Lushang life service secondary delivery table In the total construction area under management of 19.5 million square meters

China Net Finance and Economics, January 20 (trainee reporter Zhang Zengyan) More than 6 months after the first submission of the form expired, on January 18, Lushang Life Service once again submitted a prospectus to the Hong Kong Stock Exchange.

According to the prospectus, Lushang Life Service was established in 2006 as a comprehensive property management service provider. In 2018, 2019, 2020 and the first 10 months of 2021, Lushang Life Services achieved revenue of RMB282 million, RMB321 million, RMB403 million and RMB458 million, and gross profit was RMB46.276 million, RMB56.023 million, RMB79.621 million and RMB118 million, respectively, and gross profit margins were 16.4%, 17.4%, 19.8% and 25.7% respectively. As of October 31, 2021, Lushang Life Services had a total of 81 property projects under management with a total GFA under management of about 19.5 million square meters, and 81 property projects had been contracted to manage, with a total signed construction area of more than 22.8 million square meters, covering 12 cities.

Industry analysts believe that on January 1 this year, the new profit regulations of the Hong Kong Stock Exchange were officially implemented, and the difficulty of listing property companies increased, which means that the second IPO journey of Lushang Life Services is also full of uncertainty.

Revenue depends on Lushang Development Group

Similar to most property companies, the source of income of Lushang Life Services mainly includes three business lines: property management services, non-owner value-added services, and community value-added services. Among them, the income obtained through property management services accounted for a relatively high proportion of total revenue, accounting for 57.7%, 56.2%, 50.6% and 46.5% in 2018, 2019, 2020 and the first 10 months of 2021, respectively; the income from community value-added services and non-owner value-added services accounted for a total of 42.3%, 43.8%, 49.4% and 53.5% respectively.

Xiao Yunxiang, a senior analyst at Tongce Research Institute, said that for property management enterprises with small management scale and lack of special business models, the advantages of Lushang life services are not obvious, and it is difficult to get favored by the capital market.

Source: Lushang Life Services Prospectus

It is worth noting that Lushang Development Group, as a shareholder of Lushang Life Service, has contributed many property projects to it. As at 31 December 2018, 2019, 2020 and 31 October 2021, the gross GFA under management of properties developed by Lushang Development Group accounted for 98.6%, 99.8%, 76.6% and 63.6% of the total GFA under management of Lushang Life Services respectively. In particular, in 2018, 2019 and 2020, Lushang Life Services managed almost all the property projects developed by Lushang Development Group.

From the perspective of the revenue composition of Lushang life services, in 2018, 2019, 2020 and the first 10 months of 2021, the revenue contributed by Lushang Development Group was 272 million yuan, 309 million yuan, 386 million yuan and 389 million yuan, accounting for 96.5%, 96.4%, 95.8% and 85% of the total revenue, respectively, while the income contributed by independent third parties was 9.129 million yuan, 7.253 million yuan, respectively. 11.83 million yuan and 45.338 million yuan, accounting for 3.2%, 2.3%, 2.9% and 9.9% respectively. During the same period, lushang life services won 27.3%, 20.0%, 26.3% and 44.0% of the properties developed by independent third parties respectively.

"Lushang life services in the management area of nearly 20 million square meters, this type of property enterprises and the head of the enterprise gap is larger, the winning rate is relatively low." Due to the general ability to expand, the expansion path of the management scale is relatively limited, mainly relying on affiliated companies," the above-mentioned industry insiders pointed out.

It should be pointed out that before the listing, after the restructuring of Lushang Development Group, Shandong Commercial held 53.7% of the equity of Lushang Development Group, while Lushang Development Group held 100% of the equity of Lushang Life Services through direct shareholding and indirect shareholding. Therefore, in addition to Lushang Development Group, Shandong Commercial also contributes property projects to Lushang Life Services.

According to the data, Shandong Commercial is a large holding company, and its investment fields involve retail, health care, finance, commercial tourism and hotel management. As of October 31, 2021, the six property projects under management of Lushang Life Service were developed by Shandong Commercial Institute, with a total GFA under management of 1 million square meters, accounting for 4.9% of the total GFA under management of Lushang Life Service. Lushang Life Service said that since the establishment of the company, it has been providing property management and value-added services for Shandong Commercial.

The project layout is concentrated in Shandong Province

As of 2018, 2019, 2020 and October 31, 2021, the total GFA under management of Lushang Life Service Projects was approximately 9.9 million square meters, 10.7 million square meters, 15.4 million square meters and 19.5 million square meters, respectively, covering three provinces and cities, namely Shandong Province, Beijing and Harbin.

Among them, a considerable part of the business is concentrated in Shandong Province. As of October 31, 2021, Lushang Life Services managed a total GFA of approximately 16.9 million square meters in Shandong Province, accounting for approximately 86.7% of the total GFA of properties under management. In addition, in 2018, 2019, 2020 and the first 10 months of 2021, the revenue of property management services from Shandong Province accounted for 82.7%, 82.0%, 82.5% and 80.9% of the total property management services revenue, respectively.

"On the whole, Lushang Life Service is still a regional property company with weak anti-risk ability, which is not unrelated to the long-term dependence on related parties Lushang Development Group and Shandong Commerce." In the later stage, the scope of Lushang life service layout needs to be continuously expanded, mainly relying on undertaking third-party property management projects and mergers and acquisitions," the above-mentioned industry insiders told China Net Financial Reporter.

In the prospectus, Lushang Life Services said that it has been seeking to expand its existing business through scale growth and organic growth, as well as acquiring other property management companies to expand its project portfolio and gain a larger market share. In the fundraising purpose, Lushang Life Services emphasized that part of the funds will be used to acquire or invest in residential and non-residential property projects after the listing.

Xiao Yunxiang pointed out that if it can be successfully listed, the most intuitive thing for a property company is to obtain financing from the capital market, and then improve the company's management scale, service capabilities, brand recognition and so on through acquisitions. However, in the current downturn in the real estate market environment, the space for "storytelling" of Lushang life services in the future is also limited. In addition, affected by the real estate market, the trend of the property sector is in a downward channel, and non-high-quality new stocks enter the market, which has little impact on the overall plate trend.

(Editor-in-Charge: Fang Xiaoyu)