20220316-招银国际-保利物业-06049.HK-2021_results_in_line_but_spike_in_AR_is_alarming_4页_768kb

Poly Property Services (6049 HK) Summary

Core Content Overview

Poly Property Services (6049 HK) reported its 2021 results, showing a 26% YoY increase in net profit to RMB846mn, in line with its profit alert and share incentives KPI. The company's total revenue increased by 34% YoY to RMB10.8bn, driven by growth in its three main business segments: Property Management (PM), Non-owner VAS, and Community VAS. Despite the revenue growth, the company's account receivable from third parties surged by 92% YoY, leading to a 15ppt cut in the dividend payout ratio to 19.9%, and operating cash much less than profits.

Key Financial Highlights

• Revenue Growth: 34% YoY in 2021, with Property Management contributing the most at 35% YoY growth.
• Net Profit Growth: 26% YoY in 2021, with a Net Margin of 7.8%, slightly down from 8.4% in 2020.
• Gross Profit Margin: Remained flat at 18.7%, while GPM in the PM segment slightly expanded to 14.3%.
• Dividend Payout Ratio: Reduced to 19.9% in 2021 from 35.3% in 2020, reflecting a 15.4ppt decrease.
• Managed GFA: Grew by 22% YoY to 465.3mn sqm, while contracted GFA grew by 15% YoY to 656.3mn sqm.
• Reserve GFA Ratio: Dropped to 41% in 2021 from 49% in 2020, indicating a slowdown in contracted GFA growth.
• Current Ratio: Declined to 2.4 in 2021 from 3.0 in 2019, reflecting liquidity concerns.
• Receivable Turnover Days: Increased to 59 days in 2021, highlighting a longer cash collection period.

Business Segment Analysis

• Property Management (PM):

  • Revenue grew by 35% YoY to RMB6.7bn, making up 62% of total revenue.
  • Growth was primarily driven by public services, which increased by 80% YoY, despite only a 20% YoY increase in managed GFA.
  • This suggests a rise in ASP (Average Selling Price).

• Community VAS:

  • Revenue rose by 32% YoY to RMB2.3bn, representing 21.3% of total revenue.
  • Driven by 70% YoY growth in space operation revenue and 49% YoY growth in community convenience services.
  • These two services alone account for nearly half of Community VAS revenue.
  • GPM increased slightly to 31.4% from 30.3% in 2020.

• Non-owner VAS:

  • Revenue increased by 35% YoY to RMB1.8bn, with a GPM of 18.7% (flat YoY).

Valuation and Market Position

• P/E Ratio: Currently trading at 16x 2022E, which is higher than the industry average of 12x.
• Target Price: HK$53.4, with a +30.2% upside from the current price of HK$41.0.
• Industry Comparison:
  • Poly Services is rated HOLD, while other competitors like Country Garden Services and CR MixC Lifestyle are rated BUY.
  • The company's ROE increased to 13.5% in 2022E, compared to 12.5% in 2021A.

Analyst View

• The report maintains a HOLD rating due to concerns over reliance on public services, which may lead to lower margins and longer cash collection periods.
• The company's revenue growth is expected to slow in the future, as the contracted GFA growth decelerated.
• The dividend cut and operating cash flow issues are significant red flags for the company's financial health.

Stock Performance

• 12-month Price Performance: -5.0% absolute, -0.6% relative to the market.
• Shareholding Structure: Poly Development holds 72.3% of the shares, with free float at 27.7%.

Summary Table

Key Takeaways

• The company met its profit targets but showed concerning trends in account receivable and dividend sustainability.
• Public services are a major growth driver, but their margin impact and cash collection period are worrying.
• The HOLD rating reflects cautious optimism, with a target price that suggests potential upside.
• Investors are advised to review the conference call for deeper insights into the financial figures.

Disclaimer

This report is for informational purposes only and should not be considered as investment advice. CMB International Global Markets Limited (CMBIGM) is not responsible for any loss or damage resulting from reliance on the information provided. Investors are encouraged to consult with a professional financial advisor before making any investment decisions.