Takeaways from virtual property conference
? Management expects the agreement to acquire Jiayuan Services to be
finalised and announced by 23 Jun, i.e. within a week.
? Management reiterates its contracted GFA growth, revenue growth and net
profit targets for FY22F.
? Reiterate Hold on Jinke SS with a TP of HK$21.4. Key risk to its share price
is further disposal of its shares by parent Jinke Property.
Agreement to acquire Jiayuan Services to be finalised within a week
? During our virtual property conference, Jinke SS’s management reiterated its target of
growing contracted GFA by 100m sq m in FY22F, with ~50% from third-party (3P)
contracts, ~40% from M&A and ~10% from its parent Jinke Property (000656 CH, NR).
? It announced on 26 May plans to acquire Jiayuan Services (1153 HK, NR), with a
more detailed proposal to be announced by 23 Jun. If a final agreement between Jinke
SS and Jiayuan International (2768 HK, NR; parent of Jiayuan Services) cannot be
reached by 23 Jun, the M&A may not proceed.
? Apart from Jiayuan Services, management has identified some mid- to small-sized
property management (PM) firms as potential targets to meet its M&A goal.
Regrouping business segments to emphasise growth in VAS
? With the proposal of its four growth curves (referred to as “SLCT”) in Aug 21, its hotel
management business (acquired from Jinke Property) and catering services have
been grouped under the “Local catering services” or “Catering” segments. VAS to nonproperty owners has been grouped with PM services under the “Space PM services”
or “Space” segments. The original community VAS is now also called the “life”
segment.
Management reiterates FY22F revenue growth and net profit targets
? Management reiterates its target of achieving 40% yoy revenue growth (i.e.,
~Rmb8bn) and Rmb1bn net profit (excluding contribution from VAS to non-property
owners) in FY22F.
? Management expects stable FY22F revenue share from Space (60-70%), while some
FY22F revenue share from life may shift towards Catering and Smart living technology
solutions (“Technology” segment) due to higher growth rates for the latter segments.
? For FY22F, management also expects flattish gross profit margin (GPM) from PM
services (FY21: 24%), largely stable GPMs from Life and Catering segments, and a
decline in GPM from the Technology segment due to a change in product mix as a
result of rapid revenue growth. FY22F GPM for VAS to non-property owners still looks
uncertain, according to management.
Reiterate Hold with a TP of HK$21.4
? We reiterate our Hold rating on Jinke SS with a TP of HK$21.4, equivalent to 9.2x
FY22F P/E (based on 23% FY21-24F EPS CAGR and 0.4x PEG).
? Key downside risks include prolonged Covid-19 outbreak in China that slows VAS
expansion and further disposal of Jinke SS shares by Jinke Property. Improvement in
liquidity for Jinke Property is a key upside risk for Jinke SS.