A-Living (3319 HK) is a fast-growing property management (PM) company with a strategic relationship with two large developers (Agile and Greenland) who are committed and incentivized to grow the gross floor area (GFA) managed by the company. The company has ~78M GFA (vs TAM of 19B GFA) under management and expects ~10M GFA from Greenland plus ~7M from Agile, per year through 2022 – enough to support a strong +20% organic growth. Additional growth to come from third-party developers and M&A. The company operates in a fragmented industry that is growing ~6% CAGR and is in the middle of a consolidation; we expect A-living to benefit from these themes as it has ample dry powder (65% of IPO proceed earmarked of M&A). Overall, A-Living should be able to grow EPS by ~40%-50% CAGR through 2021. We think +RMN 1 per share is achievable by 2020; giving us a one-year price target of RMB 20 (40% upside).
A-Living is property management (PM) service provider to mid-to-high-end properties in China. The company recently, in Feb-2018, spun-off from Agile Group (3383 HK) and listed on the HKEX. Prior to listing on HKEX, A-Living acquired Greenland Property Services (in June-2017) from Greenland Holdings (600606 CH) who is also a strategic shareholder (23% ownership) of A-Living. A key part of the investment thesis is A-Living’s relationship with large developers, Agile and Greenland. Both developers/parents are important part A- Livings gross floor area (GFA) growth story.
A-Living is a PM service provider to mid-to-high-end properties. The Company has 25 years of experience in PM and currently operates under a dual-brand strategy, Agile Property Management and Greenland Property Services. A-Living has three key revenue streams:
- Property management services (~69% of revenue with 27% of gross profit margin): Think security, cleaning, greening, gardening, repair and maintenance, etc. to residential and non-residential properties. 79% of PM revenue in 2017 came from projects developed by Agile Group.
- Value-added services ton non-property owners (25% of revenue with 49% of gross profit margin) include sales assistance services, property agency, home inspection services and advertising services.
- Value-added services to property owners (6% of revenue with 42% of gross profit margin): This mainly involves property maintenance and repair, decoration and turnkey furnishing services.
Below is a diagram of how they make money: