[ET Net News Agency, 4 November 2019] Citi Research upped its target price for
Greentown Service Group (02869) to HK$9.1 from HK$7.82 but downgraded its rating to
"neutral" from "buy".
As a pioneer in services (2-3 years ahead of peers; normalized margin) with inevitable
R&D/loss from value-added services (VAS; estimated Rmb90m) in 2019 sowing for future
growth, Greentown Service's clear path and targets on services with transparent guidance
still deserve credit despite some short-term pain, said the research house.
Citi expects 2019 earnings to fall short of the market's high expectation (best case
+4%) given new VAS (education, apartments, convenient stores) is still in the investment
period and expected share option expense.
That said, Citi expects earnings to bottom in 2H and to accelerate from 2020 given (1)
recovering services margin - turning loss-making biz to profit or simply cutting it; (2)
lower share option expense in 2020 (estimated Rmb40m; 2019: Rmb75m); (3) intact margin on
property mgmt, via well-established platform/IT offsetting 8% growth in labour cost.
Citi remains positive on the company's long-term outlook given its quality services
edges, proven organic growth in third party/office services and aligned interest with
shareholders. (KL)