Product: research Institute of Sina Finance listed Company

Author: Chen Xian

June 9, Lego Group split its property sector Lego Health listed in Hong Kong, before the listing of Lego Real Estate 100% shareholding high health. By the end of 2020, the company is in the management area of 13.5 million square meters, the contract area of 20.1 million square meters, the reserve rate is less than twice, is a small scale, the reserve is not dominant property company.

From the name of "Lego Health", it can be seen that the property sector may usher in the second property stock that focuses on "health". However, at present, the company has only two clinics in the Yilang Health Center, and has not yet contributed its operating income. The company plans to open more than 21 health centers by 2023. So the question is, if there is no scale, there will be no community customers, and what scale can the health care business achieve?

　　The performance is sticking to the listing standard line.

Data show that Ligao Health is a residential property-based traditional property management company, 95% of the charging model is mainly contract-based. From the perspective of income structure, property management services, non-owner value-added services and community value-added services account for 61.3%, 27.6% and 11% respectively in 2020, which can be said to be very "traditional".

From 2018 to 2020, the company's operating income was 124 million yuan, 180 million yuan and 220 million yuan respectively, with a compound annual growth rate of 40.6%. The annual profit was 11.122 million yuan, 29.084 million yuan and 44.01 million yuan, with an annual compound growth rate of 99.1%.

With a profit of less than 50 million, the property sector ushered in a queue of small property enterprises. Data from the China Association of things show that at present, the number of property enterprises queuing in Hong Kong is as high as 20, and the number of listed companies in the property sector may reach 70 this year. Especially after the HKEx has changed the conditions for listing on the main board, the second half of the year may be the last window for the listing of small goods enterprises.

The revised listing standard on the main board of the HKEx requires that the profits attributable to shareholders in the most recent financial year should not be less than HK $35 million, and that the cumulative profits in the previous two financial years should not be less than HK $45 million (the cumulative profits in the three years should not be less than HK $80 million). The implementation date of the revised earnings increase is January 1, 2022.

Although the performance of Lego Health has improved rapidly in the past two years, it made a profit of only 11.12 million yuan in 2018, resulting in a total profit of 40.923 million yuan (HK $49.668 million) in the first two years.

As a result, in terms of profitability, the company's gross profit margin increased from 21% in 2018 to 34.7% in 2020, and its net profit margin rose sharply from 8.95% to 19.86%, just returning to the normal level of the industry.

　　The "conveying" area of Lego Group is slow.

From the perspective of a low base, Lego's healthy revenue growth is actually not high. Wind data show that 46 property stocks have a compound annual growth rate of 38.8% in the past two years, while Ligao Health's compound growth of 40.6% is in the middle. In 2019 and 2020, the company's revenue growth rate was 45.5% and 22.6% respectively, and the growth rate decreased slightly in 2020.

Mainly with the increase of the scale base, a certain amount of new area each year can not continue to maintain the rapid growth of revenue. 2018-2020. The area under management of Rico Health is 5.9 million square meters, 7.4 million square meters and 13.5 million square meters respectively, with a new area of 1.4 million square meters and 6 million square meters.

It is worth noting that the company acquired Wuhu Forest in 2020 and contributed to the management of a total construction area of about 4.5 million square meters. Excluding the acquired area, the new area in 2020 is only 1.5 million square meters, the same as the previous year. As Wuhu Forest has not yet merged, the current financial data does not include the former, but the area data includes the subject matter of mergers and acquisitions. So the rush to buy before going public is likely to be a "cosmetic" of scale.

Because the growth of the parent company alone is far from enough. Lego Health relies on the Lego Group, with about 83% of managed projects coming from the parent company by 2020. In the past, the new management area from Lego Group was 1 million square meters and 1.4 million square meters respectively. In the industry, take the 2020 performance data as an example, in the management area of only 7.63 million square meters, the new area of the current period is 2.7 million square meters, which is higher than the "transportation" of Lego Group. By the end of 2020, Lego Group has a total land reserve of about 23.4 million square meters, and the pace of transformation will directly affect the performance of the property sector.

In addition, in terms of outside the market, Lego Health does not have an advantage. As the second well-known property in Jiangxi Province, the comprehensive property fee of the company is 1.7 yuan, which is lower than the average of 1.9 yuan of the top 100 property enterprises announced by the Central Index Institute, while the property fee for third-party development is as low as 1.2 yuan, 29.4% lower than the company as a whole. Too low property fees not only affect revenue growth, but also affect the company's profit margin.

Of course, such a property company which is highly dependent on the parent company, the third party winning the bid is not high, which is 25%, 18.8% and 45.8% respectively.

　　Start to tell the story of health care before listing.

From the name of "Lego Health", it can be seen that the property sector may usher in the second property stock that focuses on "health". The business structure shows that Lego Health is very traditional, with property management services, non-owner value-added services and community value-added services accounting for 61.3%, 27.6% and 11% respectively in 2020.

The health business belongs to the community value-added service sector. how much does it contribute to income? The answer is that it has not yet been reflected in the financial statements. Lego Health currently has two Yee Neighbourhood Health Centre clinics in the camp, and plans to open more than 21 rehabilitation centres by 2023.

On the eve of listing (December 30, 2020), Lego Health not only acquired Wuhu Forest, but also acquired the entire issued share capital of Weiye International (the holding company of the recreation business) from Lego Holdings.

In the company's competitive advantage to the future business development, health care business has been mentioned. The company is committed to becoming the "double butler" of customers, that is, life butler and health butler, and has been awarded by the Middle Index Institute to provide outstanding customized services (health care services) property management company in 2020.

Community value-added services ushered in good at the beginning of this year, ten ministries and commissions jointly issued a "notice on strengthening and improving residential property management" to encourage qualified property service enterprises to explore the "property services + living services" model. Property service enterprises can apply for corresponding preferential support policies in accordance with the regulations when they carry out living service services such as old-age care and housekeeping.

However, at present, property stocks are mainly to provide property management services, and the blue ocean of value-added services is still being explored. Among the 46 property stocks, Olympic Park Health, which is also committed to the development of health care business, has not contributed income from the health sector since its listing in September 2018. The current price-to-earnings ratio (TTM) is 16, well below the industry average of 33.

It seems that storytelling is not enough, but also requires practical achievements. However, Ligao Health has a management area of 13.5 million square meters and a contract area of 20.1 million square meters, with a reserve rate of less than twice as much. If there is no scale, there will be no community customers, so how to develop value-added services?