During 2016-2019, revenue and net profit grew at CAGR of 57.6% to RMB1,878mn and 88.2% to RMB224mn, respectively. Ever Sunshine is confident about its future, driven not only by the parent company, but also by M&A, third parties and co-operation with independent regional property developers. The Company set its 5-year plan in 2018 to look for 10x growth from 2018 to 2023.
- 134mn shares top-up placing. On 4 Jun 2020, the Company announced to place 134mn shares through top-up placing. Placing price is HK$11.78, which is equivalent to 6.95% discount to previous closing price of HK$12.66. Net proceeds amounted to HK$1.56bn. Net proceeds will be used for future business development or investments and as general working capital. After the completion of placing and subscription of new shares, stake of Lin Family and CIFI Holdings will decrease to 36.6% and 19.8% from 39.8% and 21.5% before top-up placing, respectively.
- Multi-wheel driven market development strategies. CIFI Holdings (884 HK, NR) posted a 52% and 26% growth in contracted sales GFA in 2018 and 2019, respectively. This is an important asset for Ever Sunshine. As at Dec 2019, contracted GFA and GFA under management amounted to 110.6mn sq m and 65.2mn sq m, up 68.7% and 61.9% YoY, respectively. Robust growth of GFA is not only driven by the parent company, but also by M&A and third parties. In the past 12 months, the Company acquired major stake of three property companies. These acquisitions accelerated the growth path. Lastly, Ever Sunshine looks for co-operation with independent regional property developers. Through “5221” strategy, 50%/20%/20%/10% of future GFA will be acquired by third-parties/developer partners/CIFI/M&A.
- RMB3bn cash on war chest. After the completion of share placement, Ever Sunshine will own more than RMB3bn cash, which is about one-sixth of its market cap. We believe this not only helps its M&A plans, but also enhances its VAS business. In 2019, revenue from community VAS and non-property owners VAS grew by 144% to RMB483mn and 54% to RMB325mn, respectively. Ever Sunshine will invest further in technologies and intelligent operations to improve service quality and operational efficiency.
- Maintain BUY. We revise up our FY20/21E net profit forecast by 9.6%/20.6% to RMB357/535mn. 10x growth from 2018 to 2023, indicating the profit would achieve RMB1bn in 2023. We believe such goal is progressive and achievable given CIFI and its partners’ continuous support on VAS to non-property owners as well as more M&A deals are expected to come. Current valuation has already reflected the Company’s fast-growing perspective. But we view Ever Sunshine as a long-term growth story in a rising property management industry. Furthermore, the inclusion of HK Stock-connect and 1H20 results could be short-term catalysts. Thus, we raise our TP to HK$14.00, based on 40x FY21 P/E, closed to valuation of Poly PM (6049 HK, BUY). Maintain BUY.
