20211101-招银国际-融创服务-01516.HK-Acquisition_of_First_Services_will_generate_earnings_boost_of_12__in_2021E_6页_952kb

Summary of Sunac Services (1516 HK) Company Update

Core Content

Sunac Services (1516 HK), a property services company, has announced the acquisition of 32.22% of First Service from multiple shareholders, including Zhang Peng, Zhang Lei, Liu Peiqing, and CDH, at a total consideration of RMB692 million (HK$2.62 per share). This acquisition is at a 91% premium to the last traded price of HK$1.37. Following this deal, Sunac Services has also announced a compulsory general offer to acquire the remaining 67.78% of First Service, making it a wholly-owned subsidiary and delisting it.

Key Information

• Acquisition Details:

  • Acquisition of 32.22% of First Service at HK$2.62 per share.
  • Premium: 91% over the last traded price.
  • Total consideration: RMB692 million.
  • Additional cost for compulsory acquisition: RMB1,456 million.

• Pro-Forma Impact:

  • GFA:
    • Managed GFA increases by 53 million sq m (31%).
    • Contracted GFA increases by 73 million sq m (23%).
  • Earnings:
    • Revenue boost: 13% in 2021E.
    • Net profit boost: 12% in 2021E.
  • Profit Margins:
    • Similar net profit margins between Sunac Services (14%) and First Service (13%).

• Valuation Analysis:

  • First Service's FY2020 net profit: RMB102 million (+21% YoY).
  • Acquisition consideration implies a 14x 2021E PE, which is in line with its current PE but higher than its YTD average of 8x and 1SD-above-average of 9x.
  • Also higher than the average 13x PE in recent M&As.

Financial Overview

Earnings Summary (YE 31 Dec)

Key Ratios

Stock Performance and Market Data

• Market Cap: HK$48,619 million.
• Average 3-month Turnover: HK$202.66 million.
• 52-week High/Low: HK$29.40 / HK$11.46.
• Total Issued Shares: 3,101 million.

Analyst Ratings

• CMBIS Rating: BUY (Maintain).
• Target Price: HK$29.80 (+90.1% upside from current price of HK$15.68).
• Ratings Definitions:
  • BUY: Potential return of over 15% over next 12 months.
  • HOLD: Potential return of +15% to -10% over next 12 months.
  • SELL: Potential loss of over 10% over next 12 months.
  • OUTPERFORM: Industry expected to outperform the relevant broad market benchmark.
  • MARKET-PERFORM: Industry expected to perform in-line with the relevant broad market benchmark.
  • UNDERPERFORM: Industry expected to underperform the relevant broad market benchmark.

Shareholding Structure

• Sunac Holdings: 71.72%.
• Free Float: 28.28%.

Recent M&A Activity

Important Disclosures

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