzhou and other local governments respectively issued documents to increase the property service companies involved in epidemic prevention and control work, in accordance with the area under management of short-term subsidy policy, in order to hedge the recent rising costs of property management companies. In the short term, in order to strictly control the epidemic, many domestic cities have launched "community closed management", and the above subsidy policy is expected to be followed by more cities.

Generally speaking, the impact of the epidemic on property management enterprises is relatively limited.Its own stable cash flow model, coupled with the increased dependence of short-term residents on property companies, the collection of property management fees is very difficult to be affected.

Considering that the property fee income is stable in economic fluctuations, it is not affected by consumption preference, investment demand, import and export fluctuations and other factors, so it is more defensive. Under the catalysis of the positive policy environment and positive growth prospects, the market preference for property management stocks continues to rise.

As can be seen in the above picture, in the past two months, property stocks first suppressed and then rose in 2020, rising in the 20% price range in February.

meanwhile,This public health incident has also led to the development of online and value-added services in the property industry.The growth of value-added services will certainly promote the profitability of the industry.

two。 The medium-and long-term growth of the industry is outstanding

At present, the centrally listed property stocks are mainly residential property management, among which many property management enterprises begin to expand in the direction of commercial property management, and the overall property form is gradually diversified. From the perspective of the industry as a whole, residential property management business accounts for 60% and 70% of the industry's total income.

The following figure summarizes the data of property stock prospectuses that have recently submitted IPO applications.

Judging from the growth of the property management industry, the agency expects the growth range of the property management industry in the management area to be 3.1%, 9.7%, with a comprehensive average of about 5%.

Although the growth rate of tube area does not seem to be high, from the overall industry structure, there are two trends worthy of attention:(1) the concentration of residential property management has increased, and the annual compound growth rate of the management area of the top 100 properties can reach 10%; (2) among the non-residential property management, the growth of the business super class is more prominent, and the compound growth rate is expected to exceed 10%.

At the same time, benefiting from the "volume and price rise" of the property industry, the income scale of the industry as a whole may show high growth in the next 2-3 years.

In terms of quantity:Over the past two years, the real estate industry has maintained good growth. At the same time, due to the repair of the "scissors difference" between the new construction area and the completed area of the real estate industry, a large number of properties will be completed in the next 1-2 years, accelerating the conversion of contract area into managed area. Thus driving the rapid growth of the company's revenue.

In addition, as the reshuffle of the real estate industry continues, cheap land is becoming more and more scarce, and small and medium-sized housing enterprises are facing elimination. But at the same time, these housing enterprises have a lot of stock properties to be carved up by the leading housing enterprises.

In terms of price:The increase in property management prices mainly comes from two aspects-the improvement of urban energy levels and the transformation of new properties.

(source: first peace Davis)

3. The "joint force of the market" pushes up the plate valuation

The business of many property management companies comes from their real estate group companies. In addition to related party transactions, these parent group companies are usually also major shareholders of property companies. In this case, major shareholders are very concerned about the performance improvement and market value management of their own property stocks.

as everyone knows,In the Hong Kong stock market, institutions and foreign capital account for a large proportion, and these funds very much prefer enterprises with stable cash flow, or enterprises that can stand up in the logic of sustainable management.Such as consumer enterprises. The valuations of these companies or sectors in Hong Kong will even exceed that of A-shares. In addition, in terms of market capitalization, among the top five property management stocks in Hong Kong, Country Garden Services Holdings has a market capitalization of more than 80 billion, while the rest has a market capitalization of 300-40 billion. However, the market capitalization of small and medium-sized property management enterprises is mostly less than 10 billion. Thus it can be seen that among the listed property management enterprises, small and medium-sized enterprises are still in the majority.

Under the premise of low market capitalization, affected by the combined efforts of major shareholders, institutions and retail investors (especially new funds), the property management sector is very easy to open room for valuation improvement.

It can be seen that the valuations of enterprises such as Country Garden Services Holdings, Poly property, Greentown Service and Xincheng Yue are not low. However, thanks to the high growth of the enterprise itself (with an expected growth rate of more than 50 per cent), the PE (2020E) range of these high-quality property companies may reach 50-60 times.

In terms of comprehensive industry prospects and market characteristics, the medium-and long-term reasonable PE range of property management plate is 25-30 times.

Another batch of property stocks are listed centrally.What do you think? how do you choose?

In January, five property management companies were added to the Hong Kong stock market to submit applications for IPO. At present, a total of seven property management companies are waiting for listing in the Hong Kong stock market. Let's first learn about these new property management companies through a few charts.

1. Business structure

Among the seven companies, three are mainly focused on commercial property management, namely, Societe Generale, Xingsheng Merchants and Financial Street, and four are mainly on residential property management: Jianye New Life, Zhengrong Service, Song du Service and Fengxing Group.

In terms of the development and diversification of value-added services, Jianye's new life is the best.The traditional property management business accounts for only 38.7%, mainly due to the mature and diversified ecology of the parent company group itself. In contrast, Zhengrong Service, Song du Service and Xing Star Group have a large proportion of non-owner value-added services.

two。 Industry coordinates: region, size and gross margin

From a regional point of view, the commercial property management business in first-and second-tier cities is guaranteed both in terms of quantity and price, so we can focus on Xingsheng Group and Financial Street property.In terms of residential property management, in recent years, although the management fees of first-and second-tier new properties are much higher than those of other energy-level cities, the area is far less than that of second-and third-tier cities, and the growth rate of property area and the average price of management fees in second-and third-tier cities is very outstanding.Among them, Jianye New Life and Zhengrong Service are ranked 13th and 22nd in the national industry, so they have more advantages.

In terms of revenue scale,These seven property companies are all located in the current two or three echelons. In terms of gross profit margin, Xingsheng Merchants and Societe Generale, which are relatively small in scale and highly focused on commercial property management, have the highest gross profit. And the larger financial street service, Jianye New Life, Zhengrong service these enterprises, the gross profit margin will be lower.

3. The correlation with the parent company and the strength of the group

From the perspective of the degree of connection of the parent company, Zhengrong Service and Xingsheng Business are less dependent on the parent company.From the perspective of the strength of the parent group, Zhengrong service and Jianye's new life are worthy of attention.

4. Growth and valuation

In terms of revenue and growth, the growth of Jianye New Life and Zhengrong Service two property management enterprises is amazing.Even surpassed the new property companies listed last year, which is the most noteworthy bright spot.

Finally, the valuation of the company and a brief comment are attached. The first part of the article has shown that in the medium and long term, the PE valuation range of the property management industry is 25-30 times.

Societe Generale service:(1) the property portfolio is mainly commercial buildings, which is heavily dependent on the properties of the parent company; (2) new business: intelligent engineering services; (3) small scale, but high gross profit margin, commercial properties may be affected by the epidemic this year; (4) the market value of IPO is estimated to be RMB 26.1-3.13 billion.

Xingsheng Business Management:(1) the shopping mall in Dawan area is promising, and the management area of the company ranks first in Shenzhen and 6th in Dawan area; (2) the company's brands include COCO Park, COCO City, third Space, etc., and the group brand Xinghe Merchants ranks fourth in the brand value of commercial real estate in the country with 8.8 billion; (3) the scale is small, but the gross profit margin is high, and offline retail may be affected by the epidemic this year. (4) the market capitalization of IPO is estimated to be 45.8-5.5 billion yuan.

Finance Street property:(1) the strength of the parent company is superior, and the rich soil reserves can support the growth of the company in the next 2-3 years; (2) non-residential properties account for a large proportion, and they have accumulated brand advantages for many years (Financial Street, Yiji). Commercial property management ranks fourth in the industry in Beijing, Tianjin and Hebei. The overall property portfolio is diversified, and the non-residential business is more profitable, accounting for 77.5% of the income; (3) the market capitalization of IPO is expected to be 47.7-5.72 billion yuan.

Jianye New Life:(1) locate new lifestyle service providers, featuring life services (Jianye + life platform); asset management business (property management + asset management mode, rich management property portfolio); (2) value-added services account for a relatively high proportion of gross profit; (3) high growth occurred in the past, with profit growth exceeding 432% in the first three quarters of 2019; (4) the market capitalization of IPO is estimated to be RMB 17.2-2.06 billion.

Zhengrong Service:(1) the growth rate is high, and the market may give a higher valuation. The growth rate of revenue and profit ranked fourth and seventh in China in 2018; (2) the strength of the parent company is relatively strong, and Zhengrong Real Estate ranks in the industry TOP23; (3) non-owner value-added services account for relatively high, and this part of business is expected to grow steadily in the future; (4) the market capitalization of IPO is expected to be RMB 26.1-3.13 billion.

Song du service:(1) Deep ploughing and growing triangle in the location, accumulation of high-quality property in strong second-tier cities such as Hangzhou, and the overall growth is in the middle of the industry; (2) the business is more dependent on the property of the parent company, and the parent company is a small and medium-sized housing enterprise, which may face pressure in the future development. The overall performance is mediocre.

Star Group Holdings:(1) the equity participation of state-owned enterprises is mainly in the Beijing-Tianjin-Hebei region, accounting for 90.4%; (2) the company's net profit in the first eight months of 2019 is negative, and the parent company is a small and medium-sized housing enterprise, so the competitive environment is becoming more and more fierce and the overall attractiveness is mediocre; (3) the market capitalization of IPO is estimated to be 23.6-2.83 billion yuan.