Under the overall recovery of the Hong Kong stock market, listed companies in the property management sector frequently repurchase shares, which also makes the property management sector gradually hot.

On June 21, Jinke Services (09666) spent about HKD 982,600 to repurchase about 115,500 shares of its own stocks. This is the 33rd consecutive trading day of repurchasing shares since May 6 of the company. The company's share repurchase amount reached approximately HKD 353.693 million in the year. On the same day, Wing Sang (01995) also continued to repurchase shares for the 16th consecutive trading day, with a share repurchase amount of HKD 200.621 million in the year.

Looking ahead to the market expectations of the Hong Kong stock market in the second half of the year, most institutions believe that the trend of moderate economic recovery in China and the turning of the US Federal Reserve's monetary policy are relatively certain. Current low valuation levels and policy expectations are expected to provide support for the Hong Kong stock market.

At the time when many real estate favorable policies came out, the property management industry, which is closely related to the real estate industry, also has a chance to recover. Taking advantage of the opportunity that the overall sector is still undervalued, the long-term value of some property management stocks has already emerged.

Stable revenue growth and continuous cost reduction and efficiency improvement.

Looking at the 2023 performance, affected by factors such as the high income base of the real estate industry and the industry, the overall revenue of the property management sector fell slightly year-on-year. According to Sinolink Securities statistics, the total revenue of 60 listed property management companies was RMB 285.55 billion, an increase of 8.1% year-on-year, which is slower than the growth rate of 15.7% in 2022.

Unlike the trend of stable revenue growth, the profits of most property management companies have declined for two consecutive years. The total net profit attributable to shareholders of the 60 listed property management companies was RMB 14.96 billion, a year-on-year decrease of 1.7%. Affected by the continuous extension of the real estate payment period, some property management companies continue to provide for the depreciation of financial assets such as accounts receivable and bills receivable, and there are also risks of continued impairment of goodwill for some property management companies.

According to the understanding of the Wise Wealth app, the gap in revenue scale between property management companies in 2023 is more obvious. Cg Services (06098), Wumart Cloud (02602), and Greentown Services (02869) are among the top three in terms of income scale, and their revenues are RMB 42.6 billion, RMB 33.2 billion and RMB 17.4 billion, respectively. This is a year-on-year increase of 3.0%, 10.2%, and 17.1%, respectively.

The top three in net profit attributable to shareholders are China Res Mixc (01209), Wumart Cloud, and Everg Services (06666), with net profits attributable to shareholders of RMB 2.9 billion, RMB 2.0 billion and RMB 1.5 billion, respectively, a year-on-year increase of 32.8%, 29.4% and 8.3%, respectively.

In terms of cost control, the overall sales management expense ratio of 60 listed property management companies was 8.7%, a year-on-year decrease of 0.9 percentage points, showing a trend of consecutive years of decline. Among them, the sales and management expense ratio of central state-owned property management companies (property management companies related to central state-owned enterprises) was 6.7%, a year-on-year decrease of 0.7 percentage points, which was the lowest among all types of sample property management companies.

The three companies with the lowest sales and management expense ratios are China Ovs Ppt (02669), Binjiang Ser (03316), and China Merchants Property Operation & Service (001914.SZ), with sales and management expense ratios of 3.0%, 3.4%, and 4.5%, respectively. Their year-on-year changes are -0.7, -0.2, and 0.3 percentage points, respectively.

In 2023, abundant cash flow is still the advantage of the property management sector. The total net cash of the 60 listed property management companies was RMB 115.82 billion, a year-on-year increase of 11.4%, and the overall level is still relatively sufficient. The net operating cash flow is about RMB 29.4 billion, a year-on-year increase of 108.2%, showing a significant rebound.

In terms of recent repurchase cases, Wind data shows that as of June 21, according to the industry classification of the Hong Kong stock exchange, a total of 9 listed property management companies in Hong Kong will implement share repurchases in 2024, an increase of 50% compared to the 6 in the same period last year. The total repurchase amount is about HKD 253 million, an increase of nearly 30% compared to the same period in 2023.

Among the 9 repurchasing companies, 4 of them repurchased share amounts exceeding HKD 30 million in the year. Among them, Wumart Cloud, Greentown Services, Dexin Services Group (02215), and Jinke Services reached HKD 79.3195 million, HKD 64.8055 million, HKD 38.5101 million, and HKD 35.3693 million, respectively.

It is worth mentioning that as a leading company, Wumart Cloud recently upgraded its share repurchase plan, announcing that the board plans to repurchase H shares in the open market, with a proposed upper limit of HKD 5.8 billion, which is more than eight times the previously announced share repurchase amount in 2023.

Stable revenue growth and improved cash flow are the prerequisites for many listed property management companies to repurchase shares, and large-scale repurchases also indicate the confidence of the company's management in future development.

With improved liquidity and favorable policies, the dividend attributes of the industry are highlighted.

According to the Wisdom Financial App, in addition to performance factors, the recent buyback boom in the property sector is also related to the improvement of the market environment.

At present, the main listing of the property industry is concentrated in the Hong Kong stock market. Benefiting from the positive factors such as the revision of the expected pace of the US Federal Reserve's interest rate cuts and the marginal improvement of enterprise profit expectations, the Hong Kong stock market has continued to rebound strongly this year, and the Hang Seng Index has reached a new high of 19706 points on May 20. Up to now, the rebound of the Hang Seng Index and the Hang Seng Technology Index has exceeded 20%, entering the range of technical bull market.

China Galaxy Securities pointed out that as of June 14th, the current PE valuation of the Hang Seng Index is at the 27.78% percentile level since 2010, which is still in the historical low and medium range; the PB valuation of the Hang Seng Index is 0.90 times, which is at the 7.46% percentile level since 2010, showing relatively higher long-term allocation value.

From the perspective of the industry, with a series of support policies for the real estate industry, such as the "430 new real estate policy" and "517 new real estate policy", the real estate market confidence has been boosted, and market activity has also increased. Under policy incentives, many places have seen a surge in new home visits, and new home transaction volumes in first-tier cities and some hot cities have rebounded, showing signs of marginal improvement in the market.

Despite the suppression of the downward trend in the basic fundamentals of the real estate sector in recent years, the advantages of property management stocks such as light assets, stable cash flow, and high dividends have not changed.

According to statistics from Sinolink Securities, the total dividends of 60 listed property companies in 2023 are about 8.64 billion yuan, a year-on-year increase of 23.6%. In terms of classification, the dividends of the property companies backed by central state-owned enterprises have increased the fastest, with the total dividend amount maintaining a growth rate of more than 50% during the period from 2020 to 2023. In 2023, the total dividend amount is about 3.6 billion yuan, and the growth rate reaches 54.9%.

Among them, the three companies with the highest total dividends in 2023 are China Resources Mixc, A-Living Services, and Cg Services, with total dividends of about 1.6 billion yuan, 1.3 billion yuan, and 1 billion yuan, respectively, with year-on-year growth of 55.9%, 349.7%, and a decrease of 21.5%, respectively.

Looking ahead, the property management sector will still be a high-quality sector with both high dividends and stability, and the overall improvement of the real estate sector will also have a positive impact on the operating cash flow of the property management industry.

"From quantity to quality" is the new stage of growth for the property management industry, where value-added services and non-residential business have become new growth points for listed property companies.

At present, the property management industry is moving from a high-growth stage focused on scale to a new stage focused on quality. Although the market still belongs to a blue ocean space and competition has not yet reached a white-hot stage, facing many uncertainties, many listed property companies are turning to more cautious business strategies.

According to the report of China Index Research Institute, in general, due to the pressure of the real estate market, the transactions of property enterprises and their related real estate companies in 2023 have generally decreased. For example, Sino-ocean Service (06677) stated in its 2023 annual report, "The upstream real estate market continues to be under pressure, and the mergers and acquisitions boom has subsided. Third-party expansion has become an important channel for the growth of management scale."

However, due to the cold market for mergers and acquisitions and fierce competition in bid bidding, many property companies still face many challenges when expanding outside the market. According to the China Index Research Institute, in 2023, the management area of non-residential formats of the top 100 enterprises accounted for 34.16%, a decrease of 1.12% compared with 2022, reversing the trend of continuous growth in previous years.

According to Wisdom Financial App, under external pressure, value-added services, non-residential business and other businesses have become new subdivisions for listed property companies to explore new growth points.

For example, Sino-Ocean Services (06626) has developed five major value-added service business platforms, such as new retail, brokerage, Mei Ju, community business and intelligentization. In 2023, the non-business property management and value-added service income achieved a year-on-year growth rate of 35.5%, and the revenue ratio has reached 81.6%

Binjiang Services (03316) actively expands the home furnishings market. In March, the company's official Weibo announced that Binrui Decoration, a wholly-owned subsidiary of Binjiang Services, has launched a new solution for "whole house renovation", including batch fine decoration, home life supporting project, soft decoration and other services.

Overall, although the downward pressure on the real estate industry has not yet completely disappeared, the trend of policy support has become clear. In the future, the repair of the valuation of property companies is certain, and some high-quality head property companies still have room for further growth. At the same time, property companies associated with national and central enterprises with low credit risks will have stronger risk resistance ability, and property companies with high dividend ratios will also have considerable investment value.