【Company Research】A-Living (3319 HK) – Looking forward to next 3-year development

• 54% earnings growth in FY19. In FY19, A-Living recorded a revenue of RMB5,127mn, up 52% YoY. Gross margin remained competitive at 36.7% compared to 38.2% in FY18. Thanks to the refined management structure, SG&A to revenue declined from 10.2% to 6.8%. Net profit to shareholders grew 53.6% to RMB1,231mn, representing net margin of 24.0%, up 0.3ppt YoY.

 

• Over RMB10.0bn revenue in FY19. In FY18, CMIG/New CMIG recorded a revenue of nearly RMB4,000mn, and achieved over 10% topline growth in FY19, according to management. This means, after the consolidation of CMIG/New CMIG PM in FY20, A-Living’s topline will likely to breakthrough RMB10.0bn. As of end-FY19, A-Living has a contracted GFA of 356mn sq m and managed GFA of 234mn sq m.  If including CMIG/New CMIG’ s projects, A-Living’s contracted GFA and managed GFA will surpass 600mn sq m and 500mn sq m. Despite an immediate profit contribution for CMIG/New CMIG, the targeted company also has room to improve itself by integrating to A-Living. The previous controlling shareholder of CMIG/New CMIG is a non-PM company, which could help little in operation enhancement. In contrary, A-Living is a hardcore PM company with rich experience in helping the target company to improve. A-Living can apply its standards and system to CMIG/New CMIG.

 

• Progressive FY20-22 planning. A-Living has made a new 3-year planning for FY20-22. The key drivers in the future will be 1) developing the potential existing projects, 2) expanding actively in market with both third party expansion and participating in mixed-ownership reform of SOEs, and 3) developing innovative and new business segments. A-Living aims to achieve 730-750mn sq m contracted GFA and 600mn sq m GFA by end-FY22, and earnings CAGR from FY19 to FY22 at 30%.

 

• Reaffirm top pick in property management sector; maintain BUY. We believe A-Living is entering a new phase of development in FY20. With abundant GFA, more opportunities can be created. We revise up our FY20/21E EPS forecast by 1.2/6.8% to RMB1.30/1.57. We maintain our TP unchanged and reaffirm A-living as our top pick in property management sector.