China Property Management:Growth Visibility and Sustainability;Initiate Consolidators at Buy

Pick market consolidators in a growth sector with catalysts: We initiate at Buy/1H on China Overseas Property Holdings (COPH), Colour Life and GreentownServices, the leaders in China’s property management sector. Benefitting fromdemand from both primary unit completions and upgrade of existing units, thesector offers sustainability with growing market size (c.5.2% CAGR) and a stablepolicy outlook. Given their asset-light biz models and strong B/S (net cash positions;+OCF), we expect the leaders to increase their market shares, and outperform on29% earnings CAGR in FY15-18E, with M&As & new biz drivers (e.g. O2O) ascatalysts. Sector valuations (18.9x FY17E PER) appear not to fully price in allpositives. Our preference ladder: COPH, Colour Life and Greentown Services.

    Sector certainties