20230327-招银国际-新希望服务-03658.HK-High_dividend_growth_story_to_continue_5页_892kb

New Hope Service (3658 HK) Company Update Summary

Core Content

New Hope Service (3658 HK) is a property management company that has shown strong performance in 2022, with a +22% YoY increase in net profit to RMB 203 million. The company's dividend yield increased to 10% in 2022, driven by an increase in the dividend payout ratio from 31% to 48%, which significantly boosted the share price by 12% in the two days following the announcement. The company has confirmed that it will maintain a payout ratio above 50% going forward, making it an attractive option for income-focused investors.

Main Points

Financial Performance in 2022

• Revenue grew by 23% YoY to RMB 1,139 million.
• Net profit increased by 22% YoY to RMB 203 million.
• Gross margin decreased by 2.9ppt to 37.9% due to a higher proportion of lower-margin businesses such as third-party property management and community VAS.
• Operating cash flow declined by 24% YoY to RMB 236 million, primarily due to an increase in trade receivables.

Growth Drivers

1. Third-party expansion: Contributed 70% of new managed GFA in 2022, up from 59% in 2021.
2. Community VAS (retail and catering): Grew by 110% YoY, now accounting for 35% of segment revenue (up from 20% in 2021).
3. Revenue and net profit growth: Expected to grow at 30% and 15% CAGR respectively from 2023 to 2025.

Dividend Policy

• Dividend payout ratio: Increased to 48% in 2022, up from 31% in 2021.
• Dividend yield: Stood at 10%, which is a key attraction for investors.
• Future payout ratio: Confirmed to be above 50%, indicating a strong commitment to shareholder returns.

Valuation and Recommendations

• Current price: HK$1.57.
• Target price: HK$2.77, a +76.2% increase from current price.
• P/E ratio (2023E): 5x, which is attractive and below the industry average.
• Net cash equivalent to market cap, indicating strong liquidity.
• Recommendation: BUY, with a revised target price due to lower growth expectations in net profit.

Key Information

Shareholding Structure

• Golden Rose Developments: 66.92%
• New Voyage Dvlp Ltd.: 5.02%
• Neptune Inv Hlds.: 3.76%

Share Performance

• 1-month return: 18.0% (absolute) vs. 18.6% (relative to HSI/PM sector).
• 3-month return: 8.3% (absolute) vs. 6.5% (relative).
• 6-month return: 21.7% (absolute) vs. 9.6% (relative).

Stock Data

• Market Cap: HK$1,278 million.
• Average 3-month turnover: HK$0.10 million.
• 52-week high/low: HK$2.58 / HK$0.70.

Earnings Growth

• Revenue growth: 57.2% in FY21A, 23.1% in FY22A, and projected at 37.0%, 34.7%, and 30.0% for FY23E, FY24E, and FY25E respectively.
• Net profit growth: 51.1% in FY21A, 22.4% in FY22A, and projected at 15.1%, 14.9%, and 14.4% for FY23E, FY24E, and FY25E respectively.

Key Ratios

• Gross margin: 40.7% in FY21A, 37.9% in FY22A, and projected at 36.2%, 34.8%, and 34.0% for FY23E, FY24E, and FY25E.
• Net margin: 17.9% in FY21A, 17.8% in FY22A, and projected at 15.0%, 12.8%, and 11.2% for FY23E, FY24E, and FY25E.
• ROE: 17.4% in FY21A, 16.5% in FY22A, and projected at 15.1%, 14.3%, and 14.9% for FY23E, FY24E, and FY25E.
• Current ratio: 2.9 in FY21A, 2.8 in FY22A, and projected at 4.3, 5.1, and 5.5 for FY23E, FY24E, and FY25E.

Dividend Yield

• 2021: 5.0%
• 2022: 8.5%
• 2023E: 8.5%

Risk

• Impairment risk from trade receivables is a concern.

Valuation Table Highlights

Conclusion

New Hope Services is positioned as a high-dividend-yield company with a strong growth story, particularly in third-party property management and community VAS. Despite a slight contraction in gross and net margins, the company's attractive valuation (5x 2023E PE) and high dividend yield make it an appealing investment. The BUY recommendation reflects the company's potential for strong returns over the next 12 months.