Equity, Bottom-up Analyst, Investics Research

Sameer Taneja

Equity, Bottom-up Analyst

Investics Research

It is important to note that the information provided by Investics Research is based on publicly available data and own knowledge, which has been gathered and analyzed from a variety of sources. While every effort has been made to ensure the accuracy and completeness of the information provided, it is not guaranteed to be free from errors or omissions. All forecasts and estimates are based on information that has been obtained from public sources that are considered to be reliable. The sources include but are not limited to, company announcements, exchange filings, presentations, etc. Investics does not guarantee the accuracy and completeness of the forecasts, estimates, and/or other information.

Equity Bottom-up Research

Equity Bottom-Up

Binjiang Service Group / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/binjiang-service-group-co-ltd" target="_blank" data-smartkarma-citation="entities:28940:1" rel="noopener">Binjiang Service Group (3316 HK)</a> presents a unique opportunity for investment in the property management space trading at 11.6x/9.4x FY22/23 PE, with a dividend yield of 5.2% FY22e (60% payout).</li>
<li>The company has &gt;35% of its market capitalization in cash, and the parent so far has been a relatively safer investment option compared to the rest in the property space.</li>
<li>If the company is willing to continue paying &gt;60%, we believe it can rerate to multiples comparable with SOEs of 16-20x PE.</li>
</ul>



Binjiang Service Group (3316 HK) presents a unique opportunity for investment in the property management space trading at 11.6x/9.4x FY22/23 PE, with a dividend yield of 5.2% FY22e (60% payout).
The company has &gt;35% of its market capitalization in cash, and the parent so far has been a relatively safer investment option compared to the rest in the property space.
If the company is willing to continue paying &gt;60%, we believe it can rerate to multiples comparable with SOEs of 16-20x PE.


<ul>
<li>
<a href="https://www.smartkarma.com/entities/binjiang-service-group-co-ltd" target="_blank" data-smartkarma-citation="entities:28940:1" rel="noopener">Binjiang Service Group (3316 HK)</a> is turning out to be one of the most resilient private PMC in terms of margins and profitability with the conservative approach of the management.</li>
<li>Trading at 12x/9.4x FY22e/FY23e with 25% of the market capitalization in cash, potential investors have the best of both worlds in value and growth.</li>
<li>The company will continue to pay 60% of its earnings as dividends, resulting in a 5.2%/7.5% dividend yield for FY22e/FY23e. We believe the stock has the potential to re-rate.</li>
</ul>



Binjiang Service Group (3316 HK) is turning out to be one of the most resilient private PMC in terms of margins and profitability with the conservative approach of the management.
Trading at 12x/9.4x FY22e/FY23e with 25% of the market capitalization in cash, potential investors have the best of both worlds in value and growth.
The company will continue to pay 60% of its earnings as dividends, resulting in a 5.2%/7.5% dividend yield for FY22e/FY23e. We believe the stock has the potential to re-rate.


Binjiang 3316 HK: Most Resilient Private PMC with Good Upside Potential

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

Sichuan Languang Justbon Services / Event-Driven

Sichuan Languang Justbon Services (2606 HK)

<p><a href="https://www.smartkarma.com/entities/sichuan-languang-justbon-service-group-co-ltd-h" target="_blank" data-smartkarma-citation="entities:28337:1" rel="noopener">Sichuan Languang Justbon Service Group (2606 HK)</a> has despatched the composite document in relation to <a href="https://www.smartkarma.com/entities/country-garden-services-holdings-company-limited" target="_blank" data-smartkarma-citation="entities:27343:1" rel="noopener">Country Garden Services Holdings (6098 HK)</a> base and enhanced offer. Currently, Country Garden owns 71.17% of the outstanding shares comprising 66.99% of the domestic shares and 71.20% of the H Shares. </p><p>The base offer is an unconditional mandatory cash offer for all the issued shares is HK$51.0571 per H-share (RMB42.8547 per domestic share. The enhanced share offer, which is payable only if the delisting is approved, is HK$54.3000 per H-share (RMB45.5768 per domestic share). </p><p>Unsurprisingly, the IFA considers the base and enhanced offer to be fair and reasonable. We broadly agree with the IFA analysis with the exception that the peer multiple comparisons could be improved. </p><p>The two key conditions for the delisting will be approval by at least 75% independent H-shareholders (&lt;10% of all independent H-shareholders rejection) and the satisfaction of the minimum acceptance condition (90% of H-shares held by independent H-shareholders). Satisfaction of the minimum acceptance condition is the key hurdle. We note the privatisation proposals for <a href="https://www.smartkarma.com/entities/beijing-jingneng-clean-energy-co-ltd" target="_blank" data-smartkarma-citation="entities:16316:1" rel="noopener">Beijing Jingneng Clean Energy (579 HK)</a> and <a href="https://www.smartkarma.com/entities/harbin-electric-co-ltd-h" target="_blank" data-smartkarma-citation="entities:11116:1" rel="noopener">Harbin Electric Co Ltd H (1133 HK)</a> have previously failed due to the inability to meet the 90% minimum acceptance condition.  </p><div class="content-highlight"><p>Country Garden Services has bought itself some leeway by having the right to extend the closing date from 17 June to not later than 3 September. In theory, the extended time period should provide a greater chance of meeting the 90% threshold. At the last close, the gross spread to the enhanced offer price of HK$54.3000 stands at 4.9%.</p></div>

Sichuan Languang Justbon Service Group (2606 HK) has despatched the composite document in relation to Country Garden Services Holdings (6098 HK) base and enhanced offer. Currently, Country Garden owns 71.17% of the outstanding shares comprising 66.99% of the domestic shares and 71.20% of the H Shares. The base offer is an unconditional mandatory cash offer for all the issued shares is HK$51.0571 per H-share (RMB42.8547 per domestic share. The enhanced share offer, which is payable only if the delisting is approved, is HK$54.3000 per H-share (RMB45.5768 per domestic share). Unsurprisingly, the IFA considers the base and enhanced offer to be fair and reasonable. We broadly agree with the IFA analysis with the exception that the peer multiple comparisons could be improved. The two key conditions for the delisting will be approval by at least 75% independent H-shareholders (&lt;10% of all independent H-shareholders rejection) and the satisfaction of the minimum acceptance condition (90% of H-shares held by independent H-shareholders). Satisfaction of the minimum acceptance condition is the key hurdle. We note the privatisation proposals for Beijing Jingneng Clean Energy (579 HK) and Harbin Electric Co Ltd H (1133 HK) have previously failed due to the inability to meet the 90% minimum acceptance condition.  Country Garden Services has bought itself some leeway by having the right to extend the closing date from 17 June to not later than 3 September. In theory, the extended time period should provide a greater chance of meeting the 90% threshold. At the last close, the gross spread to the enhanced offer price of HK$54.3000 stands at 4.9%.

Languang Justbon’s Composite Document, IFA Opinion and Extended Closing Date

<p><a href="https://www.smartkarma.com/entities/binjiang-service-group-co-ltd" target="_blank" data-smartkarma-citation="entities:28940:1" rel="noopener">Binjiang Service Group (3316 HK)</a> announced a positive profit alert guiding profit growth of not less than 70% for FY20. On an adjusted profit base of 125 million RMB for FY19, we arrive at a net profit of at least 213 mn RMB for FY20.  We believe the company can grow its earnings by 35% CAGR for the next 2 years, implying a valuation of 10.3x PE FY22 (4.2x EV-EBITDA)  and a dividend yield of 6.0% based on a 60% dividend payout ratio. With more than 33% of the market capitalization in cash, we believe that the management could hike their payout if they do not find suitable acquisition targets.</p><h3>Key Upside Risks</h3><ul>
<li>Besides having a great valuation, we believe that upside risk could come from the sector's policy, which <a href="https://www.smartkarma.com/profiles/zhen-zhou-toh" target="_blank" data-smartkarma-citation="accounts:673" rel="noopener">Zhen Zhou, Toh</a> has elaborated on in his insight <a href="https://www.smartkarma.com/insights/china-property-management-services-green-light-to-grow" target="_blank" data-smartkarma-citation="insights:46805" rel="noopener">China Property Management Services - Green-Light to Grow</a>.</li>
<li>Shareholder-friendly actions like increasing the payout etc., in the final result. </li>
</ul><h3>Key Downside Risks </h3><ul><li>Incremental tightening on the China property sector could impact VAS income to non-property owners.</li></ul>

Binjiang Service Group (3316 HK) announced a positive profit alert guiding profit growth of not less than 70% for FY20. On an adjusted profit base of 125 million RMB for FY19, we arrive at a net profit of at least 213 mn RMB for FY20.  We believe the company can grow its earnings by 35% CAGR for the next 2 years, implying a valuation of 10.3x PE FY22 (4.2x EV-EBITDA)  and a dividend yield of 6.0% based on a 60% dividend payout ratio. With more than 33% of the market capitalization in cash, we believe that the management could hike their payout if they do not find suitable acquisition targets.Key Upside Risks
Besides having a great valuation, we believe that upside risk could come from the sector's policy, which Zhen Zhou, Toh has elaborated on in his insight China Property Management Services - Green-Light to Grow.
Shareholder-friendly actions like increasing the payout etc., in the final result. 
Key Downside Risks Incremental tightening on the China property sector could impact VAS income to non-property owners.

Binjiang: Positive Profit Alert, Good Time to Accumulate

<p><a href="https://www.smartkarma.com/entities/binjiang-service-group-co-ltd" target="_blank" data-smartkarma-citation="entities:28940:1" rel="noopener">Binjiang Service Group (3316 HK)</a> posted a solid H1 2020 with a 31% YoY revenue growth and a  112% YoY net profit growth. In addition to the 31% YoY revenue growth, the company increased its operating margins by 860 bps (including a 400 bps gross profit margin expansion and reduction in SG&amp;A by 460 bps). The share price performance of the stock and the sector though has been lackluster owing to regulatory overhang as elaborated in insight provider <a href="https://www.smartkarma.com/profiles/li-tang" target="_blank" data-smartkarma-citation="accounts:9462" rel="noopener">Li Tang</a>'s piece <a href="https://www.smartkarma.com/insights/china-tightens-domestic-bond-issuance-threshold-for-property-developers" target="_blank" data-smartkarma-citation="insights:42362" rel="noopener">China Tightens Domestic Bond Issuance Threshold for Property Developers</a>. Despite this, we think that over the long term, execution will lead to the share price increasing. The stock trades at a PE of 17.4x FY20 and 14.4x FY21 and has 28% of its market capitalization in cash. The company has also committed to paying at least 50% of its earnings (70% in 2019). If the company adheres to a 70% payout ratio on the basis that there are no significant acquisitions, it implies a dividend yield of close to 4%. We think that any policy-related weakness would be an excellent time to accumulate the stock.</p>

Binjiang Service Group (3316 HK) posted a solid H1 2020 with a 31% YoY revenue growth and a  112% YoY net profit growth. In addition to the 31% YoY revenue growth, the company increased its operating margins by 860 bps (including a 400 bps gross profit margin expansion and reduction in SG&amp;A by 460 bps). The share price performance of the stock and the sector though has been lackluster owing to regulatory overhang as elaborated in insight provider Li Tang's piece China Tightens Domestic Bond Issuance Threshold for Property Developers. Despite this, we think that over the long term, execution will lead to the share price increasing. The stock trades at a PE of 17.4x FY20 and 14.4x FY21 and has 28% of its market capitalization in cash. The company has also committed to paying at least 50% of its earnings (70% in 2019). If the company adheres to a 70% payout ratio on the basis that there are no significant acquisitions, it implies a dividend yield of close to 4%. We think that any policy-related weakness would be an excellent time to accumulate the stock.

Binjiang Service Group Update: Solid H1 2020, Accumulate on Sectoral Weakness

China

Binjiang Service Group Co. Ltd. provides comprehensive property management and related services across the People's Republic of China. Its core services include security, cleaning, gardening, repair, and maintenance for residential and non-residential properties, alongside value-added services for both property owners and non-property owners. The company was founded in 1995 and is headquartered in Hangzhou, China.

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Binjiang Service Group (3316 HK)

Binjiang H1 2022: Management Soundbites

Binjiang Service Group (3316 HK) presents a unique opportunity for investment in the property management space trading at 11.6x/9.4x FY22/23 PE,...

Sameer Taneja

Binjiang 3316 HK: Most Resilient Private PMC with Good Upside Potential

Trading at 12x/9.4x FY22e/FY23e with 25% of the market capitalization in cash, potential investors have the best of both worlds in value and growth...

Sameer Taneja

Languang Justbon’s Composite Document, IFA Opinion and Extended Closing Date

Satisfaction of the minimum acceptance condition is the key hurdle. At the last close, the gross spread to the enhanced offer price of HK$54.3000...

Arun George

Binjiang: Positive Profit Alert, Good Time to Accumulate

Binjiang Property Management Services is a must-own high growth company ( with a 35% EPS CAGR ) trading at 10x FY22e, with 33% of its market cap in...

Sameer Taneja

Binjiang Service Group Update: Solid H1 2020, Accumulate on Sectoral Weakness

Binjiang Service Group (3316 HK)

Sameer Taneja

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