Greentown Service Group Results Reflect Slower Top Line Growth Without M&A Impetus

No-moat Greentown Service Group, or GSG’s full-year 2020 result is in line with our expectation, in which revenue and net profit rose by 17.8% and 48.8% year on year. Topline growth is mainly attributed to GFA under management, or GUM growth which has largely not relied on M&A to boost growth with the core property management services. Hence the core PMS segment revenue increase is by 17.9% year on year, reflecting the same GUM growth during the same period to 251 million sqm. This reflects slower growth as project delivery delays are affected by the pandemic in 2020. A look through across segments reflect broad based slowing top line growth with all three segments saw slower growth than 2019, as property consulting services and community VAS revenue grew by 23% and 14% respectively. With the lack of M&A impetus during the year, the company’s revenue growth in 2020 is largely below peers. However, slight improvement in gross margin and better cost control elevated the strong bottom-line growth on revenue flow through. Nonetheless the company’s net margin remains below peers with room for cost improvement. Along with results, the company declared HKD 0.08 special dividend on top of HKD 0.12 final dividend, with the higher overall dividend above our expectation which may support near term share price.