In recent years, property has been called "one of the few high-quality assets existing in the real estate industry" by some people in the industry, and it has been suggested that the "listing tide" of property companies is coming and will continue for a long time.
2021 has passed, but the wave of property listings that people imagined has not arrived as expected. The “rising tide” and the “ebb tide” will be divided between July 2021.
According to data from the China Index Research Institute, before July 2021, a total of 12 property companies successfully landed on the Hong Kong stock market, and in July alone, 6 property service companies successfully listed on the Hong Kong stock market.
However, with the end of July, the popularity of the Hong Kong stocks property sector has declined. From August to December 17, Hong Kong stocks only added two new property companies, namely Jingcheng Jiaye and German Industrial Investment.
At the same time, the market valuation of listed property companies has also declined.
Hong Kong Stock Exchange prospectus silt down valuation of property stocks
According to Crane data, by mid-2021, there will be more than 50 listed property service companies, and more than 20 listed companies have successfully submitted the form or made clear that they want to spin-off and go public.
Based on this calculation, in the case of a normal one-time submission that is listed through a hearing, there will be more than 70 listed property companies in 2021, but as of the end of 2021, the number of listed property companies has been fixed at 55.
In fact, since the second half of 2021, it is no longer a matter of course to "list once in a form".
Last year, the prospectus of many property companies such as ZhongAn Smart Life, Great Wall Property, Ligao Healthy Life, Yujia Life Service, etc., became invalid.
Zhongliang Baiyue Zhijia, who passed the hearing on December 23, was successfully approved after submitting the prospectus for the second time.
The number of property companies submitting forms accumulates month by month, and few property companies have passed the hearing. At present, the Hong Kong Stock Exchange has accumulated a large number of property prospectuses that have not yet been reviewed.
It is a common phenomenon in the IPO process for companies to submit their prospectus on the Hong Kong Stock Exchange. Most companies will choose to update the prospectus after it expires.
However, this year is slightly different from the previous situation. As of December 24, a large number of prospectuses for property companies, including Sony Services, Helenborg Properties, Tianyu Qingchuang and Great Wall Properties, have expired and have not been updated for a long time.
According to Crane's statistics, even for listed property companies, their valuations are declining.
Affected by various aspects, with the exception of individual central enterprises and state-owned property companies whose share prices have stabilized slightly, the rest of the property stocks have fallen sharply, and property companies that have fallen below 70% from their highs are everywhere.
There are already many property stocks with a P/E ratio of less than 10 times.
The above-mentioned institutions believe that the sluggish stock price does not reflect the true value of these listed real estate companies. Even in the merger and acquisition market, it is difficult to obtain the assets of these listed real estate companies at the current stock price.
While maintaining the industry’s average normal growth rate, property companies should have a price-earnings ratio of at least 15 times, and the current stock price is seriously undervalued.
Property companies are implicated by the real estate parent company, the new rules for listing on the Hong Kong Stock Exchange are coming
The current sluggish valuation of property stocks may be largely due to concerns about the financial status of the property-related parent company.
Most of the property stocks with the deepest declines were implicated by the severe debt crisis of the parent company.
In 2021, when the industry is undergoing profound changes, real estate and property are closely linked.
Many reasons have led to the tension of the capital chain of real estate development companies, and the internal and external debt crises of real estate companies have gradually emerged, which also affected the property management industry.
Although many property management companies have been listed independently, in order to obtain the area under management, revenue and profits, most property companies still rely on the parent company of the real estate company.
With the development of the real estate industry becoming more rational, the parent companies of many real estate companies are facing financial difficulties and the capital chain is tight, resulting in real estate companies not having a large amount of "surplus food" to invest in property assets.
Crane believes that after the big changes in real estate in 2021, the way real estate transfers benefits to properties will gradually slow down after 2022.
In addition to the impact of the parent company, the Hong Kong Stock Exchange’s new review regulations for listed companies also have an impact on the listing of property management companies.
Since the second half of last year, the overall pass rate of Hong Kong stocks has been low.
Starting from 2022, the profit threshold for listing on the main board of the Hong Kong Stock Exchange will increase by 60%. It will be more difficult for companies under smaller real estate companies to list. It remains to be seen whether there will be a wave of listings in the future.
Some SMEs abandon IPO and turn to "mergers and acquisitions"
Changes in the parent company and new listing regulations on the Hong Kong Stock Exchange, these external factors hindering the listing of property management companies have also changed the internal logic of the property management companies.
In the past, "listing" seemed to be a staged sign of a company's success.
However, as the industry changes, independent listing is no longer the only option for property management companies, and mergers and acquisitions are another way of thinking.
According to incomplete statistics from the Zhongzhi Research Institute, as of December 10, 2021, the property management industry has disclosed 71 M&A transactions this year, involving 33 property companies from the acquirer.
The transaction amount is about 33.33 billion yuan, a substantial increase of about 215.33% compared to the total transaction amount for the whole year of 2020.
On the whole, this year's industry M&A market as a whole shows the characteristics of record high transaction volume, frequent occurrence of large-value transactions, listed companies as the main M&A entities, and the return of rational valuation of M&A targets.
In the process of mergers and acquisitions of material enterprises, two main teams have also differentiated.
An insider once said: "If you want to go ashore, choose Country Garden service, if you want to go aboard, choose Cloud of All Things."
In the current property management industry, in terms of scale, Country Garden Services is in a leading position.
In the first half of 2021, the contracted management area of Country Garden Services will be approximately 901 million square meters.
After buying assets such as Blu-ray Garbo, Colour Life, and R&F Properties, Country Garden has expanded its services.
On the other hand, the one that can compete with one is undoubtedly the cloud of all things that has not been listed for a long time.
Last year, Yu Liang, who had always kept secret from the listing of Wanwuyun, finally let go: the property sector will be listed, but he is just waiting for the opportunity.
Currently, Wanwuyun is actively preparing for the listing.
However, unlike Country Garden's underlying logic that other small and medium-sized enterprises are "income", the way for Wanwu Cloud to expand its scale is to reach an "alliance."
The cloud of all things is intended to target the shell system.
In the past few years, Wanwuyun established the Rui Alliance cooperation platform, strategically invested in Rui Alliance member companies and supported their listing. “The choice to be a platform must be open, but the conditions for openness are consistent values.” Vanke Group partner, Vanke Property Chief Executive Officer Official Zhu Baoquan once said so.
Currently, Sunshine Zhibo and Boen Property have joined the Rui Alliance.
Regarding the overall IPO development prospects of the industry, the Zhongzhi Research Institute pointed out that although material enterprises have experienced short-term ups and downs, their upward momentum has not changed, and the development needs of enterprises have not changed.
The agency believes that in 2022, the Hong Kong stock IPO market will be supported by companies that have already submitted accounts as the fundamentals, and industry leading companies and local state-owned enterprises will support it. The development of the capital market for property service companies in 2022 is worth looking forward to.
Text/Qi Yue