Redsun Services Group Limited Announces Details of Proposed Listing on the Main Board of HKEX
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Investment Highlights
- Redsun Services Group Limited is a fast-growing comprehensive community services provider focusing on the Yangtze River Delta, with balanced property management abilities in the management of residential and commercial properties
- As at 15 June 2020, the Group managed a total contracted GFA of approximately 29.6 million sq.m., comprising 181 projects, including 108 projects under management with a total GFA of 17.8 million sq.m. and 73 projects contracted to manage but undelivered with a total GFA of 11.8 million sq.m.
- Henderson Land's Dr. Peter Lee Ka-kit becomes a Cornerstone Investor
- The Group's commercial property management services have grown rapidly, with the total GFA under management increasing from 1.9 million sq.m. in 2017 to 3.4 million sq.m. in 2019, accounting for 49.9% of the property management services revenue in 2019
- The Group has actively expanded the property management services to properties developed by third-party property developers. From 2017-2019, the CAGR of revenue generated from the management of properties developed by third-party property developers was 97.8%, the percentage contributed by this business to the total revenue increased from 5.7% to 14.0% while its percentage of the GFA under management increased from 12.7% to 30.0%
- Community value-added services can improve the profitability of the Group. The gross profit margin of this business was 46.1% in 2019
- Redsun Town integrated platform had been established based on the concept of "business integration + intelligent IOT" aimed at improving operational efficiency and enhancing profitability
- Strong financial performance growth from 2017-2019, as the CAGR of total revenue and profit for the year was 39.9% and 41.0% respectively
- Led by a senior management team with extensive experience in property management, the Group retains a professional team
- The Group will continue to expand the scale of its operations through diversified methods and plans to seek for suitable property management companies located in the Yangtze River Delta, Southwest China, South China and Central China as potential acquisition targets
Offering Details
Redsun Services Group Limited plans to offer a total of 100,000,000 shares ("Offer Shares"), of which 90% are for International Offering (subject to reallocation and the over-allotment option) and the remaining 10% are for the Hong Kong Public Offering (subject to reallocation). The indicative Offer Price range is between HK$3.30 and HK$4.30 per Offer Share. Assuming an Offer Price of HK$3.80 per Offer Share (being the mid-point of the Offer Price range stated in the prospectus), the proceeds raised will be approximately HK$331.2 million, after deduction of underwriting fees and commissions and estimated expenses payable by us in connection with the Global Offering and assuming the over-allotment option is not exercised. ABCI Capital Limited is the Sole Sponsor.
The Public Offering will commence at 9:00 a.m. on 24 June 2020 (Wednesday) and end at 12:00 noon on 30 June 2020 (Tuesday). The final Offer Price and results of allocation will be announced on 6 July 2020 (Monday). Trading of Redsun Services' shares will commence on the Main Board of HKEX on 7 July 2020 (Tuesday) under the stock code 1971. Shares will be traded in board lots of 1,000 shares each.
Henderson Land's Dr. Peter Lee Ka-kit becomes a Cornerstone Investor
Within the International Placing, Redsun Services has entered into a cornerstone investment agreement with Successful Lotus Limited ("Successful Lotus"), an investment holding company wholly-owned by Dr. Peter Lee Ka-kit, the chairman and the managing director of Henderson Land Development Company Limited (stock code: 0012). Successful Lotus has agreed to subscribe at the Offer Price for such number of the Offer Shares which shall be the lower of (i) the number of Offer Shares that may be purchased with an amount of HK$78 million or (ii) no more than 4.99% of the total issued share capital of the Group. Assuming the Over-allotment Option is not exercised and the Offer Price is HK$3.80 per Offer Share (being the mid-point of the price range), the subscription amount of the Cornerstone Placing will be HK$75.85 million.
A fast-growing comprehensive community services provider focusing on the Yangtze River Delta, with balanced property management abilities in the management of residential and commercial properties
The Group's revenue and net profit has grown steadily in the past three years. From 2017 to 2019, the Group's total revenue increased at a CAGR of 39.9% from approximately RMB 257.1 million to approximately RMB 503.0 million. Gross profit increased from approximately RMB 58.0 million to approximately RMB 127.4 million. The gross profit margin rose from 22.6% in 2017 to 25.3% in 2019. Benefiting from the surge in the Group's revenue and gross profit margin, the Group's profit for the year increased at a CAGR of 41.0% from approximately RMB 28.7 million in 2017 to approximately RMB 57.1 million in 2019. In 2019, the profit attributable to owners of the Company amounted to RMB 59.1 million.
Benefiting from the "residential + commercial two-wheel driven" strategy adopted by Redsun Properties Group Limited, the related company of the Group, the synergies between the residential and commercial property management have helped the Group to achieve a balanced development. The Group's management scale of residential properties has achieved rapid growth. As at 15 June 2020, the Group's total contracted GFA reached approximately 29.6 million sq.m., comprising 181 projects, including 108 projects under management with a total GFA of 17.8 million sq.m. and 73 projects contracted to manage but undelivered with a total GFA of 11.8 million sq.m.
The Group continued to expand property management services to properties developed by third-party property developers. The revenue from this business increased from RMB12.7 million in 2017 to RMB49.7 million in 2019, representing a CAGR of 97.8% and its percentage of total GFA under management for properties developed by third-party property developers increased from 12.7% as at 31 December 2017 to 30.0% as at 31 December 2019. In addition, the Group has expanded its portfolio of commercial properties under its management to cover a wider range of properties, including, among others, shopping malls, home improvement and furnishing malls, hotels and a theme park and also diversified its other properties portfolio to cover office buildings and schools. As at 31 December 2019, the revenue from property management services for commercial properties accounted for 49.9% of the property management services revenue and had a total GFA of 3.4 million sq.m for the commercial properties under its management.
In the future, the Group will continue to implement the strategy of "penetrate Jiangsu province, explore the Yangtze River Delta and expand into urban agglomerations", strengthening its leading position in the Jiangsu province and expanding into selected key urban agglomerations and leveraging its presence in cities where it already has a presence to explore neighborhood areas. The Group also intends to enter into more strategic cooperative agreements with selected cooperative partners such as third-party property developers, in order to expand the property portfolio developed by third-party developers and further diversify its customer base. In addition, the Group will continue to expand the operation scale through diversified methods. The Group plans to seek suitable property management companies that are well managed and in healthy condition located in the Yangtze River Delta, Southwest China, South China and Central China as potential acquisition targets.
Comprehensive diversified services support continuous growth
Redsun Services is devoted to providing comprehensive services to customers. The Group provides 3 main business lines including property management services, value-added services to non-property owners and community value-added services. Property management business serves as the basis for the Group to generate revenue and helps to enlarge the Group's customer base for its value-added services to non-property owners and community value-added services. Through offering diversified services, the Group's community value-added services improves the market recognition of its brand and services and improve its profitability. Focusing on property developers, the Group has extended its services upstream along the value chain of property management to provide preliminary consulting services at the property planning and design stage. As for services to residential property owners and residents, the Group will continue to expand the scope of its services, launching the high-end service series, "Chenxin," in five to eight projects each year during the next two years, gradually covering all high-end residential properties under its management. These community value-added services are able to enhance profitability and the revenue generated from community value-added services increased at a CAGR of 29.7% from RMB12.3 million in 2017 to RMB26.9 million in 2019, and the gross profit margin was 46.1% in 2019.
Redsun Town integrated platform established based on the concept of "business integration + intelligent IOT" to improve operational efficiency and enhance profitability
Redsun Services has established Redsun Town integrated platform based on the concept of "business integration + intelligent IOT", which improves operating efficiency and capabilities while reducing operating costs. The Group plans to continue to upgrade its intelligent system and equipment and gradually install or upgrade intelligent equipment and systems in residential and commercial properties under its management. The Group plans to install a face-ID identification system, a Hongzhi Cloud Monitor system, a smart parking system and a remote equipment EBA management system for 20 residential communities in the next two years. The Group expects that the intelligent systems can further improve profitability, improve customers' experience and enhance its brand.
Property management services well-recognized by customers and the industry.
Redsun Services upholds the philosophy of "providing our customers with high-quality services with sincerity", and has established a standardized system of operations for better operating efficiency and quality of services. The Group has established comprehensive systems for quality management, environmental protection and occupational health and safety security and has been accredited with ISO9001 and ISO14001 standards since 2009 and OHSAS18001 standards since 2018. The Group will provide systematic, organized and standardized operations to enhance its competitiveness for sustained growth. In the future, the Group will provide property management services under four series, namely, standard service series targeting first-time homebuyers, value-added service series targeting mid-end customers and designated services series and harmonious community services series targeting mid-end to high-end customers.
Sustainable development is supported by the dedicated management team with extensive experience in property management
Redsun Services is led by a senior management team with extensive experience in property management. The management members have an average of over 15 years of experience in property management. Led by the management team, the Group has retained a professional team to support sustained growth.
Use of Proceeds
The Group estimates the net proceeds of the Global Offering, assuming an Offer Price of HK$3.80 per Offer Share (being the mid-point of the Offer Price range stated in the prospectus), will be approximately HK$331.2 million, after deduction of underwriting fees and commissions and estimated expenses payable by us in connection with the Global Offering.
The Group intends to use the net proceeds of the Global Offering for the following purposes:
Item / Percentage
Pursue selective strategic investment and acquisition opportunities: 40%
Enhance research and development and upgrade intelligent systems: 30%
Improve service quality: 10%
Recruit talent and improve employee trainings and employee benefit system: 10%
Working capital and general corporate purposes: 10%
Financial Highlights
For the Year Ended 31 December
2017 2018 2019
RMB '000 RMB '000 RMB '000
Revenue 257,140 348,981 502,990
Gross Profit 58,049 69,772 127,444
Total Profit for the Year 28,712 32,991 57,067
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