【公司研究】綠城服務 (2869 HK) – 憧憬2020年業績反彈回升
- Introduction of Longfor. Greentown Service announced on 27 Dec 2019 that the Company will introduce Longfor (960 HK, HOLD) as its substantial shareholder. Longfor shall (1) purchase approx. 5% of the total issued share from the Company’ Chairman, LI, Hairong, at price of HK$7.7168, and (2) subscribe additional 5.3% of share placements on or before 15 Jun 2020. Upon the completion of the transaction, Longfor will hold 10% of Greentown Service’s enlarged capital. Longfor will also appoint a non-executive Director.
- Financial investment at the current stage. Longfor has its own property management division. However, right now the size of Longfor’s PM division is smaller than Greentown Service. Longfor PM recorded RMB2,989mn revenue in FY18, compared to Greentown Service’s RMB6,710mn. Its contracted GFA was 268mn sq m by end-FY18 compared to Greentown Service’s 363mn sq m. Longfor has yet to announce plan to spin off its PM division. Revenue from Longfor PM only accounted for 2.6% of total revenue in FY18. But given Longfor’s large-scale DP/IP business as well as fast growing PM business (48% revenue growth in 1H19), we presume Longfor is still incubating its PM division. The deal, in our view, is more like a financial investment at the current stage, and Greentown Service will remain independent operation and the position of independent third-party PM company. The introduction of Longfor will certainly enhance Greentown Service’s profile and recognition. We expect management of Greentown Service will seek deeper cooperation with Longfor afterwards. More importantly, placement of new shares will help Greentown to raise fund after a heavy investment in Community Living Servicing Segment.
- Revise down earnings forecast due to sluggish VAS. Although we still expect a mild growth of topline of 27%/22% in FY19/20, we trim our FY19/20 earnings forecast down by 18%/7% to RMB481mn and RMB709mn, due to (1) margin of Consulting Services Segment is under pressure in FY19, especially the margin was a record high in FY18. (2) Growth of Community Living Service Segment is lower than we anticipated, especially Property Asset Management Services (second-hand property agency). (3) The Company recorded a gain from disposal at RMB116mn in FY18. We do not expect such item in FY19. Thus, we forecast a flat FY19.
- Looking forward to a rebound in FY20. Growth of Property Service Segment remains robust in the past few years. We expect the Property Service Segment to continue to grow in FY20, and its margin is still able to slightly improve. After an adjustment in VAS in FY19 and given a low FY19 base, we expect Greentown Service to regain growth in FY20. The Company’s reserved GFA exceeds its managed GFA. Fundamental of the Company’s growth remains intact. Temporary financial setback does not change the Company’s prospect. Market recognized service quality, high-end orientation, years in third-party projects expansion, as well as robust Property Service Segment are still the strengths of Greentown Service. We raise our TP to HK$8.83, based on 32x FY20 P/E (historical avg +1 SD) to reflect its pioneer status in VAS. Upside potential is 5.5%. Downgrade to HOLD.
