4.6 billion has been spent, and China Resources Vientiane Life, which has the largest market value, has become the new M&A king of property

Image source: Visual China

Reporter | Huang Yu

On the same day that Wanwuyun was listed, China Resources Vientiane Life also attracted industry attention by acquiring Xiangsheng Industry.

As the current property stock with the highest valuation, China Resources Vientiane Life announced on the evening of September 28 that it planned to acquire Xiangsheng Property for 1.036 billion yuan. The acquisition funds are equivalent to 20% of the net funds raised by the IPO of Wanwuyun, making it the 4th property management merger and acquisition case with a value of more than 1 billion yuan this year, and 2 of the other 3 cases of China Run Vientiane Life.

With the changes in the market environment, the large-scale mergers and acquisitions in the property management industry have significantly decreased this year. The two former acquirers, Wanwanyun and Country Garden Services, have also made little moves. Now, there are very few property companies that have the ability to take action in the mergers and acquisitions market.

Relying on the advantages of state-owned enterprises, China Resources Vientiane Life has been scavenging goods since the beginning of the year. The acquisition of Xiangsheng Service is its fourth acquisition after the acquisition of Yuzhou Property, Zhongnan Service and Jiuzhou Property at the beginning of the year. For 4.6 billion yuan, it has become the property company with the highest acquisition amount so far.

In 2021, there will be a merger and acquisition boom in the property management industry, and the phenomenon of “big fish eats big fish” is not uncommon. At that time, the industry’s acquisition logic was generally scale first. Since the beginning of this year, the M&A market has continued to decline, and the M&A logic of major companies has also undergone significant changes, from expanding urban layout to increasing the density of urban projects or complementing business shortcomings.

“M&A King” makes up for shortcomings

Regarding the reasons for the acquisition of Xiangsheng Industry, the board of directors of China Resources Vientiane Life stated that the acquisition will increase the group’s management concentration in some regions, expand the scope of services, and enhance the group’s regional synergy value.

According to the announcement, Xiangsheng Industry has more than 23.5 million square meters, 14.8 million square meters and 1.1 million square meters of area under management, contract area and in-transit area in Zhejiang, Anhui and Jiangsu provinces respectively. The main business covers Property management services, owner value-added services, non-owner value-added services and parking space sales agency services.

Analysts at CITIC Securities believe that China Resources Land’s acquisition of Xiangsheng Property is in the same line as the previous acquisition of Yuzhou Property and Zhongnan Services. The merger consideration of Yuzhou Property, Zhongnan Service and Xiangsheng Property is 14 times, 14 times and 10 times of PE in 2021 respectively, and the relevant consideration has been deferred to avoid the unfulfilled contract area and the uncollectible accounts receivable of the original related parties. risk.

China Index Property Research pointed out that since the beginning of this year, the property M&A market has become less popular than last year, but state-owned enterprises have become more active in the M&A market with their stable operations and sufficient cash.

According to incomplete statistics, as of the end of August 2022, there have been more than 30 M&A cases publicly disclosed in the property management industry, involving a transaction amount of more than 9 billion yuan. Among them, 5 M&A entities are state-owned property service companies. The transaction amount was about 4.314 billion yuan, accounting for nearly half of the total transaction amount.

Since 2022 , there have been 4 M&A cases with a single M&A value exceeding 1 billion yuan, 3 of which were initiated by China Resources Vientiane Life, including the acquisition of Yuzhou Property for 1.058 billion yuan, the acquisition of Zhongnan Property for 2.48 billion yuan, and the acquisition of Xiangsheng for 1.036 billion yuan. Property, 1 acquisition of Zhongliang Baiyue Zhijia for 3.129 billion yuan for Country Garden Services.

Behind China Resources Vientiane Life’s massive acquisition, it is mainly due to its urgent need to obtain scale growth in the window period of mergers and acquisitions.

China Resources Vientiane Life’s “14th Five-Year Plan” expansion goal is to consolidate the industry’s first position in business management, and at the same time, the property management sector has also entered the industry’s first echelon, becoming an influential urban space operation service provider.

Since its listing in 2020, China Resources Vientiane Life has maintained the highest price-earnings ratio range in the industry by virtue of its business management and operation advantages, and its valuation once exceeded 100 times the price-earnings ratio. As the property management sector entered the downgrade stage, the market value of China Resources Vientiane Life also inevitably fell, but due to less decline, it surpassed Country Garden Services for the first time on July 19, ranking first in the market value of the property management industry.

Up to now, the static price-earnings ratio of China Resources Vientiane Life is about 32 times, and the total market value is about 68 billion Hong Kong dollars, followed by the newly listed Wanwuyun, the current static price-earnings ratio is about 25 times, and the total market value is about 50 billion Hong Kong dollars.

Of course, China Resources Vientiane Life can take the first position in the market value of real estate enterprises, in addition to its own advantages in business management and operation, it also has the blessing of its central enterprise background.

Although the valuation has been recognized, China Resources Vientiane Life needs to seize the opportunity to change the situation of strong business management and relatively weak property management.

As of June 30, 2022, China Resources Vientiane Living has a total construction area of ​​245 million square meters, an increase of 123 million square meters year-on-year; the contracted construction area is 323 million square meters, and the number of projects with contracted construction area is 1,609. However, compared with other peers, China Resources Vientiane still has a big gap in the scale of life.

According to the data, as of the end of the first half of this year, the area under management and contract management area of ​​Wanwanyun were 840 million square meters and 1.09 billion square meters respectively; Country Garden services were about 840 million square meters and 1.61 billion square meters; 523 million square meters and 732 million square meters; Ya Life is 529 million square meters and 706 million square meters respectively.

M&A logic shift

Although scale expansion is still the focus of the current development of property management companies, blind mergers and acquisitions have become a thing of the past.

Jiahe Family Property Service Research Institute pointed out that in terms of the idea of ​​enterprise scale expansion, the overall development logic of property enterprises has undergone a major change this year. The first change is from the scale-first M&A strategy in the previous two years to a quality expansion strategy.

In 2021, Country Garden Services will be the most popular in the M&A market. At the performance conference in March this year, Li Changjiang, Executive Director and President of Country Garden Services, also said that the time for large-scale M&A has passed.

For quite some time, Country Garden Services will no longer focus on large-scale acquisitions. Even acquisitions are mainly to make up for the shortcomings of their capabilities, and they will be more strict about the targets of acquisitions.

Since the beginning of this year, Country Garden ‘s service has slowed down significantly, and only one major acquisition has been Zhongliang Property.

Yu Linkang, president of China Resources Vientiane Life, also told Jiemian News that although China Resources Vientiane Life hopes to improve and expand its scale, it will still achieve it through multiple measures, and will not make mergers and acquisitions for the sake of mergers and acquisitions. At the same time, it needs to match the company’s overall strategic development direction, which can improve the management concentration in the region, the convergence of cultural values ​​and concepts, and the valuation needs to be reasonable.

The valuation is reasonable, which is valued by all property management companies in the current market environment, but the requirements are getting higher and higher.

Huang Fengchao, chairman of Ya Life, believes that the entire industry has not yet reached the bottom, and there will be more opportunities for mergers and acquisitions at the end of this year and next year, so everyone still has to hold on to it and cannot invest precious funds at will.

Yuexiu Service, a state-owned property company that is “not bad for money”, did not conduct any mergers and acquisitions in the first half of this year.

Lin Feng, chairman of Yuexiu Service, said that since last year, the liquidity of the real estate industry has tightened, some property targets have begun to be released, and the valuation has also dropped. Yuexiu Service is actively approaching, but it still needs to do high-quality M&A, not only for Mergers and acquisitions.

In addition to a reasonable valuation level, Yuexiu Service also has two requirements for the acquisition target. One is to meet the overall strategic layout and increase the urban density of the five major regions where Yuexiu Service is deployed; high synergy.

It is not difficult to find that in the new merger and acquisition logic, the leading companies generally choose the strategic idea of ​​expanding the urban layout to increasing the density of urban projects in order to achieve a real scale effect.

Wu Lanyu, general manager of Poly Property, pointed out at the investor exchange meeting in March that 90% of Poly Property’s expansion projects last year were concentrated in cities that have already entered, and the basic urban layout has been completed. The current focus is to increase the density of urban projects and carry out in-depth cultivation.

Zhu Baoquan, chairman of Wanwanyun, also said: “Many people have asked me if I want to acquire and merge. (I think) if it can help us form street density, I will do it, otherwise I will not do it.” He once told Jiemian News that Wanwanyun has everything. Strategies are all around concentration.