Lower expectations for growth
? A-Living’s core net profit was up 31% yoy to Rmb2.3bn, with a 2.2%pt yoy
decline in overall gross profit margin.
? We estimate slower contracted GFA growth of 50m sq m p.a. from 3P in
FY22-24F, primarily due to a weaker property market.
? We cut its FY22-23F EPS to reflect just a 15% EPS CAGR over FY21-24F,
and downgrade A-Living to Hold with a lower TP of HK$14.
Unaudited FY21 results: core net profit up 31%
A-Living’s unaudited FY21 results show its core net profit rose 31% yoy to Rmb2.3bn, 3%
below our estimate. Overall gross profit margin (GPM) declined by 2.2%pt to 27.5% in
FY21 as a result of margin contraction across all existing business segments as well as
the introduction of city services with a GPM of 22%. FY21 DPS has not been declared
until its financials are audited by an auditor. Our analysis and forecasts assume no
material discrepancies between the unaudited and audited financials of A-Living.
We assume lower growth in contracted GFA from 3P developers
Its managed GFA grew by 114m sq m to 489m sq m at end-FY21, driven by the
acquisition of New CMIG PM portfolio and Shandong Hongtai, as well as third-party (3P)
contract expansion. At end-FY21, parent Agile and Greenland combined accounted for
22% of total contracted GFA (end-FY20: 26%). In view of a weaker property market
ahead and its weaker brand due to Agile’s liquidity issues, we project just 50m sq m p.a.
growth in contracted GFA from 3P in FY22-24F, compared to 70m sq m realised in FY21.
VAS revenue growth to slow down
Revenues from value-added services (VAS) to property owners and VAS to non-property
owners increased by 77%/15% yoy, respectively, in FY21. We expect some pressure on
revenue growth for VAS to property owners in FY22F, on the back of the Covid-19 surge
in Yangtze River Delta (YRD, accounting for 34.5% of its managed GFA at end-FY21).
Also, as developers’ property sales will likely decline yoy in FY22F, we project a 5% yoy
decline in revenue from VAS to developers.
Sizeable M&A unlikely but payout could be maintained
A-Living had total cash of Rmb7.7bn at end-FY21, comprising Rmb4.4bn free cash and
Rmb3.3bn of restricted cash (mostly fixed deposits at banks which will be released by 30
Apr 22). In view of the economic uncertainties, we do not expect management to proceed
with further sizeable M&A in FY22-23F, but instead expedite the integration of New CMIG
PM. We expect A-Living to maintain a payout ratio of 30-40% in FY22-23F.
Downgrade to Hold with a lower TP of HK$14.0
We cut FY22F/23F EPS by 11%/14% to reflect lower revenue and GPM compression.
Our FY21-24F EPS CAGR is reduced to 15%. We also trim its PEG ratio to 0.4x (0.6x
previously) to reflect higher financial stress of its parent. Hence, we cut our TP for ALiving to HK$14 and downgrade to a Hold rating from Add. Key downside risks include a
prolonged Covid-19 outbreak in YRD, while stronger-than-expected growth in VAS is a
key upside risk.