SMM News: 5 days ago, at the interim results meeting, the outside world is still paying attention to when China Resources Land will be spun off property independent listing, President Li Xin said at that time, let everyone wait for further announcement.

Five days later, China Resources formally submitted its prospectus.

On the evening of August 31, China Resources Vientiane Life Co., Ltd. formally submitted its listing application to the Hong Kong Stock Exchange, which was so fast that people were caught off guard.

The listing of spin-off property management was launched on 30 June this year, but it was quickly approved by the HKEx on 21 August: a possible spin-off can be carried out in accordance with item 15 of the guidelines on the application of the rules governing the listing of securities on the HKEx. On August 26, China Resources Land just announced that it was considering a possible spin-off of the Group's property management services business and commercial operation services business to be listed independently on the Hong Kong Stock Exchange.

Progress can be so fast, perhaps as Li Xin said at the interim results meeting, China Resources Land has made a lot of preparations to spin off the listing of the property management company.

Although the more specific listing time, fund-raising amount and other related content has not yet been announced, but this well-prepared prospectus is enough to give the outside world a comprehensive peek into the development of China Resources property in recent years.

Acquisition and preparation for listing

"China Resources Land started considering the strategic aspects of its business structure three years ago." In this prospectus, the considerations and preparation process for the listing of spin-off property management are disclosed in detail.

According to the prospectus, the history of China Resources Vientiane's life can be traced back to 1994, when China Resources Group invested in Beijing Huayuan Real Estate Co., Ltd. (the predecessor of China Resources Land) and carried out property development, investment and management business. it was later reorganized into China Resources Land.

According to the prospectus, China Resources Vientiane Life was officially established in 2017 and registered as a limited company in the Cayman Islands on May 18 of that year, with an authorized share capital of US $50,000.

It is worth noting that China Resources Vientiane Life is a listing platform for China Resources Land to install property management service business and commercial operation service business at the same time. At the interim results meeting of China Resources Land, the management said that "this is to maximize the overall value of 1109 (China Resources Land)". We can consider building a complete China Resources Land for property management and business management on the platform of light assets, and can strengthen the business and management platform of light assets.

In order to merge the two businesses, China Resources Land began to put the relevant property management business held by China Resources Co., Ltd., China Resources (Group) and China Resources Land into China Resources Vientiane Life this year.

Among them, China Resources Vientiane Life completed the takeover of China Resources Vientiane Shenzhen originally held by China Resources Land on July 18, 2020, entered into a sale and purchase agreement with China Resources (Group) on June 22, 2020, acquired the Song of Joy held by China Resources (Group), and then held China Resources Business Management (Shenzhen) Co., Ltd., and completed the transfer of Luzhou China Resources Land held by China Resources Land on August 12, 2020. Entered into an equity transfer agreement with China Resources Co., Ltd. on August 26, 2020 to acquire Runlian held by the latter.

The above acquisition, together with China Resources property Technology Services Co., Ltd., originally held by China Resources Vientiane Life, together constitute the management branch of the main business of China Resources Vientiane Life, and operate the main business of China Resources Vientiane Life. Specifically, China Resources Vientiane Shenzhen, China Resources property Technology Service Co., Ltd., China Resources run Xin Business Management (Shenzhen) Co., Ltd., respectively corresponding to commercial operation services, property management and commercial sublease services.

It is worth mentioning that at a time when commercial operation services have not yet been incorporated into China Resources Vientiane Life, this business is in the form of inter-departmental services within the group to provide business operation services to shopping malls at no additional charge. This business began in January this year and gradually commercialized the business as an independent business division of China Resources Vientiane Life.

"the submission of the application form should be based on strategic considerations," China Resources Land management said at the interim results meeting.

Property income in the first half of the year is 3.1 billion yuan.

Up to June 30, 2020, China Resources Vientiane Life provides property management services for residential and commercial properties with a floor area of about 107 million square meters, and a shopping mall for commercial operation services with a floor area of about 5.6 million square meters. The property covers 62 cities in 27 provincial administrative regions in China, of which 78% of the residential properties and 76% of the commercial properties under management are located in first-and second-tier cities.

On June 30, 2020, China Resources Vientiane managed 502 residential and other property projects in China, with a total floor area of 97.5 million square meters.

At the same time, China Resources Vientiane Life provides commercial operation and property management services for commercial properties, including shopping malls and office buildings. It provides commercial operation services to 51 shopping centers with a total floor area of 5.6 million square meters, property management services to 31 shopping centers with a total floor area of 4 million square meters, and property management services to 73 office projects with a total construction area of 5.1 million square meters.

In terms of financial data, the total income of China Resources Vientiane in 2017, 2018 and 2019 and for the six months ended 30 June 2019 and 2020 was 3.129 billion yuan, 4.432 billion yuan, 5.868 billion yuan, 2.641 billion yuan and 3.134 billion yuan respectively.

Among them, the income of the residential property management service division is 2.101 billion yuan, 2.763 billion yuan, 3.472 billion yuan, 1.539 billion yuan and 1.681 billion yuan respectively, accounting for 67.1%, 62.4%, 59.2%, 58.3% and 53.6% of the total income respectively. The income of the Business Operations and property Management Services Division was $1.028 billion, $1.668 billion, $2.397 billion, $1.102 billion and $1.453 billion respectively.

According to the opinion real estate new media, the income of the residential property management service division and the commercial operation and property management service division has increased significantly, mainly due to the rapid expansion of China Resources Vientiane life in recent years, whether from the China Resources Group and China Resources Land, or from an independent third party.

Among them, the income contributed by China Resources (Group) and China Resources Land to the residential property management services division of China Resources Vientiane increased from 1.6 billion yuan in 2017 to 2.654 billion yuan in 2019, to 1.351 billion yuan on June 30, 2020; income from the commercial operation and property management services division rose from 474 million yuan in 2017 to 1.077 billion yuan in 2019 to 802 million yuan on June 30, 2020.

The income contributed by independent third parties to the residential property management services division of China Resources Vientiane rose from 501 million yuan in 2017 to 818 million yuan in 2019, to 330 million yuan on June 30, 2020, and from 554 million yuan in 2017 to 1.319 billion yuan in 2019. Income from the property management services division rose to 652 million yuan on June 30, 2020.

It is worth noting that the vast majority of property management service income of China Resources Vientiane Life comes from properties developed by China Resources (Group) and China Resources Land in 2017, 2018 and 2019 and for the six months ended 30 June 2019 and 2020, this is 3.19 times, 3.16 times, 3.26 times, 3.82 times and 4.1 times the income from third parties, respectively.

Interestingly, perhaps because of the rapid progress, in the prospectus, China Resources Vientiane Life "swapped" the total income from the development of China Resources (Group) and China Resources Land with the income from independent third parties. In other words, the related party transactions, which are supposed to account for the absolute majority of the performance, accounted for only 31.2%, 32.2%, 32.3% and 36% of the revenue in the prospectus in 2017, 2018 and 2019 and in the six months ended June 30, 2020, respectively.

In addition, the gross profit margins of China Resources Vientiane Life in 2017, 2018 and 2019 and the six months ended June 30, 2019 and 2020 were 13.0%, 15.0%, 16.1%, 18.0% and 24.1%, respectively. The increase in gross profit margin was mainly due to the increase in revenue contributed by the Business Operations and property Management Services Division, which had a higher gross margin than the Residential property Management Services Division.

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