When it comes to China's Jin Mao (00817), we should be no stranger to it. As a fast-growing property developer, Jinmao Group ranked 14th among China's top 100 property service companies last year. Shanghai Jinmao Tower, the iconic building of Jinmao Group, was completed as one of the top ten tallest skyscrapers in the world.
With the development and growth of Jinmao Group, Jinmao property, which has been established for nearly 25 years, has also begun to enter the capital market. Zhitong Financial APP learned that China Jinmao issued an announcement on August 31, proposing to spin off its Jinmao property Development Co., Ltd., and list on the main board of the Stock Exchange. China International Capital Corporation and HSBC are co-sponsors.
According to the data, Jinmao property is a provider of high-end property management and urban operation services. According to the three indicators of service scope, service standards and service charges, it is in a leading position in the industry. In addition, the company's growth rate is also ahead of the same industry. The contract floor area grew at a compound annual growth rate of 36 per cent from 2018 to 2020, with an industry average of 18.9 per cent. The compound annual growth rate of total construction area in management is 31.7%, which is higher than the average of 14.6% in the industry.
Give priority to property management business
Jinmao property prospectus shows that the company's business covers property management services, non-owner value-added services and community value-added services.
Property management services are provided by Jinmao property for owners and residents as well as property developers, including order, cleaning, greening, horticulture and maintenance and protection of facilities in public areas. Non-owner value-added services include the provision of case services to property developers, as well as information and other value-added services provided to property developers. The object of community value-added services is to manage property owners and tenants to help them meet their daily needs.
The total income of Jinmao property has been growing steadily, with a compound growth rate of 28.2% from 2018 to 2020. Among them, property management services accounted for the largest proportion, reaching 57.7% in the first quarter of 2021, followed by non-owner value-added services, accounting for 33.7%. Revenue from all three businesses increased compared with the same period last year.
In addition, gross profit margins of all three businesses increased significantly in the first quarter of this year compared with the same period last year, with the composite gross profit margin rising 14.4 percentage points to 25.1%. Among them, the gross profit margin of community value-added services increased the most, rising 41.7 percentage points to 52.9% compared with the same period last year.
It is worth noting that the property management services business of Jinmao property mainly comes from the two major shareholders of Jinmao Group and Sinochem Group. In the first quarter of this year, the company's income from the properties developed by the above two major shareholders accounted for 92.4% of the total income of property management services. The company's contract construction area is 41.3 million square meters, with a total construction area of 18.1 million square meters. A total of 101 properties are managed, of which 80 are managed by the two major groups.
However, Jinmao property's reliance on individual shareholders is improving, and the company is constantly expanding properties developed by independent third parties. In the first quarter of this year, the revenue of property management service business from independent third parties reached 141 million yuan, an increase of 86.3% over the same period last year, accounting for an increase of 1.4 percentage points to 7.6%. In addition, the number of properties managed by the company from independent third parties also increased from 8 in 2018 to 21 last year.
In the view of Zhitong Financial APP, more independent third-party properties can help companies take advantage of economies of scale, earn more revenue and further increase gross profit margins. In addition, this can make their own property portfolio more diversified, while reducing the property dependence on shareholders.
In addition, the income of non-owner value-added services in the first three months of this year increased by 90.2% compared with the same period last year. This is mainly due to the expansion of Jinmao property's service products, resulting in an increase in the income of pre-planning and design services. In addition, the increase in gross profit margin of the business is due to Jinmao property's new consulting and other value-added services, accounting for 47.6% of the business. Income increased to 51.58 million yuan from 7.45 million yuan in the first three months of last year, an increase of 592.3%.
The remaining 52.4% of revenue came from case services, with an increase of 14.6%. Mainly for property developers, to help them in the sales office and model room sales and marketing, through quality customer service to attract buyers. As of the first three months of this year, Jinmao property provided case services for 102 projects, covering 50 cities in 18 provinces across the country.
In addition, Jinmao property sees the growth potential of community value-added services, expanding real estate brokerage services, interior decoration platform services and new retail services from the second quarter of last year. Revenue from the business increased by 109% over the first three months of last year. Thanks to the expansion of the scale of business, the number of communities under management has increased. At the same time, the income of community space operation services and community life services has also increased. Revenue growth also led to better gross margins for the business, which reached 52.9%.
Jinmao property has a professional team dedicated to providing better business development and management capabilities. At the same time, there is a special team debt to study customer needs, so as to enrich their own service portfolio. Business portfolio diversification, as well as continued business growth, can support the company's profit growth.
Smart community service is expected to bring new growth momentum
Jinmao property as a provider of property management services, while this business accounts for the largest proportion of revenue, let's take a look at the development prospects of the industry.
China's property management industry began in 1981, and the first property management company was established in Shenzhen at that time. Today's property management industry can provide services for a variety of properties, such as residential properties, commercial properties, office buildings, public properties, industrial parks and so on. Last year, the construction area under management in the industry was 25.9 billion square meters, and this year it is expected to reach 27.4 billion square meters, and this figure is expected to grow to 34.8 billion square meters in 2025.
In August 2014, the guidance on promoting the healthy Development of Smart cities was issued by the National Development and Reform Commission, which put forward a plan for the construction of smart cities. In addition, in December 2018, the notice on continuing to carry out the evaluation of the construction of a new smart city to further promote the healthy and rapid development of a new smart city was issued, providing comprehensive policy support and clear guidance for property management companies to build a smart city.
Jinmao property is also trying its best to develop into a smart city, developing smart community services in three ways, including smart community, smart operation and smart life. The company has a 30-person digital research and development team with an average of 9 years of relevant experience.
Smart communities build various application scenarios, including security, cleaning, parking, billing, and so on, through the Internet of things, artificial intelligence, big data analysis, cloud computing and other technologies. For example, the use of IBA Internet of things technology to provide round-the-clock monitoring of important equipment and facilities in the community can improve operational efficiency and detect the need for maintenance as soon as possible.
As the core of smart community service, smart operation improves the efficiency of operation and the use of space, as well as the ability to solve the needs of residents. This is reflected in a centralized parking management platform, which Jinmao property began operating this year, reducing the number of parking personnel employed by more than half every year, and the estimated annual cost reduction of about 6 million yuan.
In terms of smart life, Jinmao property builds a closed-loop ecosystem for owners and residents through its own "going home" APP. Through the analysis of online data, provide offline services to meet the needs of customers. Using this APP, you can easily pay for utilities, make maintenance requests, check visitors, reserve parking spaces and participate in community activities.