20210817-招银国际-远洋服务-06677.HK-1H21_results__Beat_3页_495kb

Sino-Ocean Service (6677 HK) 1H21 Summary

Core Content

Sino-Ocean Service, a property service company, reported strong financial results for the first half of 2021 (1H21), surpassing expectations with a 73% year-over-year (YoY) increase in net income to RMB261 million. This exceeded the profit alert of 60% by 13 percentage points. Total revenue grew by 53% YoY to RMB1.39 billion, driven primarily by growth in the Community VAS and Developer VAS segments. The Community VAS segment saw a remarkable 265% YoY revenue increase, while Developer VAS grew by 74% YoY.

Main Points

• 1H21 Financial Highlights:

  • Earnings Growth: 73% YoY to RMB261 million.
  • Revenue Growth: 53% YoY to RMB1.39 billion.
  • Gross Profit Margin (GPM): Increased by 3.4 percentage points YoY to 31.9%.
  • Net Profit Margin (NPM): Rose by 2.2 percentage points YoY to 18.9%.
  • Community VAS Contribution: Accounted for 28% of total revenue in 1H21, up from 7% in 1H20.
  • Brokerage Services Growth: Surged 1294% YoY to RMB104.6 million, significantly boosting Community VAS revenue.

• Segment Analysis:

  • Community VAS:
    • Revenue growth: 265% YoY.
    • Key drivers: Parking lot management (+47% YoY) and expanded house brokerage service (+1294% YoY).
    • GPM: 50%, higher than PM (27%) and Developer VAS (20%).
  • Developer VAS:
    • Revenue growth: 74% YoY.
    • Property engineering services accounted for 42% of Developer VAS revenue, growing 312.4% YoY to RMB111.8 million.
  • Property Management (PM):
    • Third-party revenue proportion increased from 32.9% in 1H20 to 39% in 1H21, in line with industry trends.

• New Business Expansion:

  • The company announced the inclusion of commercial operation services for shopping malls and offices in early June.
  • Currently managing 8 shopping malls and 11 offices.
  • Expected to contribute RMB30 million in net profits from 2H21, or 7% of 2021E net profits.

Key Information

• Stock Performance:

  • Current Price: HK$4.99.
  • Target Price: HK$7.41 (maintained from previous).
  • Price-to-Earnings (P/E) Ratio: 8x for 2022E.
  • Market Cap: HK$5,908 million.
  • Average 3-month Turnover: HK$15.39 million.
  • 52-week High/Low: HK$6.88 / HK$3.81.

• Analyst View:

  • Rating: BUY (Maintain).
  • Reasoning: Strong 1H21 results and the addition of high-margin commercial operation services are expected to drive further growth.
  • Recommendation: Investors are encouraged to attend the company’s conference call on 17 August at 10:30am for more insights.

• Shareholding Structure:

  • Sino-Ocean Group: 67.6%.
  • Free Float: 32.4%.

• Dividend & EPS:

  • EPS in 1H21: RMB0.22.
  • Consensus EPS for 2021E: RMB0.35.
  • EPS growth: 29% YoY in 1H21, 49.8% in FY22E.

• Financial Metrics (YE 31 Dec):

  • Revenue (RMB mn): FY19A: 1,830; FY20A: 2,023; FY21E: 2,827; FY22E: 4,075; FY23E: 5,473.
  • Net Income (RMB mn): FY19A: 207; FY20A: 258; FY21E: 406; FY22E: 608; FY23E: 820.
  • ROE (%): FY19A: 49.4; FY20A: 12.7; FY21E: 17.3; FY22E: 21.7; FY23E: 24.5.
  • Net Gearing (%): FY19A: 452.4; FY20A: Net cash; FY21E: Net cash; FY22E: Net cash; FY23E: Net cash.
  • Dividend Yield (%): FY19A: N.A.; FY20A: 1.4; FY21E: 3.5; FY22E: 5.2; FY23E: 7.1.

CMBIS Ratings

• BUY: Potential return of over 15% over next 12 months.
• OUTPERFORM: Industry expected to outperform the broad market benchmark.

Disclosures & Legal Information

• Auditor: PwC.
• Analyst Certification:
  • The analyst certifies that the views expressed reflect personal opinions.
  • No compensation was directly or indirectly related to the views expressed.
• Disclosure:
  • CMBIS or its affiliates have investment banking relationships with the issuers covered in this report.
• Conflicts of Interest:
  • CMBIS may have investment positions or business relationships with the companies mentioned, which could affect the objectivity of the report.
• Legal Restrictions:
  • The report is intended solely for distribution to major US institutional investors.
  • UK and Singapore recipients are subject to specific legal limitations.

Conclusion

Sino-Ocean Service has demonstrated robust growth in 1H21, with significant contributions from the Community VAS and Developer VAS segments. The addition of commercial operation services is expected to further enhance profitability in the second half of 2021. CMBIS maintains a BUY rating, citing strong earnings and potential for re-rating. The stock currently trades at an attractive 8x 2022E P/E ratio. Investors are advised to independently evaluate the investment and consult with a financial advisor.