Basic services segment. While the growth rate of the addressable market will decelerate to 6% p.a. over 2020-25E as China’s property completion momentum is set to slow down, we estimate the scale expansion of the top-100 players will remain intact at a five-year CAGR of 22%. With a 21% CAGR in traditional property segments (i.e., residential/office/ retail properties), new property segments like industrial parks, schools, and hospitals will serve as additional growth engine, which are underpenetrated by top property management companies. We estimate the fee CAGR at 27% over 2020-25E for the top-100 players.

Community value-added services (community VAS). Despite some adverse impact amid the COVID-19 outbreak in 2020, we believe the strong momentum will continue over the next five years. With the provision of more diversified services and continued expansion on the customer base, we expect the community VAS revenue to grow by 37% p.a. for the top-100 players. The monetisation ratio (i.e., community VAS revenue-to-basic services revenue) will expand by 1.5 pp p.a. and reach 17.5% in 2025 (vs. 10% in 2020).

FY20 results preview. For the seven HK-listed property management companies under our coverage, we estimate managed GFA to expand by 47% YoY in aggregate as at end of 2020, which is to drive revenue growth of 47% YoY. We estimate a largely stabilised margin trend in FY20 with the adverse COVID-19 impact offset by government subsidies and thus we estimate profit growth at 49% YoY in FY20.

Prefer A-Living and CG Services. We prefer the names that have (1) more sufficient project pipelines with better embedded gross margin, (2) a stronger edge in the nonresidential property management segments, and (3) better execution on community VAS monetisation. We initiate coverage on KWG Living and Sunac Services with an OUTPERFORM rating and CMPO with a NEUTRAL rating. We upgrade COPH to NEUTRAL with lower-than-peers’ growth largely priced in. Among our coverage, we prefer CG Services and Sunac Services. We also see a better risk-reward profile for A-Living.