Redsun Services reported 1H20 revenue growth of 60.4% YoY. Adjusted net attributable profit (excluding listing expense) grew 64.3% YoY, while GFA under management reached approximately 18.7mn sq m, up 52.9% YoY. We consider Redsun Services to fit the fast-growing, mid-tier, regional leader archetype, and project earnings to grow at 2019-22E CAGR of 42%. Initiate BUY with TP of HK$9.00.
- Fits the fast-growing, mid-tier, regional leader archetype. Redsun Services fits the archetype of the emerging mid-tier property management company with a strong regional focus. 1H20 revenue and adj. net attributable profit (excluding listing expense) were RMB 323mn and RMB 37mn, up 60.4% and 64.3% YoY. GFA under management reached 18.7mn sq m, up 52.9% YoY.
- Rapid growth underpinned by strong regional presence of parent developer. Redsun Services enjoys the backing of Redsun Properties Group, one of the leading developers in Jiangsu province that, along with its associates, contributed to 68.2% of total PM revenue and 69.1% of managed GFA in 1H20. Redsun Services’ strong regional position also allows it to effectively acquire third-party projects, which we project to grow at 2019-22 CAGR of 49% and make up 40% of total managed GFA by 2022.
- Commercial property feature provides additional edge. Redsun Services also features strongly in the management of commercial properties such as shopping malls, home improvement and furnishings malls, hotels and theme parks. Revenue from commercial property management reached RMB 87.7mn in 1H20, which accounted for 39% of PM revenue and 19% of managed GFA. We forecast revenue from commercial properties to exceed 50% of total PM revenue by 2022, resulting from management fee hikes and GFA expansion.
- Set TP at HK$9.00; initiate with BUY. We project earnings to grow at 2019-22E CAGR of 52%, which may be further boosted by potential M&As secured using proceeds from IPO listing. Using peers analysis we set target price at HK$9.00, representing 23x FY21E P/E.
