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Behind The Trend Of Property Spin Off And Listing: From "After Sale Of Developers" To "Soft Infrastructure"

2020/11/25 17:09:00 0

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This year, a hot spot in the capital market is the property sector.

Driven by soaring stock prices and valuations, well-known developers have also spun off their properties for listing. After Shimao, China Resources, rongchuang and Evergrande, on November 23, Yuexiu real estate, a state-owned enterprise in Guangzhou, announced that it intended to spin off the property and go public.

The logic of property becoming a new favorite of capital lies in the fact that the importance of community service during the epidemic period is highlighted, in addition to the need for capital hedging. The more fundamental reason is that the leading companies led by poly property have greatly expanded the boundary of property, and extended the traditional community service to the broad urban and township services, which has unlimited growth space.

Wu Lanyu, general manager of poly property, who first proposed the concept of "big property", believes that property service has ushered in the best golden age, and the industry has risen to the national strategic stage. During the 14th Five Year Plan period, property will play a more important role in providing public services as a "soft infrastructure".

In this context, the valuation system of the property industry has changed, and the differentiation between property companies is also taking place. Those enterprises that have the ability to serve urban governance have a better future, and the property industry giants will also emerge in these enterprises.

Expanding boundaries

One year later, Wu Lanyu still remembers that when poly property was listed on the road show, he described the concept of "big property" to investors. At the beginning, he was still worried that investors could not understand. However, by the end of 2019, the IPO of poly property was oversubscribed, and the frozen capital exceeded that of Ali.

The heat of property stocks was brewing at that time. As Wu Lanyu said, the boundary of property companies was opened.

In the past 20 or 30 years, property services have been subordinate to real estate. Most of the business is limited to residential communities and some office buildings and shopping malls. Poly and Vanke have extended it to urban services.

Vanke recently renamed the property company "cloud of all things", positioning it as space science and technology services, including Vanke property, all things Liangxing and urban services.

Wu Lanyu's positioning of property is to serve the soft infrastructure of national strategy. She said that in the proposal of the CPC Central Committee on the formulation of the 14th five year plan for national economic and social development and the long-term goals for the year 2035, 7-8 of the 12 sections are related to property services; the position of the property industry should coordinate with the national strategy to serve the country and become a soft service force, namely soft infrastructure, whose foundation is public service.

Up to now, Poly has received services from dozens of towns and scenic spots, including Xitang, and Vanke property has also extended to Gulangyu, Hengqin pilot free trade zone and other places in Xiamen.

Both poly, Vanke and country garden are focusing on three major tracks: residential, commercial and public services, while other companies are more focused on residential and commercial offices.

After 2018, the concept of "big property" has benefited all listed property companies. Before and after the listing of poly property, investors have been scrambling for property shares; almost all the top 50 real estate companies plan to spin off their properties for listing.

Since 2020, the valuation of the property sector has risen by 60 times, but it still experienced a significant rise of 70 times.

However, from the perspective of the property stocks listed recently, the industry has been divided. Shimao and Hejing have broken out one after another. Rongchuang service has fallen down after the big rise in listing, and the overall popularity has declined.

In the future, property companies will be divided into two categories: one is traditional community property, which takes basic property services as its content and income source; the other is large property companies with evolution and upgrading, typically represented by Vanke and poly.

At present, most property companies in the market belong to the former. The difference between poly and Vanke lies in: in the field of public services, Vanke is more in the city, while poly is more sinking and suddenly entering the villages and towns.

On the property track, "those who get public services get the world". The prospects of property companies that expand public services are far greater than those that are only residential and commercial.

Debate between scale and profit

Because it can take over the new residential areas developed by the parent company, the property company is considered to have certain growth, which is the internal logic of the property shares' popularity in the past two years.

Take the country garden service, which has the largest market value at present, as an example. Its affiliated company country garden is the largest real estate company in the world. Every year, the communities developed are managed by country garden service.

According to Societe Generale Securities, the property industry will still enjoy the scale dividend in the next 3-5 years, including the improvement of the concentration of the real estate industry, the expansion of diversified business formats, acquisition and merger, and the expansion of value-added services in the upstream and downstream of the whole value chain of real estate.

According to the calculation of Dongfang securities, by 2030, only the scale of the basic property management property market will reach 1.7 trillion yuan, and the total scale of the industry will exceed 2.5 trillion yuan.

In fact, only in the community mode, the unlimited growth of property companies is a false proposition. Due to the fact that the real estate enterprises in the traditional times are generally born out of the real estate enterprises and focus on the residential areas, there are barriers between them, and no one can swallow them up.

However, relying on the expansion of capital merger and acquisition can only attract communities with poor quality, and only one or three-year contracts can be obtained.

Color life, the earliest listed property company, is such an example. In 2019, the revenue of color life will drop sharply and the net profit will hardly increase.

Therefore, the boundary and space of property will be opened to a greater extent when it is extended to the field of public services; when the "hard space" moves forward to "soft infrastructure", the growth of property will be magnified.

At this stage, both Mr. Zhu Baobao, CEO of Vanke property, and Wu Lanyu, both admitted that the scale was still the first. The areas under management of Vanke, poly, country garden and Evergrande were in the hundreds of millions of square meters; the smaller ones, rongchuang, Jinke and Shimao, were also hundreds of million square meters.

At present, whether relying on capital acquisition or natural expansion, all property companies are still in the process of enclosure, and the growth of scale has not seen the boundary.

The reporter found that the core of the current profit model and source of property companies is still property fees. Compared with the past, there is no big breakthrough, and its valuation support is insufficient.

What is more noteworthy is that the industry is mixed with good and bad, and the profit level of property companies is very different, and the water content is not small. For example, the gross profit rate and net profit margin of Shimao service in 2019 will reach 33.7% and 15.4%, respectively; the gross profit rate and net profit rate of country garden service will be 31.6% and 17.8%, while the gross profit rate of poly property will be about 20.3% and the net profit rate will be 8.4%. The gross profit rate of China shipping property will be 20% and the net profit rate will be 9.8%.

A real estate brokerage researcher pointed out that the obvious difference is due to the existence of a large number of related party transactions between many property companies and their parent companies and brother companies; the second is that the profit level of public services is lower than that of other sectors.

However, the reporter noted that the profit level of poly property is relatively reasonable. In the middle of 2020, poly's community value-added service revenue will reach 761 million yuan, up 40.8% year-on-year, accounting for 21.1% of the company's revenue. The revenue and profits of the community value-added service sector are indeed higher than those of the basic property.

The property companies and investors have a more rational view on the soaring property stocks this year and the future trend.

Wu Lanyu said that since the property industry has just entered the golden age, it should be given a healthy growth environment and space, and the valuation should return to the average level of the society. It should not "devote all its efforts to fishing".

Huang Lichong, a real estate financial researcher in Hong Kong, believes that the property stocks soared in the first half of the year, and there is a certain degree of speculation, but its value can not support the overvalued value. The reasonable P / E ratio of property stocks in the future should be between 18-29 times.

 

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