12 December 2025 | 7:28AM CST Equity Research GREENTOWN SERVICE (2869.HK) Sector-leading margin recovery; Buy We reiterate our Buy rating on Greentown Services. Post its effective portfolio optimization and business restructuring during this downturn, we expect GTS to deliver an average 10% p.a. scale ramp-up pace (double that of coverage overall) and, more importantly, given its strong focus on portfolio quality and efficiency enhancement, we see GTS standing out among coverage PMs in terms of its profitab ...

Summary of Key Points from the Conference Call Industry Overview - **China Residential Market**: Developers are increasingly negative due to accelerated price declines, leading to margin and earnings pressure in 2025 and 2026. BEKE anticipates a 30% YoY decline in existing home GTV in Q4 2025 and a 13% and 6% decline in existing and new home transaction GTV in 2026 respectively [2][19]. - **Hong Kong Residential Market**: Developers report a strong recovery in transaction volume driven by rate cuts, rising rental demand, and increased investment from mainland Chinese buyers. There is potential for gradual price increases in new project launches [3]. - **Retail Sector**: High-end malls in China and Hong Kong are experiencing better momentum in 2H25, attributed to positive wealth effects from stock markets and rising gold prices. However, mass market retail remains challenging due to consumption downgrades and e-commerce penetration [4]. - **Office Market in Hong Kong**: There are signs of recovery in the Central office market, driven by increased leasing inquiries from the financial sector and IPO-related services [5]. Company-Specific Insights - **CR Land**: Reported a 17% YoY decline in contract sales gross value to Rmb170bn and expects downward pressure on earnings in 2025 due to lack of one-off gains [8]. - **COLI**: Experienced a 21% YoY decline in contract sales gross value to Rmb189bn, with expectations of launching large projects to mitigate sales decline [9]. - **Greentown China**: Reported a 6% YoY decline in contract sales to Rmb120bn, with expectations of slight profit in 2025 but continued pressure from vintage inventory [10]. - **Poly Developments**: Focused on liquidity and destocking, with a significant portion of sales coming from vintage inventory [11]. - **CR Mixc**: Forecasted double-digit core net profit growth for FY2025, supported by strong same-store sales growth [15]. - **Beike (KE Holdings)**: Expects a 30% YoY decline in GTV for existing homes in Q4 2025, but maintains a guidance of Rmb7bn adjusted operating profit for 2026 [19][20]. Market Preferences - **Stock Preferences**: Preference for HK developers like Henderson and Sino due to the bottoming of the HK residential market, and for retail properties like CR Mixc and Swire Properties due to recovery in mainland China retail [6]. Risks and Valuation - **Valuation Methods**: P/BV methods are used for mainland China property developers, while discount to NAV is used for Hong Kong developers and landlords [31]. - **Key Risks**: For Hong Kong, risks include weakening macroeconomic conditions and increased housing supply. For mainland China, risks involve government policies restricting demand and tight financing for developers [32]. Additional Insights - **Market Sentiment**: There is a cautious optimism among developers in Hong Kong regarding sales momentum and potential price increases, while mainland developers face significant challenges due to declining sales and margins [3][4][5][8][9][10][11].

Core Viewpoint - Evergrande's liquidators are actively seeking buyers for a majority stake in Evergrande Services, with non-binding offers already received and final bids expected by November, amidst the backdrop of the company's significant financial struggles and the ongoing real estate crisis in China [1][5]. Group 1: Liquidation and Offers - The liquidators control a 51.016% holding in Evergrande Property Services Group, which had a market value of approximately HK$9.95 billion ($1.28 billion) before the announcement [1][5]. - Non-binding indicative offers have been received from multiple parties, and confidentiality agreements have been signed with these potential bidders [1][5]. - Shares of Evergrande Services experienced a surge of up to 40% on Friday, later stabilizing at a 25% gain, following a trading suspension on Thursday due to the announcement [1][5]. Group 2: Market Context and Bidders - The company has been severely impacted by China's prolonged real estate crisis, with its shares plummeting over 95% since their peak in 2021 [1][5]. - State-owned subsidiaries, including China Overseas Holdings and China Resources Holdings, have shown interest in bidding for Evergrande Services, although China Overseas Property Holdings has stated it has not placed a bid [4][5]. - The outcome of the liquidation process may hinge on whether a single bidder aims to maintain the listing of Evergrande Services or opts for a compulsory acquisition [5]. Group 3: Future Outlook - The liquidators are also looking for buyers for Evergrande's stakes in its electric vehicle division, Evergrande New Energy Vehicle Group, which represents the company's two most valuable assets [5]. - Analysts suggest that no firm actions will take place until at least November, indicating a prolonged process ahead for potential bidders [5].

Core Insights - Newmark Group reported strong Q2 2025 earnings, exceeding analyst expectations with non-GAAP EPS of $0.31 and GAAP revenue of $759.1 million, reflecting double-digit growth from the previous year [1][2] - The company raised its full-year 2025 guidance, anticipating total revenue between $3.05 billion and $3.25 billion, and adjusted EPS of $1.47 to $1.57 [10] Financial Performance - Non-GAAP EPS increased by 40.9% year-over-year from $0.22 in Q2 2024 to $0.31 in Q2 2025 [2] - GAAP revenue rose by 19.9% year-over-year from $633.4 million in Q2 2024 to $759.1 million in Q2 2025 [2] - Adjusted EBITDA grew by 32.1% year-over-year, reaching $114.0 million [2] - Net income (GAAP, fully diluted) increased by 39.8% year-over-year, from $20.6 million in Q2 2024 to $28.8 million in Q2 2025 [2] Business Segments and Growth Drivers - All key business segments experienced double-digit revenue growth, driven by organic expansion [5] - Management services and servicing fees grew by 13.6%, marking eight consecutive quarters of year-over-year gains [5] - The leasing and other commissions segment increased by 13.8%, supported by a rebound in office and retail leasing in major U.S. cities [6] - The capital markets segment saw a revenue increase of 37.9%, with notable growth in commercial mortgage origination fees and investment sales [7] Operational Efficiency - Non-compensation expenses rose by only 3.1%, significantly lower than the 19.9% increase in total revenues, indicating effective expense control [8] - Adjusted free cash flow improved to $95.9 million, up from $38.7 million in Q2 2024 [8] Strategic Focus and Future Outlook - The company is focusing on technology integration, client relationship strengthening, and global expansion, investing in AI and data analytics [4] - Management plans to maintain a conservative balance sheet while growing recurring fee-based revenue streams [4] - The company expects adjusted EBITDA for FY2025 to be between $523 million and $573 million, an increase from earlier guidance [10]

Financial Performance - TowneBank's total assets reached $17.1 billion as of Q2-FY24 [9], with total loans at $11.5 billion and total deposits at $14.3 billion [9] - The bank reported a Core Return on Average Assets (ROAA) of 1.01% and a Core Return on Average Tangible Common Equity (ROTCE) of 12.08% [9] - Net Interest Margin (NIM) on a fully tax-equivalent basis was 2.89%, while noninterest-bearing deposits accounted for 30.2% of total deposits [9] - For Q2-FY24, net income attributable to TowneBank was $42.9 million, a 2.7% increase year-over-year [47] - Earnings per share (diluted) for Q2-FY24 were $0.57, up 1.8% year-over-year [47] Business Segments - The bank's revenue mix is diversified, with net interest income accounting for 62% and noninterest income for 38% YTD Q2-FY24 [24] - Insurance segment contributes 39% to the total noninterest income YTD Q2-FY24 [26] - Towne Insurance is the largest bank-owned insurance company in the country [105], with insurance revenue of $29.6 million in Q2-24 [105] Balance Sheet and Asset Quality - Noninterest-bearing deposits accounted for 30.15% of total deposits in Q2-FY24 [47] - Nonperforming assets represent 0.04% of total assets [47] - The bank's loan-to-deposit ratio was 80.24% [47] Capital and Liquidity - The total risk-based capital ratio was 15.34% [47] - The tangible common equity to tangible assets ratio was 9.37% [47] - Total liquidity sources were $6.471 billion [171], covering 105% of adjusted uninsured deposits [172]

Investment Rating - The report highlights a "Buy" rating for seven selected stocks within the property value chain, indicating a positive outlook for these companies as they are well-positioned to benefit from recovering housing upgrade needs and building renovation demand [3][34]. Core Insights - The property value chain is expected to see a significant shift towards domestic demand, driven by potential policy support aimed at mitigating external uncertainties. This shift is projected to create a total addressable market (TAM) of Rmb5.7 trillion by 2035, representing a 70% increase compared to 2024 [3][34]. - The report anticipates an average 5% compound annual growth rate (CAGR) in topline revenue for the property value chain companies through 2035, with a notable improvement in profitability and dividend yields due to operational efficiencies and disciplined capital expenditures [5][34]. Summary by Sections Property Value Chain Stocks - The report identifies seven stocks (CRL, Yuhong, BNBM, Kinlong, Robam, KE, and Greentown Service) as beneficiaries of domestic stimulus, all rated as "Buy" [3][34][18]. Executive Summary - The property construction value chain, which constitutes approximately 30% of China's GDP, has faced challenges due to the downturn. However, potential policy support for domestic demand is expected to accelerate housing upgrades and boost secondary market transactions [29][34]. Implications for the Value Chain - The report outlines three main implications for the value chain: a decline in demand for building products, a consolidation of the developer industry, and a significant shift towards secondary market transactions, which are projected to account for 66% of total housing transactions by 2035 [31][32][51]. Housing Market Outlook - By 2035, housing demand is expected to be 40% below peak levels, with a significant portion coming from Tier-1 and Tier-2 cities. The secondary market is projected to overtake the primary market in terms of transaction volume and value [42][51]. Renovation Demand - Renovation demand is anticipated to nearly double by 2035, contributing approximately 60% of total construction gross floor area (GFA), which will help offset the decline in new builds [54][36].

Core Insights - The company reported a revenue of approximately 1.9836 billion yuan for 2024, representing a year-on-year increase of about 8.4% [1] - The profit attributable to shareholders was 79.671 million yuan, a decrease of 29.86% compared to the previous year [1] - The basic earnings per share were 0.54 yuan, with a proposed final dividend of 0.1452 yuan per share [1] Revenue Breakdown - Revenue from property management services was approximately 1.399 billion yuan, an increase of about 23.6% year-on-year, driven by growth in managed area and number of projects [1] - The total managed project area at the end of the reporting period was approximately 45.9 million square meters, with 22.5 million square meters from Beijing Urban Construction Group and its joint ventures, and 23.4 million square meters from third-party projects, reflecting growth of about 3.9% and 18.7% respectively [1] Strategic Initiatives - The decline in profit was attributed to increased upfront and quality maintenance investments to gain market share, as well as provisions for impairment of receivables in accordance with accounting standards [1] - The company achieved new signed area of approximately 7.4 million square meters, a year-on-year increase of about 35.2%, and new contract value of approximately 695.6 million yuan, up by about 22.2% [2] - A total of 52 new property projects were signed, with 49 from third-party sources, accounting for approximately 94.2%, indicating a strong focus on expanding external markets and enhancing marketing capabilities [2]