The capital story of the listed real estate enterprises of the agent construction business of the green city split cant be told completely

category:Finance
 The capital story of the listed real estate enterprises of the agent construction business of the green city split cant be told completely


In recent years, as a business sector that has made great contribution to the sales of Greentown China, Greentown management has been attracting market attention. Upon completion of the spin off, Greentown management will continue to be a subsidiary of Greentown China, which will continue to consolidate all assets, liabilities and income statement items managed by Greentown.

According to the prospectus of green city management, the board of directors of green city management consists of 8 members, including 2 executive directors, Li Jun, Lin Sanjiu, chief executive officer, and 3 non-executive directors, respectively Guo Jiafeng, Zhang Yadong and Liu Wensheng, chairman of the board. The three directors are Lin Zhihong, Ding Zuyu and Chen Renjun. Among them, Li Jun and Lin Sanjiu are currently the directors, general manager and executive general manager of green city management group, Guo Jiafeng, Zhang Yadong and Liu Wensheng are all executive directors of green city China, in addition, Zhang Yadong is also the chairman of the board of directors and chief executive of green city China, and Guo Jiafeng is the executive president of green city China.

First agent listed company

Thanks to the brand awareness accumulated by green city for many years, the sales scale of green city management has gradually increased in the past few years.

According to public information, Greentown Chinas first agent construction business started in 2008, when it took over government projects and began to enter the field. In 2010, green city China officially contacted commercial agent construction and took over a project called Ruian Yuyuan.

According to China Index Research Institute, green city management is the largest agent construction company in Chinas real estate market, with a scale more than twice that of its second largest market counterpart. At present, in the real estate industry, the real estate enterprises with agent construction business include Greentown, Binjiang, Jianye, Yajule, etc.

After years of development, green city management has begun to take shape. In 2017, the sales scale of green city management reached 43 billion yuan; in 2018, it rose to 55.2 billion yuan; in 2019, the number further increased to 66.4 billion yuan, corresponding to the contract sales area of about 5.05 million square meters.

According to the data in the prospectus, as of September 30, 2019, green city has managed 84 cities in 25 provinces, municipalities and autonomous regions in China, and 262 agent construction projects in a city in Cambodia, with a total construction area of 68.5 million square meters. Among them, the management area of the first and second tier cities is 28.123 million square meters, and that of the third and fourth tier cities is 40.044 million square meters.

According to the estimation of Dai Deliang, the total sales value of the above-mentioned agent construction projects is estimated to be about 357 billion yuan.

In view of the asset light nature of agent construction business, the net profit margin of green city management is significantly higher than that of the companys main real estate development business.

According to the prospectus, in 2017, 2018 and the first nine months of 2019, green city management achieved operating revenues of 1.016 billion yuan, 1.481 billion yuan and 1.513 billion yuan, respectively, with profits of 257 million yuan, 363 million yuan and 296 million yuan in the period. Based on this calculation, the net profit margin of green city management is 25.2%, 24.5% and 19.56% respectively.

Overall, the net profit margin of green city management is more than 20%, and the average net profit margin of industry developers is about 10% in the same period.

Li Jun, general manager of green city management, previously publicly stated that the IPO of green city management had been launched as early as 2017. In March 2018, the board of directors of green city China approved the listing plan of green city management, but then shoubainian emptied the shares of green city China. At that time, in order to ensure the transaction, the listing of green citys agent construction business was suspended until 2019.

Imagination space of agent Market

The real estate agent business refers to the land and corresponding funds provided by the partners, and the management team provided by the agent company, which is responsible for the preliminary planning and design, subsequent construction, marketing, brand output and property management. Greentown management prospectus shows that the company does not need to invest a lot of financial resources in the project.

In recent years, the cost of land acquisition by real estate enterprises is higher and higher, while the agent construction does not need to buy, auction and hang the land, so its advantage is that it can expand the scale without large-scale capital investment.

According to the prospectus of green city management, on December 31, 2017, 2018 and September 30, 2019, the bank and other borrowings due within one year under green city management were 10 million yuan, 10 million yuan and zero respectively.

Green city management without financial leverage and with high profitability is regarded as unicorn within green city group. Li Jun once said publicly that in the future, the agent construction business is expected to account for 10% of the market share of the real estate industry, reaching a market scale of trillion yuan.

However, the agent construction business is not an area where everyone can have a share. Enterprises must have a mature business system and the core operating ability through the policy cycle.

The leading real estate enterprises are mature, with good brands and mature product lines, and these large companies do not need the intervention of the agent construction enterprises. However, many local small real estate enterprises own land resources, but the development capacity and capital strength are limited, and the products cannot generate a premium. In this context, green city management has a large market. Li Jun said.

In recent years, with the continuous penetration of large-scale real estate enterprises into the second, third, fourth and fifth tier cities, the impact on the local small and medium-sized real estate enterprises is very significant.

Lin Xiangdong (pseudonym), a small local real estate business owner in Yunnan Province, told first finance: for example, if our company develops and sells a project by itself, it may only earn tens of millions; but if we change to a company with strong sales integration ability to sell, it can earn 100 million. It is reported that his company has a project to introduce brand management.

However, the agent construction business also has its own business pressure. For example, it is not easy to expand high-quality projects. A senior industry official told reporters: many small developers can cooperate with large developers by transferring part of the project equity, and then carry out project development cooperation with the help of brand advantages, or even transfer to large developers the right to market. The asset light model is established, but in fact, it also competes with many mainstream developers.

Even so, compared with the development business with large capital occupation and high leverage, the capital market is very fond of the business with high margin of safety, which can be seen from the fact that the valuation of property management after listing is much higher than that of the development business. Before Greentown management, Greentown service (02869. HK), which is engaged in property management, has been listed first. By the end of February 28, the market value of Greentown China was HK $22.274 billion, while the market value of Greentown services reached 27.177 billion. At present, there are not a few domestic real estate enterprises that have opened agent construction business, such as Binjiang, Yajule and other companies, which have established agent construction companies. With green city management taking the lead in completing the Longmen leap in the capital market, the follow-up listing of other companies will follow. Agent construction may become the next story that real estate enterprises prepare for the capital market after property management. Source: First Financial Editor: Guo Chenqi, nbj9931

Even so, compared with the development business with large capital occupation and high leverage, the capital market is very fond of the business with high margin of safety, which can be seen from the fact that the valuation of property management after listing is much higher than that of the development business.

Before Greentown management, Greentown service (02869. HK), which is engaged in property management, has been listed first. By the end of February 28, the market value of Greentown China was HK $22.274 billion, while the market value of Greentown services reached 27.177 billion.

At present, there are not a few domestic real estate enterprises that have opened agent construction business, such as Binjiang, Yajule and other companies, which have established agent construction companies. With green city management taking the lead in completing the Longmen leap in the capital market, the follow-up listing of other companies will follow.

Agent construction may become the next story that real estate enterprises prepare for the capital market after property management.