CR Mixc’s 2020 results was in line with profit alert, with core earnings up 148% YoY. Gross margin leaped 11ppt in to 27%, mainly due to the introduction of commercial operations. The Company guided >40% core profit CAGR for next five years, which we believe can be reached through 1) accelerated asset-light delivery to achieve ~25% CAGR in mall GFA; and 2) rental/retail sales rebound to provide RMB1,400mn in operations income (vs. est. RMB600mn in 2020). We raise 2021E/22E earnings forecast by 5.4%/7.0% and raise TP to HK$56.00 reflecting 50x 2022E P/E. Reiterate CR Mixc as a sector top pick.
- Targets 150 malls and 400mn sq m residential GFA by 2025. CR Mixc plans to open 12-15 malls/yr (2021E: 13, 2 asset-light) and gain 10+ asset-light mall contracts each year (most will open in ~3 years), representing roughly 20% mall GFA CAGR. For residential PM, the Company plans for 45mn sq m new third-party GFA each year to reach ~400mn sq m by 2025 (2020: 107mn sq m). Company guides >40% five-year core earnings CAGR through expansion and margin upgrade.
- Negotiation with existing malls to accelerate asset-light delivery. With 17 asset-light malls open by 2020, CR Mixc has been able to attract third-party developers and expand through asset-light model. In addition, the Company will start to negotiate for existing malls which will shorten delivery cycle. Given our expectation of 500+ new malls/yr for the entire market, ~200 of which are luxury to high-end (on par with Mixc/Mixone), there are plenty of suitable targets for the leading player. If successful, this will allow mall delivery to exceed guidance of ~15/yr and result in 25% CAGR in mall GFA.
- Rental/sales rebound in 2021 to provide est. RMB1,400mn operations income. CR Land’s rental income/retail sales has rebounded strongly in Jan/Feb (+35%/46% YoY for rental, +34%/91% YoY for sales), which signals a strong year for high-end malls and would benefit CR Mixc whose operations segment takes commissions from rental income (~5%) and EBITDA (~10%). We estimate operations income using ~11% of parentco’s mall rental income (assuming 60% EBITDA margin). Given CR Land’s 2020 rental income of RMB10bn and est. 30% rental growth, we estimate operations segment to contribute RMB1,400mn revenue in 2021, vs est. RMB600mn in 2020.
- 2020 earnings in line with profit alert. CR Mixc recorded 124% YoY net profit growth to RMB818mn, in line with profit alert. Revenue grew 15.5% YoY to RMB6,779mn. GP margin leaped 10.9ppt to 27.0% mainly due to 1) high margins of new commercial operations business. The Company declared dividend of RMB0.132/share, representing 36.8% payout ratio.
- Raise TP to HK$56.00 and reiterate TOP PICK. We raise 2021E/22E earnings forecast by 5.4%/7.0% given our confidence for the Company to deliver its target. Raise TP to HK$56.00 reflecting 50x 2022E P/E. Reiterate CR Mixc as a sector top pick.
