As time goes on, the concentration of the property management industry will continue to increase, and the growth rate of the performance of the head enterprises will show a high growth due to the volume of the management area.
Editor’s note: This article is from Huasheng College, author charlieH.
One stock has driven a plate! On September 26, the resumption of the service of the ya life service ushered in a surge, and the stock price rallied in the morning, with the biggest increase exceeding 10.9%. This led to the entire property management stocks sector, Xincheng Yue Service, China Shipping Property and Kaisa Industry rose more than 3%.
Source: Huasheng Securities
Ya Life M&A is expected to approach the industry first
What is the good event that triggered the surge in ya life services? Originally on the morning of September 26, Ya Life announced that the company acquired a 60% stake in Zhongmin Property with a fixed consideration of RMB 1.56 billion and a 60% stake in Xinzhongmin Property with a total consideration of no more than RMB 500 million.
Source: Corporate earnings
As of the end of 2018, the management area of the holding property companies under the Zhongmin Property Group and the Xinzhongmin Property Group totaled approximately 190 million square meters, and the total management area of the participating property companies was approximately 100 million square meters, totaling nearly 2,000 projects. The Yalong Life 2019 semi-annual report shows that the company has a management area of 211 million square meters, a contract area of about 325 million square meters, and 1031 pipeline projects.
In other words, after the completion of the acquisition transaction, Yahua’s overall management area will exceed 500 million square meters, and the management project will exceed 3,000, exceeding the Country Garden service and further approaching the industry leader’s color life.
After the transaction is completed, Zhongmin PropertyThe respective financial results of the Group’s subsidiaries and the subsidiaries of the New Zhongmin Property Group will be consolidated with the Agile Group and the Ya Life Services. This means that the scale and profit level of Ya Life will also achieve leapfrog growth.
Data Source: Corporate Earnings, Huasheng Securities
In the first half of 2019, Yali Life achieved revenue of 2.245 billion yuan, and its revenue in 2018 was 3.379 billion yuan. At the beginning of the listing of Ya Life, it was proposed that by 2020, the annual revenue of the company will reach 10 billion yuan. Although at present, the growth rate of 55% in the first half of the year is not bad, but Ya lives still has a distance to achieve the goal. However, after successful mergers and acquisitions, the situation is different. As of the end of 2018, the total revenue of Zhongmin Property Group and Xinzhongmin Property Group was about 3.96 billion yuan. It can be said that Ya Life is rapidly approaching the target of 10 billion yuan through mergers and acquisitions.
The property management industry that doubles the stocks
In the past two years, there have been more than a dozen property management companies listed in Hong Kong, including many property management companies with strong parent companies such as China Shipping Property, Country Garden Service, Ya Life, and Colour Life. The author also noticed that these property management companies’ stock prices in the Hong Kong stock market performed very strongly, including a good increase in the case of a weaker market in 2019.
Data Source: wind, Huasheng Securities
For example, the rankings since the listing went up, and Greentown Services ranked first with a 296% increase. To know that the Greentown service was listed but just three years ago, the composite yield of 58% is very good. Secondly, the increase in New City Yue Service and Yongsheng Life Service is above 110%. Pujiang China and Kaisa have a good performance of more than 50%.
Data Source: wind, Huasheng Securities
Looking at the price changes that ended this year until September 26, 15 of the 17 property management stocks kept rising, with a ratio close to 90%. In the property stocks, Yongsheng Life Services rose by as much as 118%, ranking first. There are 5 other companies that have increased by more than 70%, including Kaisa Yimei, Country Garden Service, Xinchengyue Service, Zhonghai Property and Yali Life Service. If they are ranked by market value, among the property management stocks with a total market capitalization of more than 5 billion Hong Kong dollars, the annual increase is more than 70% to 5, which is as high as 71.4%.
Why are property stocks favored by funds?
Data Source: wind, Huasheng Securities
Why property stocks are unique in the Hong Kong stock market, we can choose the answer from their latest performance in the first half of 2019. From the perspective of revenue growth, the listed companies in the property management sector have basically maintained growth, while revenues such as Country Garden services reached 3.518 billion yuan, an increase of 74.3% over the same period last year. There are 6 revenue growth rates above 40%, namely Country Garden Service, Xincheng Yue, Yongsheng Life, Ya Life, Aoyuan Health and Riverside Service.
In terms of profit growth rate, there are 4 companies with a year-on-year growth of more than 100%, namely, Xinchengyue, Yongsheng Life, Aoyuan Health and Kaisa. Among them, the profit growth rate of Kaisa has even reached 289%! Therefore, it is not difficult to understand the strength of the company’s performance when it comes to these companies with outstanding performance.
Of course, there is a well-respected reason for the property management sector, which is the industry prospect of Chaoyang.
In 2018, China’s urbanization rate has increased to 59.6%. With the gradual acceleration of China’s urbanization process, the commercial housing market has also flourished. A large number of commercial houses have brought huge market space for the property management industry. At the end of 2018, the management area of China’s property management industry has reached 20.4 billion square meters.
The average area of management of leading companies in the property management industry (Top 10) has grown significantly faster than other companies, from less than 100 million square meters in 2014 to 239 million square meters in 2018, and the top 100 at the end of 2018. The average management area of property management enterprises is only 37.181 million square meters.
Data Source: Anxin, Huasheng Securities
As time goes on, the concentration of property management industry will continue to increase, and the growth rate of head enterprise performance will increase due to the volume of management area. Therefore, investors can focus on property management companies that rely on powerful housing companies and active mergers and acquisitions.