中國地產(chǎn)管理：城市改造-千億元市場(chǎng)的新潛力

1、Global Research4 May 2020China Property ManagementUrban Renovation A new potential Rmb100bn marketWe expect re-rating to continueGiven the sharp rally in the property sector (+50% YTD for our covered universe vs. MSCI China: -4%), we think the market is appreciating the sectors earnings sustainabili

2、ty and growth outlook, as we previously highlighted in completion upcycle, public property, and third-party contract. We see urban renovation as the next market. We raise our 2020-22E earnings 3.5-10% and raise our price targets by an average of 34% on higher target multiples due to new market oppor

3、tunities. Our top picks remain Country Garden Services (CGS) for its competitive advantage in winning third-party contracts in lower-tier cities and A-Living due to its public property management business. See related report on urban redevelopment.Urban renovation: A new market that may worth Rmb100

4、bn per annumTo boost consumption and improve living conditions, the State Council announced that it will renovate 39,000 aging urban residential communities in 2020, which will benefit 7m households, doubled from 19,000 communities and 3.5m households in 2019. This is a multi-year project, as the Mi

5、nistry of Housing has identified 42m households that need to be renovated. Also, the government is promoting the introduction of professional management companies to manage the renovated facilities, as in the case of Beijing. Assuming 100sqm/unit, the 7.0m household renovation target for 2020 repres

6、ents 93%/43% of 2020E GFA completion/GFA starts, and we think the renovation of 42m households may represent Rmb100bn per annum, under a blue sky scenario vs. Rmb600bn for the residential property management market.Raising our 2020-22E earnings and price targetsWe raise our 2020-22 earnings estimate

7、s for Country Garden Services by 15-36% and COPH by 4-7%, mainly to factor in higher value-added services revenue and third-party GFA. We raise our price targets for our covered universe by 34%, on average, as we think investors may appreciate the stocks growth profiles and urban renovation.Valuatio

8、n and whats priced inOur covered universe is trading at 30.8x 2021E PE, with a 32% net profit CAGR in 2019-22E, implying 0.97x PEG. We looked at internet and consumer stocks with high earnings multiples and found that investors will pay a high valuation (1.0 x PEG) for stocks with reliable earnings

9、and growth. We think 0.97x PEG prices in a completion upcycle, reserved GFA and public property, but overlooks urban renovation.Real EstateChinaEquitiesJohn Lam, CFAAnalyst HYPERLINK mailto:john-za.lam john-za.lam+852-2971 6358Mark LeungAnalyst HYPERLINK mailto:mark.leung mark.leung+852-2971 8636Tit

10、us Han Associate HYPERLINK mailto:titus.han titus.han+86-10-5832 8777Cindy ChenAssociate Analyst HYPERLINK mailto:cindy-zb.chen cindy-zb.chen+852-2971 8396Figure 1: Summary of valuation changes for property management companies under our coverageCompanyRIC codeShare price(HK$)Mkt cap(US$ bn)RatingPr

11、ice target (HK$)NewOld Chgupside2021E tarNewget PEOldImpliedPEGEarni2020Engs growth2021E 2022ECAGR19-22EPE2021E2022EImpliedPEGMostCG Services6098.HK36.0012.6Buy44.2033.8031%23%36.035.01.133%35%33%33%29.822.50.9PreferredA-Living3319.HK42.707.3Buy50.7040.2026%19%27.020.00.944%27%22%31%Poly

12、Property Dev6049.HK82.155.9Buy96.0074.7029%17%50.036.01.445%34%31%36%43.533.31.2Colour Life1778.HK3.690.7Buy4.606.70-31%25%9.010.00.718%12%10%13%LeastGreentown Service2869.HK10.303.7Neutral10.409.509%1%31.028.01.032%33%26%31%PreferredCOPH2669.HK8.593.6Sell6.503.16106%-24%25.013.0

13、1.025%26%22%25%Weighted average34%13%636%31%28%32%30.824.00.97Note: Price data as of 29 April 2020. Source: Reuters, UBS estimates HYPERLINK /investmentresearch /investmentresearchThis report has been prepared by UBS Securities Asia Limited. ANALYST CERTIFICATION AND REQUIRED D

14、ISCLOSURES BEGIN ON PAGE 27. UBS does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single

15、 factor in making their investment decision.China Property ManagementUBS Research THESIS MAP MOST FAVOREDLEAST FAVOREDA-Living, Country Garden ServiceCOPHPIVOTAL QUESTIONSQ: Will public property management be the next growth driver for listed managers?Yes, as the government is opening public propert

16、y management to public companies and M&A is increasing. Besides, we think this segment deserves a higher valuation multiple than residential property management on a like-for-like basis given: 1) not subject to property cycle; 2) more stable margin as management fee is subject to revision every 1-3

17、years; 3) high entry barrier; and 4) positive to the brand image.China Property Management: Public property management: a new growth area Q: Will rising labour costs (about 60% of COGS) result in margin pressure?Not in the next three years, due to strong GFA growth from new projects. We think margin

18、s on existing projects are falling as it is difficult for management companies to raise fees (more than 50% of property owners must approve), but labour cost has been rising 5-8% per annum. However, the margin on new projects is much higher than existing projects due to higher management fees and lo

19、wer occupancy rate (ie, lower maintenance cost). With strong GFA growth from the addition of new projects, we think margins will remain stable over the next three years. However, margins could decline if growth slows, which may happen after five years, in our view.China Property Management: Potentia

20、l to become integrated service providers Q: Will global model of integrated service providers be adopted in China to drive growth? Yes. From the global peers development history, we see three ways to expand: 1) expand their non- management business (eg, value-added services); 2) expand to non-reside

21、ntial property; and3) expand globally. Looking at JLL and CBRE for commercial property, and FirstService for residential property, we think Chinese management companies non-management fees business (ie, value- added services) may bring more than 50% of their future revenue. Chinese peers are increas

22、ing scale and project density in cities so that it is scalable to launch their value-added services. Thus we are monitoring overall GFA scale, city-level project density, and expansion to non-residential property.China Property Management: Potential to become integrated service providers WHATS PRICE

23、D IN?We expect the property management valuation re-rating to continue; we see the sectors earnings as defensive and we see four new growth drivers for management companies. Our study of internet and consumer stocks suggests investors could pay a high valuation (eg, 1.0 x PEG) for a stock that shows

24、 earnings defensiveness and growth, though technical factors (eg, free float) also matter. HYPERLINK l _bookmark0 more UBS VIEWPotential upside from integrated service providers and opportunities from urban renovation may not be priced in: We think management companies have an edge in providing valu

25、e-added services, especially property-related services with an edge in information advantage and unique offline access to owners. Also, we believe urban renovation could be the next area of growth for listed managers as government is planning to renovate 42m households to improve living conditions,

26、which we estimate could create a new Rmb100bn market.EVIDENCEOur review of global peers business models, conversations with companies in public property management, and public tender document analysis: We compared global peers business models and believe that growth for Chinese companies could come

27、from: 1) expansion of non-management business; 2) expansion to non-residential property; and 3) global expansion. We also talked to existing players in the public property management market and checked 480 public tender documents of public property management in Shenzhen. We view this market as havi

28、ng a high entry barrier and being dominated by local companies.Urban renovation: A potential Rmb100bn marketWhat is urban renovation: Urban renovation is a central government program to:1) renovate aging residential communities (eg, install elevators, redecorate outer walls, and renovate facilities

29、such as water pipes, power grid, gas and optical fibre); and 2) introduce property management services to residential communities after the renovation of those facilities.Objective: Stimulate domestic consumption and improve living conditions.What are aging residential communities?: As per Ministry

30、of Housing and Urban-Rural Development (MOHURD), aging residential communities refers mainly to residential buildings built 20 years ago (ie, before 2000). According to MOHURD, as of end-2019, China had 160k aging residential communities with 42m households totalling 4.0bn sqm. We estimate investmen

31、t could reach Rmb4.0trn, or Rmb800bn per annum, assuming a five-year renovation period. Other types of property considered aging residential communities include:Properties with aging or lacking facilities like water pipe, power grid, gas, optical fibre, elevators, or parking lots; andProperties buil

32、t early that lack public services (eg, property management).Figure 2: Guangzhous urban renovation of an old factory, before and afterSource: Guangzhou Urban Renewal BureauFigure 3: Guangzhous urban renovation of an old village, before and afterSource: Guangzhou Urban Renewal BureauHistory: In 2017,

33、the Ministry of Housing launched a pilot program in 15 cities including Xiamen, Guangzhou for that. As of end-2018, 106 aging residential communities had been renovated, benefiting 56k households. Since 2019, urban renovation has been included under affordable housing projects with funding support f

34、rom the central government. In 2019, 19,000 communities were renovated, benefiting 3.52m households.Figure 4: China aims to double the urban renovation in 2020 vs. 2019000Development of urban renovationhouseholdsCommunitiesTotal:42,000k households160k communities39,00019,000106563,5207,00012,00050,0

35、0010,00040,0008,00030,0006,00020,0004,00010,0002,000-201820192020F-(10,000)No. of households (LHS)No. of communities (RHS)Source: Ministry of Housing and Urban-Rural DevelopmentImpact to property management sector? As per MOHURD, urban renovation requires introducing property management services to

36、the communities before the renovation process, so as to improve living conditions and maintain facilities. However, an uncertainty lies in the number of communities that will introduce property management services once renovations are finished, due to potential pushback from residents due to managem

37、ent fees.Example from Beijing: In Beijing, 243 aged residential communities were renovated in 2017-19, of which 210 will introduce professional property management services after the renovation, suggesting an 86% introduction rate.Example from Guangzhou: In Guangzhou, as of Sept 2018, 70 communities

38、 had been renovated, but only 22 of the communities (ie, 30%) had introduced property management.COVID-19 may help the rollout of property management: We think the COVID-19 outbreak could accelerate the introduction of property management as residents could begin place a higher value on sanitation,

39、sterilisation and security.Scale A new Rmb100bn per annum market in a blue sky scenario: In 2020, the government aims to renovate 39,000 residential communities with 7.0m households, doubling the amount in 2019. As per Ministry of Housing, 42m households have been identified to be renovated, suggest

40、ing this will be a multi- year project. Annually, there are 1.4bn sqm of GFA sold, 1.6bn sqm GFA new starts and 0.755bn sqm of GFA completion. Based on the governments 2020 target to renovate 7.0m households, and assuming 100sqm/household, we estimate this implies 93%/43% of GFA completion/GFA sold

41、in 2020E. Also, in a blue sky scenario, assuming all renovated residential communities introduce property management services, as MOHURD suggests, we estimate this could represent an incremental 4.0bn sqm of residential market (vs. around 27bn sqm existing residential housing stock). Assuming a Rmb2

42、.0/month/sqm managementfee, we estimate this would suggest Rmb96bn or close to Rmb100bn per annum in new revenue opportunities, vs. the Rmb608bn residential property management market and Rmb400bn public property management market.Figure 5: We estimate urban renovation represents a new market worth

43、close to Rmb100bn(Rmb bn)Property management market size in 2020E608400967006005004003002001000Urban renovationPublic propertiesResidential propertiesSource: CREIS, Ministry of Housing and Urban Rural Development, UBS estimatesPotential bottlenecks:Who pays the bill?: As per MOHURD, total investment

44、 for renovating the 42m households would be Rmb4trn, with a portion of the funding needs to be financed by the central and local governments. For example, the Ministry of Finance has allowed the inclusion of urban renovation into the use of proceeds of special bonds issued by local governments. Howe

45、ver, part of the funding will need to be provided by the residents, which could result in pushback from the residents.Introduction of management services: Even if renovations are carried out, there may be pushback from residents about the introduction of property management services, as in the above

46、mentioned case of Guangzhou. However, as management fees would likely be low compared to household disposable income or housing price, we think pushback would stem mainly from low perceived value rather than affordability. But we think the COVID-19 outbreak could change residents perception of the v

47、alue of property management servicesespecially with regards to sanitation, sterilisation and security in public areas.Stock picks and price target revisions:Stock picks: A-Living and Country Garden Services remain our top picks: With high valuation multiples, we think earnings dependability is impor

48、tant. We are concerned about the potential negative impact of COVID-19 on value added services to developers/consumers. The next earnings announcements will be in August 2020 for H120 results. We have higher earnings certainty for A-Living and Country Garden Services (CGS) H120 earnings due to conti

49、nued support from their parent/associated developers. Also, CGS has a strong potential and capability to win third-party contracts in lower-tier cities (see our report for upgrade). On A- Living, we like its acquisition of CMIG, which allows the company to expand into the public property management

50、market. Also, we see potential growth opportunities from multiple drivers: completion upcycle, public property, third- party contracts, and urban renovationPoly Property Development: We reiterate Buy on Poly to follow the public property market theme, and also a rising completion cycle. Poly is not

51、one of our top picks as we view some of the positives have already be priced in.Greentown Service: We reiterate Neutral on Greentown Service. We like its quality brand name and its strong capability in winning third-party developer contracts, but we are concerned about the negative hit to H120 earni

52、ngs from its value added servicesespecially education and property agency.COPH: We reiterate Sell on the company as it trades at 33.2x 2021E PE, vs. a 25% 2019-22E EPS CAGR, and also on uncertainty on COLI contract sales in the next three years.Colour Life: We reiterate Buy on the company mainly for

53、 its low valuation.Earnings and Price Target change:CGS: We raise 2020-22E earnings by 15-36%, as we raise the community value added services revenue by c.30% in 2020-22E due to faster than expected VAS revenue growth in 2019, and as we incorporate the revenue and earnings contribution from Three Su

54、pplies and Property Management in 2020-22E. Our price target is raised 31% to HK$44.2/share, based on a target multiple of 36.0 x 2021 PE, implying 1.1x PEG.Poly Property Development: We raise our price target by 29% based on 50.0 x 2021E PE, due to inclusion of the Stock Connect and limited free fl

55、oat for the stock. Our target multiple implies 1.4x PEG. Our earnings estimates remain unchanged.A-Living: We raise our price target by 26% based on 27x 2021E PE, due to the inclusion of the Stock Connect. Our target multiple implies 0.9x PEG. Our earnings estimates remain unchanged.COPH: We raise 2

56、020-22E EPS by 4-7% as we raise 2020-22E property management revenue due to fast expansion from third-party contracted GFA due to expansion into public property. We also raise our 2020-22E community value added services revenue forecasts. We raise our price target to HK$6.50/share, based on 25x 2021

57、E PE, implying 1.0 x PEG.Greentown Service: We raise our price target by 9% based on 31.0 x 2021E PE, implying 1.0 x PEG. Our 2020-22E earnings remain unchangedColour Life: We lower our 2020-22E earnings 13-15% as we revise down our property management GFA growth and revenue forecasts and lower our

58、forecasts for value added services revenue and margin. Our price target is revised down by 31%, based on target 9.0 x 2021E PE.Figure 6: Our scorecard for our covered companies and target multiplesScorecardGrowth visibility (40%)Earnings quality (40%)Corporate governance (10%)Liquidity (10%)Target20

59、19 reserve area % of rev. bearing areaDevelopers related2019contract sales (Rmb bn)2019 connected party transaction as % of revenue2019 % of PMrevenue from M&A2019 % of PM revenue from 3rd party developersProject vintageProject density2020Enet profit (Rmb m)Company2021E P/EScorePoly Property Dev50.0

60、4.389%Poly Developments46217.8%4.8%13.3%536711CGS36.04.2167%Country Garden77315.8%13.3%11.9%2212,220Greentown Service31.04.0110%Greentown China2020.3%10.0%71.4%264630A-Living27.03.167%Agile, Greenland23637.8%27.5%10.4%4531,769COPH25.03.233%COLI32017.3%0.0%8.1%616612Colour Life9.02.556%Fantasia363.5%