www.jpmorganmarkets.comAsiaPacificEquityResearch23October2019ChinaPropertyManagementNavigatingtheblueocean;initiatewithapositiveviewChina,HongKongChina/HongKongPropertyKarlChanAC(852)2800-8513karl.chan@jpmorgan.comBloombergJPMAKCHANRyanLi,CFAAC(852)2800-8529ryan.li@jpmorgan.comBloombergJPMARLICussonLeung,CFA(852)2800-8526cusson.leung@jpmorgan.comJevonJim(852)2800-8538jevon.jim@jpmorgan.comAveryChan(852)2800-8659avery.chan@jpmorgan.comJ.P.MorganSecurities(AsiaPacific)LimitedSeepage90foranalystcertificationandimportantdisclosures,includingnon-USanalystdisclosures.J.P.Morgandoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.WeinitiatecoverageoftheChinapropertymanagementsectorwithapositiveview,placingitatanearlystageofstructuralexpansion(marketsizesurpassingRmb1trillionin2021EandRmb2trillionin2030E,ora9%CAGR).Consolidationofbigplayerswilllikelycontinue(Top100marketsharetojumpfrom27%in2018to59%in2030E),drivinga31%18-22EearningsCAGRforcoverednames.Inourtargetscenario,the2-yearimpliedreturnwouldbe107%,drivenbyreratingandearningsgrowth.OurtoppickisA-Living(3319HK).WealsolikeCountryGardenServices(6098HK)andColourLife(1778HK).Awell-deservedpremium:Thesectoristradingata24x20EP/E(developers:6xP/E).Weconsiderthepremiumjustifiedbecause:(1)itisastructurallygrowingsector,tappingdomesticconsumptionbasedonanexpandinghousingstock;(2)itisasset-lightwithpositiveoperatingcashflowsfromrecurringincome;(3)weseeamplepotentialupsideasthemarketisnotmatureyet;top100marketsharetorisefrom27%in2018to59%in2030E;(4)weseehugegrowthpotentialfromvalue-addedservices(VAS),whichcurrentlyrepresentonly11%oftotaladdressablemarket;(5)itisdefensiveduetolowpolicyrisk,stickiercustomerbaseandlowermacrosensitivity.Weprojecta9%18-30ECAGRinindustryrevenue,drivinga14%earningsCAGRamongtop100players.S...
