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Value Discovery Or Bubble Accumulation After IPO Feast Of Second Tier Property Stocks?

2020/7/14 8:23:00 2

Second Tier Property StocksIPOFeastValueBubble

If the listing of leading companies in the first two years is the mainstream of the property sector, then this year is the "window period" of the second and third tier property stocks.

In the first half of this year, the property sectors of small and medium-sized real estate enterprises have been split and listed. 14 property companies such as Jinke service, Financial Street Service and Hejing Youhuo rushed to IPO, with a total planned financing of more than 10 billion yuan.

There are no industry giants in this wave of listing tide. There are only a lot of small and medium-sized property companies' hasty splitting steps and their confusion about the future under the wealth effect of abundant liquidity and rising property prices.

At present, the price earnings ratio and market value of listed property stocks are generally high, far exceeding the affiliated parent company. The market gives them overvalues mainly because they are expected to be associated with the business expansion of the parent company and have stable performance growth, such as country garden services.

However, small and medium-sized property companies do not have such certainty. Most of their parent companies are less than 100 billion yuan, and their capital chain is tight, and most of them are dozens of times different from the leading property companies. They do not have an advantage in the game of "big fish eat small fish", and it is difficult to support high valuation.

From the industry as a whole, the earnings ratio of the property stock market has generally reached more than 50 times, far exceeding the real estate sector of their parent company. There is a possibility of de bubble in the future.

Wealth effect of property listing

Recently, the trend of property listing has added another heat.

On July 6, Financial Street property was listed on the Hong Kong stock exchange, becoming the fourth listed property company in 2020 after Xingye Wulian, Yixing group and Jianye new life.

The IPO raised more than HK $660 million. By the end of July 6, Financial Street properties had a share price of HK $9.46, up 28.53% from the IPO price, with a total market value of HK $3.406 billion.

During the first half of the year, a total of 14 properties have been listed or are to be listed. Except Shimao and Jinke, which are medium-sized, the rest are small property companies. Behind them, dozens more are preparing.

Why are small and medium-sized properties going public this year? Ding Zuyu, President of E-House China, believes that many property companies have been preparing to spin off and go public in the past few years. This year's financial data have reached the standard, which is driven by market factors.

The biggest driving factor may come from the demonstration "making money" effect of listed property stocks. According to Kerui data, in the first half of the year, the average share price of the top 50 listed real estate companies fell by 14.54%, while the 27 listed property stocks on the other side increased by 52%.

Among them, there are many online bonus stocks with double market value, such as China Olympic home, Yongsheng life service, times neighborhood and Xinyuan service, all of which have increased by more than 100%; the shares of poly property, xinchengyue service, Zhonghai property, jiazhaoye Meihao have also increased by more than 60%, reaching the peak value since listing.

Property stocks even have an epoch-making moment. The market value of country garden service, a leading enterprise, once rose to HK $104.79 billion, becoming the first property company with a market value of 100 billion yuan in the industry.

As for the dazzling wealth effect of property stocks, Li Changjiang, general manager of Country Garden property, believes that under the special background of community epidemic prevention, property services can be said to have gone from "behind the scenes" to "in front of the stage", and its value has been "rediscovered".

Qi zejin, head of investment consultant of Anxin securities Tianjin Branch, said that the positive payment of property owners during the epidemic period and the stable income of property fees were one of the reasons for the better performance of property stocks this year. But more importantly, the weak cyclical property stocks, good and stable cash flow, in the risk prone environment more favored by investors.

Capital markets have given very high valuations. As of June 30, the weighted average price to earnings ratio (TTM) of 27 A + H property stocks was 59 times, according to wind data.

More than 50 times of the city earnings ratio of the property companies such as China Merchants Park and Bigui park.

Apart from the direct financing amount and Book wealth effect, the split property listing can also bring more benefits to the real estate enterprises. At the end of May, Xuhui holding's voting right on Yongsheng service, which belongs to the same family of Lin Feng, increased to 50.12%. It actually controlled Yongsheng service and consolidated it again.

Southwest Securities believes that after the merger, the continuous improvement of Xuhui's recurrent income will also contribute to the improvement of Xuhui's credit rating and financing cost.

There are so many benefits, developers to split property, promote the enthusiasm of listing unprecedented. In the second half of this year, dozens of property companies are expected to prepare for IPO.

The bubble?

Hongyang service compares its listing road to "Tiger Leaping project". It wants to have a "leaping and leaping" combination with Hongyang real estate, a related real estate enterprise. However, after opening the financial report, the area under management of Hongyang service is only 15.8 million square meters. Other things like Songdu property and Yixing group are less than 6 million square meters.

In fact, in addition to Jinke, the area under management of other 13 property companies to be listed this year is less than 100 million square meters, including 11 more than 30 million square meters, less than a fraction of the industry leaders Country Garden Service (685 million square meters) and Vanke property (640 million square meters); more than half of them had revenue less than 1 billion last year, which was not comparable to the revenue of country garden.

At present, behind the rapid development of property companies, most of them rely on the business support of affiliated real estate enterprises and parent companies.

For example, country garden services, which are backed by country garden, have expanded rapidly in recent years. Most of them are projects from country garden, an affiliated company, because they are the property of Yang Huiyan's family. In 2019, nearly 90% of country garden's service income comes from the properties developed by Country Garden Group, while the project income from third-party developers is only 11.4%.

However, the property companies in this round of listing, whose affiliated companies are small, can not give them enough support for expansion.

However, there is still room for them to compete in the future. Everbright Securities Research Institute believes that in the post epidemic era, due to the disadvantages of small and medium-sized properties in capital management, M & A opportunities will emerge in large numbers, and the market share of leading properties will be greatly increased. The second half of the year will be the initial consolidation period of the property industry, and the first round of high tide will begin for big fish eating small fish.

Since the beginning of the year, many property listed companies such as country garden service have conducted large-scale market financing to reserve ammunition for the "merger window period" in the second half of the year.

According to the data of the central government, the area under management of the top 100 property service enterprises has increased from 19.5% in 2014 to 43.6% in 2019, and it is expected that the number will reach 45.4% in 2023.

In addition, this year's property stocks on the valuation of virtual high, there is a bubble, the market is also controversial.

A leading real estate analyst of a well-known securities firm told the reporter of the 21st century economic report that the current P / E ratio of property stocks is too high, and their own growth is not as certain as the market thinks, the growth rate of development business is also shrinking, the collection rate of property fees is also very low, and the so-called value-added services have not seen the actual implementation.

Founder Securities real estate chief analyst Xia Yifeng said that property stocks stand in the wind, this year has a larger rise. The key lies in the fact that the company does not have a long-term high-speed growth and strong customer satisfaction

Qi zejin also maintained a cautious attitude. The development momentum of property stocks is closely related to the development prospects of property companies. Rising power or to see the property company's own business capacity.

In Qi zejin's view, at present, China's property companies are still in the initial stage, single profit point, only stay in the business of collecting property fees. In the later stage, we can also develop some value-added services in the aspects of Internet of things linkage and housekeeping services, so as to obtain more income and maintain the growth of performance.

It is worth noting that some property companies are listed only as financing tools or pure capital operation by related companies, and there is suspicion of related party transactions.

In this regard, Xia Yifeng believes that if the affiliated real estate enterprises have a demand for the share price, there will be a continuous transfer of interests. For the company, the developers and their affiliated properties are the problem of left pocket and right pocket.

Yan Yuejin, research director of Shanghai E-House Real Estate Research Institute, said that there is the possibility of interest transfer between related real estate enterprises and property companies. After all, the two enterprises have a very high degree of correlation, and the capital pressure of development business is relatively large. Therefore, it is necessary to prevent property stocks from transferring funds to real estate enterprises.

 

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