Evergrande’s property service unit pays US$233 million to buy a rival to meet target of increasing 2020 profit by 50 per cent

China Evergrande Group’s property services unit bought a rival firm for 1.5 billion yuan (US$233 million) to help meet its ambitions of increasing profit by 50 per cent this year and becoming the country’s largest property manager.

Evergrande Property Services Group agreed to buy Ningbo Yatai Hotel Property Services, adding 940 projects serving two million homeowners to its portfolio, the company said in a statement Friday. Ningbo Yatai also manages office buildings and industrial parks.

The deal is the first by Evergrande Property Services since it raised US$1.84 billion in an initial public offering in November. At the time, the company said most the proceeds would be used for acquisitions.

The property services stock has almost doubled from its IPO price of HK$8.80, closing Friday at HK$17.18.

While many property services companies benefit from new projects of their parent developers for expansion, Evergrande’s services arm needs mergers and acquisitions to sustain growth, UBS Group AG analysts led by John Lam wrote in a January report. Evergrande might need to sell some property projects due to tight liquidity and a down cycle in the market, which could weaken growth at its management affiliate, according to the report.

Earlier this month, Evergrande Property Services said it planned to expand the area under management by 30 million square meters (323 million square feet) each month this year, people familiar said. The acquired firm would increase its business scale by at least 80 million square meters, according to filing.