Revenue and net profit gained by 16.0% to RMB869mn and 66.4% to RMB145mn in 1H20, respectively. Powerlong Comm will commence to operate 12 shopping malls with 1.35mn sq m managed GFA in 2H20. Furthermore, managed GFA of residential properties is expected to increase to 13mn sq m by end-20 and 15mn sq m by end-21. First M&A had started in Jul 2020 and more are expected.
- Earnings jumped 66% in 1H20. Revenue and net profit gained by 16.0% to RMB869mn and 66.4% to RMB145mn in 1H20, respectively. Revenue growth was driven by the rise in managed GFA to 18.6mn sq m in the period. Furthermore, improvement in gross margin and better SG&A cost control lifted overall profitability. Lastly, a 2.4ppts retreat on effective tax rate to 24.8% in 1H20 further boosted profitability.
- 12 new malls in 2H20. As of Jun 2020, 51 commercial properties (up 6 YoY) with 7.0mn sq m (up 9.6% YoY) were under management, of which 45 were shopping malls and six were shopping streets. Revenue from commercial operation increased by 12.8% to RMB700mn in 1H20, of which income from Yangtze River Delta (YRD) accounted for 65%. Overall occupancy rate increased by 0.8ppts from a year ago to 87.1% as of Jun 2020. GM of commercial operation improved from 29.3% in 1H19 to 31.1% in 1H20. The Company plans to commence operations of 12 shopping malls in 2H20, of which two are owned by third parties. Total managed GFA of these 12 malls are 1.35mn sq m. It also utilizes technology to enhance consumers’ experience and improve operating efficiency.
- VAS enhanced margin. Revenue from residential property management increased by 31.6% to RMB168mn in 1H20, of which revenue from VAS soared 117% to RMB42.9mn. GM of residential property management improved by 9.5ppts to 21.9% in 1H20 because of increase contribution of high margin VAS. Managed GFA increased by 10.2% to 11.65mn sq m in 1H20, of which YRD accounted for 44.6%. Managed GFA is expected to further increase to 13mn sq m by end-20 and 15mn sq m by end-21.
- First M&A. In Jul 2020, the Company announced to acquired 60% interest of Zhejiang Xinghui Commercial Management with RMB40.6mn. Xinghui is engaged in retail commercial property operation and management. It had 14 retail projects of 0.89mn sq m under management. The acquisition multiple is 11.3x 20E P/E or 8.8x 21E P/E based on profit guarantee. The Company will look for further target which managed five or more retail properties.
