In the face of the continuous adjustment of the real estate industry, the property management sector, which was previously known as the "cash cow" of real estate enterprises, is now collectively in trouble. Because of the impact of the real estate downward cycle, the property management market's ability to resist declines has "failed", and it has become unpopular in the capital market. The data shows that since the end of June 2021, the index of the Hong Kong property sector has fallen all the way, and now the cumulative decline has exceeded 80%, and the prices of many stocks have continued to bottom out.
In view of the market environment, the "listing tide" of the property management industry a few years ago was also overshadowed.
Wind data shows that only two property management stocks were listed in the Hong Kong stock market last year, and the most recent listed property management stock was Zhongan Smart Life (02271.HK), which was listed on July 18, 2023.
On April 24, a property management company with a state-owned background struggled to sprint to the Hong Kong capital market in the face of adversity and successfully passed the hearing of the Hong Kong Stock Exchange, just one step away from its official listing. The company, known as Prosperity City Operation Services Group Co., Ltd. ("Prosperity Services"), acted quickly and passed the hearing of the Hong Kong Stock Exchange before other property management companies, Shum Yip Property and Jingfa Property, which also have local state-owned backgrounds.
Accordingly, Hongying Services is expected to become the first property management company to be successfully listed since 2024, and the first listed stock in the property management industry in the "Year of the Dragon".
Changsha state-owned assets are wholly owned, and the performance of "blood transfusion" has increased steadily
In the past year, the momentum of private property management enterprises to list in Hong Kong has been extinguished, but property management enterprises with state-owned backgrounds have continued to sprint to the Hong Kong Stock Exchange. This is due to the fact that these enterprises are backed by state-owned assets, hold a large number of government projects in their hands, have strong development resilience, and have more advantages than private property management enterprises in the capital market.
Founded in 2015, Hongying Services was mainly engaged in parking lot operation business at the beginning, and later gradually involved in property management services, landscaping and commercial management services.
In 2020, Urban Development Group, wholly-owned by Changsha State-owned Assets Supervision and Administration Commission, acquired 100% of the shares of Hongying Services, and Hongying Services officially became a state-owned enterprise. At present, Hongying Services is directly held by 95% of the equity of Urban Development Group and indirectly holds 5% of the equity.
After becoming a member of Changsha State-owned Assets, Hongying Services further expanded its business to lighting system operation and municipal sanitation business. By 2023, the total number of business projects of Prosperity Services will be 360, and the total gross floor area of property management and commercial operation under management will be 11.8 million square meters.
At present, Hongying Services is mainly engaged in three major businesses, namely: 1) property management services (including various property management services and value-added services for public properties, commercial properties and residential properties), 2) urban services (including landscaping and engineering, lighting system operation, parking lot operation and municipal sanitation services), and 3) commercial operation services.
Prosperity Services has successfully entered the list of the top 100 property management enterprises in China, and ranked 49th in the "2023 China Top 100 Property Service Enterprises" selected by the China Index Institute.
The advantage of property management enterprises backed by state-owned assets is that the energy source continues to obtain stable projects from local governments, and the "blood transfusion" of government projects can be said to be the "stabilizer" of the development of these property management enterprises. "CDLG's diversified portfolio of properties provides us with a large pool of potential high-quality projects, and CDL will continue to award projects to us as long as we meet certain criteria," the company said in the prospectus. ”
From 2021 to 2023, the total revenue of Hongying Services from CDG and its associates was RMB303 million, RMB349 million and RMB420 million respectively, accounting for 70.2%, 66.0% and 64.4% of the Company's total revenue, respectively.
With the continuous blood transfusion of Urban Development Group, the operating performance of Hongying Service in the past few years has been stable.
From 2021 to 2023, the revenue of Hongying Services will be 432 million yuan, 529 million yuan and 652 million yuan respectively, and the profit attributable to equity shareholders of the company will be 40.4 million yuan, 53.095 million yuan and 70.178 million yuan respectively.
However, unlike Shum Yip's high independence in the property market, Hongying Services has a dependence on the parent company, and its market-oriented expansion ability needs to be enhanced. In 2023, the Company's property management services and urban services segments accounted for 10.2% and 25.4% of the revenue from independent third parties, respectively, and the Company's project bid rate from independent third parties in the past three years did not exceed 30%.
Urban services are more "popular" than property management
Urban services are a general term for the comprehensive services provided to city governments, enterprises and residents. Urban services are a broad concept that includes multiple fields, such as landscaping and engineering, parking lot operations, lighting system operations, municipal sanitation services, etc.
As the government pushes to improve public services, a new model of "urban services" has emerged, bringing opportunities for property management companies to participate in public services and social governance. Not only Hongying Services, but also companies such as Country Garden Services (06098.HK), Poly Property (06049.HK) and Wanwuyun (02602.HK) are vigorously betting on the urban service track to open up new growth poles.
With the diversified development and expansion of the city services business, the city services business of Prosperity Services has generated stable revenue and profits, and has become a key driver of the company's growth and the focus of its business.
In the past three years, the growth of urban services has far outperformed that of property management services and commercial operation services, with revenue growing rapidly from RMB185 million in 2021 to RMB353 million in 2023, with a compound annual growth rate of 38%, becoming the main force behind the growth of Hongying's service revenue.
The urban service sector has the characteristics of diversified service types, numerous service recipients, high mobility, high quality requirements and high customer stickiness. Under the downward trend of the real estate industry, the overall growth rate of residential properties has slowed down, and the growth entry point is to focus on the blue ocean city services, which is also a wise choice for property management enterprises.
For the use of the proceeds from the IPO, Prosperity Services plans to identify potential strategic acquisition opportunities for property management service providers and urban service providers. "As of December 31, 2023, approximately 140 downstream property management service providers and 70 urban service providers met our investment and acquisition criteria," the company said in its prospectus. ”
Author: Far away