Soon after the listing, Hejing leisurely threw out a big M & An order non-stop. On January 17th, Hejing leisurely announced that it planned to acquire an 80% stake in Cedar Zhaopin Technology Group Co., Ltd. (hereinafter referred to as "Cedar Zhaopin") for a cash consideration of 1.316 billion yuan. After delivery, the target company will become an indirect non-wholly owned subsidiary of Hejing leisure. therefore, the assets, liabilities and financial results of the target group will be incorporated into the group's consolidated financial statements.
According to the announcement, Cedar Zhaopin has an area of more than 86 million square meters and more than 1000 projects under management, covering 17 provinces and 109 cities across the country. Hejing leisurely live estimated that after delivery, the area in the tube will exceed 120 million square meters. As soon as the good news came out, Hejing leisurely life once rose by more than 10%.
In the area of management, the acquisition may bring down the net interest rate.
The reason why this merger and acquisition can bring such a big market reaction is mainly because of its large volume.
First of all, from the perspective of Cedar Zhaopin, it has a management area of more than 86 million square meters, covering residential, public buildings, commercial offices and other forms of business, and has a leading market share in domestic public buildings and various segments of the market. As of November 30, 2020, Cedar Zhaopin achieved an operating income of 1.193 billion yuan and a net profit of 124 million yuan after tax.
In fact, it has already surpassed the small and medium-sized enterprises such as Binjiang Service, no matter in terms of the size of the area or the scale of revenue. According to the data of China Daily in 2020, the company is of the same size as Blu-ray Garbo service and belongs to the second echelon of goods enterprises that are about to exceed 100 million square meters. Take Xingsheng Business, which is offering shares as an example, the former has a revenue of 387 million yuan in 2019, and Cedar Intelligence can be listed independently.
In fact, as the property sector of the Cedar Group, Cedar property was rumored to be listed in 2016. The growth rate of revenue and net profit in 2019 reached 72.76% and 108.35% respectively, and the 11-month performance in 2020 also increased by 44.32% and 70.15% over the previous year. The fast-growing performance is in line with the listing rumors, but in November 2020 it was sold to Hejing leisurely, and the inside story of abandoning the listing is unknown.
For the acquirer Hejing leisurely living, to be able to acquire a similar size of the property company is a good time to achieve a big leap, but it is not an easy task.
Hejing leisurely landed on the Hong Kong Stock Exchange in October 2019, and the financial data before listing were updated to April 2020. At that time, the operating income of Hejing leisurely living was 428 million yuan and the net profit was 77 million yuan. In 2019, the annual revenue was 1.125 billion yuan and the net profit was 185 million yuan. The two have the same scale of revenue and profit.
But the area of Cedar Zhaopin is much larger. As of April 2020, Hejing leisurely living 18.9 million square meters of residential + 3.3 million square meters of commercial total management area of 22.2 million square meters, plus cedar Zhaopin 89 million square meters, Hejing leisurely living management area will exceed 100 million square meters. Hejing leisurely said that Cedar Zhaopin is in a leading position in some regional markets. After this acquisition, the Group will have a total managed area of more than 50 million square meters in the core urban agglomeration in the central and western regions, making it the leading company in the market share in the region.
The area of 100 million is gratifying, but at the end of 2020, Blu-ray Garbo service and Metro Hyatt service have successively announced that the area is over 100 million, and the second echelon property enterprises are also making great strides forward. Investors should also pay attention to the fact that the net interest rate of the underlying Cedar Zhaopin is relatively low, which is 7.37%, 8.88% and 10.47% respectively, which is bound to lower the profit margin of Hejing leisurely. Before the listing, the net interest rate of Hejing leisurely rose from 9.5% to 16.5%, and as of April 2020 it was 17.8%, slightly higher than that of cedar properties.
There are few business logic changes left in listed M & A funds?
Based on the purchase consideration of 1.316 billion yuan and the net after-tax profit of 11 months in 2020, the M & A PE of this deal is about 13.26 times, which is equivalent to the 10-15 times of M & A PE on the market. It is a good deal for Hejing leisurely living.
But after the acquisition, there will be little left of Hejing's IPO fund-raising. The company's IPO raised a net amount of 2.41 billion yuan, of which 60%, or 1.446 billion yuan, was used to collect mergers and acquisitions. The merger and acquisition of Cedar Zhaopin will cost 91% of the acquisition money. With the cash at the end of the period, the free cash of the company is about 1.5 billion yuan at the beginning of 2021. If there is no capital operation, it is unlikely to carry out large mergers and acquisitions.
In addition, the reason why Cedar Zhaopin has a large area and a low net profit rate also has a lot to do with the format it manages. According to the announcement, Cedar Zhaopin has an advantage in public buildings. Compared with commercial property, residential + public buildings are characterized by large area and low gross profit.
Previously, the income composition of Hejing leisurely living was divided into two parts: residential property management and commercial property services, accounting for 67.5% and 32.5% in 2019, with gross profit margins of 34.45% and 43.4%, respectively. It is clear that commercial property management services have higher gross margins, and capital markets are happy to give such companies a higher valuation premium, such as Baolong's commercial price-to-earnings ratio of (TTM), China Resources Vientiane Life's 166x, and Hejing leisurely Life's 75x, which is higher than most small and medium-sized residential property management companies.
After the combination of cedar intelligence and table, Hejing leisurely living in the management industry will change greatly. The original revenue structure of 37% will be greatly reduced in the proportion of commercial property management services, and the proportion of income from property management services in various formats will increase.
Hejing is leisurely and frank. Through this acquisition, the Group's business structure will be transformed and upgraded. On the basis of the middle and high-end commercial housing projects under management, the Group will further strengthen the layout of various formats, including stable business, public buildings and industrial parks with broad market prospects, urban operation services and other formats, helping the Group to develop in a more balanced manner. To become a national 'smart city' operation and service enterprise in the whole industry chain.
In the capital market, there is another property enterprise that tells the story of "urban operation service".