J.P. 摩根-中国-房地产行业-中国物业管理：2019年表现优异并且会持续-2020.3.9-68页.pdf

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 of Mainland China.This report or any portion hereof may not be reprinted,sold or redistributed without the written consent of J.P.Morgan.China Property ManagementOutperformance should continue through FY19 results,and beyondChina,Hong KongChina/Hong Kong PropertyKarl Chan AC(852)2800-Bloomberg JPMA KCHAN Ryan Li,CFA(852)2800-Cusson Leung,CFA(852)2800-Jevon Jim(852)2800-Avery Chan(852)2800-J.P.Morgan Securities(Asia Pacific)LimitedSee page 65 for analyst certification and important disclosures,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 this report as only a single factor in making their investment decision.Property 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 profit alerts.We expect outperformance to continue intoFY19 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 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 areCGS(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,it is still attractive compared to other high-growth sectors given its31%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(more).Education is trading at 40 x P/E,and we think PMCs could gradually reach that level withlonger track records.Even if the P/E stays the same,strong growth alone shouldstill drive up share prices,in our view.What should be the normalized P/E?Given the non-cyclical nature,we think that,after a high-growth stage,PMCs will eventually be benchmarked to stable growth sectors such as consumer staples,telecom and utilities,which are trading 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 amid market consolidation.There is also upside risk if management fees manage 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 ofPoly Property Development(6049 HK)at Neutral(see initiation).Although we 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 catalysts.We alsoinitiate on Languang Justbon(2606 HK)at Overweight with a PT of HK$70,for 59%potential upside(see initiation).P/E is low today at 12x due to the short listing history,less M&A activity than expected,and management 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 beat the minimum growth stated in positive profit alerts(more).Strong IPO pipeline:Five PMCs are in the IPO pipeline for HKSE(see more in peer comparison),and CR Land,Shimao and KWG,among others,may potentially spin off PMCs too(per Bloomberg).Total PMC market cap is still small at only US$36 bn(roughly equivalent to a big-cap developer),and thus we believe over-supply is not a concern at this time.Sector P/E vs EPS CAGRThree stages of China property management sector P/E Source:Bloomberg,J.P.Morgan estimates.Prop MgtF&BBrewerySeasoningCateringHome applianceSupermarketHK RetailFurnitureSportswearDigital mediaE-commOnline gameOnline travelStreamingEducationTelecomDevelopersHK LandlordsUtilities0510152025303540450%10%20%30%40%20E P/E(x)EPS CAGR4681012141610152025303540455055Jun-14Apr-15Feb-16Dec-16Oct-17Aug-18Jun-19-PMC P/EDevelopers P/EStage 1LearningBenchmark:Education(40 xP/E)Benchmark:Staples/telecom/utilities(20 x P/E)Stage 2HarvestStage 3MaturityDevelopers P/E(x)PMC P/E(x)2Asia Pacific Equity Research09 March 2020Karl Chan(852)2800-Equity Ratings and Price TargetsMkt CapPriceRatingPrice TargetCompanyTicker($mn)CCYPriceCurPrevCurEnd DatePrev End DatePoly Property Development6049 HK4,552HKD66.30N69.00Dec-20Sichuan Languang Justbon2606 HK1,010HKD44.05OW70.00Dec-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 Services1778 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.A income Estimate Changes in millionsFY19EFY20ECompanyBBG TickerCCYPrevCurPrevCurPoly Property Development6049 HKCNY-507-744-Sichuan Languang Justbon2606 HKCNY-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.P.Morgan estimates.Major reportsChina Property Management:Navigating the blue ocean;initiate with a positive view.Table of ContentsStock picks.3How is the sector positioned now?.7FY19E results preview.13Peer comparison.15Valuation.20Poly Property Development.23Sichuan Languang Justbon.33Country Garden Services.45A-Living Services.49Greentown Service.53China Overseas Property Holdings.57Colour Life Services.613Asia Pacific Equity Research09 March 2020Karl Chan(852)2800-Stock picksTable 1:Summary of price targetsSource:J.P.Morgan estimates.Note:For a detailed breakdown of how we arrive at the target P/E in each business segment,please see the valuation section.Figure 1:Rerating quadrant for China property management companiesSource:Company data,J.P.Morgan estimates.Companies marked with*are not covered by JPM;numbers of those are based on Bloomberg consensus.CompanyTickerTarget P/EHK$/shTarget P/EHK$/shTarget P/EHK$/shDec-20 Price Target(HKD)Current Price(HKD)Potential upsideFY20E P/EFY21E P/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 HK18x6.217x2.411x0.89.59.6-1%38x31x25xChina Overseas PH2669 HK22x5.413x0.611x0.46.36.6-5%33x27x23xLanguang Justbon2606 HK17x37.418x23.39x9.370.044.159%20 x15x12xColour Life1778 HK13x2.715x3.67x0.38.04.098%17x15x13xAverage33x26x21xProperty ManagementCommunity VASNon-community VASImplied valuationCGSA-LivingPoly PDGreentown ServiceCOPHS-Enjoy*Ever Sunshine*Languang JustbonPowerlong Commercial*Colour LifeTimes Neighborhood*Aoyuan Healthy Life*Binjiang Service*Kaisa Prosperity*0%10%20%30%40%50%60%70%80%90%100%0 x5x10 x15x20 x25x30 x35x40 x45x50 x2.EMERGING19-21 earnings CAGRP/E3.HARVEST4.MATURITY1.LAGGARDSlow growth&lower credibilityHigh growth&gaining credibilityHigh growth&higher credibilitySlow growth&high credibilityHigher credibilityHigher growth4Asia Pacific Equity Research09 March 2020Karl Chan(852)2800-Our assessment framework For stock-picking we reference our rerating quadrant,which separates companiesinto four general categories.Overall:In general,we like our covered names in Quadrant 3,Harvest,which havemore 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 positives arelikely 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.The 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 management 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):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.Quadrant 2 Emerging(high growth&gaining credibility):This is normally the stage PMCs go through in the first 1-2 years post IPO.While there arehigh growth expectations,the market is not yet willing to assign a P/E premium until it seesresults.Thus,names here have the highest potential for share price outperformancewhen 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 spotwhere 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 the 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.g.Greentown Service)could be positioned here,as investors would still trust their management capability.5Asia Pacific Equity Research09 March 2020Karl Chan(852)2800-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 Country 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 could 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 cyclical business(agency),but this 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 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 in 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,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 reputation(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(2669 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 is insufficient.SOE and branding premium should have been priced in already.We 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 with fewer-than-expected M&As and management changes.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 interest Strong efficiency in community VAS under-appreciated;more track record on that should boost market expectations.Colour Life(1778 HK)Overweight Very low expectations due to slow growth in contracted GFA and consistent disappointment in earnings growthhistorically.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 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.Morgan6Asia Pacific Equity Research09 March 2020Karl Chan(852)2800-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 valuation in different P/E scenariosSource: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 li