HSBC Global Research raised its target price for A-Living Services (03319) to HK$29.7 from HK$15.8 and upgraded its rating to "buy" from "hold" after factoring in its recent acquisition of CMIG.
The research house said the portfolio of the targeted companies of CMIG has a wide geographical coverage, spanning across Yangtze River Delta, Sichuan-Chongqing and Pearl River Delta. This will enable A-Living to increase its exposure in Sichuan-Chongqing and Shandong. This will also increase A-Living's exposure in Yangtze River Delta substantially.
Upon the completion of the CMIG transaction, expected in 1Q 2020, HSBC forecast A-Living's revenue to increase by 31%/43% in FY2020/21. Driven by a higher revenue and partially offset by a lower combined gross margin, HSBC anticipated the core profit will be lifted by 8% and 14% in FY2020 and FY2021, respectively.