With the selection of the value list of Jinqilin listed companies in Hong Kong stock market opened, thousands of companies will compete fiercely for the eight Project Awards. Who is the most leading entrepreneur, such as Zhang Yong, Yu Liang, Wang Xing, Lei Jun, Xu Jiayin and Ding Lei.
five years ago, sun Hongbin said, “a property management company that will not seek to be listed on the stock exchange will not seek to be separated from rongchuang, because the property company is just like an office public service organization. If it is split and listed, it will turn the property company into a tool for making money, which is not advisable.” The implication is that the spin off property listing is a little sniffy.
on August 6, the official website of the Hong Kong Stock Exchange showed that rongchuang service Holdings Co., Ltd. (hereinafter referred to as “rongchuang service”) submitted a prospectus and planned to be listed independently on the main board of the stock exchange to raise funds for seeking strategic investment and M & a opportunities, upgrading intelligent management service system and expanding community value-added services.
as for the specific fund-raising scale, rongchuang service has not been disclosed in the prospectus. According to a foreign media report on July 21, rongchuang is considering an IPO of US $1 billion property management business in Hong Kong.
according to the data disclosed in the prospectus, in the past three years, rongchuang service has achieved rapid growth in scale, revenue and profit. As Gao Xi, chief financial officer of rongchuang, said, “we hope to be a leading enterprise in the property industry”. However, the proportion of overseas projects is low, its profitability is not strong, and the gross profit rate is lower than the industry average.
rongchuang service was born out of rongchuang group, and its development mainly experienced three stages. It started from 2004-2005 and followed rongchuang real estate’s water test and property management business; from 2006 to 2015, it expanded nationwide, and established rongchuang service group in 2015, which settled in Xi’an, Chengdu, Changzhou, Nanjing, Shanghai and Wuhan to carry out group management and control; since 2016, it has implemented standardized management to improve the quality of basic services.
in terms of performance, according to the prospectus, from 2017 to 2019, rongchuang service achieved operating revenue of RMB 1111 million, RMB 1.841 billion and RMB 2.827 billion, with an annual compound growth rate of 59.5%; corresponding net profits of RMB 43 million, RMB 98.3 million and RMB 269 million, respectively, with an annual compound growth rate of 150.7%.
even in the first quarter of the epidemic, the growth rate of rongchuang service was not affected. The revenue increased by 34.1% from 536 million yuan in the three months ending March 31, 2019 to 719 million yuan in the same period of 2020; the net profit increased by 394.9% from 14 million yuan in the three months ending March 31, 2019 to 67 million yuan in the same period of 2020.
from 2017 to 2019, the construction area of rongchuang service in management increased significantly from 1998.8 million square meters to 52.963 million square meters, and reached 100.6 million square meters by the end of May 2020, with an annual compound growth rate of 95.2%, covering 29 provinces and 126 cities in China, of which 86.2% are located in the first and second tier cities of China; the contracted building area increases from 57.4 million square meters at the end of 2017 to May 3, 2020 8 million square meters on the 1st day, with an annual compound growth rate of 76.5%.
how to describe the performance of rongchuang service in recent years? Perhaps as it stressed in the prospectus, “we are the fastest growing large property management service provider in China, with a leading market position. According to the data of China Index Research Institute, in 2019, our overall growth rate (calculated by the average annual growth rate of building area, revenue and profit under management) is 104.5%, ranking first compared with the top 100 large property service enterprises in 2019. ”
according to the statistics of Kerry, by the end of 2019, there were 15 enterprises with a management area of more than 100 million square meters, Vanke property and Country Garden Service ranked the top two with 439 million square meters and 393 million square meters, while rongchuang service just crossed the 100 million mark.
in terms of revenue scale, rongchuang service is also inferior to the leading enterprises. According to public information, in 2019, the revenue of Vanke property has reached 12.7 billion yuan, and country garden service and green city service have reached 9.64 billion yuan and 8.582 billion yuan respectively. In addition, the revenue of investment surplus, elegant life and poly property also exceeded 5 billion yuan last year, and the volume of rongchuang service of 2.827 billion yuan was generally in the middle of the industry.
it is worth noting that, like most property management companies, the profitability of rongchuang service is inseparable from the parent company rongchuang group’s active “blood transfusion”.
in 2017-2019 and the first quarter of 2020, the revenue generated by rongchuang group’s properties accounted for 99.4%, 99.1%, 99.6% and 99.2% of the income from property management services respectively; as of the end of March 2020, there were only 2 outward expansion projects of rongchuang service, involving a construction area of 1352000 square meters, accounting for only 2.3% of the total area under management.
in this regard, rongchuang services frankly stated in the prospectus, “as we are unable to control the management strategy of rongchuang group and the macroeconomic or other factors that may affect its business operation, any adverse development of rongchuang group’s operation or its ability to develop new properties may affect our access to new service contracts related to property management services and non owner value-added services Ability. ”
in recent years, with the real estate industry from the stock age to the era of incremental improvement, and the tightening of various regulatory policies, both the head and middle reaches of the real estate industry are strengthening their ability to expand outside in order to reduce their dependence on the parent company. In terms of rongchuang service, at present, it is mainly through acquisition and merger to enhance the ability of outward expansion. For example, it completed the acquisition of Kaiyuan property management and the integration of Chengdu global century in 2020.
in the capital market, the ability of outward expansion is often regarded by investors as the evaluation index or value judgment standard for the profitability, growth and imagination space of property enterprises. In fact, with the rapid growth of its performance and backed by the 100 billion yuan real estate enterprise rongchuang China, the profitability of rongchuang service is not outstanding.
according to the prospectus, the overall gross profit margin of rongchuang service from 2017 to 2019 is 21%, 23% and 25.5%, showing a continuous upward trend.
according to the data released by China Property Management Association and China real estate evaluation center of Shanghai E-House Real Estate Research Institute, as of April 30, 2020, the average gross profit margin of 26 domestic property management companies listed in a shares and H shares were 29.8%, 29.7% and 29.4% respectively, and rongchuang service lagged behind by 8.8%, 6.7% and 3.9%.
for horizontal comparison, take Jinke smart service and Shimao service, which recently submitted forms and whose parent company’s strength is still behind rongchuang China, the gross profit rates of the latter two services during 2017-2019 are 26.8%, 25.7%, 27.3% and 27.45%, 29.35% and 33.67%, respectively, which are all above rongchuang service.
further analysis shows that during the reporting period, the core business is also the business sector with a large proportion of revenue – property management services, whose gross profit margin is too low or one of the incentives to lower the overall gross margin of rongchuang service.
from 2017 to 2019, the gross profit rates of rongchuang service business segment were 1.6%, 6.4% and 11.8%, respectively. Although the trend is upward, it is still low enough to put it in the industry to “look up”. Node finance and economics noted that the gross profit rate of basic property services of Kaiyuan property acquired by merger and acquisition in the same period reached 20.9%, 20.8% and 19.4%, while that of Jinke smart service reached 21.3%, 19.7% and 21.7%. In contrast, rongchuang service inevitably calls into question the lack of profitability.
in particular, it should be pointed out that the revenue share of rongchuang service property management business is declining year by year. In the past three years, the proportion of property management business income in the total revenue of rongchuang service decreased from 51.7% to 40.6%; the proportion of non owner value-added service revenue increased from 47.2% to 55.6% due to providing a lot of case sales assistance and consulting services for the parent company.
as the main business and basic business of the property management company, the decline in the proportion of rongchuang service property management business is undoubtedly worthy of vigilance. To a certain extent, it shows that the core competitiveness of the company is declining, and more efforts should be made in the main business in the future.
from the content of the prospectus, rongchuang service has been aware of the problem. It said in the prospectus, “in the next few years, as a large number of real estate development projects are delivered and expanded, the revenue of non owner value-added services is expected to decline steadily.”
as early as the beginning of 2019, rongchuang service has begun to prepare for the establishment of overseas listing structure. In February and March 2019, rongchuang China successively registered Huixi (Hong Kong) Investment Co., Ltd. and Tianjin Rongjia Property Service Co., Ltd., with Tianjin Rongjia holding 100% of rongchuang service, and Huixi Hong Kong holding 100% of Tianjin Rongjia. In November 2019, rongchuang service increased the registered capital from 100 million to 300 million.
rongchuang China first divided its business into real estate and non real estate sectors and set up corresponding management departments. Then in September 2019, Cao Hongling, the former chief financial officer of rongchuang China, was appointed president of rongchuang service group.
from never going public to eager to be listed, rongchuang service gives the following reasons: optimistic about the future development space and potential of the property service industry, enhancing the market competitiveness of the group through the capital market; enabling the group to have an independent financing platform and providing funds for future development through the establishment of an independent and extensive investor base; and enabling the group to achieve a more integrated business Since rongchuang will continue to benefit from the future development of the group by merging the financial accounts of the group and collecting the dividends of the group.
after all, financing is still the main purpose. After all, rongchuang China’s high debt is obvious to all. By the end of 2019, rongchuang China had total assets of 960.649 billion yuan, total liabilities of 846.555 billion yuan, and the asset liability ratio was 88.12%. Among them, the current liabilities were 620.681 billion yuan, but the cash on account was only 77.944 billion yuan, which was not enough to cover. It is a shortcut to reduce pressure by splitting the property management business. On the other hand, under the background of the policy of “no speculation on housing and housing”, there are more listed entities A platform to ensure the safety of liquidity.
from a more macro perspective, this year, the state issued the guiding opinions on comprehensively promoting the transformation of old urban residential areas. According to the preliminary statistics of the Ministry of housing and urban rural development, there are nearly 170000 old residential areas in China, involving more than 42 million households and a construction area of about 4 billion square meters. In 2020, 39000 old urban residential areas will be reconstructed, involving nearly 7 million households, double the number of 19000 residential areas and about 3.52 million households in 2019. After the transformation of old residential areas, it is necessary to introduce professional property management, so as to release the huge market demand.
at this time of listing, sun Hongbin can not only tell a good capital story, but also share the dividend income of rongchuang service after listing. It is indeed a plan of “the best of both worlds”.