20171215-中国银河国际证券-2018_Outlook__Growth_Momentum_Sustained_with_more_M_A__Greentown_Service_is_Our_Top_Pick_8页_577kb

China Property Management Sector Summary

Core Content

This document provides an analysis of the China Property Management sector for the year 2018, highlighting the positive outlook and investment potential for the industry. It focuses on three major listed companies: Greentown Service (2869 HK), China Overseas Property (COPL, 2669 HK), and Colour Life Services (1778 HK), all of which are rated BUY.

Main Points and Key Information

1. Positive Outlook for 2018

• The sector is expected to maintain steady growth despite ongoing tightening in the property market.
• Urbanization in China will continue to support the demand for property management services.
• The addition of completed GFA (Gross Floor Area) remains stable, providing a solid foundation for expansion.
• The sector is considered to have lower policy risk compared to property developers.

2. Investment Highlights

• Greentown Service is highlighted as the top pick due to its strong GFA growth and expansion into value-added services.
• COPL benefits from the acquisition of CITIC Property Management, which is expected to boost its earnings.
• Colour Life is expected to recover earnings even without the Wanda acquisition, with potential upside once the deal is completed.

3. Growth Drivers

• M&A activities: Leading companies are actively pursuing acquisitions, which will contribute to earnings growth in 2018.
• Value-added services: These services, such as education and shopping assistance, are expected to enhance profitability and provide a growth edge.
• Capital market activities: More listings and M&A activity in the sector are anticipated, which could improve market sentiment and provide better valuations.

4. Company Performance and Valuation

5. Sector Investment Thesis

• Stable GFA growth: The sector is expected to see consistent GFA additions, supporting the core business.
• Lower policy risk: Property management is less affected by regulatory changes compared to property development.
• M&A contributions: Acquisitions are anticipated to enhance earnings, particularly for COPL and Greentown Service.
• Value-added services: These are becoming a significant growth driver with higher margins.

6. Industry Consolidation

• The property management sector is becoming more concentrated, with the top 10 companies holding 10.18% of the market share in 2016.
• Larger companies benefit from the consolidation of developers and have better access to capital.

7. Capital Market Activities

• Country Garden Property Service withdrew its A-share IPO in 2017, likely due to regulatory issues, and is considering a Hong Kong listing.
• Poly Property Management was listed on the NEEQ and is expected to pursue an A-share listing.
• A-Living Group, a subsidiary of Agile Group, submitted an IPO application to HKEx and may attract significant market attention.

Conclusion

The China Property Management sector is poised for continued growth in 2018, driven by urbanization, stable GFA additions, and strategic M&A activities. The three covered companies are expected to deliver strong earnings growth, with Greentown Service being the top recommendation due to its robust expansion into value-added services and clear growth trajectory. The sector's lower policy risk and increasing market concentration further support a positive outlook.