On Thursday, Morgan Stanley (NYSE:MS) adjusted its outlook on Poly Property Services Co Ltd (6049:HK), reducing the price target to HK$32.41 from the previous HK$44.07. Despite the decrease, the firm has maintained an Overweight rating on the stock.
The adjustment comes with a positive view of the company's prospects, as noted by Morgan Stanley. Poly Property Services is recognized for its robust parent developer with a state-owned enterprise (SOE) background, which is actively consolidating the market.
The company's competitive advantage is underscored by its strong track record in expanding public projects and increasing its presence in secondary residential and office buildings. This strategic growth is expected to help mitigate any potential decrease in primary residential spaces.
The analyst further highlighted the company's effective cash management, particularly in public projects. This is attributed to the selective expansion of projects and a proactive approach to cash collection. The financial discipline is seen as a key strength for Poly Property Services.
Additionally, the company's valuation is considered deep, with a 2024/25E ex-cash price-to-earnings (P/E) ratio of 1.6x/1.5x, which is significantly lower than the industry average of 4.2/3.7x for the same years.
This valuation is supported by a strong net cash position that accounts for approximately 60% of the company's market capitalization, positioning it as one of the lowest valuations among the property management companies covered by Morgan Stanley.
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