Growth prospects intact
Investment Thesis
On track to achieve full-year targets despite turbulence in the property sector. Together with its M&As in 2021 and a largely unaffected delivery schedule from CIFI (884 HK), Ever Sunshine has achieved its full-year managed GFA growth target of 60m sm. Community VAS should have progressed as expected, while non-property owner VAS will likely be under pressure as CIFI slowed down on land acquisitions in 2H21 given the liquidity crunch and uncertainty in the property sector. Impact from non-property owner VAS should be manageable given the segment’s relatively low earnings contribution (c.17% gross profit in 1H21). We believe Ever Sunshine should have met its FY21 earnings growth guidance of 50-60%.
Future growth prospects intact. Most of the increase in Ever Sunshine’s GFA has been from 3rd party projects (91% of 1H21’s managed GFA increment, 47% non-residential GFA), reducing its risk to CIFI and the overall physical market slowdown. Meanwhile, thanks to CIFI’s better-than-peers liquidity position, it is less affected by the sector’s liquidity struggle and currently targets to post 10% growth in FY22 attributable presales. With these in mind, we believe Ever Sunshine’s GFA growth prospects remain intact,
and its guidance to grow managed GFA by c.60m sm (or c.45% y-oy) in 2022 should be achievable.
Valuation:
Our TP is based on 32.7x FY22F EPS, which is on par to the company’s average 1-year forward PE in 2H21.
Where we differ:
Sell-off on spillover concerns from the property sector have been overplayed. We believe Ever Sunshine is less affected in terms of growth outlook from both a slowdown of its related developer (CIFI) and the overall physical market as compared to its peers.
Key Risks to Our View:
Significant presales slowdown of CIFI and of the physical market, fluctuations in labour costs; fails to secure 3rd party projects at reasonable margins; deterioration in fee collection rates.