Equity Research in HK and Mainland China

Li Tang

Thematic (Sector/Industry)

<p>Vice-Premier Liu He wrote an article in the people's Daily on China's 'dual circulation' strategy on Wednesday in which he noted that the real estate industry influences investment and consumption, and is connected to people's livelihoods and development. Liu's speech maintains existing top-level property policy, but at the same time relates property to investment and consumption, implying that property policy setting could be considered jointly with investment and consumption targets. This suggests a more pragmatic approach towards property policy weighting up risks against growth benefits.</p>
<p>Rumour spread in the market that regulator will tighten the trust funding quota approved due to a risk concern, fears were quick to emerge of a liquidity squeeze for some of China's indebted developer, causing its shares and bonds to tumble. However, in the last week we have seen several cities such as Harbin in last week issuing the policy to support property sales. Those can be seen as policy support for the sector.</p>

Vice-Premier Liu He wrote an article in the people's Daily on China's 'dual circulation' strategy on Wednesday in which he noted that the real estate industry influences investment and consumption, and is connected to people's livelihoods and development. Liu's speech maintains existing top-level property policy, but at the same time relates property to investment and consumption, implying that property policy setting could be considered jointly with investment and consumption targets. This suggests a more pragmatic approach towards property policy weighting up risks against growth benefits.
Rumour spread in the market that regulator will tighten the trust funding quota approved due to a risk concern, fears were quick to emerge of a liquidity squeeze for some of China's indebted developer, causing its shares and bonds to tumble. However, in the last week we have seen several cities such as Harbin in last week issuing the policy to support property sales. Those can be seen as policy support for the sector.

China's Real Estate Sector to Be Tightened

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Last Week in Event SPACE: Tokyo Dome, ESR/Sabana, NTT Docomo, Evergrande, LG Corp, China Resources

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Capital Markets

China Resources Mixc Lifestyle / Equity Capital Markets

<div><p><a href="https://www.smartkarma.com/entities/china-resources-mixc-lifestyle-services" target="_blank" data-smartkarma-citation="entities:29285:1" rel="noopener">China Resources Mixc Lifestyle Services (1209 HK)</a>/CR Mixc is a Chinese property management and commercial operational service provider. CR Mixc was the fifth-largest Chinese property management companies as measured by property management service revenue in 2019, according to Frost &amp; Sullivan. The controlling shareholder is <a href="https://www.smartkarma.com/entities/china-resources-land-ltd" target="_blank" data-smartkarma-citation="entities:418:1" rel="noopener">China Resources Land (1109 HK)</a>. </p></div><div><p>At the proposed IPO price range of HK$18.60-22.30 per share, CR Mixc will have a market cap of HK$40,920-49,060 million ($5.3-6.3 billion). At the mid-point of the IPO price range, the total proceeds are HK$11,004.7 million ($1.4 billion). </p></div><div><p>Seven cornerstone investors will subscribe for $650 million worth of the offer shares (44.8% of the offer shares at the IPO mid-point). The cornerstone investors are GIC, Hillhouse Capital, <a href="https://www.smartkarma.com/entities/ping-an-insurance-grp-co-of-china-ltd" target="_blank" data-smartkarma-citation="entities:12880:1" rel="noopener">Ping An Insurance (H) (2318 HK)</a>,  Cephei Capital, Matthews Funds, China Structural Reform Fund and GLP. </p></div><div><div><div class="content-highlight"><p>In <a href="https://www.smartkarma.com/insights/china-resources-mixc-lifestyle-ipo-initiation-the-paradox-of-plenty" target="_blank" data-smartkarma-citation="insights:45244" rel="noopener">China Resources Mixc Lifestyle IPO Initiation: The Paradox of Plenty</a>, we stated that CR Mixc’s fundamentals are mixed, in our view. We label this insight bearish as our valuation analysis suggests that we would participate at most at the low-end of the IPO price range. </p></div></div></div>

China Resources Mixc Lifestyle Services (1209 HK)/CR Mixc is a Chinese property management and commercial operational service provider. CR Mixc was the fifth-largest Chinese property management companies as measured by property management service revenue in 2019, according to Frost &amp; Sullivan. The controlling shareholder is China Resources Land (1109 HK). At the proposed IPO price range of HK$18.60-22.30 per share, CR Mixc will have a market cap of HK$40,920-49,060 million ($5.3-6.3 billion). At the mid-point of the IPO price range, the total proceeds are HK$11,004.7 million ($1.4 billion). Seven cornerstone investors will subscribe for $650 million worth of the offer shares (44.8% of the offer shares at the IPO mid-point). The cornerstone investors are GIC, Hillhouse Capital, Ping An Insurance (H) (2318 HK),  Cephei Capital, Matthews Funds, China Structural Reform Fund and GLP. In China Resources Mixc Lifestyle IPO Initiation: The Paradox of Plenty, we stated that CR Mixc’s fundamentals are mixed, in our view. We label this insight bearish as our valuation analysis suggests that we would participate at most at the low-end of the IPO price range. 

China Resources Mixc Lifestyle IPO: Valuation Insights

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<p><a href="https://www.smartkarma.com/entities/china-resources-mixc-lifestyle-services" target="_blank" data-smartkarma-citation="entities:29285:1" rel="noopener">China Resources Mixc Lifestyle Services (1209 HK)</a> ("CRM") is the latest property management service company to seek a listing. The Offer Price is expected to be announced on the 8 December, with the commencement of trading in the shares on the 9 December.</p>
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<p>CRM is the spin-off of <a href="https://www.smartkarma.com/entities/china-resources-land-ltd" target="_blank" data-smartkarma-citation="entities:418:1" rel="noopener">China Resources Land (1109 HK)</a>, which will own 75% in CRM after the IPO, down from 100% currently, before over-allotment.</p>
<p>CRM intends to raise HK$11.2bn (US$1.4bn) if using HK$20.45/share, the mid-point of the indicative Offer Price range.</p>
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<p>Even at the bottom end of its IPO range, CRM's FY20(L) PER surpasses all peers. It also has below-average revenue growth and gross margins. </p>
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<p>For CR Land, it is trading marginally above its P/B premium to peers from a historical standpoint, and its implied stub P/B is an outlier compared to other parents of property management spin-offs. </p>
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<p>More below the fold. </p>
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China Resources Mixc Lifestyle Services (1209 HK) ("CRM") is the latest property management service company to seek a listing. The Offer Price is expected to be announced on the 8 December, with the commencement of trading in the shares on the 9 December.


CRM is the spin-off of China Resources Land (1109 HK), which will own 75% in CRM after the IPO, down from 100% currently, before over-allotment.
CRM intends to raise HK$11.2bn (US$1.4bn) if using HK$20.45/share, the mid-point of the indicative Offer Price range.


Even at the bottom end of its IPO range, CRM's FY20(L) PER surpasses all peers. It also has below-average revenue growth and gross margins. 


For CR Land, it is trading marginally above its P/B premium to peers from a historical standpoint, and its implied stub P/B is an outlier compared to other parents of property management spin-offs. 


More below the fold. 


China Resources Mixc (1209 HK): This Is An Avoid

<p><a href="https://www.smartkarma.com/entities/china-resources-mixc-lifestyle-services" target="_blank" data-smartkarma-citation="entities:29285:1" rel="noopener">China Resources Mixc Lifestyle Services (CRML HK)</a>/CR Mixc is a Chinese property management and commercial operational service provider. CR Mixc was the fifth-largest Chinese property management companies as measured by property management service revenue in 2019, according to Frost &amp; Sullivan. The controlling shareholder is <a href="https://www.smartkarma.com/entities/china-resources-land-ltd" target="_blank" data-smartkarma-citation="entities:418:1" rel="noopener">China Resources Land (1109 HK)</a>. CR Mixc is joining the ever-expanding list of property management IPOs by seeking to raise $1 billion, according to press reports.  </p><div class="content-highlight"><p>Property developers continue to spin-off their property management arms due to tight credit conditions. However, sentiment on property management IPOs has turned cautious. In such an environment, an IPO hopeful needs to offer a combination of stellar fundamentals and/or attractive valuation to grab attention. Unfortunately, CR Mixc’s fundamentals are mixed, in our view. Consequently, we label this insight bearish pending the IPO price range announcement. </p></div>

China Resources Mixc Lifestyle Services (CRML HK)/CR Mixc is a Chinese property management and commercial operational service provider. CR Mixc was the fifth-largest Chinese property management companies as measured by property management service revenue in 2019, according to Frost &amp; Sullivan. The controlling shareholder is China Resources Land (1109 HK). CR Mixc is joining the ever-expanding list of property management IPOs by seeking to raise $1 billion, according to press reports.  Property developers continue to spin-off their property management arms due to tight credit conditions. However, sentiment on property management IPOs has turned cautious. In such an environment, an IPO hopeful needs to offer a combination of stellar fundamentals and/or attractive valuation to grab attention. Unfortunately, CR Mixc’s fundamentals are mixed, in our view. Consequently, we label this insight bearish pending the IPO price range announcement. 

China Resources Mixc Lifestyle IPO Initiation: The Paradox of Plenty

Hong Kong

China Resources Land Limited, through its subsidiaries, develops and invests in properties.  The Company also provides corporate financing and electrical engineering services.

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China Resources Land (1109 HK)

China's Real Estate Sector to Be Tightened

Overall property policies lean towards tightening.The change will constrain highly leveraged developers mostly but providing opportunities for...

Li Tang

Last Week in Event SPACE: Tokyo Dome, ESR/Sabana, NTT Docomo, Evergrande, LG Corp, China Resources

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

China Resources Mixc Lifestyle IPO: Valuation Insights

At the mid-point of the IPO price range, CR Mixc will raise net proceeds of $1.4 billion. We label this insight bearish as we would participate at...

Arun George

China Resources Mixc (1209 HK): This Is An Avoid

I'm also not a buyer of CRM. It is not cheap, even more expensive than some recent property management IPO's I have written about, ones I found...

David Blennerhassett

China Resources Mixc Lifestyle IPO Initiation: The Paradox of Plenty

A property management IPO needs to offer a combination of stellar fundamentals and/or attractive valuation to grab attention in a cautious market....

Arun George

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