Chasing The Trend Of Property Listing, China Resources Land'S Asset Light Layout

The listing tide of real estate enterprises is becoming more and more intense this year. After rongchuang, Evergrande and other head real estate enterprises plan to split the property listing, China Resources land also started.

On August 31, five days after the official announcement of "possible split", China Resources announced that China Resources Vientiane life Co., Ltd. (hereinafter referred to as "China Resources Vientiane") had submitted a prospectus in the Hong Kong stock exchange. Its main business was property management services and commercial operation management services, which was consistent with the contents of the previous announcement.

In recent years, China Resources Land has put forward the positioning of "urban comprehensive investment and development operator", with parallel development and operation, high sales ranking and leading commercial real estate rental income.

After years of "residential + commercial" dual track operation, China Resources Land wants to release the potential value of this model and separate out the light asset management part for listing, which also makes it different from a number of property stocks.

"Property management + business management" listed

At the mid-term performance meeting on August 28, the management of China Resources Land said that preparations for the listing of the spin off property had been started three years ago.

This can explain why China Resources moved so quickly from the announcement to the submission of the prospectus.

According to the prospectus, in 2017, China Resources Vientiane life was officially established and initially focused on providing residential property management services to meet the business needs of China Resources Land. Then, the independence of this platform is becoming stronger and stronger, and it is committed to becoming "China's leading property management and commercial operation service provider".

This time, China Resources land plans to merge the property management business and commercial operation management business into one and go public together. The key merger will take place in 2020.

From June to August, China Resources Vientiane life intensively purchased the commercial operation and management business of China Resources Vientiane Commerce (Shenzhen), Shenzhen Buji Vientiane Hui and Luzhou Vientiane Hui, and Hubei runlian property.

After a series of merger actions, the listing basket of China Resources Vientiane has been prepared, including four investment holding companies, nine property companies and three commercial management companies.

At the end of August, China Resources Vientiane officially knocked on the gate of the Hong Kong stock exchange. According to market sources quoted by IFR, the listing of China Resources Vientiane life plans to raise about US $1 billion (about HK $7.8 billion).

As for the reasons for the split listing, Li Xin, President of China Resources Land, said that the main reason was to fully release the value of the rapid development of "two wheel drive" in the past ten years.

Different from other real estate enterprises, China Resources is a rare real estate enterprise with dual track of residential and commercial development. Its property rental income has exceeded 10 billion for two consecutive years, and it is the only listed real estate enterprise in the mainland to exceed 10 billion.

The merger of property management and commercial management is to strengthen the asset light business and management platform of China Resources Land, and build its own profitability; in addition, the separation can make China Resources Vientiane become an independent listing platform, which can directly enter the debt and stock markets for financing, and improve the market value.

For China Resources Land, the spin off listing will also support its asset development and investment businesses, as well as bring new profit growth points.

Although the amount of financing and the expected market value are not disclosed in the prospectus, it can be seen from the financial data that China Resources Vientiane will exist in a large volume.

As of June 30, 2020, the construction area of residential and commercial properties provided by China Resources Vientiane for property management services is about 107 million square meters, and the construction area of shopping centers providing commercial operation services is about 5.6 million square meters.

From 2017 to 2019, the life performance of China Resources Vientiane increased steadily, with revenue of 3.129 billion yuan, 4.432 billion yuan and 5.868 billion yuan respectively, and the net profit of the same period was 388 million yuan, 423 million yuan and 365 million yuan respectively. The compound annual growth rate of revenue and net profit was 36.8% and - 3.06%, and the average annual growth rate of average revenue and net profit in the industry was 34.62% and 37.17% respectively.

Most of the management properties of China Resources Vientiane are from the parent company China Resources Land, which is highly tied with the latter. In 2019, China Resources Vientiane life achieved an operating income of 5.868 billion yuan, second only to Vanke, green city, country garden and poly property.

According to the agency report, according to the service income of property companies in 2019, China Resources Vientiane ranked fifth; according to the income of shopping center management services in 2019, China Resources Vientiane ranked second.

The future of China Resources Vientiane

According to the prospectus, after the split up, the shareholding ratio of China Resources Land to China Resources Vientiane remained unchanged at 59.55%. For other shares, the management of China Resources Land said that it would give priority to guarantee quotas for landland shareholders in accordance with the listing regulations.

Like many property companies, China Resources Vientiane also chose to start the journey of capitalization in Hong Kong.

As of September 1, 11 property management enterprises, including China Resources Vientiane life, have planned to go to Hong Kong for listing. Many of these enterprises are backed by leading real estate enterprises like China Resources Vientiane life, such as Evergrande property under China Evergrande, rongchuang service Holdings under rongchuang China, Shimao services under Shimao Group and Jinke property under Jinke.

In fact, since this year, many large, medium and small real estate developers have started the road of property separation. This trend is more obvious after the epidemic, because investors have seen the value of property in community management. The performance of property stocks this year is eye-catching, and the price earnings ratio is generally dozens of times, and the highest is more than 80 times.

China Resources Vientiane is not a pioneer in this wave of property listing. Previously, under the leadership of Central real estate developers, China shipping property entered the Hong Kong Stock Exchange early in 2015, and was the second listed company in the property field, and its share price has risen by more than 480%; poly property was listed at the end of 2019, and its share price rose by more than 75% in more than half a year. The investment surplus was completed at the end of 2019, and the property business was split and listed after asset restructuring.

This year, property stocks are more popular. Evergrande property has attracted Ma Yun's Yunfeng fund, Ma Huateng, Sequoia Capital and CITIC Capital to take shares.

Many real estate companies have been given more significance in the divestiture and listing this year, such as reducing debt. Xia Haijun, President of Evergrande, said at the mid-term performance meeting that the net debt ratio of Evergrande will be reduced by about 19 percentage points due to the divestiture.

In the first half of 2020, the net debt ratio of China Resources land increased by 15.6 percentage points to 45.9%. Although it is still in the low range, the split listing will undoubtedly further strengthen the balance sheet of China Resources Land.

Looking forward to the future, frost Sullivan report indicates that the total revenue of China's full format property management and commercial operation service market may reach 698.2 billion yuan in 2024, achieving a compound annual growth rate of 8.2% from 2019 to 2024.

China Resources Vientiane saw this development opportunity and said in the prospectus that it will accelerate its expansion in scale and consolidate its leading market position in the future.

The property + business management mode distinguishes China Resources from the existing property companies. In the field of residential property, what China resources can do, just like other real estate enterprises, is to acquire and expand the resources of the parent company; in the field of business management, the brand of China Resources business can also allow it to expand light assets and export brand management.

Li Xin said that in the next five years, on the basis of stable growth in scale, China Resources land will continue to expand and strengthen its asset heavy business with shopping centers as the core and asset light business such as commercial management and property management.

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