Vanke’s Property Management Unit Slides Further After Hong Kong Debut Flops

What’s new: Chinese property management services provider Onewo Inc. saw its Hong Kong stock tumble 3.5% to HK$44.4 ($5.70) on Friday, extending a 6.8% debut-day loss as investors lowered valuations across the sector amid turmoil in the real estate market.

The subsidiary of developer China Vanke Co. Ltd. (000002.SZ) raised HK$5.6 billion in its IPO on Thursday, when shares were sold at the midpoint of their range at HK$49.35 apiece.

The context: Chinese developers have scrambled to float their profitable property management units since 2018 to ease their financing difficulties. The asset-light property management business can often be a source of stable revenue.

But such firms have since last year also felt the pain of the real estate market’s liquidity and confidence crisis as well as Covid-19 lockdown disruptions. In the first half of 2022, the average net profit attributable to shareholders of 15 Hong Kong-listed Chinese mainland property management firms was 507 million yuan ($71.2 million), down 7.1% year-on-year, according to calculations by brokerage Industrial Securities Co. Ltd.

Valuations in the sector are much lower than in the same period of 2021, Vanke’s Secretary to the Board of Directors Zhu Xu said last month at a half-year earnings briefing.

In the first half, Onewo booked 14.2 billion yuan in revenue, up 38.2% year-on-year. About 56.1% of that came from providing services to residential properties and 35.8% from business and public properties. Its net profit attributable to shareholders over the period rose 16.6% year-on-year to 873.2 million yuan.

Its Hong Kong IPO propelled Onewo to become the second-largest Chinese property management firm in terms of market valuation — about HK$57.6 billion — only smaller than China Resources Mixc Lifestyle Services Ltd.’s about HK$67 billion.

Related: Distressed Chinese Developers Scramble for a Piece of $28.5 Billion Industry Bailout

Quick Takes are condensed versions of China-related stories for fast news you can use.

Contact reporter Guo Yingzhe (yingzheguo@caixin.com) and editor Joshua Dummer (joshuadummer@caixin.com)

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