Offers 788,100,000 Shares
Offer Price Range between HK$1.93 and HK$2.39 per Share
Huijing Holdings Company Limited (“Huijing Holdings” or the “Group”), a PRC integrated residential and commercial property developer, with foothold in the Greater Bay Area and strategic focus on Guangdong and Hunan provinces, today announced the details of its proposed listing on the Main Board of The Stock Exchange of Hong Kong Limited (“SEHK”), under the stock code 9968.
Investment Highlights
– The Group is a recognized regional developer, with foothold in the Greater Bay Area. Of the 17 property projects it was acquiring, had completed or was developing as at 30 September 2019, 12 were in the Greater Bay Area and the rest in Heyuan, the Yangtze Mid-Stream Urban Cluster and Yangtze River Delta Urban Cluster. As at 30 September 2019, in terms of site area, approximately 63% of its land reserves (acquired and in the process of acquiring) were in Greater Bay Area
– According to the valuation report prepared by JLL, as at September 30, 2019, the total valuation of Group I to Group IV properties, together with the reference market value for Group V properties and properties in connection with the Group’s urban renewal projects (calculated assuming their development will be in accordance with the proposed zoning changes under the “Three-Old Transformation Scheme”), total to approximately RMB43.3 billion after deduction for double counting
– The Group is involved in urban renewal projects in Dongguan. It has completed or begun 11 urban renewal projects since 2013, and has initiated urban renewal process for three projects. Moreover, it holds parcels of or interests in land for seven potential urban renewal projects, and since July 2019 to December 21, 2019, it has been appointed as the provider of preparatory services for three urban renewal projects
– Able to take advantage of the salient features and strengths of each development site to design developments with unique style that can highlight local attractions or features. At present, the Group’s properties promoting specific industries comprise of “tourism-healthy living” projects and “innovative technology industry” projects
– Able to effectively control land acquisition and construction costs, thereby enhance profitability. Its gross profit margin increased from 30.2% for the year ended 31 December 2016 to 51.9% for the six months ended 30 June 2019, and its adjusted net profit margin in the same period rose from 16.2% to 18.5%
Offering Details
The Group intends to offer a total of 788,100,000 shares (“Offer Shares”) (subject to over-allotment option), of which 90% are for Placing (subject to reallocation and over-allotment option) and the remaining 10% are for the Hong Kong Public Offer (subject to reallocation). The indicative Offer Price range is between HK$1.93 and HK$2.39 per Offer Share. Assuming an Offer Price of HK$2.16 per Offer Share, the mid-point of the indicative Offer Price range, and the over-allotment option is not exercised, the net proceeds from the listing are estimated at approximately HK$1.56 billion.
The Hong Kong Public Offer will commence on 31 December 2019 (Tuesday) at 9:00 a.m. and will end at noon on 9 January 2020 (Thursday). The final Offer Price and allotment results are expected to be announced on 15 January 2020 (Wednesday) and dealing of Huijing Holdings’ shares is expected to commence on the Main Board of SEHK on 16 January 2020 (Thursday). Shares will be traded in board lots of 2,000 shares each. China Galaxy International Securities (Hong Kong) Co., Limited is the Sole Sponsor, Joint Global Coordinator, Joint Bookrunner and Joint Lead Manager of the listing.
Investment Highlights
A recognized regional developer with foothold in the Greater Bay Area and strategic focus on high growth potential cities
Since its establishment in 2004, from setting up base in Dongguan, the Group has established foothold in the Greater Bay Area, enjoying policy benefits as an area highlighted as a strategic focus in the PRC’s development blueprint. The development of the Greater Bay Area has been referred to by the State Council in its “Guidance on Deepening Regional Cooperation in the Pan-Pearl River Delta Region”, and was included in the 13th Five Year Plan in 2016. As at 30 September 2019, in terms of GFA, approximately 37% of the property projects, completed or developing, of the Group were in the Greater Bay Area. In terms of site area, approximately 63% of its land reserves (acquired and in the process of acquiring) were in the Greater Bay Area. Leveraging its success in the Greater Bay Area, the Group have expanded its operations to the Yangtze Mid-Stream Urban Cluster and Yangtze River Delta Urban Cluster in 2016 and 2017 respectively, where it target opportunities in regional cities which has high growth potential, such as Hengyang, Changsha and Hefei. As at 30 September 2019, of the 17 property projects which were being acquired, completed or underdevelopment, 12 were located in the Greater Bay Area, two were located in the Yangtze Mid-Stream City Cluster, two were located in Heyuan and one was located in the Yangtze River Delta Urban Cluster, with site area totaling approximately 2,000,000 sq.m. and planned total GFA of approximately 4,500,000 sq.m.
According to the valuation report prepared by JLL, as at 30 September, 2019, the total market value of the properties under Group I to Group IV, including the project developed by our joint venture, amounted to RMB22.2 billion. The total valuation of Group I to Group IV properties, together with the reference market value for Group V properties and properties in connection with the Group’s urban renewal projects (calculated assuming their development will be in accordance with the proposed zoning changes under the “Three-Old Transformation Scheme”), total to approximately RMB43.3 billion after deduction for double counting.
Furthermore, the Group’s property projects have earned it accolades and recognitions in the industry. It has been recognized by Sohu as “Dongguan’s Most Influential Brand” in 2014, and “Anhui Top-10 City Complex Annual Award” by the Graduate School of Real Estate of Hefei University in 2016.
Experience in urban renewal projects
Huijing has been involved in urban renewal projects in Dongguan, and have completed or begun 11 urban renewal projects since 2013. As at 21 December, 2019, it has initiated the urban renewal process for three projects, and was appointed as the preparatory services provider for three urban renewal projects.
The Group has built working relationships with third party professionals and operators, including design firms, lawyers and accountants, allowing it to more effectively complete for and execute urban renewal developments. Also, it has a dedicated team of 20 employees based in Dongguan which have relevant experience in urban renewal. The Group has conducted its business in Dongguan for more than 15 years, and have since gained an insight into local sentiment and culture, as well as experience in liaising with local authorities. The Group believes such experience would be an advantage for it in handling property developments generally, but would be especially useful in urban renewal projects.
Ability to coordinate various resources for tailoring project-specific development plans for land parcels
With experience in developing various types of property projects, ability to coordinate various resources, and land parcel feasibility studies it conducts for acquisitions it makes, the Group has been able to enhance the realizable value of its land parcels through devising specific development plans. At the same time, it is able to take advantages of the salient features and strengths of each development site to design developments with unique style that can highlight local attractions or features. Currently, the Group’s properties promoting specific industries comprise of “tourism-healthy living” projects and “innovative technology industry” projects.
Regarding “tourism-healthy living” projects, the Huijing Yanhu International Resort, located near Hengyang Wild Goose Lake, is designed as an eco-tourism town, taking advantage of the natural greenery and the waterfront offered by Wild Goose Lake, offering destination to customers seeking cultural experiences and ways to maintain a healthy lifestyle. To illustrate the advantage of the initiative, the eco-tourism town has been selected as a central element to the local government’s urban planning as it has been identified to serve not only as an important tourist attraction in the region, but also as a stimulant to the local economy.
As for “innovative technology industry” projects, the Group’s innovative technologies industry property projects provide communities with sufficient facilities for emerging industries. The Group has entered into a cooperation framework agreement with a local government authority in relation to the development of an AI Town in Dongguan, and is working with Zhejiang University to prepare a feasibility report on the AI town, and provide it with technical support.
Effectively control of land acquisition and construction costs
Capitalizing on its experience in the Greater Bay Area and its proven strategy, the Group has been able to identify and acquire quality and cost-competitive land parcels. Firstly, it adopts a deep-plough strategy where it makes early investments in areas with significant growth potential before the land parcel of that area increases in value. Secondly, its focus on urban renewal projects enable it to acquire land in more urbanized areas at a relatively lower upfront cost, and also with less competition when compared to other methods of acquisition. Thirdly, it adopts a market selection strategy with a uniform land acquisition policy, which has enabled it to control investment risks when making land acquisition decisions. Fourthly, the social amenities (such as hotels, shopping outlets, etc.) that the Group introduces makes it more competitive when acquiring land compared to other competitive bidders who are only able to offer standardized developments, and therefore leads to lower acquisition costs. Further, such social amenities would tend to increase the value of the development as well as the future ASP of the project developed. The Group’s land cost as a percentage of revenue decreased from approximately 13.4% for the year ended 31 December 2016, to 9.0% for the year ended 31 December 2018.
Moreover, the Group has built strong relationship with suppliers over the past years. It has also established a comprehensive cost management system managed by a dedicated team, and actively manage the construction period of its developments so as to achieve targeted completion schedule, in order to effectively control cost of sales. The Group’s cost of sales continued to improve, decreasing from RMB5,614 per sq.m. for the year ended 31 December 2016 to RMB4,945 per sq.m. for the year ended 31 December 2018. According to data of the National Bureau of Statistics of China, the average price of residential properties in Dongguan for the same period increased from RMB13,780 per sq.m. to RMB17,876 per sq.m.
The stringent and successful cost control strategy of the Group have also helped enhance its profitability. Gross profit margin increased from 30.2% in 2016 to 53.3% in 2018. Adjusted net profit margin also surged from 16.2% to 18.5% .
Professional management team with extensive industry experience
The Group has a management team with rich industry experience. Its Chairman and Non-Executive Director Mr. Lun Ruixiang and Executive Director and CEO Mr. Lun Zhao Ming both possess over 15 years of experience in business development. The management team members have an average of more than 10 years of experience in the real estate industry, covering aspects such as real estate investment, planning, construction, financing and sales.
Future development strategies
Huijing Holdings will implement the mission of “Maintain foothold in Greater Bay Area”. With a foothold in Dongguan, it will primarily focus on developments in Guangdong Province and expand into regions such as the Central China Region.
Huijing Holdings will continue to focus on property projects in the Greater Bay Area and Heyuan and continue to make deep-plough investments in high growth potential cities that enjoy government policy support, and continue developments in regions where it already has a foothold, in order to continue building its presence and increasing its market share in these high growth regions. As at 30 September 2019, the Group was holding or developing 11 property projects in the Greater Bay Area with a total site area of 666,652 sq.m., and an aggregate expected GFA of 1.6 million sq.m., and acquired or contracted to acquire land parcels in Dongguan (or interests in such land) with a site area of 634,615 sq.m. and 12 future projects over which development have not yet commenced.
Also, the Group plans to leverage and reinforce its experience in urban renewal developments in the Greater Bay Area, and increase its presence in the field of urban redevelopment through obtaining strategic land parcels in locations where it believes to have high redevelopment potential. As at 30 September 2019, the Group held parcels of or interests in land for seven potential urban renewal projects with a total site area of 379,425 sq.m. The Group will aim to leverage on PRC Government policies to expand its urban renewal operations to other regions in the PRC. Further, since July 2019 until December 21, 2019, the Group was appointed as the preparatory service provider for three urban renewal projects of total site area about 825,000 sq.m.
In addition, the Group will continue to focus on developing integrated tailored developments, and continue to cooperate with entities in emerging industries, ensuring that its business is in line with PRC Government initiatives. For example, the Group has submitted a development proposal for Eastern Automobile City located in Dongguan where the relevant local government authority is set on developing, in Zhangmutou Town, a one-stop destination for automobiles, which would include sales, maintenance, and second-hand trading of cars. The Group believes that its proposal which is in line with local government initiatives would increase its chance of obtaining the relevant land or approvals for development.
Use of proceeds
Assuming the offer price at HK$2.16 per share (being the mid-point of the offer price range) and after deducting the underwriting commissions and other estimated expenses in connection with the global offering, net proceeds from the global offering is estimated at approximately HK$1,564.1 million, which the Group intends to use for the following purposes:
Item / Percentage
– Complete acquisitions of land parcels and/or project companies: 55%
– Repay certain existing interest-bearing bank borrowings and other borrowings: 20%
– Used for development and construction costs: 20%
– Working capital and for other general corporate purposes: 5%
Financial performance
For the year ended 31 December For the six months ended 30 June
(RMB million) 2017 2018 YoY change 2019
Revenue 1,198 2,239 +86.9% 1,316
Gross profit 650 1,193 +83.5% 683
Profit for the year/period 158 401 +153.9% 2441
Net profit margin 13.2% 17.9% +4.7ppts 18.5%
Land reserves
Type / Interest attributable to the Group (RMB hundred million )
Type I: Properties held for sale: 20.16
Type II: Properties held for investment: 9.77
Type III: Properties held under development: 83.68
Type IV: Properties held for future development: 71.52
Type V: Properties to be acquired by the Group in the PRC: 85.25
Total: 270.38
The reference market value for properties in connection with the Group’s urban renewal projects (calculated assuming their development will be in accordance with the proposed zoning changes under the “Three-Old Transformation Scheme”) is RMB132.60 hundred million.
Source: JLL
About Huijing Holdings Company Limited
Huijing Holdings Company Limited (“Huijing Holdings” or the “Group”) is an integrated residential and commercial property developer in the PRC with foothold in the Greater Bay Area and gradually expanding presence to Heyuan, the Yangtze River Delta Urban Cluster and the Yangtze Mid-Stream Urban Cluster. It focuses on urban renewal projects, covering residential property projects, integrated property projects and industry-specific property projects. As at 30 September 2019, the Group held or had agreed to acquire in all 17 property projects in five cities in three provinces. These projects have in aggregate site area of approximately 2,000,000 sq.m. and planned GFA after completion of approximately 4,500,000 sq.m. According to JLL valuation, as at 30 September 2019, the total valuation of Group I to Group IV properties, together with the reference market value for Group V properties and properties in connection with the Group’s urban renewal projects (calculated assuming their development will be in accordance with the proposed zoning changes under the “Three-Old Transformation Scheme”), total to approximately RMB43.3 billion.
Source: ACN Newswire