A-Living posted solid 1H20 results as revenue and net attributable profit increased by 78.5% to RMB 4,002mn and 40.0% YoY to RMB 758mn respectively, mainly thanks to consolidation of CMIG PM acquisition. The Company outlined revenue targets of 10%/20%/30% in 2021E/22E/23E for its newly-announced city services segment, and we consider the new segment to be a synergistic extension to the Company’s public-project heavy portfolio. Overall, we reaffirm our view of A-Living to be among the first tier of property management companies, and thus maintain TP of HK$60.7. Maintain BUY.
- Solid earnings growth driven by consolidation of CMIG acquisition. In 1H20, revenue and post-tax profit increased by 78.5% and 53.6% YoY, respectively, to RMB 4,002mn and RMB 873mn, of which CMIG PM contributed RMB 1,112mn and RMB 120mn. GFA under management grew by 177mn sq m in 1H20 to 353mn sq m. In terms of business segments, both basic property management and property owners VAS grew considerably at 113.4% and 105.0% YoY, respectively. Extended VAS took a hit in 1H20 due to COVID-19 impact, growing at 18.8% YoY.
- Transition to organic growth-oriented strategy to match sector leaders. In 1H20, the Company posted “organic” growth (excl. CMIG) in revenue and post-tax profit of 28.9% and 32.5% YoY, respectively. Transition to an organic growth-focused strategy is not only an expected step after the CMIG PM acquisition, but also a necessary one in order to match the valuation of current sector leaders. We are positive on the future strength A-Living’s capacity for organic expansion as the Company establishes itself as a property management group offering comprehensive services.
- New city services a natural extension of vast public property GFA. The Company announced its target for the new city services segment to reach 10%/20%/30% of revenue in 2021E/22E/23E, respectively. The new segment will mainly include public sanitation, maintenance of public facilities, and other environmental and urban management services. A-Living has been making a sustained effort to accumulate public projects, which has exceeded residential properties in 1H20 as the largest property type in terms of GFA under management, making up 44.4% of total (compared to 35.1% as of YE19). We consider the city services business to be an important way for A-Living to reap the potential of its managed public properties.
Forecast and TP unchanged; maintain BUY. We maintain our forecast unchanged, and maintain TP of $60.7 equivalent to 34.7x 2021E P/E. Maintain BUY.
