Greentown Service Group’s 1H Results Dragged by Higher Costs, Untimely in Current Weak Market

Despite continued stable operating performance and consistent growth at the business end, no-moat Greentown Service Group's first-half 2022 results was dragged by higher costs. We think this has disappointed investors, when property companies are focused on cost-cutting measures in view of the weak property market. However, given the key sector concern of property management companies remains that of negative contagion from the developers' liquidity stress at the expense of the property management sector, we we think the company's positioning as a relatively more independently operated property management company may subject it to less share price pressure on related developer risks. We factor in impairment losses and lower our 2022 earnings projection by 14%, but maintain our fair value estimate of HKD 10.50 as we have already factored higher administration costs into our estimates.