20220106-招银国际-华润万象生活-01209.HK-Implication_of_acquiring_Yuzhou_s_residential_PM_on_MixC_and_the_property_sector_6页_840kb

Summary of CR Mixc Lifestyle (1209 HK) Company Update

Core Content

CR Mixc Lifestyle (1209 HK) has announced the acquisition of Yuzhou's residential property management arm on the eve of January 5th. The deal involves a total consideration not exceeding RMB1.06 billion, with Yuzhou's residential PM business managing/contracting a GFA of 17.6/26.6 million square meters in 2020.

Key Implications

• Impact on MixC:

  • On a pro forma basis, the acquisition is expected to increase MixC's contracted and managed GFA by 18.6% and 16.5%, respectively.
  • It is projected to boost MixC's net profit by 6% in 2020.
  • If Yujia's net profit doubles in 2021E, its valuation is estimated at 11x 2021E PE, which is higher than the average for small players in the sector (below 8x).
  • However, the acquisition may not align with MixC's focus on commercial property management, and there is a risk that the parent company's (Yuzhou) delivery obligations will now be transferred to MixC.

• Implication on Property Sector:

  • The deal is positive for the property sector as it indicates that SOEs are stepping in to help alleviate default risks for non-SOE developers.
  • Despite this, SOEs are likely to maintain a conservative approach to M&A, meaning they alone may not resolve the cash shortage issues.
  • The acquisition may help alleviate concerns over Yuzhou's ability to repay its upcoming USD242 million and USD347 million bonds due on January 23rd and 25th, respectively, though the size of the deal is insufficient to fully cover the repayment.

Potential SOE PM Firms for M&A

• Poly Property Management: Likely to pursue M&A due to its active search for assets following share incentives.
• Onewo: Unlikely to engage in M&A as it has already acquired Yango Smart Services.
• COSP: Unlikely to engage in M&A due to limited cash and lack of focus on such activities.

Earnings Summary (YE 31 Dec)

Stock Data

• Market Cap (HK$ mn): 73,268
• Average 3 mths t/o (HK$ mn): 108.65
• 52w High/Low (HK$): 55.25 / 31.75
• Total Issued Shares (mn): 2,283

Share Performance

Key Ratios

CMBIS Ratings

• BUY: Stock with potential return of over 15% over next 12 months.
• HOLD: Stock with potential return of +15% to -10% over next 12 months.
• SELL: Stock with potential loss of over 10% over next 12 months.
• NOT RATED: Stock is not rated by CMBIS.
• OUTPERFORM: Industry expected to outperform the relevant broad market benchmark.
• MARKET-PERFORM: Industry expected to perform in-line with the relevant broad market benchmark.
• UNDERPERFORM: Industry expected to underperform the relevant broad market benchmark.

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• Past performance does not guarantee future results.
• The report may be subject to change without notice.
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Conclusion

CR Mixc Lifestyle's acquisition of Yuzhou's residential PM arm has significant implications for both the company and the broader property sector. While it offers potential growth and diversification, it also introduces risks due to the transfer of Yuzhou's obligations and the mismatch with MixC's commercial focus. The company is expected to continue its growth trajectory, with projected revenue and net profit increases. However, the market's response to the deal and the broader M&A environment will play a crucial role in its future performance.