NEW YORK, Nov. 3, 2021 /PRNewswire/ -- Ucommune
(Nasdaq: UK) is an asset-light operator that focuses on providing
operation custody, operation management and output services for
other asset owners, where the proportion of projects managed under
the light-asset model is expected to reach 75% by 2022 from ~50% in
2020. Specifically, Ucommune's asset-light
business contracted 154 venues in 52 cities, with a management area
of approximately 439,000 square meters as of June 30, 2021, increased by respective 141%, 63%
and 98% year-over-year from a year ago.
Bridging the Valuation Gap – Ucommune and its
competitors
UK's revenues have been growing at a much faster
pace than its competitors (public companies), more than tripled
from ~USD 70 million in 2018 to
$211 million in 2021, according to
Capital IQ. On the back of steady recovery of China's economic conditions
shaking off the adverse impact of Covid, Ucommune's
looking to realize positive revenue growth this year.
With more and more companies electing to extend the
work-from-home practices coming out of Covid pandemic, corporations
are increasingly resorting to coworking space to cut costs of
office rentals while improving work efficiency. And with a
differentiated, yet better asset-light operating and managing
business model, UK shares is expected to warrant an upward
revaluation from the current trough level, to be more in line with
other co-working space operators.
As of Oct. 29, 2021, the current
market competitor has a market capitalization of ~US$8 billion, valuing the firm at a P/S ratio of
~3X over its 2021 estimated revenue of ~US$2.65 billion, based on its SEC filings,
compared to a P/S ratio of ~0.4X for Ucommune. The market value of
UK is expected to be higher than 4 billion
yuan (by applying ~3X of estimated 2021 revenue of
1.35bn yuan), or more than 8X from
today's market capitalization of ~$80 million.
With asset-light model Ucommunce is able to free up operating
cash flow to scale business more efficiently, while avoiding asset
value volatilities, for the following reasons:
- Higher capital efficiency. Due to the small investment in the
early stage, Ucommune's asset-light projects are expected to be
more profitable, evidenced by the company's narrowing operating
losses. Specifically, UK's net loss narrowed by 37% year-on-year in
2020.
- Greater business scalability. The current market competitor's
number of communities dropped 10% to 763 in 38 countries from the
end of 2020. On the contrary, UK has been in a state of rapid
expansion transitioning into the light-asset model. As of
June 30, 2021, Ucommune had 282
venues in 87 cities, an increase of 21% compared to the end of
2020.
- Stronger operational capabilities leading to higher occupancy
rates. Ucommune's occupancy rate was 79% in the first half of
2021, up from 77% in 2020. UK is able to maintain a high occupancy
rate owing to the rapid growth of its asset-light projects, and the
recognition of its strong operating capabilities.
Furthermore, UK has a strategic domestic focus, making it easier
to standardize and reproduce. UK's communities
footprints started with the comprehensive first- and second-tier
cities in China, while trickling
down to also cover the third- and fourth-tier cities. Though
Ucommune's main focus is on China's domestic markets, it is
also making initial entrance into the international market, through
the join hands with Australia's Hexa Group to
co-develop "Hexa Space-Ucommune" light-asset project,
according to the company's press release on
Oct. 18.
The advantage of asset-light model is gradually gaining
recognition by other coworking space operators. UK has built a
business model integrating asset-light, SaaS, and enterprise
services. Key customer customization (such as for Alibaba,
Meituan, 360 and Zhongwang Group, etc. in major cities) and digital
transformation and upgrade (such as holding e-commerce
qualifications, self-developed APP, SaaS systems, smart hardware
including face recognition and cloud printing, and "speed reading
network" for the real estate brokers) have completed and already
demonstrated noticeable results.
DISCLOSURES AND DISCLAIMERS
Stone Street Group LLC ("Stone Street") publishes research reports on
publicly-traded companies. Stone
Street has been retained by the Company discussed in this
report (the "Company") to provide ongoing digital
investor relations services, including the creation and
dissemination of this report. All research published by
Stone Street is based on public
information, or on information from the Company that the Company is
required to promptly make public.
Stone Street is not a
broker-dealer or a "covered person" under SEC
Regulation AC, and does not distribute its research through a
registered broker-dealer or any associated person of a registered
broker-dealer. Accordingly, Stone
Street is exempt from the provisions of Regulation AC.
Nevertheless, Stone Street makes the
following voluntary disclosures and disclaimers in connection with
its research reports:
NO GUARANTEE: This research report is not a substitute for
the exercise of an investor's independent due
diligence and independent investment determinations. Information
contained herein is based on sources we believe to be reliable but
we do not guarantee their accuracy. It should be presumed that the
analyst who authored this report has had discussions with the
Company to endeavor to ensure factual accuracy prior to
publication, however, no independent due diligence or verification
has been undertaken by the analyst. No endorsements are made
in respect of information provided or published by the subject
Company and relied upon by the analyst for purposes of this
research report. Recipients of this report should consider this
report as only one factor in making any investment decision. This
report is for information purposes only and is not intended as an
offer to sell or a solicitation to buy securities. Any and
all information provided by the Company which has been publicly
disclosed as "forward looking information" remains
subject to all uncertainties in such regard and Stone Street makes no assurances or guaranties
of actual outcomes.
NO CONFLICTS OF INTEREST: Stone
Street does NOT own securities of the issuers described
herein, and Stone Street does not
make a market in any securities. Stone
Street does not engage in, or receive compensation from, any
investment banking or corporate finance-related activities with the
Company discussed in the report. Stone
Street's contracts with issuers protect
Stone Street's full
editorial control of all research, timing of release of reports,
and release from liability for negative reports.
ANALYST INDEPENDENCE: Each Stone Street analyst has full
discretion on the analysis and revenue targets contained in the
report, based on his or her own due diligence. Analysts are paid in
part based on overall profitability of Stone Street. No part of
analyst compensation was, or will be, directly or indirectly,
related to the specific recommendations or views expressed in any
report or article. Stone Street
policy does not allow an analyst or a member of their household (i)
to own, trade, or have any beneficial interest in any securities of
any Company that analyst covers, or (ii) serve as an officer or
director of a covered Company.
RISK FACTORS: Earnings targets and opinions concerning the
composition of market sectors included in this report reflect
analyst judgments as of this date and are subject to change without
notice. A risk to our earnings targets is that the
analyst's estimates or forecasts may not be met. This
report contains forward-looking statements, which involve risks and
uncertainties. Actual results may differ significantly from such
forward-looking statements. Factors that may cause such differences
include, but are not limited to, those discussed in the
"Risk Factors" section in the issuer's
SEC filings available in electronic format through SEC Edgar
filings at www.sec.gov.
COMPENSATION: Stone Street
received a flat fee from or on behalf of the Company for the
creation and dissemination of the report. Stone Street has not received investment banking
income from the Company in the past 12 months, and does not expect
to receive investment banking income from the Company in the next
12 months.
ANALYST CERTIFICATION: The research analyst certifies that
this report accurately reflects his/her personal views about the
Company's securities that none of the research
analyst's compensation was, is or will be, directly or indirectly,
related to the analyst's specific recommendations or views
contained in this research report.
View original
content:https://www.prnewswire.com/news-releases/upward-revaluation-rationalized-by-superior-asset-light-coworking-space-management-model-301415484.html
SOURCE Ucommune International Ltd.