Record number of Chinese property management companies expected to flock to Hong Kong for IPOs this year
- Segment is countercyclical compared with other industries, especially in economic downturns and shocks such as the pandemic, industry insiders and experts say
- The average stock price of 27 property management companies listed in Hong Kong has gained 53.7 per cent since the start of this year
When Shanghai-based property management company Ever Sunshine Lifestyle Services Group was listing in Hong Kong in December 2018, it was unsure about an initial public offering (IPO) in the special administrative region.
“When Ever Sunshine was planning to go public, the capital market had limited knowledge of the property management segment. So its management was hesitant. The company finally decided to list in Hong Kong after considering the opportunities ahead,” Gerry Xie, CRIC Securities’ chief executive in Hong Kong, whose team helped Ever Sunshine with its IPO, said.
As of Thursday, Ever Sunshine’s stock price had risen sevenfold.
More such companies are expected to go public in Hong Kong this year, even hit a record high, as the coronavirus has revealed the importance of property management.
“The Covid-19 outbreak has increased concern about public health in China, which has led to an increase in demand for hygiene-related services,” said Kevin Chan, senior director of valuation advisory services at JLL, the professional services firm that specialises in real estate and investment management. “At the same time, property managers are offering more value-added services to residents who are now spending more time in their properties.”
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Investor sentiment around the segment is positive because it remains an underdeveloped market. It is also countercyclical compared with other industries, especially in economic downturns and shocks such as the pandemic, according to industry insiders and experts.
The market capitalisation of such companies listed in Hong Kong and mainland China has surged 162 per cent on average since their IPOs, according to CRIC Securities. The average stock price of 27 property management companies listed in Hong Kong has gained 53.7 per cent since the start of this year, compared with a drop of 12.6 per cent in the Hang Seng Index.
Last year, property managers such as Hong Kong-listed A-Living Services, part of Guangzhou-based Agile Group, saw their stock prices more than double. Year to date until Wednesday, various companies in the segment continued to rise fast. Yincheng Live Service and Times Neighborhood had risen 186.7 per cent and 112.4 per cent, respectively.
Three mainland Chinese companies from the sector – Xinye Wulian Service Group, Ye Xing Group Holdings and Central China New Life – had successfully landed on the Hong Kong exchange as of last month, raising HK$2.5 billion (US$322.5 million) in total. At least another 10 property companies based on the mainland have filed for IPOs year to date. Two of these, Beijing-based Financial Street Property and Nanjing-based Redsun Services Group, are expected to go public in early July.
Financial Street Property, which provides services for commercial real estate, plans to list on July 6. The state-owned company, which is well positioned because it serves property developer Financial Street Holdings’ projects, which are led by the government, will offer 90 million H shares in the HK$7.16 – HK$7.56 a share range. Financial Street Property is a subsidiary of Beijing Financial Street Investment Group, which is the largest shareholder of Financial Street Holdings.
“The number of new listings in Hong Kong this year is likely to reach, or well exceed, that of last year,” said Tang Xiaochen, project director of the property management consulting department of China Real Estate Information Corporation (CRIC) in Shanghai. CRIC Securities is a part of CRIC. “IPOs by property management companies will accelerate.”
Redsun plans to list in Hong Kong on July 7. The company plans to use most of the proceeds for project acquisitions and development of smart systems. It said it was looking for acquisition opportunities in western Chongqing city.
The wave of property management companies filing for IPOs will continue for the next three years, said CRIC Securities’ Xie. The company is an underwriter for Financial Street Property’s IPO. “Hong Kong has more flexible rules on related party transactions and lock-up periods for major stockholders, therefore attracting more such companies. Investors are also more rational about the valuation of Hong Kong stocks,” he said.
