65% of the funds raised by Evergrande Property’s IPO in Hong Kong will be used for mergers and acquisitions
Author: Sun Mengfan
On November 22, Evergrande Property announced the IPO price of 8.5-9.75 Hong Kong dollars per share. The IPO time is from November 23 to November 26. It is expected to be listed on the Hong Kong Stock Exchange on December 2, stock code 06666.
It is reported that the basic issuance scale of the IPO is about 1.62 billion shares. The Hong Kong public offering and international placement accounted for 10% and 90% of the scale of the issuance respectively. In addition to the basic issuance, there is a standard 15% over-allotment right. Based on this calculation, Evergrande Property’s listing is expected to raise 13.783 billion to 15.81 billion Hong Kong dollars.
Before the official listing, 23 cornerstone investors have confirmed their participation in this offering in advance. Calculated at the end of the price range, cornerstone investors will subscribe for approximately 790 million shares in total, equivalent to 48.7% of the total issuance.
From the disclosure of the prospectus at the end of September to the passing of the hearing, Evergrande Real Estate has been advancing the pace of listing extremely rapidly. Behind the “lightning” meeting is Evergrande Group’s eager desire to reduce debt. The data shows that as of the end of 2019, the group’s debt-to-asset ratio, net debt ratio and cash to interest-bearing debt coverage ratio excluding advance accounts were 85.3%, 199.3%, and 51.7%, respectively.
“Under the three red lines, regardless of whether the company’s property management sector has matured, some companies are eager to promote the spin-off and listing of property management companies. Supplementing equity through equity financing will significantly improve the level of corporate leverage, especially the asset-liability ratio And net debt ratio.” CITIC SecuritiesThe aspect thinks.
In addition to helping the group reduce its debt, Evergrande Property also expressed strong expansion ambitions. According to data, as of June 30, 2020, Evergrande’s property layout covers more than 280 cities in China, with 1354 contracted and serviced projects, contracted management area of 513 million square meters, and 254 million square meters of area under management.
In 2017, 2018, 2019, and as of June 30, 2020, Evergrande’s property revenue was 4.399 billion yuan, 5.903 billion yuan, 7.332 billion yuan, and 4.563 billion yuan, respectively, and net profits were 106 million yuan and 239 million yuan respectively. , 930 million yuan and 1.147 billion yuan, the compound annual growth rate of net profit in the past three years is 195.5%.
The gross profit margin of Evergrande Properties has increased in the past three years. In 2017, 2018, 2019 and the six months ended June 30, 2019 and 2020, the gross profit margin of Evergrande Properties was 9.8%, 12.2%, and 23.9, respectively. %, 23.0% and 38.1%.
The increase in gross profit margin is mainly due to the increase in the proportion of projects with relatively high property management fees, and Evergrande Property has increased its efforts to collect parking space property management fees from 2019. At the same time, the overall profit margin is improved by reducing labor costs year by year, simplifying the decision-making process, and adopting technological empowerment methods to control projects.
At the same time, the percentage of Evergrande’s property community value-added service revenue has increased from 5.7% in 2017 to 11.1% in the first half of 2020. The first half of this year’s revenue is close to that of last year, with a gross profit of 65%.
Since 2019, Evergrande Property has begun to focus on external expansion and mergers and acquisitions markets. In June this year, the investment development team was formally established. From June to September, the mergers and acquisitions of 5 regional independent third-party property companies were completed. The total area under management is About 7.72 million square meters.
“As a subsidiary of Evergrande Group, Evergrande Real Estate operates independently. In the past, it focused more on managing existing projects.” Hu Liang, general manager of Evergrande Real Estate, said that after the company goes public, it will increase third-party outreach efforts and raise funds. About 65% of the funds will be used for mergers and acquisitions.
Hu Liang also said that the property company controls the private domain traffic of tens of millions or more owners, which is a very valuable resource at this stage. Through asset-light operations, it is possible to realize the improvement of value-added services of property companies and a win-win situation for owners to have a more convenient life.
How to realize this resource? Hu Liang explained that Evergrande Real Estate has conducted business discussions and cooperation with many Internet companies and strategic investors in various aspects, and strives to open up the private domain traffic chain from the Internet to the last mile of the community, including home improvement and housing rental and sales. , Education and training, community media, community new retail and other value-added services.
Massive information, accurate interpretation, all in Sina Finance APP
Editor in charge: Qi Qiqi