20180810-兴业金融证券-雅生活服务-03319.HK-Dual-Brand_and_Dual-Turbo_Driven,_Earnings_Growth_Accelerating_5页_463kb

A-Living Services (03319.HK) Summary

Core Content

A-Living Services is a property management company that leverages dual-brand strategies and expansion through acquisitions to drive earnings growth. The company operates under two strategic shareholders, Agile Group and Greenland Holdings, with the dual brands of Agile Property Management and Greenland Property Services. This strategy, combined with value-added services, is expected to significantly enhance the company's profitability and growth.

Key Financial Highlights

• Revenue Growth: In 2018H1, the company recorded revenue of RMB 1,405.7 million, a 103.1% increase year-over-year. This growth is attributed to increased management GFA from both strategic shareholders and the rapid expansion of value-added services.
• Revenue Breakdown:
  • Property management services: RMB 750.3 million (up 37.1% y-o-y), accounting for 53.4% of total revenue.
  • Value-added services to non-property owners: RMB 575.4 million (up 438.9% y-o-y), representing 40.9% of total revenue.
  • Value-added services to property owners: RMB 79.9 million (up 110.6% y-o-y), accounting for 5.7% of total revenue.
• Net Profit Growth: Net profit for 2018H1 reached RMB 332.3 million, a 196.3% increase y-o-y. The net profit margin (NPM) improved to 23.6%, up by 7.1 ppts.
• Gross Profit Margin (GPM): GPM for 2018H1 was 36.3%, an increase of 2.8 ppts from the previous year. The GPM for different service lines were:
  • Property management services: 29.0%
  • Value-added services to non-property owners: 44.3%
  • Value-added services to property owners: 46.9%
• Contracted GFA: Total contracted GFA reached 185.6 million sqm in 2018H1, up by 47.2% y-o-y. The breakdown is as follows:
  • Agile Group: 34.1%
  • Greenland Holdings: 10.2%
  • 3rd-party: 55.7%
• Management Fee: The average management fee was 3.02 Yuan/sqm/month, slightly higher than the previous year's 2.97 Yuan/sqm/month.

Main Business Expansion

• Scale Expansion: A-Living actively expanded its management area by 21 million sqm in 2018H1 through 3rd-party cooperation in the new housing market.
• Acquisitions: The company acquired 51% equity in Nanjing Zizhu Property Management Company and Lanzhou Chengguan Property Management Company, adding 24.3 million sqm and 24.9 million sqm of management area, respectively. This helped expand its business into East China and Northwest China.
• Future Growth Strategy: A-Living plans to continue seeking M&A opportunities to strengthen its scale effect and ensure sustained growth.

Value-Added Services

• Growth: Value-added services showed strong growth, with revenue increasing by 438.9% for non-property owners and 110.6% for property owners.
• Composition:
  • 70% of value-added services to property owners are life services (e.g., maintenance, housekeeping, community group purchase, community tourism).
  • 30% are asset management services (e.g., club management, hotel and apartment management, second-hand housing intermediary service).

Risks

• Expansion and Acquisition Failure: The success of the company's growth strategy depends on the effectiveness of its M&A activities and expansion into new markets.
• Unable to Raise Management Fee: There is a risk that the company may not be able to increase its management fee, which could impact profitability.
• Lower Growth for Value-Added Services: The growth of value-added services may slow down in the future, affecting overall revenue performance.

Investment Rating

• Industry Investment Rating: The report does not explicitly state the industry rating, but the company's performance is expected to outperform the market due to its growth strategies.
• Company Investment Rating: The report does not provide a specific rating for the company, but it highlights the potential for strong earnings growth through its dual-brand and dual-turbo strategies.

Disclaimer and Information Disclosure

• The report is prepared by Industrial Securities Co., Ltd., a qualified securities investment consulting business.
• The report is distributed in Hong Kong by China Industrial Securities International Brokerage Ltd., which is regulated by the Hong Kong Securities and Futures Commission.
• The report contains hyperlinks to external websites, which are provided for convenience and reference only. The company is not responsible for the contents of these websites.
• The report is based on public information and does not guarantee its authenticity, accuracy, or completeness.
• The company may have conflicts of interest due to its involvement in investment banking services, and investors are advised to consider this before making decisions.
• Unauthorized redistribution or use of the report is prohibited without prior written consent.