Core Viewpoint - Consumption is a key driver of economic development and is a focal point for investors, with overseas institutions believing that stimulating consumption will have a more sustainable impact on the economy [1] Economic Context - The government work report has signaled a clear intention to enhance consumption capacity, increase quality supply, and improve the consumption environment, aiming to unleash diverse and differentiated consumption potential [1] - In the first two months of this year, the total retail sales of consumer goods reached 83,731 billion yuan, a year-on-year increase of 4.0%, accelerating by 0.5 percentage points compared to the previous year [1] Company Overview - Starry Commercial (6668.HK) is positioned as a leading commercial property operation service provider in the Greater Bay Area, showing resilience in its recent 2024 annual performance report [2] Financial Performance - The company reported revenue of approximately 645 million yuan, a year-on-year increase of about 1.5%, with a gross profit of approximately 298 million yuan and a gross margin of 46.2% [3] - Same-store traffic and sales increased by 8.1% and 8.8% year-on-year, respectively, outperforming the expected retail sales growth of 3.5% for 2024 [3] Market Position - Starry Commercial's vacancy rate is 7.6%, significantly lower than the market average of 9.8%, indicating strong operational performance [3] - The company has opened 27 projects by the end of 2024, focusing on high-quality project openings to drive steady growth [4] Strategic Focus - The company emphasizes sustainable and potential market development, continuously optimizing operational measures to promote organic growth [4] - Starry Commercial has introduced over 500 new brands and more than 150 first stores within its system, with a brand replacement rate exceeding 25% [5] Consumer Trends - The company is capitalizing on the increasing trend of Hong Kong and Macau consumers traveling north, with a significant rise in cross-border vehicle checks [6] - The "Big Grab Festival" and "Hi Star Carnival" events have led to a 42% increase in traffic and a 37% increase in sales during the festival period [5] Investment Appeal - Starry Commercial is well-positioned to benefit from macro policies aimed at boosting consumption, with a focus on service consumption as a new engine for economic growth [8] - The management maintains confidence in the company's long-term growth, proposing a final dividend of 8.3 Hong Kong cents per share, resulting in an annual dividend of 13.1 Hong Kong cents, with a payout ratio of approximately 80% [9] Conclusion - Starry Commercial demonstrates steady operational performance and a clear value logic in the context of macro policies, industry trends, and fundamentals, making it an attractive investment target with a good safety margin [11]

Core Viewpoint - The post-pandemic era continues to see a trend of consumption downgrade, particularly among the younger generation represented by Generation Z, leading to increased savings and more cautious spending habits, which poses challenges for large shopping centers [1] Financial Performance - The company reported a revenue of approximately 645 million, a year-on-year increase of about 1.5%, with a net profit of around 154 million, maintaining a high level [2] - Same-store traffic and sales increased by 8.1% and 8.8% respectively, indicating improved operational efficiency [2] - The company has cash and cash equivalents of 1.367 billion, demonstrating strong liquidity [2] - The proposed final dividend for 2024 is 0.083 HKD per share, leading to a total annual dividend of 0.131 HKD per share, with a payout ratio of approximately 80% [2] Revenue Breakdown - Revenue from the Greater Bay Area accounted for approximately 4.76 billion, representing 73.9% of total revenue, with a slight year-on-year decrease of 5.4% [2] - Revenue from the Long Triangle region, including cities like Shanghai and Nanjing, reached 89.988 million, a year-on-year increase of 26.7%, contributing 14% to total revenue [3] - Other regions generated a total revenue of 78.194 million, a year-on-year increase of 44.16%, accounting for about 12.1% of total revenue [3] Business Structure and Margins - The brand and management output services generated revenue of 95.713 million, while the entrusted management services saw a 5.0% increase in revenue to 426 million, driven by new project openings [3][4] - The overall gross margin decreased by approximately 6.3 percentage points, yet remained at a high level of 46.2% [4] - The company has opened 27 retail commercial property projects, with occupancy rates of 93.8% and 90.7% for COCO Park and COCO City respectively [4] Strategic Focus - The company is focusing on four core areas: regional deepening, digital transformation, project quality optimization, and operational capability enhancement [5][6] - Cost control is emphasized as a key directive for 2024, with initiatives aimed at reducing unnecessary expenditures and improving operational efficiency [5] - The company is developing a comprehensive digital platform to enhance consumer experience and operational decision-making [6] Future Outlook - The strategic focus on cost reduction and efficiency is expected to create a clear competitive advantage for the company [7] - Anticipation of entering a new growth cycle by 2025, with performance expected to meet market expectations [7]

Investment Rating - The investment rating for the company is "Recommended" [1][6][11] Core Views - The company reported a revenue of 645 million HKD for 2024, reflecting a year-on-year growth of 1.5%, while the net profit attributable to shareholders was 154 million HKD, a decrease of 9.7% [3][6] - The company maintains a high dividend payout, with a final dividend of 8.3 HKD cents per share and a total annual dividend of 13.1 HKD cents per share, indicating a payout ratio of 80% [3][6] - The company has a solid operational foundation, with same-store traffic and sales increasing by 8.1% and 8.8% respectively, and a rental rate of 92.4%, which is above the industry average [6] Financial Performance Summary - Revenue projections show a gradual increase from 645 million HKD in 2024 to 679 million HKD by 2027, with corresponding year-on-year growth rates of 1.5% to 2% [5][10] - Net profit is expected to recover slightly from 154 million HKD in 2024 to 167 million HKD by 2027, with a projected year-on-year growth of 3.1% in 2027 [5][10] - The gross margin is projected to improve from 46.2% in 2024 to 48.0% by 2027, while the net margin is expected to stabilize around 23% to 24% [5][10] Operational Highlights - The company has successfully opened new projects in Guangzhou and Shanghai, contributing to its strategic focus on the Greater Bay Area and national expansion [6] - As of 2024, the company has a contracted area of approximately 2.71 million square meters and an operational area of about 1.65 million square meters, with 27 projects opened and 18 in preparation [6] Valuation Metrics - The current price-to-earnings (P/E) ratio is projected to be 8.1 for 2024, decreasing to 7.5 by 2027, indicating a potentially attractive valuation [5][10] - The price-to-book (P/B) ratio is expected to remain stable at around 1.0 in 2024, decreasing to 0.8 by 2027 [5][10]

Financial Performance - The company's revenue for the year ended December 31, 2024, was approximately RMB 644.5 million, representing a growth of about 1.5% compared to RMB 635.0 million for the year ended December 31, 2023[3]. - The profit attributable to the owners of the company for the year ended December 31, 2024, was approximately RMB 154.5 million, a decrease of about 9.7% from RMB 171.1 million for the year ended December 31, 2023[3]. - The gross profit for the year ended December 31, 2024, was RMB 297.9 million, down from RMB 333.6 million in the previous year, indicating a decline in gross margin[5]. - The company's basic earnings per share for the year ended December 31, 2024, was RMB 15.25, compared to RMB 16.84 for the previous year[5]. - The annual profit for the year ending December 31, 2024, was approximately RMB 148.4 million, a decrease of about 8.6% compared to approximately RMB 162.3 million for the year ending December 31, 2023[84]. Dividends - The board proposed a final dividend of HKD 0.083 per share, with a total expected dividend distribution of HKD 0.131 per share for the year, resulting in a payout ratio of approximately 80.0%[3]. - The company declared an interim dividend of 4.8 HKD cents per share for 2024, compared to no interim dividend in 2023, totaling approximately RMB 44,520,000[28]. - The proposed final dividend for the year ending December 31, 2024, is 8.3 HKD cents per share, amounting to approximately 84,205,000 HKD, pending shareholder approval[29]. Assets and Liabilities - Total assets less current liabilities amounted to RMB 1,918.8 million as of December 31, 2024, compared to RMB 1,956.8 million as of December 31, 2023[7]. - The company’s total equity attributable to owners decreased to RMB 1,246.9 million as of December 31, 2024, from RMB 1,256.8 million in the previous year[7]. - The company's cash and cash equivalents increased to RMB 710.6 million as of December 31, 2024, from RMB 546.9 million in the previous year[6]. - The company's cash and cash equivalents as of December 31, 2024, were approximately RMB 1,366.5 million, a decrease of about 3.1% from RMB 1,410.4 million as of December 31, 2023[90]. - The debt-to-asset ratio is approximately 44.9%, relatively stable compared to 45.3% on December 31, 2023[92]. Revenue Breakdown - Total revenue from commercial property operation services for 2024 was RMB 644,541,000, a slight increase of 1.3% from RMB 635,006,000 in 2023[16]. - Customer contract revenue for 2024 was RMB 588,581,000, down 0.1% from RMB 592,270,000 in 2023[18]. - Rental income increased to RMB 55,960,000 in 2024 from RMB 42,736,000 in 2023, representing a growth of 30.8%[16]. - The revenue from entrusted management services was RMB 426,497,000 in 2024, up 4.8% from RMB 406,372,000 in 2023[16]. - The income from brand and management output services decreased significantly to RMB 95,713,000 in 2024 from RMB 145,026,000 in 2023, a decline of 34.1%[16]. Operational Metrics - The average occupancy rate for retail properties was 92.4% in 2024, down from 92.8% in 2023, with COCO Park at 93.8% and COCO City at 90.7%[54]. - The total number of commercial property projects under contract is 53, covering 21 cities in China, with a total contracted building area of approximately 2.7 million square meters[35]. - The company operates 27 retail commercial properties, with a total operational building area of about 1.6 million square meters[35]. - The total number of operational retail properties increased, indicating a strategic push for market expansion and diversification of revenue streams[55]. Employee and Cost Management - The total employee costs, including director remuneration, rose to RMB 229,383,000 in 2024 from RMB 208,642,000 in 2023, an increase of 9.9%[25]. - Service costs for the year ending December 31, 2024, were approximately RMB 346.6 million, an increase of about 15.0% year-on-year, primarily due to the increase in the number of newly opened leasing projects[73]. Strategic Initiatives - The company is focusing on cost reduction and resource optimization, implementing energy-saving measures such as upgrading air conditioning systems and replacing old lighting fixtures[58]. - The "Star Butler" mini-program has been launched to optimize management processes and improve service efficiency, contributing to cost reduction and increased revenue[59]. - The company is focusing on brand and management output services for new developments, enhancing operational efficiency and tenant attraction[56]. - A diversified招商策略 is being adopted to improve brand attractiveness and reduce vacancy rates, ensuring stable revenue growth[62]. Corporate Governance - The company is committed to maintaining high standards of corporate governance and has adhered to the principles outlined in the Corporate Governance Code for the fiscal year ending December 31, 2024[109]. - The annual performance for the fiscal year ending December 31, 2024, was reviewed by the audit committee in conjunction with management and auditors[110].

Investment Rating - The report does not provide a specific investment rating for the company [2]. Core Insights - The company, Xing Sheng Commercial, is a leading commercial management company in the Greater Bay Area, focusing on enhancing the value of commercial properties through professional management and long-term contracts with property owners [3][5]. - As of June 2024, the company holds cash reserves of RMB 1.466 billion with no bank loans, indicating a strong liquidity position relative to its market capitalization of HKD 1.228 billion [3][5]. - The company has a high dividend yield of 11%, reflecting its commitment to returning capital to shareholders [5]. - The company operates 29 projects, with 19 located in the Greater Bay Area, and has a stable average occupancy rate of 92.5% [5]. - The company’s revenue model includes service fees from property owners and additional profit sharing, leading to high visibility in earnings and stable cash flow [5]. Financial Performance - The company reported revenues of RMB 635 million for 2023, with a year-on-year growth of 13% [6][10]. - The net profit attributable to the parent company for 2023 was RMB 171.1 million, reflecting an increase of 10.9% compared to the previous year [6][22]. - The company maintains a high dividend payout ratio, with 70% for the full year of 2023 and 50% for the first half of the year [5][22]. - The projected P/E ratios for 2024 and 2025 are 7.5 and 6.3, respectively, which are approximately 50% lower than the industry average [5]. Business Model and Strategy - Xing Sheng Commercial operates under a light-asset model, focusing on property management without owning or developing properties, which reduces capital expenditure [5]. - The company has established a strong relationship with Xinghe Holdings, a top 100 real estate company in China, which provides a stable business foundation for future growth [5]. - The company’s service offerings include entrusted management, brand and management output services, and full rental services, catering to various client needs [6]. Market Position - The company is positioned as a rare pure commercial service player in the Hong Kong stock market, enhancing its investment appeal due to its scarcity [5]. - The flagship brand, COCO Park, targets consumers aged 15-50 and has successfully attracted a significant number of Hong Kong visitors, accounting for about 50% of weekend foot traffic [5].

Investment Rating - The report gives a "Buy" rating for Xing Sheng Commercial (06668.HK) [3] Core Views - Xing Sheng Commercial has a strong development potential in the Greater Bay Area, supported by its strategic layout and solid backing from its parent company, Xinghe Holdings [3][12] - The company is focused on optimizing its business structure, with a stable revenue growth forecast and a commitment to high dividend payouts to investors [3][31] - The company has a robust operational strength with three main business models contributing to its revenue [3][39] Summary by Sections 1. Company Overview - Xing Sheng Commercial has established a strategic presence in the Greater Bay Area, with 33 out of 54 projects located there, representing 61.1% of its total projects [3][19] - The company has a total contracted area of approximately 2.77 million square meters, with 1.77 million square meters already opened [3][14] 2. Business Model and Revenue Structure - The company operates under three main business models: entrusted management, brand and management output, and whole rental services [3][39] - As of H1 2024, the revenue from entrusted management services was 210 million RMB, showing a year-on-year growth of 10.5% [2] - The gross profit margins for entrusted management, brand output, and whole rental services were 57.9%, 75.2%, and 12.7% respectively, maintaining stability compared to the previous year [2] 3. Financial Performance - In 2023, the company reported a revenue of 635 million RMB, a 13.0% increase year-on-year, with a gross margin of 52.5% [3][5] - The net profit attributable to shareholders for 2023 was 171 million RMB, with a projected net profit of 150 million RMB for 2024 [5] - The company has maintained a high dividend payout ratio, with a dividend of 0.12 RMB per share in 2023, reflecting a 12.2% increase [3][31] 4. Future Outlook - The company expects to achieve net profits of 1.50 billion RMB, 1.55 billion RMB, and 1.59 billion RMB for the years 2024 to 2026, with corresponding PE ratios of 8, 7, and 7 [3][5] - The strategic focus will continue to be on the Greater Bay Area, with plans for further expansion and optimization of project structures [3][19]

Investment Rating - The report gives a "Buy" rating for Xing Sheng Commercial (06668.HK) [3] Core Views - Xing Sheng Commercial has a strong development certainty in the Greater Bay Area, with a strategic layout of "Bay Area Dual Centers, Twin Stars in One City" [1] - The company is focused on optimizing its business structure, with a significant portion of its projects located in the Greater Bay Area [1][19] - The company has a robust operational strength and brand recognition, with a stable financial position and leading advantages in the market [3] Summary by Sections 1. Company Overview - Xing Sheng Commercial has established a strong presence in the Greater Bay Area, with 33 out of 54 projects located there, accounting for 61.1% of total projects [1][19] - The company has a total contracted area of approximately 2.77 million square meters, with 1.77 million square meters already opened [1][14] 2. Business Model and Revenue Structure - The company operates through three main business models: entrusted management, brand and management output, and whole leasing services [2][39] - As of H1 2024, the revenue from entrusted management services was 210 million RMB, showing a year-on-year growth of 10.5% [2] - The gross profit margins for entrusted management, brand output, and whole leasing services were 57.9%, 75.2%, and 12.7% respectively, maintaining stability compared to the previous year [2] 3. Financial Performance - In 2023, the company reported a revenue of 635 million RMB, a year-on-year increase of 13.0%, with a gross margin of 52.5% [3][5] - The company has consistently paid high dividends, with a dividend per share of 0.12 RMB in 2023, representing a 12.2% increase and a payout ratio of 70% [3][31] 4. Growth Strategy - The company has a flexible strategy that adapts to market conditions, focusing on optimizing project structures and ensuring high-quality profit growth [3][35] - The management team is experienced and has a clear strategic direction, emphasizing the importance of talent development and operational efficiency [29][33] 5. Market Position and Recognition - Xing Sheng Commercial has been recognized as a leading commercial management company in the Greater Bay Area, receiving multiple awards for its operational excellence [26][27] - The company has a strong backing from its parent company, Xinghe Holdings, which provides financial stability and growth potential [12][13]

Company Operations - As of June 30, 2024, the company provided services to 54 commercial property projects across 21 cities in China, covering a total contracted gross floor area of approximately 2.77 million square meters[3]. - The company operates 29 retail commercial properties with a total operational gross floor area of about 1.77 million square meters[3]. - The company has a significant presence in the Greater Bay Area, positioning itself as a leading provider of commercial property operation services[3]. - The company has established a strong operational capability recognized in the market, contributing to its competitive advantage[3]. - The company has a diversified service offering, including property leasing, operational management, and value-added services, catering to both tenants and related clients[8]. - The company employs a commission-based management service model, allowing for a higher level of autonomy in managing projects, which is expected to enhance operational performance and increase revenue[6]. - The company focuses on enhancing the operational performance of commercial properties through professional management services, including market positioning and tenant recruitment[4]. Revenue and Financial Performance - The company's revenue for the six months ended June 30, 2024, was approximately RMB 313.8 million, representing a year-on-year growth of about 8.8%[22]. - Revenue from entrusted management services was approximately RMB 209.7 million, accounting for 66.8% of total revenue, with a year-on-year increase of about 10.4%[22]. - Revenue from brand and management output services decreased by approximately 31.4% to RMB 43.5 million, representing 13.8% of total revenue[23]. - Revenue from leasing services increased by approximately 72.3% to RMB 60.6 million, accounting for 19.4% of total revenue[23]. - The company's service costs for the six months ended June 30, 2024, were approximately RMB 151.9 million, reflecting a year-on-year increase of about 22.6%[25]. - The overall gross profit was approximately RMB 161.9 million, with a gross profit margin of about 51.6%, down from 57.1% in the same period last year[26]. - Selling expenses increased by approximately 198.5% to RMB 14.7 million, primarily due to increased marketing activities for new projects[32]. - Administrative expenses decreased by approximately 11.4% to RMB 31.8 million, mainly due to reduced preparation costs for leasing projects[33]. - The company reported a loss of approximately RMB 0.1 million from its share of a joint venture, primarily from its investment in Guangzhou Kaixing Commercial Management Co., Ltd.[35]. Assets and Liabilities - As of June 30, 2024, the group's trade and other receivables amounted to approximately RMB 333 million, an increase of about 18.0% compared to December 31, 2023, primarily due to business growth[38]. - The group's trade and other payables were approximately RMB 2,396 million as of June 30, 2024, a decrease of about 16.5% from December 31, 2023, mainly due to the payment of year-end bonuses[39]. - The group's debt-to-asset ratio was approximately 47.4% as of June 30, 2024, an increase of 2.1 percentage points from 45.3% on December 31, 2023, mainly due to an increase in payable dividends[43]. - The total assets as of June 30, 2024, amounted to RMB 1,901,349,000, a decrease from RMB 1,956,802,000 as of December 31, 2023[69]. - The company's total liabilities decreased to RMB 239,611,000 as of June 30, 2024, from RMB 286,984,000 as of December 31, 2023, a decline of 16.5%[101]. - The company’s total equity as of June 30, 2024, was RMB 8,487,000,000, reflecting a slight decrease from RMB 8,506,000,000 as of December 31, 2023[105]. Share Capital and Dividends - The total issued share capital of the company as of June 30, 2024, was 1,014,516,000 ordinary shares[56]. - The company declared an interim dividend of HKD 0.048 per ordinary share for the six months ended June 30, 2024[64]. - The company has adopted a share incentive plan on April 17, 2023, granting 54,800,000 shares to 136 eligible participants, with 31,710,000 shares remaining unexercised as of June 30, 2024[63]. - The company repurchased a total of 761,000 shares on the stock exchange for a total consideration of HKD 979,750 during the six months ended June 30, 2024[57]. - The company has accumulated 1,937,000 shares purchased under the restricted share unit plan as of June 30, 2024[64]. Strategic Initiatives and Future Plans - The company plans to enhance its flagship product line, COCO Park, focusing on attracting young consumers and improving product quality and innovation capabilities[17]. - The company aims to optimize its organizational capabilities and management processes to adapt to the changing market environment and enhance decision-making efficiency[16]. - The operational strategy includes a "one store, one policy" approach to improve customer experience and service levels, targeting the Hong Kong consumer market[18]. - New projects are set to open in 2023 and 2024, including COCO Parks and COCO Cities, contributing to future revenue growth[11]. - The company plans to continue focusing on operational efficiency and cost management to improve profitability in the upcoming quarters[72]. Compliance and Governance - The company has been compliant with the corporate governance code and listing rules, with efforts ongoing to fill the vacancy of an independent non-executive director[52]. - The audit committee reviewed the unaudited interim financial information for the six months ended June 30, 2024, ensuring adherence to accounting principles and internal controls[55]. - The company has no significant contingent liabilities as of June 30, 2024[40].

Investment Rating - The report assigns a "Buy" rating for the company with a target price of HKD 1.75, indicating a potential upside of 55% from the current price of HKD 1.12 [1][2]. Core Insights - The company experienced an 8.1% year-on-year decline in net profit for the first half of 2024, despite an 8.8% increase in revenue to HKD 314 million. The gross profit decreased by 1.6% to HKD 162 million, with a gross margin of 51.6%, down 5.5 percentage points due to a higher proportion of lower-margin rental projects [1][3]. - The company maintained a high dividend payout ratio of 50%, declaring an interim dividend of HKD 0.048 per share [1][2]. - The company has a strong cash position with cash on hand of HKD 1.466 billion, a 3.9% increase from the end of 2023, and generated cash income of HKD 17.55 million during the period [1][3]. Financial Performance Summary - For the first half of 2024, the company reported: - Revenue: HKD 314 million, up 8.8% year-on-year - Gross Profit: HKD 162 million, down 1.6% year-on-year - Net Profit: HKD 89 million, down 8.1% year-on-year - Gross Margin: 51.6%, down 5.5 percentage points [1][3]. - The company’s same-store sales increased by 8% and customer traffic rose by 16% during the same period, with an overall occupancy rate of 92.5% [1][3]. Project and Operational Insights - The company has opened two new rental projects in Guangzhou and Shanghai, bringing the total number of operational retail projects to 29, covering an area of 1.77 million square meters [1][3]. - The company has a project reserve of approximately 2.77 million square meters across 17 projects, with 44.2% of the area managed by third parties, indicating a solid growth trajectory [1][3]. Future Projections - The company is expected to achieve net profits of approximately HKD 157 million, HKD 198 million, and HKD 236 million for the years 2024, 2025, and 2026, respectively [1][2].

Investment Rating - The investment rating for the company is "Recommended (Maintain)" with a current stock price of 1.15 HKD [1]. Core Views - The company reported a revenue of 314 million HKD for H1 2024, representing a year-on-year growth of 8.8%, while the net profit attributable to shareholders decreased by 8.1% to 89 million HKD [3]. - The company emphasizes quality improvement and efficiency enhancement in its ongoing projects, with same-store traffic increasing by 16% and same-store sales rising by 8% in H1 2024 [3]. - The overall gross margin stands at 51.6%, with stable margins across most operational models, despite some pressure from new projects still in the cultivation phase [3]. - The company has a strong cash position, with cash increasing by 3.9% compared to the end of 2023, and a dividend payout ratio of 50% [3]. - The company has opened new projects in Guangzhou and Shanghai, continuing its strategic focus on the Greater Bay Area and national expansion [3]. - The associated company, Xinghe Holdings, maintains a stable operation with a AAA credit rating, indicating strong financial health [3]. Financial Summary - For H1 2024, the company achieved a revenue of 314 million HKD, with a gross margin of 51.6% [3]. - The projected earnings per share (EPS) for 2024-2026 are adjusted to 0.15 HKD, 0.16 HKD, and 0.16 HKD respectively, reflecting a decrease from previous estimates [3]. - The price-to-earnings (P/E) ratios for the next three years are projected at 6.9x, 6.7x, and 6.5x [4][3]. - The company’s total assets are projected to grow from 2,325 million HKD in 2023 to 2,984 million HKD by 2026 [7].