20180523-招银国际-雅生活服务-03319.HK-One_of_the_fastest_growing_players_in_the_market_24页_1mb

A-Living Services (3319 HK) Summary

Core Content

A-Living Services (3319 HK) is a prominent property management service provider in China, focusing on mid- to high-end properties. The company was spun off from Agile Group and listed on the Hong Kong Stock Exchange (HKEX) on 9 Feb 2018 with an IPO price of HK$12.30. It operates under two well-known brands: "雅居乐物业 (Agile Property Management)" and "绿地物业 (Greenland Property Services)."

Main Points

• Industry Outlook: A-Living operates in a rapidly growing property management sector, driven by urbanization and rising disposable incomes. The market is expected to continue expanding, with traditional property management and value-added community services showing significant potential.

• Business Model: The company provides three main business lines:

  1. Property Management Services: Includes security, cleaning, green maintenance, and repair services. These are the core of the business, accounting for 68% of revenue.
  2. Value-Added Services to Non-Property Owners: Primarily property developers. These include sales assistance, advertising, property agency, and home inspection services.
  3. Value-Added Services to Property Owners: Includes resident services like housekeeping and property value management such as residential property lease services.

• Growth Strategy: A-Living plans to expand through organic growth and M&A. The company has already begun acquiring third-party projects and has a strong project pipeline. It also launched a market development team in 2017 to target third-party projects.

• Shareholder Support: Agile Group (3383 HK) and Greenland Holdings (600606 CH) are key shareholders. Agile Group will deliver 100% of its projects to A-Living, while Greenland has committed to delivering at least 7mn sq.m of GFA annually from 2018 to 2022. Both companies provide support in value-added services and have entered into multiple framework agreements with A-Living.

• Technology Integration: A-Living has developed a one-stop service platform, including mobile applications such as "A-Steward," "A-Business," and "A-Assistant," to enhance service delivery and optimize transaction flows. The platform supports both resident and vendor services, improving user experience and operational efficiency.

• Financial Performance: In FY17, A-Living reported revenue of Rmb1,761mn and net profit of Rmb290mn. The company has shown strong growth in net profit, with a CAGR of 91% from 2014 to 2017. Its gross profit margin and net margin have improved significantly due to the rise in value-added services.

• Valuation: The current share price is HK$11.92, trading at 19.3x 18E PER and 12.3x 19E PER. The target price is HK$15.74, representing a 32.0% upside. The investment thesis is to Initiate with BUY.

Key Information

• Market Presence: As of 31 Dec 2017, A-Living managed properties in 69 cities, with a total GFA under management of 78.3mn sq.m and a contracted GFA of 126.1mn sq.m.

• IPO Details: The IPO raised approximately HK$3,944.6mn, with 65% allocated to M&A and strategic investments. The company issued 333.3mn H shares, representing 25% of the total share capital.

• Shareholding Structure:

  • Agile Group: 54%
  • Greenland Holdings: 15%
  • Free float: 25%

• Investment Risks:

  • Uncertainties in M&A
  • Weaker than expected support from shareholders
  • Weaker than expected growth of value-added services

Financial Analysis

Investment Thesis

• A-Living is positioned in a sunrise industry with significant growth potential.
• The company benefits from strong shareholder support from Agile and Greenland, which provide a steady flow of GFA and enhance the company's competitive position.
• A-Living's value-added services are growing rapidly and offer higher profit margins, contributing to overall profitability.
• The one-stop service platform improves efficiency and customer engagement, supporting future scalability.
• The company is in a high development phase, with a clear strategy for expansion and a strong project pipeline.

Conclusion

A-Living Services is a promising player in the property management sector, with a solid foundation, strategic shareholder backing, and a clear path for growth. The company's focus on value-added services and technological integration positions it well for future success. The investment recommendation is BUY with a target price of HK$15.74.