20211108-招银国际-万科企业-02202.HK-Onewo_s_spin-off_a_strong_value_boost_for_Vanke_5页_935kb

CMB International Securities | Equity Research | Company Update Summary

Core Content

This report provides an equity research update on Vanke - H (2202 HK), focusing on the potential value creation from its spin-off of Onewo, a property management company. The analysis highlights the financial performance, business segments, and valuation implications of the spin-off, as well as the broader context of the China property sector.

Key Points

Spin-off of Onewo

• Vanke plans to spin off Onewo, a property management division, which could unlock significant value.
• Estimated valuation for Onewo is HKD100 billion.
• Vanke owns 63% of Onewo, implying HKD63 billion in potential value creation.
• This could represent 25% of Vanke's current market cap.
• The market is expected to react positively to this move, and the report suggests investors should accommodate.

Financial Performance of Vanke

• Revenue for Vanke has grown at a CAGR of 30% from FY18A to FY20A (RMB9.7bn, RMB12.7bn, RMB18.2bn).
• Operating margin was 9% in FY20A and is expected to rise to 10% in FY21E.
• Net profit has shown consistent growth, from RMB33.773bn in FY18A to RMB53.879bn in FY22E.
• EPS has increased from RMB3.06 in FY18A to RMB4.64 in FY22E.
• P/E ratio has declined from 4.6x in FY18A to 3.0x in FY22E.
• ROE has decreased from 21.7% in FY18A to 17.8% in FY22E.
• Net gearing ratio has fluctuated between 23.2% and 30.6% over the periods.

Business Segments of Onewo

• Residential Property Management:
  • GFA under management: 566mn sq m in FY20A.
  • Contracted GFA: 751mn sq m in FY20A (up 26% and 17% YoY).
  • Revenue: RMB10.1bn in FY20A (55.2% of total).
• Commercial and Facility Management:
  • GFA under management: 110mn sq m.
  • Revenue: RMB5.3bn in FY20A (29.2% of total).
  • Growth guidance: 30–60%.
• City Services:
  • Projects under management: 31 in 21 cities.
  • Growth guidance: More than 60%.
• Residential dominates the revenue with 90% of total revenue in FY20A.

Valuation and Comparables

• Onewo's closest comparable is CGS (6098 HK), with 821mn sq m of contracted GFA in FY20A.
• Onewo's revenue in FY20A is RMB10.4bn, compared to CGS's RMB11.6bn in 1H21.
• Profit margin for Onewo is lower than CGS.
• A conservative 2021E PE for Onewo is estimated at 30x, compared to CGS's 34x.

Market Performance

• Current Price: HK$17.02.
• Target Price: HK$33.92.
• Up/downside: +99.3%.
• Share Performance (12-month):
  • Absolute: -38.0%.
  • Relative: -35.9%.

Strengths and Analysis

• Partial SOE background (Shenzhen Metro owns 28% of Vanke) provides a strategic advantage.
• Technology development with Vanrui and 5th Dimension Technologies could enhance services with BPaaS (Building Platform as a Service).
• Reserved GFA ratio is 25% in FY20A, significantly below the industry average of 75%.
• Revenue growth has slowed from 36% YoY in 2018 to 27% YoY in 2021E.
• Operating margin is relatively low at 9% / 10% (FY20A / FY21E), compared to 20% for industry leaders.
• Parent company performance has weakened, with contracted sales down 2.8% YoY in 3Q21 and earnings down 23.3% YoY.

Industry Comparables (Figure 4)

Financial Summary Highlights

• Revenue growth has been consistent, with a CAGR of 30%.
• Net profit has also shown growth, from RMB33.773bn in FY18A to RMB53.879bn in FY22E.
• Operating profit has increased from RMB88.966bn in FY18A to RMB138.134bn in FY22E.
• Net cash from operating has fluctuated, with RMB29.285bn in FY21E.
• Capital expenditure has decreased over the years, from RMB18.486bn in FY18A to RMB7.060bn in FY22E.
• Shareholders' equity has grown from RMB155.764bn in FY18A to RMB389.880bn in FY22E.
• ROE has declined from 21.7% in FY18A to 17.8% in FY22E.

Investment Recommendation

• CMBIS Rating: BUY.
• Target Price: HK$33.92.
• Up/downside: +99.3%.

Analyst Certification and Disclosures

• The analyst certifies that the views expressed in the report reflect personal opinions.
• No part of the analyst's compensation is directly or indirectly related to the report.
• The analyst confirms that no trades were made in the covered stocks within 30 days before the report was issued.
• CMBIS is not a registered broker-dealer in the U.S., and the report is intended for major U.S. institutional investors only.
• The report is not suitable for all investors, and CMBIS does not provide individually tailored investment advice.
• The report is for the intended recipients only, and may not be reproduced or distributed without prior written consent.