中国物业管理：表现优异并且会持续

1、Asia Pacific Equity Research09 March 2020This report is neither intended to be distributed to Mainland China investors nor to provide securities investment consultancy services within the territory ofMainland China. This report or any portion hereof may not be reprinted, sold or redistributed withou

2、t the written consent of J.P. Morgan.China Property ManagementOutperformance should continue through FY19 results, and beyondProperty management companies (PMC) have outperformed the HSCEI by 28% YTD, driven mostly by: 1) an increasing perception of defensiveness; 2) policy easing; and 3) positive p

3、rofit alerts. We expect outperformance to continue into FY19 results, where positive guidance should drive further upgrades. We expect PMCs to deliver 41% Y/Y growth in 19E, with net margins staying at 13-14%. Trading at 31x 12m fwd P/E, the sector is still attractive, in our view, especially if we

4、benchmark to the 40 x P/E of the education (after-school tutorial) sector, which shares similar traits (e.g. early stage of consolidation). Our top picks are CGS (6098 HK), A-Living (3319 HK) and Languang (2606 HK).Still upside to P/E, benchmarking education: While the 31x P/E does not look cheap, i

5、t is still attractive compared to other high-growth sectors given its 31% 18-22E earnings CAGR. We think a good benchmark is education, which shares similar traits, such as: 1) early stage of consolidation; 2) strong earnings growth; 3) asset-light with net cash; and 4) lower cyclicality ( HYPERLINK

6、 l _bookmark3 more). Education is trading at 40 x P/E, and we think PMCs could gradually reach that level with longer track records. Even if the P/E stays the same, strong growth alone should still drive up share prices, in our view.What should be the normalized P/E? Given the non-cyclical nature, w

7、e think that, after a high-growth stage, PMCs will eventually be benchmarked to stable growth sectors such as consumer staples, telecom and utilities, which areChina, Hong KongChina / Hong Kong Property Karl Chan AC(852) 2800-8513 HYPERLINK mailto:karl.chan karl.chanBloomberg JPMA KCHAN Ryan Li, CFA

8、(852) 2800-8529 HYPERLINK mailto:ryan.li ryan.li Cusson Leung, CFA (852) 2800-8526 HYPERLINK mailto:cusson.leung cusson.leungJevon Jim(852) 2800-8538 HYPERLINK mailto:jevon.jim jevon.jimAvery Chan(852) 2800-8659 HYPERLINK mailto:avery.chan avery HYPERLINK mailto:.chan .chanJ.P. Morgan Securities (As

9、ia Pacific) LimitedSector P/E vs EPS CAGR20E P/E (x)4540trading at 20 x P/E. However, we think a structural derating may not kick inuntil at least two to three years later as growth will likely stay strong amidBreweryEducationmarket consolidation. There is also upside risk if management fees manage

10、to increase faster. Other derating risks include: 1) substantial earnings disappointment; 2) labour cost hikes; and 3) policy tightening.Initiate coverage of Poly at N, Languang at OW: We initiate coverage of35Supermarket30Telecom25Utilities20F&B15SeasoningOnline travelE-commProp MgtSportswear Cater

11、ingPoly Property Development (6049 HK) at Neutral ( HYPERLINK l _bookmark8 see initiation). Although10HK RetailFurnitureOnline gameDigital mediaStreamingwe think Poly is a solid company with a 42% earnings CAGR, SOE backing and a distinctive edge in public facilities, we see limited near-term cataly

12、sts. We also5HKLandlords0Home applianceDevelopersEPS CAGRinitiate on Languang Justbon (2606 HK) at Overweight with a PT of HK$70, for 59% potential upside ( HYPERLINK l _bookmark11 see initiation). P/E is low today at 12x due to the short listing history, less M&A activity than expected, and managem

13、ent changes, but we expect a rerating to come after: 1) evidence of a 33% earnings CAGR; 2) M&As; and 3) approval for H-share full circulation.FY19 results preview: We expect bottom lines to be broadly in line, except for Greentown Service, which may see a slight miss. CGS and A-Living will likely b

14、eat the minimum growth stated in positive profit alerts ( HYPERLINK l _bookmark0 more).Strong IPO pipeline: Five PMCs are in the IPO pipeline for HKSE (see more in HYPERLINK l _bookmark6 peer comparison), and CR Land, Shimao and KWG, among others, may potentially spin off PMCs too (per Bloomberg). T

15、otal PMC market cap is still small at only US$36 bn (roughly equivalent to a big-cap developer), and thus we believe over-supply is not a concern at this time.0%10%20%30%40%PMC P/E (x)Developers P/E (x)55504540353025201510Stage 1 LearningStage 3 Maturity16B1412108 PMC P/E Developers P/EBenchmark: 6S

16、taples/telecom/ utilities 4(20 x P/E)(40 x P/E)enchmark: EducationStage 2HarvestThree stages of China property management sector P/EJun-14 Apr-15 Feb-16 HYPERLINK l _bookmark6 Dec-16 Oct-17 Aug-18 Jun-19-Source: Bloomberg, J.P. Morgan estimates.See page 65 for analyst certification and important dis

17、closures, including non-US analyst disclosures.J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider th

18、is report as only a single factor in making their investment decision. HYPERLINK / Equity Ratings and Price TargetsCompanyTickerMkt Cap ($ mn)Price CCYPrice Rating CurPrevCur Price TargetEndPrev End DateDatePoly Property Development6049 HK4,552HKD66.30N69.00Dec-20Sichuan Languang Justbon2606 HK1,010

19、HKD44.05OW70.00Dec-20Country Garden Services6098 HK10,557HKD30.25OWn/c39.00Dec-2031.00n/cA-Living Services3319 HK5,905HKD34.40OWn/c44.00Dec-2031.00n/cGreentown Service2869 HK3,429HKD9.57Nn/c9.50Dec-208.80n/cChina Overseas Property Holdings2669 HK2,801HKD6.62Nn/c6.30Dec-204.60n/cColour Life Services1

20、778 HK740HKD4.04OWn/c8.00Dec-20n/cn/cSource: Company data, Bloomberg, J.P. Morgan estimates. n/c = no change. All prices as of 09 Mar 20.Adj. net income Estimate Changesin millionsFY19EFY20ECompanyBBG TickerCCYPrevCurPrevCurPoly Property Development6049 HKCNY-507-744-Sichuan Languang Justbon2606 HKC

21、NY-422-564-Country Garden Services6098 HKCNY1,4901,490-1,9341,98450A-Living Services3319 HKCNY1,1811,155(27)1,8431,629(214)Greentown Service2869 HKCNY555505(51)760642(119)China Overseas Property Holdings2669 HKHKD515509(6)6326331Colour Life Services1778 HKCNY556517(39)701596(105)Source: Bloomberg, J

22、.P. Morgan estimates.Major reportsChina Property Management: Navigating the blue ocean; initiate with a positive view.Table of Contents HYPERLINK l _bookmark1 Stock picks 3 HYPERLINK l _bookmark2 How is the sector positioned now? 7 HYPERLINK l _bookmark4 FY19E results preview 13 HYPERLINK l _bookmar

23、k5 Peer comparison 15 HYPERLINK l _bookmark7 Valuation 20 HYPERLINK l _bookmark9 Poly Property Development 23 HYPERLINK l _bookmark10 Sichuan Languang Justbon 33 HYPERLINK l _bookmark12 Country Garden Services 45 HYPERLINK l _bookmark13 iving Services 49 HYPERLINK l _bookmark14 Greentown Service 53

24、HYPERLINK l _bookmark15 China Overseas Property Holdings 57 HYPERLINK l _bookmark16 Colour Life Services 61Stock picksTable 1: Summary of price targetsProperty ManagementCommunity VASNon-community VASDec-20 PriceTarget (HKD)CurrentPrice (HKD)Potential upsideImplied valuationCompanyTickerTarget P/EHK

25、$/shTarget P/EHK$/shTarget P/EHK$/shFY20EP/EFY21EP/EFY22EP/ECountry Garden Services6098 HK24x29.017x6.712x2.039.030.329%48x34x26xA-Living Service3319 HK21x31.617x8.09x4.444.034.428%32x24x20 xPoly Prop Dev6049 HK23x50.819x16.611x1.569.066.34%46x34x26xGreentown Service2869 HK18x6.217x2.411x-1

26、%38x31x25xChina Overseas PH2669 HK22x5.413x0.611x-5%33x27x23xLanguang Justbon2606 HK17x37.418x23.39x9.370.044.159%20 x15x12xColour Life1778 HK13x2.715x3.67x0.38.04.098%17x15x13xAverage33x26x21xSource: J.P. Morgan estimates. Note: For a detailed breakdown of how we arrive at the target P/E i

27、n each business segment, please see the HYPERLINK l _bookmark7 valuation section.Figure 1: Rerating quadrant for China property management companiesHigh growth & gaining credibility100%High growth & higher credibility90%Times Neighborhood*80%70%Higher credibility60%S-Enjoy*Powerlong Commercial* 50%A

28、oyuan Healthy Life*Ever Sunshine*Binjiang Service*Languang Justbon40%A-LivingCGSPoly PDP/E30%0 x5x10 x15x20 x25x30 x35x40 x45x50 xKaisa Prosperity*20%COPHGreentown ServiceColour Life1. LAGGARDSlow growth & lower credibility10%0%4. MATURITYSlow growth & high credibilityHigher growthEMERGING19-21 earn

29、ings CAGRHARVESTSource: Company data, J.P. Morgan estimates.Companies marked with * are not covered by JPM; numbers of those are based on Bloomberg consensus.Our assessment frameworkFor stock-picking we reference our rerating quadrant, which separates companies into four general categories. Overall:

30、In general, we like our covered names in Quadrant 3, Harvest, which have more certainty in growth. Meanwhile, names in Quadrant 2, Emerging, offer even more potential upside (yet higher risk) as market confidence has not yet picked up.We generally avoid Quadrant 4, Maturity, as these companies posit

31、ives are likely priced in already. We would also be cautious on Quadrant 1, Laggard, as the market does not have much expectation for these names rerating here should require several growth catalysts.Explaining the rerating quadrantWe think a PMC typically goes through a four-stage rerating cycle. T

32、he Y-axis represents growth, and we use 19-21E earnings CAGRs as the benchmark. The X- axis reflects credibility, which we think is best measured by P/E as it reflects the premium the market is willing to pay. Credibility is essentially market perception, which can be subjective and is shaped by man

33、agement track record, corporate governance, SOE status, growth sustainability, leverage, etc.Typically, a companys roadmap starts in Quadrant 1 and moves gradually to 2, 3 and finally 4. In some cases, a company will even revert back to Quadrant 1.Quadrant 1 Laggard (slow growth & lower credibility)

34、: Most companies start here. Quite often, by the time of IPO, they have entered Quadrant 2, as companies need strong growth expectations to attract investors. Meanwhile, Quadrant 1 is also where some companies may end up if their growth has slowed and their track record has disappointed the market.Q

35、uadrant 2 Emerging (high growth & gaining credibility): This is normally the stage PMCs go through in the first 1-2 years post IPO. While there are high growth expectations, the market is not yet willing to assign a P/E premium until it sees results. Thus, names here have the highest potential for s

36、hare price outperformance when they deliver earnings, as the share price would likely benefit from both: 1) a move to Quadrant 3 and 2) the earnings growth itself. However, given the shorter track record, risk is also higher.Quadrant 3 Harvest (high growth & higher credibility): This is the sweet sp

37、ot where PMCs enjoy a high P/E with strong growth. There is still further rerating potential for some names in this quadrant, although the magnitude might not be as strong as the movement from Quadrant 2 to 3. S-Enjoy (not covered) and Ever Sunshine (not covered) both moved from Quadrant 2 to 3 in t

38、he past quarter (they used to trade at mid-teens P/E, based on Bloomberg consensus estimates).Quadrant 4 Maturity (slow growth & higher credibility): This is where rerating potential is most limited given slower growth. Typically, SOE names (e.g. China Overseas PH) or those with stronger branding (e

39、.g. Greentown Service) could be positioned here, as investors would still trust their management capability.Table 2: Summary of stock recommendationsCompanyRatingInvestment thesisCountry Garden Services (6098 HK)Overweight (top pick)CGS checks all the boxes with strong parental support (80% from Cou

40、ntry Garden), visible growth pipeline(reserve GFA is 67% of contracted GFA) and edge in third-party GFA expansion due to leadership position in tier-3/4 cities.Rerating could continue when CGS demonstrates a longer track record in third-party GFA expansion and improvement in community VAS.There coul

41、d be upside on earnings upgrades if: (1) preferential tax rate continues in 2020; and (2) profit contribution from “Three Supplies & One Industry” is better than expected.A-Living (3319 HK)Overweight (top pick)P/E has consistently been at a discount due to its higher profit contribution from cyclica

42、l business (agency), butthis looks set to change as reliance on this should decline from 30% to 10% in 2020E.Rerating will come through (1) evidence of organic growth ability; (2) improvement in community VAS; and (3) longer track record in acquiring GFA of public facilities.Management has a strong

43、growth appetite, and could be even more incentivized if the management stake (6%; currently domestic shares) can be fully circulated (under application).Poly Property Dev (6049 HK)Neutral We think Poly Prop Dev is expensive for good reasons a rare SOE (defensiveness) with growth (42% earnings CAGR i

44、n 18-22E). It also has good efficiency in community VAS and an edge in management of public facilities.However, we see limited near-term catalysts that can further substantially rerate the stocks as the above positives should have been priced in. Growth will rely on aggressive third-party expansion,

45、 but compared to CGS, its less uncertain due to reliance on more public facilities. Plus, management is not well incentivized.We could turn more positive if Poly manages to deliver a stronger growth pipeline, such as M&As.Greentown Service (2869 HK)Neutral We like its strong branding & service reput

46、ation (helpful for third-party expansion) and good community VAS operations.However, a mediocre track record in delivering earnings growth in the last two results prevent us from giving a further premium on P/E.Earnings downgrades could continue to drag share price performance.China Overseas PH (266

47、9 HK)Neutral Lack of growth appetite (24% earnings CAGR, below sector average of 31%) as seen by the over-reliance on backing developer (90% from COLI) without aggressive expansion in third-party GFA; management incentive isinsufficient.SOE and branding premium should have been priced in already.We

48、could turn more positive if it becomes more aggressive in expanding third-party GFA or even M&A.Languang Justbon (2606 HK)Overweight (top pick)Currently low expectations due to short listing history and lower recognition with backing developer, coupled withfewer-than-expected M&As and management cha

49、nges.Rerating should come through (1) evidence of 33% earnings CAGR through results; (2) more M&As; and (3) full circulation of H-shares to align management interestStrong efficiency in community VAS under-appreciated; more track record on that should boost market expectations.Colour Life (1778 HK)O

50、verweight Very low expectations due to slow growth in contracted GFA and consistent disappointment in earnings growth historically.While we agree Colour Life should trade at a discount due to lack of backing developer support and slow earnings growth (15% CAGR), the discount is too steep, and should

51、 narrow with (1) strong growth in community VAS (efficiency still the lowest in sector despite its large scale); and (2) improvement in leverage as M&As have slowed down.Recent management change may help fuel the above, and rerating could come when there is evidence.Source: Company data, J.P. Morgan

52、Testing different P/E scenariosGiven the strong earnings growth of PMCs, we think share price performance will be solid even in the absence of further P/E rerating. We have therefore tested the following four different P/E scenarios (assuming our earnings forecasts are intact):Table 3: Implied valua

53、tion in different P/E scenariosCompanyTickerPrice HK$If P/E further reratesIf P/E stays at current levelIf P/E reverts to historical meanIf P/E drops to historical troughTarget P/EImplied valuation (HK$)Implied potential returnCurrent P/EImplied valuation (HK$)Implied potential returnHist. Avg P/EIm

54、plied valuation (HK$)Implied potential returnHist. trough P/EImplied valuation (HK$)Implied potential return21E22EDec-20Dec-2121E22EDec-20Dec-2121E22E1-year2-year21E22EDec-20Dec-21Country Garden Services6098 HK30.348x55.472.783%140%35x40.953.635%77%25x29.438.6-3%28%17x19.825.9-35%-14%A-Living Servic

55、e3319 HK34.432x59.171.572%108%24x44.253.529%56%15x26.832.4-22%-6%10 x18.121.9-47%-36%Poly Prop Dev6049 HK66.346x93.6123.541%86%42x86.0113.430%71%25x51.768.1-22%3%17x34.745.8-48%-31%Greentown Service2869 HK9.638x11.514.220%48%37x11.213.917%45%29x8.810.9-8%14%16x4.96.1-49%-37%China Overseas PH2669 HK6

56、.633x7.58.914%35%33x7.79.116%38%19x4.45.1-34%-22%12x2.83.3-58%-50%Languang Justbon2606 HK44.120 x90.9114.2106%159%12x55.069.125%57%13x59.774.935%70%12x56.370.828%61%Colour Life1778 HK4.017x9.110.4125%156%8x4.55.112%27%19x9.911.2145%178%8x4.14.72%17%Average33x66% 105%27x23%53%21x-9%*14%*13x-29%-13%So

57、urce: Bloomberg, J.P. Morgan estimates. Prices as of 9 March 2020.For Polys historical mean & trough P/E, we benchmark to CGSs due to Polys short listing history.*Excluding Colour Life.We think the risk reward is attractive given the visible earnings growth pipeline. The biggest downside risks are t

58、hose that will substantially affect earnings such as higher-than-expected labour cost hikes. On the other hand, we see upside risks to earnings if management fees grow faster than expected.Table 4: China property management valuation summaryCompanyStock CodeJPMRatingCCYJPMPrice TargetLast Close9-Mar

59、-20MarketCap US$ mnP/EDiv YieldP/BPEG18-21EEPS CAGRAvgTurnover US$ mnYTDPrice Perf.FY20E 12M F(x)(x)FY21E(x)FY19E (%)FY20E (%)FY20E FY21E(x)(x)FY20E(x)Country Garden Serv ices6098.HKOWHKD37.0030.2510,52637.035.126.00.5%0.7%44%22.415%A-Living3319.HKOWHKD43.0034.405,8871.1%1.6%5.

60、44.50.741%23.828%Poly Property Dev6049.HKNHKD69.0066.304,7090.4%0.6%46%-42%Greentow n Serv ice2869.HKNHKD9.509.573,4280.7%0.6%8.37.01.823%7.112%China Ov erseas PH2669.HKNHKD6.006.622,79334.433.428.70.7%0.9%24%5.335%S-Enjoy Service1755.HKNCHKD-14.861,56027.3