Recently, another property company, Suxin Good Life Service Co., Ltd. (hereinafter referred to as "Suxin Good Life"), submitted a prospectus to the Hong Kong Stock Exchange, with BOCOM International as its sole sponsor.
Suxin Better Life is one of the leading providers of integrated urban services and property management services in Suzhou. In 2020, the company ranked first in the Suzhou property management service market and the urban service market in terms of total revenue and urban service revenue, and ranked 48th among the top 100 property service enterprises in China in 2021.
According to the prospectus, SuGaoxin Company and Sugao New City Construction hold 93.13% and 6.87% of the company's shares respectively. It is worth noting that Su Gaoxin Company is owned by the People's Government of Huqiu District of Suzhou City and the Department of Finance of Jiangsu Province with 90% and 10% of the interests respectively.
Due to changes in housing supply and demand, the real estate industry has gradually tilted from construction and development to property management and asset management, and paid more attention to the operation and service of property.
In the Yangtze River Delta region, the total area under management of property management companies is increasing year by year, and at the same time, the total revenue of property management companies has also increased, from 68.7 billion yuan in 2015 to 123.5 billion yuan in 2020, with a compound annual growth rate of 12.4%, and is expected to reach 201.2 billion yuan by 2025.
From the perspective of Suzhou, from 2015 to 2020, the total revenue of property management companies will increase from 9.2 billion yuan to 17 billion yuan, with a compound annual growth rate of 13.1%, and it is expected to reach 29.4 billion yuan by 2025.
Benefiting from the industry-driven, Suxin Good Life's operating performance increased steadily during the reporting period, with revenue of 388 million yuan, 436 million yuan and 437 million yuan respectively, and the corresponding net profit was 36.16 million yuan, 43.55 million yuan and 48.1 million yuan. As of June 2021, Suxin Good Life has contracted 77 projects in three cities in two provinces, with a total contracted gross floor area of 7.2 million square meters, and any change in the total area under management will directly affect the company's financial situation.
In terms of segmentation, the income of Suxin Meili Bio mainly comes from four business lines, including urban services, commercial property management services, residential property management services and property leasing, accounting for 32.3%, 44.9%, 16.4% and 6.4% of the total revenue in 2020, respectively. Among them, commercial property management services are the main source of revenue for the company, accounting for 48.8%, 45.4% and 44.9% of the revenue during the reporting period.
In terms of scale, China's property management service market is very fragmented, with companies in the top ten in 2020 accounting for only 16.3% of total revenue. The market share of Suxin Good Life in Suzhou is 2.6%, ranking first.
Suxin Good Life ranks first in Suzhou's market share, and it has to be mentioned that almost all of its projects come from Suzhou. From 2018 to 2020, the revenue from Suzhou was 386 million yuan, 434 million yuan and 434 million yuan respectively, accounting for 99.5%, 99.5% and 99.4% of the total revenue. The company's revenue is too limited to the Yangtze River Delta region, largely dependent on the local economic development situation, if the urban development rate changes, it will adversely affect the company's performance.
In addition, the majority of the Company's revenue came primarily from the contracted property management services, which charged property management fees at pre-determined monthly prices per square metre, accounting for 99.6%, 99.4% and 99.4% of total revenue during the reporting period, respectively. If the Company is unable to estimate or control the cost of providing property management services, it will suffer a significant loss due to its lack of right to charge additional payments from the owner, tenant or property developer to make up the difference. From 2018 to 2020, the Company incurred losses of $5.9 million, $5.2 million and $5.3 million on 17, 13 and 11 properties.
Looking back at the first half of 2021, real estate stocks were sluggish, while property stocks in the post-real estate industry repeatedly reached new highs and performed strongly. However, in the past two months, property stocks have begun to pull back, and the listing of new stocks has also fallen into a spell of breaking, accompanied by more and more property companies pouring into the capital market, the scarcity of the target has declined, and the capital may gradually retreat. However, at present, property management is receiving more and more attention, and in the case of no downward adjustment of the performance expectations of the property enterprise, it is still worth paying attention to in the long run.
Property stock monthly market, image source: Futu
As the real estate industry gradually shifts its focus to the operation and management of properties, the tide of listing of property companies is hot, and this year it is again peaking, so the competition on the track is also extremely fierce. Although the operating performance of Suxin Good Life has grown steadily, it has great hidden dangers, and if it cannot be improved in time, it will adversely affect the operating conditions.