Based on existing company and analyst reports, it's shown that in the previous year, CG Services (6098) has ramped up its bottom line by 89%, with its latest earnings level surpassing its average level over the last five years.
In terms of revenue-bearing gross floor area (GFA), CG Services' portfolio has reached 123m sqm in 2017, making it also one of the largest property management companies in terms of GFA.
This strong performance generated a robust double-digit return on equity of 28%, which is an optimistic signal for the future.
One analyst commented that "CG Services' ability to maintain an adequate level of cash to meet upcoming liabilities is a good sign for its financial health. This implies that the company manages its cash and cost levels well, which is an important determinant of the company's health."
Noting the health of its balance sheet, analysts believe CG Services has plenty of headroom to grow debt (if required) to fund further expansion later on.
Analyst review: optimistic future outlook
Most market analysts tracking the property management sector in the Asia Pacific region share a positive and healthy outlook for CG Services.
In an industry report released in February this year, a DBS analyst revealed that CG Services ranked among the highest in terms of the overall attributes when evaluated amongst its peers.
"We have ranked the companies under our coverage based on a combination of nine key attributes for property management services and five key factors for value-added services to gauge their overall strengths and competitiveness in this sector," the analyst said.
And based on those parameters, CGS scored the strongest on the property management front.
Even before the company went public, analysts noted that CG Services' profitability in 2017 has far exceeded its peers'. CG Services reported a net profit of RMB402m in 2017, up 23.9% YoY.
One analyst who tracks the property management sector in Hong Kong said, "In fact, if 2017 net profit is considered, CG Services is the most profitable property management company listed in Hong Kong."
Another research firm, which issued a report on CG Services on 30th September 2019 wrote a similarly positive outlook for the company.
The report said: "CG Services (6098) is a financially-sound company with a great history and an optimistic future outlook."
The report highlighted CG Services' exceptional growth potential and solid track record
"Investors in search for stocks with room to flourish should look no further than 6098, with its expected earnings growth of 26%. This growth in the bottom-line is bolstered by an equally impressive top-line expansion over the same period, which is a sustainable driver of high-quality earnings, as opposed to pure cost-cutting activities," the report said.
Given the size of the China market, a DBS report on the country's property management sector painted a growth sector.
Among the highlights of the report:
Despite its defensive nature, property management industry will see market size double by 2030, creating tremendous growth opportunity
Earnings of leading players under our coverage to grow at a decent average 3-year CAGR of 42%
A defensive industry with market size set to double in the next 15 years. We identified the property management sector as a Recurring, Innovation-driven, Cash-rich and High growth
Given the successful listing of CG Services in Hong Kong, China's property management industry body said: "We believe that with the support of its parent, Country Garden, one of the largest and most aggressive property developers in China, CG Services will continue to remain one of the leaders in the sector."
We believe CG Services is a buy.