Management covers multiple formats, covering more than 60 cities. Cosco Services is a comprehensive property management service provider focusing on high-end properties in China for more than 20 years. Business formats include high-end residential communities, commercial properties (such as offices, shopping malls and hotels), public properties and other properties (such as hospitals, public service facilities, government buildings and schools). The scope of management of the company covers five major urban agglomerations in China, with a total contract area of 7110 million square meters by the end of 2020, covering more than 60 cities in more than 20 provinces, municipalities and autonomous regions in China. Among them, first-and second-tier cities account for 90.7% of the total area under management.
Focus on high-end property management, information + intelligent services enable traditional properties. The Cosco service business model includes three business lines, namely, property management services, non-owner value-added services and community value-added services. After years of development, the company has formed standardized three-tier property service standards and perfect quality, environmental and occupational health and safety service systems for residential, commercial, public and other property forms. In addition, on the basis of traditional property services, the company relies on scientific and technological information construction and diversified intelligent service platforms such as Housekeeping, Yijia Life, Yijiaxu and EBA systems to provide customers with mid-and high-end premium services.
The parent company fully supports the establishment of a commercial asset management platform. According to the company's official Wechat account, the company and Cosco signed a general agreement on business operation services on June 14. Cosco Services provide business operation services to Cosco related parties, including 1) pre-opening management services: positioning and design management services, investment promotion and management services; 2) operation management services: business preparation services, business plan management services, tenant guidance services, consumer management services and marketing services. The service items include 11 office projects (with a total floor area of 966 million square meters) and 11 commercial property projects (with a total floor area of 90.5 million square meters). The maximum amount of service transactions from 2021 to 2023 is 100 million yuan, 220 million yuan and 300 million yuan respectively. In addition, on June 15, Cosco Services held a conference call and announced the establishment of a commercial asset management team and a commercial asset management platform to fully undertake the management and operation business of shopping malls and office buildings held by Cosco Group. We believe that the parent company's provision of commercial projects to Cosco Services reflects the strong support of the parent company, and the establishment of a commercial asset management platform will help the company to effectively coordinate asset operation services and traditional property management services, and lay the foundation for follow-up third-party expansion.
Investment advice: "better than the big market". Cosco service relies on the support of Cosco Group, and we believe that the company will have a higher growth rate in terms of managed area and corresponding income in 2021. At the same time, we believe that the future income growth rate of company owner value-added services and non-owner value-added services will be faster in the early stage and tend to stabilize after the impact of low base and economies of scale. We predict that the company's EPS will be 0.36 yuan per share in 2021. With reference to the comparable company's EPS valuation, we value the company at 20-23 times PE in 2021, corresponding to a market capitalization range of HK $97-HK $11.2 billion and a corresponding reasonable value range of HK $8.23-HK $9.47 per share (unless otherwise noted herein, all are denominated in RMB, HK $1 = RMB0.88). Risk tips: 1) there are uncertainties in the company's extension area, contribution income and profit margin of the extension project. 2) it takes a certain period to convert the contract area into the in-tube area, and the speed of conversion will affect the growth of the company's in-tube area.