中国房地产经纪：随着市场的成熟经纪人能脱离房地产市场

1、GlobalResearch29 October 2019Initiation of CoverageChina Real Estate Brokerage SectorChinaCanbrokersbreakawayfromthepropertypackas the market matures?ChinaUncovering long term growth potentialWe initiate coverage of Chinas real estate brokerage sector with a positive view, and believe the sector wil

2、l attract more interest as Chinas housing market matures. We think investors may be underestimating the potential for: 1) long-term growth in the secondarymarket;and2)marketconsolidationacrosssub-sectors;whilebeingoverly concernedaboutthethreatfromonlinebrokers.Wesetoursectortarget2020EPEat 14x base

3、d on a comparison with global peers, and initiate coverage of 5i5j (Buy) and WorldUnion (Sell). We like 5i5j on its strength in the secondary market and attractive valuation. We think Shenzhen WorldUnion (WorldUnion) will continue to face headwinds in most of its business lines in the next few years

4、, while earnings growth and visibility are lower than for 5i5j.Potential for: LT growth in secondary brokerage; consolidation in sub-sectors There is a positive correlation between the scale of secondary housing markets and urbanisation. We expect transaction frequency to rise, though transaction co

5、sts will somewhat dampen activity, and forecast a 2019-30 secondary sales value CAGR of 7.4% (against a largely flat primary market). We also think the rental market will double in transaction value over 2019-30 due to population flows and policy support. We expect brokers to concentrate further in

6、brokerage sub-sectors. We like efficient, high-quality brokers, with a strong distribution network and/or good relationships with top developers.Stable trends in commission and agent costs; online not negative for the sector We think the rising industry concentration and brokers focus on quality pro

7、vide support for commission rates, but rates are capped by sellers transaction costs and developers sales expenses. We also consider current agent costs reasonable. We believetheUSmarketisnotavalidcomparisononcommissionrates(about5%)and agent costs (70-95% of commission income). We also think the on

8、line transformation willimproveefficiencyandqualityinthesector,notbedestructive.Webelievebrokers that move early and fast in IT could benefitmost.Valuation: trading at 14x 2020E PE on average; we prefer 5i5j to WorldUnion 5i5j and WorldUnion are trading at 12x and 16x 2020E PE, respectively, compare

9、dto averages of 19x for US brokers (since listing) and 14.5 for global integrated service providers(since2004).Wevalue5i5jat16x2020EPEandWorldUnionat12x2020E PE.Figure 1: Valuations of China real estate brokers under our coverageReal EstateEquitiesJohn Lam,CFAReal EstateEquities HYPERLINK mailto:joh

10、n-za.lam +852-29716358Titus HYPERLINK mailto:titus.han +86-105-8328777Stock codecap(US$3M (US$Ratingprice(Rmb)PTUpside(Rmb)%P/EP/B2018-21e2019ROE2019yield2018Net gearing2019E2020E2021E2019E2020E2021E5i5j000560.SZWorldUnion002285.SZ5.3BuySell4.353.746.002.80-25%13.8x25.1x11.7x15.9x9.8x13.4x1.0 x1.4x1

11、.0 x1.3x0.9x1.2x18%11%8%6%6%2%4%4%Weighted Average18.6x13.5x11.3x1.2x1.1x1.0 x15%7%4%Above data as of 28 October 2019.Source: Company data, Wind, Thomson Reuters, UBS estimates HYPERLINK /investmentresearch /investmentresearchThisreporthasbeenpreparedbyUBSSecuritiesAsiaLimited. ANALYSTCERTIFICATIONA

12、NDREQUIREDDISCLOSURESBEGIN ONPAGE44. UBSdoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbe aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider thisChina real estate brokerage sectorU

13、BS THESIS MAP a guide to our thinking and whats where inthis reportOURTHESISINPICTURESMOSTFAVOUREDLEAST FAVOURED5i5jWorldUnionPIVOTALQUESTIONSQ: Can real estate brokers sustain long-termgrowth?Yes.For2019-30weforecastasecondaryresidentialsalesCAGRof7.4%andarentaltransaction valueCAGRof6%,benefitting

14、secondarybrokers.Weseefurtherconsolidationpotentialinprimary and secondary brokerage, and believe efficient brokers with high service quality, a strong distribution network and/or good relationships with top developers are well positioned to gain marketshare.Q: Will commission rates and agent costs

15、remain stable?Yes.Weexpectthemtobelargelystable.WebelievecommissionratesandagentcostsintheUS market are not comparable, and think price wars are unlikely in the future. Regulation and the internetmaybedisruptivefactors,buttheyarenotnecessarilynegativeforprofitability.Q: Will online transformation be

16、 destructive to traditional brokerage business?No. We believe online platforms will not replace offline business or lead to a price war like that in 2014-16. In fact, we think the online transformation will improve quality and efficiency in the sector.Thisisbasedonouranalysisof:1)theinternetcyclein2

17、014-16;2)Beikesonlinemodeland3)theUSexperience.moreUBSVIEWWeinitiatecoverageofChinasrealestatebrokeragesectorwithapositiveview.Wethinkinvestors may be underestimating the potential for: 1) long-term growth in the secondary market; and2)marketconsolidationacrosssub-sectors.Weexpectcommissionratesanda

18、gentcostsineach sub-sector to be stable, and think the online transformation will be positive for traditional brokers, improving efficiency/quality and benefitting those that move early and fast in IT. We like 5i5j on its strength in the secondary market. We think WorldUnion will continue to face he

19、adwinds in most businesslines.EVIDENCEIn2018,transactionvalueinsecondaryresidentialsalesreachedRmb6.5trn,andrentaltransaction valuewasRmb1.5trn.Thereisastrongpositivecorrelationbetweensecondarytransactionvolume as a percentage of housing sales, urbanisation rates and disposable income. In 2018, the

20、concentration ratio for the top three companies (CR3) by transaction value achieved, was 9% for primary on-site agency and 20% for secondary sales, compared to 30%+ in the US secondary housingmarket.In2014-16,internetbrokersfailedtodefendtheirmarketshareinbrokerage,and newinternetpropertyserviceprov

21、idersarefocusingmoreonefficiencyandquality.WHATSPRICEDIN?5i5j and WorldUnion are trading at 12x/16x 2020E PE, respectively, compared to the US broker averageof19x(sincelisting)andglobalintegratedserviceprovideraverageof14.5x(since2004). Wethinkinvestorsarefocusingontheshort-termcyclesofthepropertyma

22、rkets,whileoverlooking:1)thelong-termgrowthpotentialofthesecondarymarkets;and2)sector-wideconcentration.The marketmayalsobeconcernedaboutthepotentialimpactofonlinetransformation.moreTransaction value forecasts for China residential housing marketRmb bn5,00002017E 2018E 2019E 2020E 2021E 2022E 2023E

23、2024E 2025E 2026E 2027E 2028E 2029E 2030EPrimarysalesSecondarysalesSource:NationalBureauofStatistics,Lianjia,ChinaRealEstateIndexSystem,UBSestimatesChina Real EstateBrokerageSectorUBSResearchOURTHESISINPICTURESreturnTransaction value forecasts for China residential housing marketRmb bnTransaction va

24、lue forecasts for China residential housing market5,0000We forecast a 7.4% secondary residential sales value CAGR over 2019-30 and a 6% rental transaction value CAGR over the same periodUrbanisation rate95%90%85%80%75%70%65%60%55%2017E2018E2019E2020E2021E2022E2023E2024E2025E2026E2027E2028E2029E2030E

25、PrimarysalesSecondarysalesRental2017E2018E2019E2020E2021E2022E2023E2024E2025E2026E2027E2028E2029E2030EA positive correlation between urbanisation rate and share of secondary marketSecondarysalesvolume%oftotaldriven by ongoing urbanisation and rising incomes.CR3 for major brokerage subsectors in Chin

26、a and the US10%20%30%40%50%60%70%80%90%CR3 for major brokerage subsectors in China and the US35%30%25%20%15%10%We also think there is potential for further market consolidation in the primary and secondary brokerage sectors.5%0%3.0%2.5%2.0%ChinaprimaryChinasecondaryUSsecondaryCommission rates for di

27、fferent brokerage businesses1.5%1.0%0.5%201420152016201720185i5jprimary5i5jsecondaryQFangprimaryQFangsecondaryE-HouseagencyE-HousedistributionWorldunionHopefluentCommission rates have been largely stable in recent years, and we expect them to remain so.USJapanUKAustraliaChinaSpecific license require

28、d?USJapanUKAustraliaChinaSpecific license required?BrokersYesYesNoYesYesAgentsYesYesNoYesNoStrict regulation? BrokersYesYesNoNot reallyNot reallyAgentsYesYesNoNot reallyNoStrong sector self-disciplines?YesYesYesNot reallyNoStrong agent rights protection?YesNot reallyNot reallyNot reallyNoSecondary m

29、arket structure MLS applied?YesYesYesYesNoMostly exclusive agency?YesYesYesYesNot reallyMostly single-sided agency?YesYesYesYesNoGross commission rate primary Gross commission rate secondary Agent cost % of revenue primary* Agent cost % of revenue secondary*23%56%7095%3%6%12%2%13%*2% 5060%6070%USDmS

30、egment revenues ofSoFun4504003503002502001501000Internet companies, including SoFun, aggressively penetrated the brokerage sector by offering low prices starting in 2014, but most have since exited the brokerage sector.2012201320142015201620172018MarketingListingMembershipBrokerageSegmentInternetInt

31、ernet potentialBuyer Seller Listing volume - primary Listing volume - secondaryEfficiency and cash flow (esp. primary)Higher client trafficAfter marketSearching, filtering & home detailsInformation authenticityHome visitsEfficiency and cash flow (esp. primary)Higher client trafficAfter marketSearchi

32、ng, filtering & home detailsInformation authenticityWe think information and service quality and transaction efficiency are the key areas which online brokers could improve (current performance and future potential of internet companies in key segments of theHigher client trafficTransaction Negotiat

33、ion for the deal perspective Legal process, finance, etc.Higher client traffichome purchase process).perspectiveBackstage support - data & systemperspectiveBackstage support - data & systemBackstage support - experience & efficiencyPotential cooperation (across agents or brokers)Securing clients aga

34、inst competitorsForward 12m PE302520151055i5j and WorldUnion are trading at 12x and 17x 2020E PE, respectively (on consensus estimates), compared to the 19x average for US brokers (since listing) and 14.5x for global integrated service providers (since 2004).Jan-16Jul-16Jan-17Jul-17Jan-18Jul-18Jan-1

35、9Jul-190Jan-16Jul-16Jan-17Jul-17Jan-18Jul-18Jan-19Jul-195i5jWorldUnionSources for the exhibits above: National Bureau of Statistics, local government websites, Lianjia, China Real Estate Index System, National Association of Realtors, company data, Wind, Thomson Reuters Eikon, UBS estimatesChina Rea

36、l EstateBrokerageSectorUBSResearchINVESTMENT SUMMARY ANDSTOCKPICKSreturnInvestment summaryWeinitiatecoverageofChinasrealestatebrokeragesectorwithapositiveview.In 2019-30, we forecast a 7.4% secondary residential sales value CAGR and 6% rental transaction value CAGR.WeestimatesecondarysaleswillreachR

37、mb15trnby2030andrentaltransaction value Rmb3trn and think brokers could account for about 90% or secondary transaction value and about 30% of rental transaction value (compared to about 80% and about 15% currently; rental includes both brokerage and asset management).Forprimarybrokerage,weforecastal

38、argelyflatprimaryresidentialsalesmarket, withsalesvalueofRmb15trnby2030.Weestimateprimarybrokerscouldaccount forabout50%oftotalresidentialprimarysalesforon-siteagencyandabout30% of distribution businesses by then (currently about 45% and about 15%, respectively).Figure2:TransactionvalueforecastsforC

39、hinaresidential housingTransaction value forecasts for China residential housing marketRmbbnTransaction value forecasts for China residential housing market35,00030,00025,000Figure 3: Estimated value of transactions done by brokers, 2018 vs. 2030Rmb bn30,00025,0005,000020,00015,00010,0005,0002017E20

40、18E2019E2020E2021E2022E2023E2024E2017E2018E2019E2020E2021E2022E2023E2024E2025E2026E2027EPrimarysalesSecondarysalesRental02028E2029E2028E2029E2030E2030ESource:NationalBureauofStatistics,Lianjia,ChinaRealEstateIndexSystem,UBS estimates.Note: Rental includes rental brokerage and apartments.Source:Natio

41、nalBureauofStatistics,Lianjia,ChinaRealEstateIndexSystem,UBS estimatesWe also believe there are market consolidation opportunities in the primary and secondary brokerage sectors. In our view, this is more important for primary brokers as we expect primary sales to be flat going forward. We have stud

42、ied several overseas markets and forecast stable commission rates and agent costs going forward, leading to stable margins; and think the online transformation will be positive for brokers overall, as it will improve quality and efficiency.We prefer secondary brokers due to the long-term growth pote

43、ntial (versus a largely flat primary market); and for primary brokerage, we like companies with high efficiencies, strong relationships with top developers (that are not too concentrated) and large distribution networks. Figure 4 shows the business positioning and strategies for Chinese real estate

44、brokers.We prefer 5i5j to WorldUnion, given 1) 51%/56% of 5i5js revenue was from secondarybrokeragein2018/H119;and2)weareconfidentthat5i5jcanatleast defend its market share in its core cities and further expand in other cities. We have a Sell rating on WorldUnion, as we think: 1) it is losing market

45、 share in primarybrokerageandisunlikelytoregainitquickly;and2)itsassetmanagement business(HomePlusApartments)haslowvisibilitytoturnprofitable.Figure 4: Business comparison of listed brokers in China (percentage of total revenue, 2018)PrimarybrokerageSecondarybrokerageRevenueTotalAgencyTotalApartment

46、PropertybreakdownDistributionE-commerce(on-site)ConsultingsecondarySalesRentalrentalmgmt.VAS5i5j15.3%*51.3%37.4%13.9%15.5%0.2%0.5%WorldUnion66.3%22.3%44.0%3.4%8.4%6.8%13.4%E-House87.0%7.1%*79.9%10.5%2.5%GuochuangHopefluent10.0%3.4%Location & strategies5i5jHasofficesin18tier-1and2cities,mostlyintheBe

47、ijing-Tianjin-Hebei(BTH)andYangtzeRiverDelta(YRD)regions,andenterlower-tiercitiesthroughfranchise and M&A.WorldUnionProvideson-siteagencyin200citiesandecommercebusiness,andabout60%ofsalesvaluewasfromthetop100developersin2018;willfurther penetrate lower-tier cities.Provides on-site agency in 204 citi

48、es, has service to business to customers (S2B2C) business in 56 cities and operates a large property database; worksE-Housemainly with top developers and has 26 developers and/or associates to developers as shareholders. According to the company, it will continue to focus on S2B2C business and expan

49、ding city coverage (penetrating into more lower-tier cities) and business scale.GuochuangHasofficesin12tier-1and2cities,andisespeciallystronginShenzhen.Accordingtoits2018annualreportitplanstoexpandtoothercorecitiesand lower-tiercitiesnearthesecorecities.Themajorclientsofitsprimarydistributionbusines

50、saremid-to-smalldevelopers.HopefluentProvideson-siteagencyin150+cities(butabout50%ofrevenueisfromGuangzhou).* means major business, while means minor business *Providesservicestobrokers(mainlysecondary)undertheFangyoubrandandmainlyearnscommissiononprimarysales.Source: Company dataWhy are we initiati

51、ng coverage of the sector?The real estate brokers business is correlated with the property marketso why do we think it is worth considering brokerage companies as well as developers?On a company level, 5i5js and WorldUnions share prices have lagged A-shareandHongKong-listedChinesedevelopersunderourc

52、overageby 35ppt/31ppt YTD on average, implying the market may have more concernsonthesebrokersthanondevelopers.However,wethinkmany of the concerns are overdone. In addition, we believe brokers multiple business lines can also alleviate earnings fluctuations and potentially provide some synergy.More

53、importantly, in the long run, we think the brokerage sector: 1) is positioned to benefit more from the secular trend in the secondary market; 2) has further concentration potential; 3) has better earnings visibility;and4)hasthepotentialtobecomeintegratedserviceproviders. We believe these factors wil

54、l provide some brokers with competitive edgesoverdevelopersasChinashousingmarketmatures.Valuation and stock picksWe set our sector target 2020E PE at 14x, implying 15x 12-month forward PE based on our estimates, largely in line with the historical average level of the five global integrated service

55、providers, but still below the historical average of US brokers. We value 5i5j on 16x 2020E PE and WorldUnion on 12x 2020E PE. We initiate coverage of 5i5j with a Buy rating and WorldUnion with a Sell rating.Figure 5: China real estate broker valuationsStock codeMarketcap (US$ bn)3M ADTV(US$m)Rating

56、Stock price (LC)P/EP/BEV/EBITDA2019-21ECAGR2019E ROE2019 EFCFyield2020FCF yield2018ANet gearing2019E2020E2021E2019E2020E2021E2019E2020E2021EChina Real Estate Brokers5i5j000560.SZ1.54.7Buy4.3513.8x11.7x9.8x1.0 x1.0 x0.9x7.9x6.6x5.4x18%8%6%11.0%4%WorldUnion002285.SZ1.15.3Sell3.7425.1x15.9x13.4x1.4x1.3

57、x1.2x10.8x7.7x6.7x11%6%2%3.2%4%Guochuang1002377.SZ0.52.8Not Rated3.969.9x8.6x7.5x0.7x0.6x0.6x5.6x4.9x4.3x16%7%NANANet cashE-House12048.HK1.60.8Not Rated8.908.8x7.1x5.8x1.3x1.1x1.0 x4.4x3.1x2.4x22%15%NANANet cashHopefluent10733.HK0.20.0Not Rated1.72N/AN/AN/AN/AN/AN/ANANANAN/ANANANANet cashMidland1120

58、0.HK0.10.0Not Rated1.2812.0 x3.4x1.9x0.6x0.5x0.5x-6.1x-3.2x-2.8x102%9%NANANet cashWeighted Average14.2x10.6x8.8x1.1x1.0 x0.9x6.8x5.2x4.4x19%10%4%8%China Real Estate Online Service ProvidersSofun1SFUN.N0.20.1Not Rated2.09N/A14.9xN/AN/AN/AN/ANANANAN/A3%NANA78%1WUBA.N7.79.4Not Rated51.4814.8x14.7x12.6x

59、2.1x1.9x1.8x12.9x9.9x7.3x-15%18%NANANet cashChina Index1CIH.O0.3N/ANot Rated3.55N/AN/AN/AN/AN/AN/ANANANAN/ANANANANet cashWeighted Average14.8x14.7x12.6x2.1x1.9x1.8x12.9x9.9x7.3x-15%18%NANAUS Real Estate BrokersRE/MAX1RMAX.N0.61.8Not Rated33.8515.7x15.3x14.7x1.6x1.5x1.8x8.7x8.1x7.8x1%29%NANA35%Realog

60、y1RLGY.N1.04.3Not Rated8.838.1x7.3x6.3x0.4x0.4x0.4x6.4x5.9x5.3x-2%3%NANA154%Redfin1RDFN.O1.7N/ANot Rated17.97N/AN/AN/A5.2x6.2x7.1x-37.2xNANA10%-54%NANANet cashWeighted Average10.9x10.3x9.4x3.1x3.5x4.0 x-15.2x6.7x6.2x5%-21%NANAGlobal Integrated Real Estate Service ProvidersCBRECBRE.K17.779.5Neutral52