A-Living announced that its profit after tax and net profit attributable to the shareholders are expected to increase more than 50% and 35% respectively in 1H20. Meanwhile, the Company also proposed to change the company name from "A-Living Services" to "A-Living Smart City Services". We maintain our profit forecast unchanged but lift TP from HK$41.53 to HK$60.7, which is equivalent to 34.7x 2021E P/E or average of Top 3. Maintain BUY recommendation.
- Expect to earn more than RMB730mn in 1H20. In 1H19, revenue and net profit attributable to shareholders amounted to RMB2,241mn and RMB541mn. The Company announced that net profit attributable to shareholders would grow more than 35% in 1H20. In other words, net profit attributable to shareholders is expected to be more than RMB730mn in 1H20. The rise in net profit was mainly attributable to the consolidation of CMIG Futurelife Property Management acquisitions that increase managed GFA as well as improvement of overall operational efficiency.
- Commence the city services business. Secondly, the Company proposed to change the company name to "A-Living Smart City Services Co. Ltd.". It is because the Company believed that city services has ample opportunity and established the fifth business segment, city services, which focuses on refined city management. By utilising technologies, management experience and resources advantages, A-Living will strive to enhance city management system and build itself as a comprehensive platform of intelligent city services.
- H share full circulation. A-Living also announced that it received a formal approval from CSRC for the H share full circulation and the issue of additional overseas listed foreign shares. The Company plans to convert domestic shares and unlisted foreign shares into H shares. Furthermore, it is allowed to issue no more than 86.7mn new H shares, which is valid for 12 months from 24 Jun 2020. If all new H shares are issued, A-Living may raise more than HK$3bn that can help it explore new business.
- Forecast unchanged but lift TP; maintain BUY. We maintain our earnings forecast unchanged. We forecast net profit to surge by 41.3% to RMB1,739mn in 2020 and 20.2% to RMB2,091mn in 2021. Being the second largest property management company, A-Living is undervalued. We lift TP from HK$41.53 to HK$60.7, which is equivalent to 34.7x 2021E P/E or average of Top 3. Maintain BUY recommendation.
