Revenue from brokerage network services has increased significantly compared with the same period last year. The company's 2019H1 operating income was 4.33 billion yuan, an increase of 55.8% over the same period last year. The growth was mainly driven by the growth of first-hand housing agency income (2.578 billion yuan, + 15.7%, accounting for 60%) and brokerage network service revenue (1.31 billion yuan, an increase of 681.3% over the same period last year, accounting for 30%). The rapid growth in revenue from brokerage network services is mainly due to an increase in the commission rate charged by the company to assist developers in finding new property buyers. In addition, revenue from 2019H1, a real estate data and consulting service, was about 443 million yuan, up 15.4 per cent from a year earlier and accounting for 10 per cent of total revenue.
As a result of the adjustment of the income structure, profit margins fell compared with the same period last year. Judging from the gross profit margin of itemized income, the gross profit margins of 2019H1's three main businesses are 31.3% for first-hand housing agents, 4.29% lower than the same period last year, 18.7% for real estate data and consulting services, 22.57% lower than the same period last year, and 0.4% for brokerage network services, from negative to positive, an increase of 44.32% over the same period last year. 2019H1's profit margin before interest and tax was about 18.2 per cent, down 10.4 per cent from a year earlier, mainly due to a sharp increase in revenue from low-margin real estate brokerage network services, accounting for 30 per cent of revenue but a gross margin of just 0.4 per cent.
Scale brokerage effect, the proportion of staff costs decreased. The staff cost of the company accounts for the largest proportion of the cost side.
The employee cost of 2019H1 was 1.825 billion yuan, an increase of 35.7% over the same period last year. The increase in staff costs is mainly affected by the expansion of the company, but the proportion of staff costs in revenue has fallen from 48.4 per cent of 2018H1 to 42.1 per cent of 2019H1.
There is plenty of cash and liquidity remains strong. As of 2019H1, the book cash and cash equivalents are about 3.025 billion yuan. The cash is mainly used to finance the required working capital and other recurrent expenses to support business expansion. As of 2019H1, the company's gearing ratio was 43.1%, up 30.6% from the end of 2018, mainly due to the addition of $300 million in senior notes due in 2021.
The company's 2019H1 liquidity ratio is about 2.42, which is slightly lower than at the end of 2018, but still remains high. We believe that the overall liquidity of the company is strong.
Investment advice: "better than the big market". Due to the impact of buybacks, the total share capital of the company has been reduced. With the original profit forecast unchanged, we expect the company's EPS to become 0.82 yuan per share in 2019. We are optimistic about the ability of the company's business to continue to grow. With reference to the valuation of the comparable company, we value the company at 15-17 times PE in 2019, with a corresponding reasonable market capitalization of HK $194-21.9 billion, a reasonable value range of HK $13.91-15.76 per share (RMB12.24-13.88 per share), and a PEG of 0.58-0.66 in 2019. (it is not specifically noted in this article that the exchange rate is denominated in RMB, and the average exchange rate is about HK $0.88.) risk hints: 1) New home sales are faced with double downward pressure on sales area and prices, resulting in lower-than-expected revenue. 2) the competition of real estate brokerage business is intensified, which leads to resistance to the development of real estate brokerage business.