PDF《BUY》

Friday, September 29,

2017 Company Report China Merchants Securities (HK) Co.

, Ltd. Hong Kong Equity Research To access our research reports on the Bloomberg terminal, type CMHK

1 Greentown Service Group (2869 HK) Industry leader with outperforming growth Greentown Service Group, listed in 2016, is China'

s

2 nd largest property management services provider in 2017. We expect co. continue to deliver high earning growth of 31% CAGR in 16-19E Co. currently manages 118mn sqm GFA, another 135mn sqm is on the pipeline which will be converted into revenue-bearing area over next 3-4 years. Value-added services (VAS) is another growth driver, whose revenue is set to grow at a 52% CAGR in 16-19E With high earnings visibility and higher-than-peers'

earnings growth, we initiate coverage with BUY with a TP HK$5.66 2nd largest in China;

high visibility from core business Greentown Service'

s revenue from prop. mgt. services is set to grow at a 29% CAGR in 2016-19E. Visibility is high as co. had 118mn sqm managed GFA as of Jun17, and another 135mn sqm of reserved GFA which will be converted into revenue-bearing area in next 3-4 years. Profitability of prop. mgt. service revenue will increase at an even faster pace as GPM will improve from 6% in 2013, to 11%/14% in 2016/19E as portion from higher-fees non-residential GFA will increase. VAS as new growth driver;

16-19E revenue CAGR: 52% Co. is bearing fruits from the provision of value-added services(VAS) (e.g. community products) with VAS revenue grown at +60% CAGR in 2013- 16. As co. continues to expand into cultural &

education and prop. asset mgt. services, we expect its VAS revenue to grow at another 52% CAGR for next

3 years, and VAS as % of total revenue to increase from 13% in

2016 to 21% in 2019E. High VAS GPM (est. 36%-34% for 17E-19E) is also expected to expand the overall margin. Initiate with BUY;

expect re-rating will continue We initiate coverge on Greentown Service with a BUY rating. Our target price of HK$5.66 is set at 26x P/E on FY18E EPS, which is

2 SD above historical average P/E of 19x and peers'

avg P/E of 16x, justified by 1) co'

s improved earnings visibility on an increased reserved GFA pipeline and VAS segment as new revenue growth driver;

and 2) a higher-than- peers'

earning growth (29% vs peers'

24% &

18%). Stock price has +85% YTD, but we believe this is just the beginning of stock re-rating cycle as visible managed GFA growth, robust VAS driver &

high earnings growth should support further stock re-rating. Financials RMB mn

2015 2016 2017E 2018E 2019E Revenue 2,919 3,722 4,903 6,276 8,072 Growth (%) 32.4% 27.5% 31.7% 28.0% 28.6% Adjusted net profit

198 286

385 492

640 Growth (%) 32.8% 44.3% 34.7% 27.8% 30.1% Adj. EPS (RMB) 0.10 0.12 0.14 0.18 0.24 CMS/ consensus - - 100.6% 96.6% 95.0% Adj. P/E (x) 39.3 32.0 27.9 21.8 16.8 Dividend yield (%) - 1.0 1.2 1.5 1.9 Net gearing (%) (565.4) (133.6) (132.0) (145.0) (158.8) Sources: Company data, CMS (HK) estimates Harry WONG Jackson HUI +852

3189 6358 [email protected] +852

3189 6179 [email protected] Initiation BUY Price HK$4.76 12-month Target Price (Potential up/downside) HK$5.66 (+19%) Price Performance Source: Bigdata % 1m 6m 12m

2869 HK 2.1 65.1 54.9 HSI 3.7 15.4 19.1 Sector: Property Hang Seng Index

27491 HSCEI

10909 Key Data 52-week range (HK$) 2.38-5.08 Market cap (HK$ mn)

13250 Avg. daily volume (mn) 5.99 BVPS (HK$) 0.64 Shareholding Structure Mr. Shou Bainian 14.7% Ms. Xia Yibo 14.3% Mr. SongWeiping 7.7% Ms. Li Hairong 21.3% No. of shares outstanding (mn)