Good News on Listing | Frost & Sullivan Assists DSE Investment Services Group Co., Ltd. in Successfully Going Public in Hong Kong (2270.HK)

Dezhou Commercial Property Investment Service Group Co., Ltd. (hereinafter referred to as 'Dezhou Commercial Property Investment') successfully went public on December 17, 2021, with a global issuance of 150 million shares at a price of HK$1.11 per share, raising approximately HK$12.8 million in total funds.

During the Hong Kong listing process, Frost & Sullivan mainly undertook the following tasks: helping the company accurately and objectively understand its positioning in the target market, using objective market data to discover, support, and highlight the company's competitive advantages, assisting the company, investment banks, and other intermediaries in completing relevant parts of the prospectus (such as the overview, competitive advantages and strategy, industry overview, business, and other important sections), facilitating communication with the Hong Kong Stock Exchange and investors, helping investors quickly understand the market ecosystem and competitive landscape, and assisting the company in responding to various questions from the Hong Kong Stock Exchange regarding the industry.

Broadly speaking, property management refers to the operation, control, and supervision of real estate. Management involves the maintenance, supervision, and responsibility for the lifespan and condition of properties. Property management also refers to the management of personal property, equipment, tools, as well as the capital assets purchased and used for constructing, maintaining, and servicing deliverable properties, buildings, government buildings, industrial facilities, sites, stadiums, schools, and hospitals. Property management service companies typically provide services including: (i) traditional property management services; and (ii) other services, including value-added services provided to property developers and community value-added services.

The scale of the property management service market in Sichuan-Chongqing region and Chengdu

According to a Frost & Sullivan report, in the Sichuan-Chongqing region, the total managed construction area of property management service companies increased from 3.19 billion square meters in 2015 to 3.95 billion square meters in 2020, with an annual compound growth rate of 4.4%. In 2020, the total managed construction area of residential properties reached 3.38 billion square meters, with a compound annual growth rate of 4.1% from 2015 to 2020; in 2020, the total managed construction area of non-residential properties reached 580 million square meters, with a compound annual growth rate of 6.6% from 2015 to 2020. Looking ahead, with the continuous development of the economy and real estate market in the Sichuan-Chongqing region, it is expected that the total managed construction area will continue to grow. By 2025, it is expected that the total managed construction area in the Sichuan-Chongqing region will reach 46.7 billion square meters, with a compound annual growth rate of 3.4% from 2020 to 2025.

From 2015 to 2020, the total revenue of property management service companies in the Sichuan-Chongqing region increased from RMB 312 billion to RMB 551 billion, with an annual compound growth rate of 12.0%. During the same period from 2015 to 2020, the total revenue from residential and non-residential properties increased from RMB 202 billion and RMB 110 billion to RMB 341 billion and RMB 210 billion, respectively, with annual compound growth rates of 11.1% and 13.7%. In 2025, it is expected that the total revenue of property management service companies in the Sichuan-Chongqing region will reach RMB 924 billion, with an annual compound growth rate of 10.9% from 2020 to 2025.

From 2015 to 2020, the total managed construction area of property management service providers in Chengdu increased from 635 million square meters to 815 million square meters, with an annual compound growth rate of 8.8%. In 2020, the total managed construction area of residential properties in Chengdu reached 674 million square meters, with an annual compound growth rate of 4.7% from 2015 to 2020; while in 2020, the total managed construction area of non-residential properties in Chengdu reached 141 million square meters, with an annual compound growth rate of 7.1% from 2015 to 2020. In the future, with the steady development of the real estate industry, it is expected that the total managed construction area of property management service providers in Chengdu will reach 983 million square meters, with an expected annual compound growth rate of 5.4% from 2020 to 2025.

From 2015 to 2020, the total revenue of Chengdu property management service companies increased from RMB 10 billion to RMB 18.68 billion, with an annual compound growth rate of 13.2%. By 2025, it is expected that the total revenue of Chengdu property management service companies will reach RMB 34.39 billion, with an expected annual compound growth rate from 2020 to 2025 of 13.0%. From 2015 to 2020, the total revenue of residential and non-residential properties in Chengdu increased from RMB 6.25 billion and RMB 3.82 billion to RMB 10.96 billion and RMB 7.72 billion respectively, with annual compound growth rates of 11.9% and 15.1%, respectively.

Future Opportunities in the Property Management Service Market in Sichuan-Chongqing Region and Chengdu

The supply of high-end residential properties continues to increase:With the rapid economic development of core cities in Sichuan and Chongqing and the growth of the middle-class population, many well-known property developers have entered the region in recent years, dedicated to creating high-end and boutique residential properties. Unlike ordinary residential properties, owners of high-end residential properties have higher requirements for property management services and are less sensitive to the price of property management fees. In the future, as the supply of high-end residential properties in Sichuan and Chongqing (especially in Chengdu and Chongqing) continues to increase, property management service providers that offer high-quality services to such properties are expected to gain more projects and become more competitive in the property management service market in Sichuan and Chongqing.

Industry concentration is rising:In recent years, the property management service market has become increasingly concentrated due to policy environment, market competition, and information technology. In addition, property management service companies are committed to developing alliances and integrating to achieve economies of scale in the future, further concentrating the property management service market in Sichuan and Chongqing regions. As more property management companies listed on the Hong Kong Stock Exchange seek high-quality Chinese property management companies as their acquisition targets, these companies face fierce competition in trying to find suitable acquisition targets.

Enhanced service quality awareness:Today, property owners pay more attention to service quality when choosing property management service providers. As per capita disposable income continues to increase, property owners pursue better living conditions and are willing to pay a premium for high-quality property management services. More and more property management service companies anticipate optimizing their traditional property management services through the application of information technology and upgrading service quality to keep up with this trend.

Expand service scope and provide value-added services:Property management service companies are expanding property services and integrating basic living services, such as elderly care services, consulting services, community leasing, and sales services. The profit margin of value-added services is usually higher than that of traditional property management services. At the same time, the increasing demand for professional property management services tailored to different property types will promote innovation in service standards and service models in the property management service market of China.

Business operation services refer to comprehensive services provided to retail commercial property developers or owners, tenants, and consumers from the pre-opening period to the post-opening period of retail commercial properties. These services aim to determine an appropriate positioning and design, optimize tenant and brand mix for property developers or owners, assist tenants in improving store operations, provide professional property management services, and create unique lifestyle experiences to attract customers. Retail commercial properties refer to various retail venues, mainly including enclosed and open malls as well as open blocks.

Depending on the location, scale, complexity of retail commercial properties and customer requirements, business operation services typically include (i) consulting services; (ii) investment promotion services; (iii) preparation for the opening of retail commercial properties; (iv) operation and management services; (v) property leasing services; and (vi) other value-added services.

Business operation service providers with broad brand awareness, strong operational and management capabilities, and outstanding past performance records are likely to maintain their leading position in the business operation service market.

The scale of the commercial operation service market in Sichuan-Chongqing region and Chengdu

In recent years, with the continuous increase in the number of shopping malls and commercial streets in the Sichuan-Chongqing region, the total managed construction area of the commercial operation service market in this area has increased from 18.9 million square meters in 2015 to 46.1 million square meters in 2020, with an annual compound growth rate of about 19.5% from 2015 to 2020. In the future, with the improvement of consumption levels, it is expected that demand for shopping malls and commercial streets will further increase. It is anticipated that the total managed construction area of the commercial operation service market in the Sichuan-Chongqing region will continue to grow, reaching 79.3 million square meters by 2025, with an annual compound growth rate of about 11.5% from 2020 to 2025.

From 2015 to 2020, the total revenue of commercial operation service companies in Sichuan and Chongqing increased from RMB 4.9 billion to RMB 12.1 billion, with an annual compound growth rate of about 19.9%. In the future, as the managed total construction area of the commercial operation service market further increases, it is expected that the total revenue of commercial operation service companies in Sichuan and Chongqing will continue to grow rapidly, reaching RMB 228 billion by 2025, with an annual compound growth rate from 2020 to 2025 of about 13.6%.

In recent years, with the continuous increase in the number of shopping malls and commercial streets in Chengdu, the total managed construction area of the city's commercial operation service market has increased from 7.3 million square meters in 2015 to 16.1 million square meters in 2020. The annual compound growth rate from 2015 to 2020 was about 17.2%. In the future, as consumer levels improve, the demand for shopping malls and commercial streets will further increase. It is expected that the total managed construction area of the Chengdu commercial operation service market will continue to grow, reaching 32.2 million square meters by 2025, with an annual compound growth rate from 2020 to 2025 of about 14.9%.

From 2015 to 2020, the total revenue of Chengdu Commercial Operation Service Company increased from RMB 2.15 billion to RMB 4.87 billion, with an annual compound growth rate of about 17.7%. In the future, as the managed total construction area of the commercial operation service market further increases, it is expected that the total revenue of Chengdu Commercial Operation Service Company will continue to grow rapidly, reaching RMB 10.59 billion by 2025, with an annual compound growth rate of about 16.8% from 2020 to 2025.

competitive landscape

The property management service and commercial operation service market in Chengdu is relatively fragmented. In terms of revenue generated in Chengdu, five major property management service companies providing commercial operation services account for 4.5%. Based on the total revenue generated in Chengdu in 2020, among all companies providing property management services and value-added services, our group ranked fifth in terms of revenue generated in Chengdu, accounting for about 0.5% of the total revenue from property management and commercial operation services in Chengdu, with a revenue of RMB 128 million.

Future opportunities in the commercial operation service market

Market concentration continues to rise:The continuous increase in the number of commercial operation service providers has brought fierce competition to the commercial operation service market in Sichuan and Chongqing regions. As market concentration continues to rise, commercial operation service providers with sufficient project experience, strong operational and management capabilities, as well as a good brand reputation, will gradually dominate the market due to their comprehensive understanding of strategies, operational models, and related professional knowledge.

Different service types:To maintain competitiveness, business operation service providers will offer more diversified services, enhance service quality and invest in human resources to ensure operational capabilities. At the same time, business operation service providers in the Sichuan-Chongqing region are committed to integrating their services with online platforms and mobile applications to develop digital operation services (such as using big data to analyze customer consumption habits), enrich value-added services such as membership points, gift cards, and rental mobile power banks, for better promotion and to provide consumers with a good shopping experience.

The popularization of the light-asset model:The light-asset model can reduce the financial burden on commercial operation service providers when holding and acquiring assets, improve operational efficiency, and will become more widespread as the commercial operation service market in Sichuan and Chongqing develops in the future. By leveraging the light-asset model, commercial operation service providers will optimize resource allocation, use their strong capabilities in project design, development, and management consulting services as well as investment promotion services to improve the operational conditions of shopping malls and districts. This will enable shopping malls and districts to realize asset appreciation, bring higher profit margins to commercial operation service providers, and further drive the expansion of the commercial operation service market in Sichuan and Chongqing.

Frost & Sullivan has extensive research experience in the property and real estate industry, assisting well-known enterprises in successfully listing on the capital market. Successful listings include: China Resources Vanguard Life (1209.HK), Excel Property Group (6989.HK), Bao Long Commercial (9909.HK), China Tianbao (1427.HK), Yincheng Life Services (1922.HK), Fangduo (NASDAQ:DUO), Xinyuan Technology Services (1895.HK), China Index Holdings (NASDAQ:CIH), Aoyuan Health (3662.HK), Chuangyi Holdings (3992.HK), Joyou Property (2168.HK), and Yajiu Investment Holdings (8426.HK).

01. Frost & Sullivan assists China Resources Vanguard Life in successfully listing on the Hong Kong Stock Exchange (1209.HK)

02. Frost & Sullivan helps outstanding businesses successfully list on the Hong Kong Stock Exchange (6989.HK)

03. Frost & Sullivan assists Bao Long Commercial in successfully listing on the Hong Kong Stock Exchange (9909.HK)

04. Frost & Sullivan assists China's Tianbao Group in successfully listing on the Hong Kong Stock Exchange (1427.HK)

05. Frost & Sullivan assists Yincheng Life Services in successfully listing on the Hong Kong Stock Exchange (1922.HK)

06. Frost & Sullivan assists Homeplus in successfully going public in the US (NASDAQ: DUO)

07. Frost & Sullivan assists Xinyuan Services in successfully listing on the Hong Kong Stock Exchange (1895.HK)

08. Frost & Sullivan assists CITIC Holdings in successfully going public in the US (NASDAQ: CIH)

09. Frost & Sullivan assists OCT Health in successfully listing on the Hong Kong Stock Exchange (3662.HK)

10. Frost & Sullivan assists Chuangyi Holdings in successfully listing on the Hong Kong Stock Exchange (3992.HK)

11. Frost & Sullivan assists Jiazhao Real Estate in successfully listing on the Hong Kong Stock Exchange (2168.HK)

12. Frost & Sullivan assists Yajuzhou Investment Holdings in successfully listing on the Hong Kong Stock Exchange (8426.HK)