Marketing services revenue earner for property portal

money-glitz | Victor Zhong 3 May 2021

China's online real estate listing platform Anjuke is seeking the green light to go public in Hong Kong.

The mainland property portal plans to raise US$1 billion (HK$7.8 billion) through public sales, IFR reported.

The Tencent-backed (0700) company provides online marketing services for new and existing properties under two brands Anjuke and 58 Real Estate to property buyers, owners, and tenants, as well as brokerages, agents, and developers.

It operates Aifang, a new platform that facilitates developers' new property sales through brokerage brands and agents.

Also, it offers property brokerage brands and agents with cloud-native, purpose-built SaaS (Software as a Service) solutions through Qiaofang, helping them to digitalize workflow and improve operational efficiency.

Anjuke ranks the largest online real estate listing platform in the country measured by average mobile monthly active users both in the year and the quarter ended December 31, 2020, according to a commissioned report by iResearch.

Its online service covers over 820 cities and towns with 194 million units listed, as of end-December, 2020, the prospectus says.

More than 726,000 agents were paying for its service, the largest number among Anjuke's rivals, and Anjuke took up 67 percent of the online real estate advertising market share, as of December 31 last year.

The real estate market is one of China's largest industries representing 23.6 percent of gross domestic product in 2020. The residential real estate market was valued at 24 trillion yuan (HK$28.71 trillion) in 2020 and is expected to grow at a compound annual growth rate of 8.9 percent to 36.6 trillion yuan by 2025, iResearch says.

The penetration rate of brokerage services in China's new residential properties market is expected to increase from 31.5 percent in 2020 to 54.2 percent by 2025, the report says.

However, it warns that the business is susceptible to market fluctuations, overall growth, and government measures.

It generates revenue from online marketing services offered to real estate brokerage brands, agents and developers, and commissions from new property sales.

Annual net profit grew by 20.94 percent to nearly 2.31 billion yuan year-on-year in 2019 before retreating by 15.24 percent to 1.95 billion yuan in 2020.

Excluding certain non-recurring and non-cash expense items, adjusted net profit increased by 19.33 percent year on year to 2.62 billion yuan in 2019, and then fell to 2.10 billion yuan a year later.

Revenue grew by 21.92 percent year-on-year to 7.58 billion in 2019 and further to 8.05 billion in 2020, of which around 97 percent came from online marketing services.

The leverage ratio, measured by total debt over assets, increased from 0.19 times in 2018 to 0.21 times in 2019 and shot up to 12.77 times in 2020, due to a surge in borrowings.

The once-US-listed, an online classified platform, holds 45.3 percent of stake in Anjuke, while the Shenzhen-based Tencent owns 14.1 percent before the initial public offering.

Private equity firms including Warburg Pincus and Ocean Link are also among investors.

Anjuke plans to invest the net proceeds in technological capabilities and product development, followed by the expansion of the new property transaction business, as well as strategic cooperation, investment, and acquisitions.

Proceeds will also be used for repaying long-term loans, marketing and promotions, and general corporate purposes.

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