China Resources Mixc Lifestyle Services, the property management service arm of China Resources Land (1109), is said to launch a Hong Kong initial public offering as soon as Wednesday to raise about US$1.6 billion (HK$12.48 billion).
The Shenzhen-based property manager plans to open institutional book-building tomorrow, IFR reported, after securing listing approval from the Hong Kong stock exchange earlier this month.
The company plans to use the net proceeds for strategic investments and acquisitions to expand property management and commercial business. Some proceeds will be for investing in value-added services providers, supply chain, information technology systems, and smart communities.
CR Mixc Lifestyle provides property management services for residential properties in the mainland. The services contributed 53.6 percent of revenue in the first half.
It also manages and operates office buildings and luxury shopping malls. These generated 46.4 percent of revenue. As of June 30, the company managed 22 shopping malls under "MIXC" brand and 26 shopping centers under "MIXON", which were developed by its parent company.
The company ranked fifth among all mainland property managers by revenue in 2019, according to Frost & Sullivan. It was second in terms of revenue from shopping mall property management service last year.
As of end-June, CR Mixc Lifestyle managed residential and commercial properties with a gross floor area of 106.6 million square meters and operated shopping malls with a GFA of 5.6 million sqm.
Its revenue grew by 32.4 percent to 5.87 billion yuan (HK$6.9 billion) in 2019. In the first half of this year, revenue grew by 18.68 percent to 3.13 billion yuan.
CR Mixc Lifestyle's net profit dropped by 13.7 percent to 364.93 million yuan last year, mainly due to the fair value change of Shenzhen Buji MIXONE, which opened in April 2018 after the renovation was completed. Net profit surged more than 76 percent in the first half to 338.57 million yuan, despite some shopping malls being shut down amid the coronavirus pandemic that raged across the mainland.
However, CR Mixc Lifestyle's gross profit margin is lagging far behind its domestic peers. In the first half, gross profit margin climbed by 6.1 percentage points to 24.1 percent, while listed mainland property managers reported a more than 30 percent gross profit margin on average.
CR Mixc Lifestyle's profit margin was mainly dragged down by its residential segment. The gross profit margin for residential projects was below 10 percent in the past three years, mainly due to losses from projects developed by independent third parties, including state-owned enterprise reform projects transferred from Dongfeng Motor Corporation.
Meanwhile, CR Mixc Lifestyle intends to expand its business by collaborating with external developers, which will further put pressure on its profitability.
The company generated more than 85 percent of revenue from its parent's projects, which target mid-to-high-end markets with higher fees.
In the first half, the weighted average property management fees of projects developed by CR Group and CR Land was 2.45 yuan per sqm per month, 42 percent higher than SOE reform projects. And CR Mixc Lifestyle charged 14.11 yuan per sqm per month for its parent's office buildings, almost double that of external projects.
Before listing, CR Mixc Lifestyle's cash and cash equivalents slumped by around 40 percent to 366.39 million yuan as of June 30 from the end of last year, mainly due to advances to CR Group and its associates. It also declared a dividend of 434.77 million yuan to CR Land in June.
CCB International Capital, China International Capital Corporation, Citigroup, and Goldman Sachs are the joint sponsors of the IPO.