Result first take: 1H22 results slightly below, unexpected cash and receivable movements a negative surprise
- The company recorded a 47% decline in cash from Dec-21, in part led by a purchase trust and fund products
- Other receivables surged 98%, in part a result the provision of short-term loans to third parties, as well as an increase in balance of guarantee deposit and project cooperation intention funds
- 1H22 net profit fell 7% y-o-y, which was slightly below expectation upon larger than expected impairment loss
- Unexpected cash and receivable movements may spark concerns over financial independency and corporate governance
- Key things to watch include the company’s explanation over the movements over other receivables and provision of loans to 3rd parties, details over its fund and trust investments, and latest earnings growth guidance, among others
- TP and rating on the company are currently under review
What’s new?
A-Living released a set of slightly below expected 1H22 results after market close
Our review
Unexpected cash and other receivable movements may shed concerns over corporate governance
- Total cash fell 47% to c.Rmb4bn vs Dec-21, in part result from a 280% increase in financial assets at fair value through profit or loss as the company’s invested in several funds and trusts
- Other receivables surged 98.3% to Rmb2.65bn, mainly due to 1) the provision of a Rmb724.8m short-term loan to 3rd party (in which Rmb210m are secured by pledge of non-listed equity investments and Rmb10m loans are guaranteed by third parties) and 2) an increase in guaranteed deposits and project cooperation intention funds
1H22 earnings slightly below expectation with the increase in revenue largely offset by impairment
- 1H22 revenue rose 22% y-o-y, with declines from extended VAS offset by an increase in revenue from property management, CVAS and city services. this locked in 49%/45% of our/market full year estimates
- Gross margin fell across all business segments. with extended VAS took on the largest decline. Overall GPM fell 3.1ppts to 26.9%, largely in-line
- A net impairment loss of Rmb274.5m was made on receivables, acquisition deposits and loans to third parties
- SG&A as % of revenue improved c.2ppts to 5.6% due to efficiency enhancement and decrease in marketing activities
- Effective tax rate rose c.4ppts to 21.3% as the company is no longer applicable to the 15% preferential tax policy under the Certificate of High and New Technology Enterprise in 1H22.
- Attributable net profit margin fell 4ppts to 13.9%, which translate into 7% decrease in attributable profits and locked in 41%/40 of ours/market full-year earnings estimates, slightly below expectations
More to follow after the company’s online results briefing to be held at 9:30am on Thursday (18 Aug)
Key things to watch:
- Rationale behind the purchase of funds/trusts and loan to third parties?
- Expected profitability and growth impact from the current property market difficulties and COVID-19 disruptions
- Latest GFA growth guidance – from Agile (3383 HK), third party projects and M&A
- How much more impairments will have to be made on its receivables?
- Dividend policy, amongst others
