Global Offering
Stock Code：00816
IMPORTANT: If you are in any doubt about any of the contents of this prospectus, you should obtain independent professional advice.
JINMAO PROPERTY SERVICES CO., LIMITED
(Incorporated in Hong Kong with limited liability)
GLOBAL OFFERING
Number of Offer Shares under the
Global Offering
: 101,411,500 Shares (subject to the Offer Size
Adjustment Option and the Over-allotment
Option)
Number of Hong Kong Offer Shares : 10,142,000 Shares (subject to reallocation
and the Offer Size Adjustment Option)
Number of International Offer Shares : 91,269,500 Shares (subject to reallocation,
the Offer Size Adjustment Option and the
Over-allotment Option)
Maximum Offer Price : HK$8.14 per Offer Share, plus brokerage of
1.0%, SFC transaction levy of 0.0027%,
Stock Exchange trading fee of 0.005% and
FRC transaction levy of 0.00015%
(payable in full on application in Hong
Kong dollars and subject to refund)
Stock code : 00816
Joint Sponsors, Joint Global Coordinators,
Joint Bookrunners and Joint Lead Managers:
(In alphabetical order)
Joint Global Coordinators, Joint Bookrunners and Joint Lead Managers:
(In alphabetical order)
Joint Bookrunners and Joint Lead Managers:
(In alphabetical order)
Joint Lead Manager:
Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the
contents of this prospectus, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in
reliance upon the whole or any part of the contents of this prospectus.
A copy of this prospectus, having attached thereto the documents specified in the section headed “Documents Delivered to the Registrar of Companies and Available for Inspection”
in Appendix VI, has been registered by the Registrar of Companies in Hong Kong as required by Section 38D of the Companies (Winding Up and Miscellaneous Provisions)
Ordinance. The Securities and Futures Commission and the Registrar of Companies in Hong Kong take no responsibility for the contents of this prospectus or any other document
referred to above.
The Offer Price is expected to be determined by agreement between the Joint Representatives (for themselves and on behalf of the Underwriters) and our Company on or around
Thursday, March 3, 2022 and, in any event, not later than Wednesday, March 9, 2022. The Offer Price will not be more than HK$8.14 per Offer Share and is expected to be not
less than HK$7.52 per Offer Share, unless otherwise announced. Applicants under the Hong Kong Public Offering are required to pay, on application, the maximum Offer Price
of HK$8.14 per Hong Kong Offer Share, plus brokerage of 1%, SFC transaction levy of 0.0027%, Stock Exchange trading fee of 0.005% and FRC transaction levy of 0.00015%,
subject to refund if the Offer Price as finally determined is less than HK$8.14 per Offer Share.
If, for any reason, our Company and the Joint Representatives (for themselves and on behalf of the Underwriters) are unable to reach an agreement on the Offer Price on or before
Wednesday, March 9, 2022, the Global Offering will not proceed and will lapse.
The Joint Representatives (for themselves and on behalf of the Underwriters) may, where considered appropriate, based on the level of interest expressed by prospective professional
and institutional investors during the book-building process, and with the consent of our Company, reduce the number of Offer Shares and/or the indicative Offer Price range below
that stated in this prospectus (which is HK$7.52 to HK$8.14 per Offer Share) at any time on or prior to the morning of the last day for lodging applications under the Hong Kong
Public Offering. In such case, notices of the reduction in the number of Offer Shares and/or the indicative Offer Price range will be published on the website of the Stock Exchange
at www.hkexnews.hk and our Company’s website at www.jinmaowy.com as soon as practicable following the decision to make such reduction, and in any event not later than the
morning of the day which is the last day for lodging applications under the Hong Kong Public Offering. Further details are set forth in the sections headed “Structure of the Global
Offering” and “How to Apply for Hong Kong Offer Shares” in this prospectus.
Prior to making an investment decision, prospective investors should consider carefully all of the information set out in this prospectus, including the risk factors set out in the section
headed “Risk Factors” in this prospectus.
The obligations of the Hong Kong Underwriters under the Hong Kong Underwriting Agreement are subject to termination by the Joint Representatives (for themselves and on behalf
of the Hong Kong Underwriters) if certain grounds arise prior to 8:00 a.m. on the Listing Date. Such grounds are set out in the section headed “Underwriting — Underwriting
Arrangements and Expenses — Hong Kong Public Offering — Grounds for Termination” in this prospectus. It is important that you refer to that section for further details.
The Offer Shares have not been and will not be registered under the U.S. Securities Act or any state securities laws in the United States and may not be offered, sold, pledged or
transferred within the United States. The Offer Shares are being offered, sold or delivered outside the United States in offshore transactions in reliance on Regulation S or other
exemption from the registration requirements under the U.S. Securities Act.
ATTENTION
We have adopted a fully electronic application process for the Hong Kong Public Offering. We will not provide printed copies of this document or printed copies of any application
forms to the public in relation to the Hong Kong Public Offering.
This prospectus is available at the websites of the Stock Exchange at www.hkexnews.hk and our website at www.jinmaowy.com. If you require a printed copy of this prospectus,
you may download and print from the website addresses above.
IMPORTANT
February 25, 2022
IMPORTANT NOTICE TO INVESTORS:
FULLY ELECTRONIC APPLICATION PROCESS
We have adopted a fully electronic application process for the Hong Kong
Public Offering. We will not provide printed copies of this prospectus or printed
copies of any application forms to the public.
This prospectus is available at the website of the Stock Exchange at
www.hkexnews.hk under the “HKEXnews > New Listings > New Listing
Information” section, and our website at www.jinmaowy.com. If you require a
printed copy of this prospectus, you may download and print from the website
addresses above.
To apply for the Hong Kong Offer Shares, you may:
(1) apply online through the White Form eIPO service at www.eipo.com.hk;or
(2) apply through CCASS EIPO service to electronically cause HKSCC
Nominees to apply on your behalf, including by:
(i) instructing your broker or custodian who is a CCASS Clearing
Participant or a CCASS Custodian Participant to give electronic
application instructions via CCASS terminals to apply for the Hong
Kong Offer Shares on your behalf; or
(ii) (if you are an existing CCASS Investor Participant) giving electronic
application instructions through the CCASS Internet System
(https://ip.ccass.com) or through the CCASS Phone System by calling
+852 2979 7888 (using the procedures in HKSCC’s “An Operating
Guide for Investor Participants” in effect from time to time). HKSCC
can also input electronic application instructions for CCASS Investor
Participants through HKSCC’s Customer Service Centre at 1/F, One &
Two Exchange Square, 8 Connaught Place, Central, Hong Kong by
completing an input request.
We will not provide any physical channels to accept any application for the Hong
Kong Offer Shares by the public. The contents of the electronic version of this
prospectus are identical to the printed prospectus as registered with the Registrar of
Companies in Hong Kong pursuant to Section 38D of the Companies (Winding Up and
Miscellaneous Provisions) Ordinance.
If you are an intermediary, broker or agent, please remind your customers, clients
or principals, as applicable, that this prospectus is available online at the website
addresses above.
Please refer to “How to Apply for Hong Kong Offer Shares” for further details on
the procedures through which you can apply for the Hong Kong Offer Shares
electronically.
IMPORTANT
Minimum Application Amount and Permitted Numbers
Your application through the White Form eIPO service or the CCASS EIPO
service must be for a minimum of 500 Hong Kong Offer Shares and in one of the
numbers set out in the table. You are required to pay the amount next to the number you
select.
JINMAO PROPERTY SERVICES CO., LIMITED (Stock Code: 00816)
(HK$8.14 per Hong Kong Offer Share)
NUMBER OF HONG KONG OFFER SHARES THAT MAY BE APPLIED FOR AND PAYMENTS
No. of
Hong Kong
Offer
Shares
applied for
Amount
payable on
application
No. of
Hong Kong
Offer
Shares
applied for
Amount
payable on
application
No. of
Hong Kong
Offer
Shares
applied for
Amount
payable on
application
No. of
Hong Kong
Offer
Shares
applied for
Amount
payable on
application
HK$ HK$ HK$ HK$
500 4,111.02 8,000 65,776.32 150,000 1,233,305.85 1,000,000 8,222,038.99
1,000 8,222.04 9,000 73,998.35 200,000 1,644,407.80 1,500,000 12,333,058.49
1,500 12,333.06 10,000 82,220.39 250,000 2,055,509.75 2,000,000 16,444,077.98
2,000 16,444.07 15,000 123,330.59 300,000 2,466,611.69 2,500,000 20,555,097.48
2,500 20,555.10 20,000 164,440.78 350,000 2,877,713.64 3,000,000 24,666,116.97
3,000 24,666.12 25,000 205,550.98 400,000 3,288,815.59 3,500,000 28,777,136.47
3,500 28,777.13 30,000 246,661.17 450,000 3,699,917.54 4,000,000 32,888,155.96
4,000 32,888.16 35,000 287,771.37 500,000 4,111,019.50 4,500,000 36,999,175.46
4,500 36,999.17 40,000 328,881.56 600,000 4,933,223.40 5,071,000
(1)
41,693,959.72
5,000 41,110.20 45,000 369,991.76 700,000 5,755,427.30
6,000 49,332.23 50,000 411,101.95 800,000 6,577,631.19
7,000 57,554.28 100,000 822,203.90 900,000 7,399,835.09
(1) Maximum number of Hong Kong Offer Shares you may apply for.
IMPORTANT
If there is any change in the following expected timetable of the Hong Kong Public
Offering, we will issue an announcement in Hong Kong to be published on the websites
of the Stock Exchange at www.hkexnews.hk and our Company at www.jinmaowy.com.
Hong Kong Public Offering commences .........................9:00 a.m. on Friday,
February 25, 2022
Latest time to complete electronic applications under the
WHITE Form eIPO service through
the designated website www.eipo.com.hk
(2)
...............11:30 a.m. on Wednesday,
March 2, 2022
Application lists open
(3)
................................11:45 a.m. on Wednesday,
March 2, 2022
Latest time for completing payment for White Form eIPO applications
by effecting internet banking transfer(s) or PPS payment transfer(s)
and giving electronic application instructions to HKSCC . . .12:00 noon on Wednesday,
March 2, 2022
Application lists close
(3)
...............................12:00 noon on Wednesday,
March 2, 2022
Expected Price Determination Date
(4)
..................................Thursday,
March 3, 2022
(1) Announcement of the final Offer Price, the level of
indications of interest in the International Offering,
the level of applications in the Hong Kong Public Offering
and basis of allocation of the Hong Kong Offer Shares
under the Hong Kong Public Offering to be published on or before ......Wednesday,
March 9, 2022
(2) Results of allocations in the Hong Kong Public Offering
to be available through a variety of channels as described
in the section headed “How to Apply for Hong Kong
Offer Shares – D. Publication of Results”
in this prospectus from ........................................Wednesday,
March 9, 2022
EXPECTED TIMETABLE
(1)
–i–
(3) Announcement containing (1) and (2) above will be
published on the website of the Company and the
Hong Kong Stock Exchange at our website at
www.jinmaowy.com and www.hkexnews.hk from ...................Wednesday,
March 9, 2022
Results of allocations in the Hong Kong Public Offering
will be available at
www.iporesults.com.hk (alternatively: English
https://www.eipo.com.hk/en/Allotment; Chinese
https://www.eipo.com.hk/zh-hk/Allotment)
with a ‘‘search by ID’’ function from ....................8:00 a.m. on Wednesday,
March 9, 2022
to 12:00 midnight on Tuesday,
March 15, 2022
Despatch/Collection of share certificates or deposit of the share
certificates into CCASS in respect of wholly or partially successful
applications pursuant to the Hong Kong Public Offering
on or before
(5)(6)(7)
.............................................Wednesday,
March 9, 2022
Despatch/Collection of White Form e-Refund payment
instructions/refund cheques in respect of wholly or partially
successful applications if the final Offer Price is less than the maximum
Offer Price per Hong Kong Public Offer Share initially paid on
application (if applicable) or wholly or partially unsuccessful applications
pursuant to the Hong Kong Public Offering on or before .................Wednesday,
March 9, 2022
Despatch of share certificates to Qualifying Jinmao
Shareholders who are entitled to receive Shares
under the Distribution on or before
(8)
...............................Wednesday,
March 9, 2022
Dealings in the Shares on the Hong Kong Stock Exchange
expected to commence at 9:00 a.m. on ...............................Thursday,
March 10, 2022
Despatch of cheques to Non-Qualifying Jinmao Shareholders
(if any) of the net proceeds of the sale of Shares
which they would otherwise receive pursuant to
the Distribution on or before
(9)
......................................Tuesday,
April 12, 2022
EXPECTED TIMETABLE
(1)
–ii–
Notes:
(1) All dates and times refer to Hong Kong local time, except as otherwise stated.
(2) You will not be permitted to submit your application under the WHITE Form eIPO service through the
designated website at www.eipo.com.hk after 11:30 a.m. on the last day for submitting applications. If you
have already submitted your application and obtained a payment reference number from the designated website
prior to 11:30 a.m., you will be permitted to continue the application process (by completing payment of the
application monies) until 12:00 noon on the last day for submitting applications, when the application lists
close.
(3) If there is a “black” rainstorm warning signal or a tropical cyclone warning signal number 8 or above and/or
Extreme Conditions in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Wednesday,
March 2, 2022, the application lists will not open and close on that day. See section headed “How to Apply
for Hong Kong Offer Shares” in this prospectus.
(4) The Price Determination Date is expected to be on or around Thursday, March 3, 2022 and in any event, not
later than Wednesday, March 9, 2022. If for any reason, the Offer Price is not agreed between the Joint
Representatives (for themselves and on behalf of the Underwriters) and us by Wednesday, March 9, 2022, the
Global Offering will not proceed and will lapse.
(5) The Share certificates will only become valid at 8:00 a.m. on the Listing Date, which is expected to be
Thursday, March 10, 2022, provided that the Global Offering has become unconditional in all respects at or
before that time. Investors who trade Shares on the basis of publicly available allocation details or prior to the
receipt of the Share certificates or prior to the Share certificates becoming valid do so entirely at their own
risk.
(6) e-Refund payment instructions/refund cheques will be issued in respect of wholly or partially unsuccessful
applications pursuant to the Hong Kong Public Offering and also in respect of wholly or partially successful
applications in the event that the final Offer Price is less than the price payable per Offer Share on application.
Part of the applicant’s Hong Kong identity card number or passport number, or, if the application is made by
joint applicants, part of the Hong Kong identity card number or passport number of the first-named applicant,
provided by the applicant(s) may be printed on the refund cheque, if any. Such data would also be transferred
to a third party for refund purposes. Banks may require verification of an applicant’s Hong Kong identity card
number or passport number before encashment of the refund cheque. Inaccurate completion of an applicant’s
Hong Kong identity card number or passport number may invalidate or delay encashment of the refund cheque.
(7) Applicants who have applied on White Form eIPO for 1,000,000 or more Hong Kong Offer Shares under the
Hong Kong Public Offering and have provided all information required by the Application Form may collect
any refund cheques and/or Share certificates in person from our Company’s Hong Kong Share Registrar,
Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183
Queen’s Road East, Wanchai, Hong Kong from 9: 00 a.m. to 1: 00 p.m.. Applicants being individuals who are
eligible for personal collection may not authorize any other person to collect on their behalf. Applicants being
corporations which are eligible for personal collection must attend by their authorized representatives bearing
letters of authorization from their corporations stamped with the corporation’s chop. Both individuals and
authorized representatives of corporations must produce identification and (where applicable) authorization
documents acceptable to our Hong Kong Share Registrar at the time of collection.
EXPECTED TIMETABLE
(1)
– iii –
Applicants who have applied for Hong Kong Offer Shares by giving electronic application instructions to
HKSCC should see “How to Apply for Hong Kong Offer Shares” in this prospectus for details. Uncollected
Share certificates and/or refund cheques will be despatched by ordinary post, at the applicants’ own risk to the
addresses specified in the relevant applications. See “How to Apply for the Hong Kong Offer Shares — A.
Applications for the Hong Kong Offer Shares — 6. Applying through CCASS EIPO Service” in this prospectus
for details.
Applicants who have applied for less than 1,000,000 Hong Kong Offer Shares and any uncollected Share
certificates and/or refund cheques will be despatched by ordinary post at the applicant’s risk, to the address
specified in the relevant applications.
See ‘‘How to Apply for Hong Kong Offer Shares — F. Refund of Application Monies’’ and ‘‘How to Apply
for Hong Kong Offer Shares — G. Despatch/Collection of Share Certificates/E-Refund Payment
Instructions/Refund Cheques’’ in this prospectus.
(8) For Qualifying Jinmao Shareholders whose shareholdings in China Jinmao are held in CCASS, their
entitlements to Shares under the Distribution will be issued in the name of HKSCC Nominees and deposited
into CCASS for credit to their CCASS Investor Participant stock accounts or the stock accounts of their
designated CCASS Participants. For Qualifying Jinmao Shareholders whose shareholdings in China Jinmao are
held in their names on the register of members of China Jinmao, share certificates for Shares under the
Distribution will be despatched by ordinary post to their addresses on the register of members of China Jinmao
at their own risks.
(9) Non-Qualifying Jinmao Shareholders (if any) will be entitled to the Distribution but will not receive Shares.
Instead, the Shares which they would otherwise receive pursuant to the Distribution will be sold by China
Jinmao on their behalf as soon as reasonably practicable after commencement of dealings in the Shares on the
Stock Exchange and they will receive a cash amount equal to the net proceeds of such sale. Further information
is set out in the section headed “The Spin-off and Distribution — Distribution” in this prospectus.
Share certificates for the Hong Kong Offer Shares and Shares to be distributed
pursuant to the Distribution are expected to be issued on Wednesday, March 9, 2022 but
will only become valid evidence of title if the Global Offering has become unconditional
in all respects and neither of the Underwriting Agreements is terminated in accordance
with its terms before 8:00 a.m. on the Listing Date, which is expected to be on on
Thursday, March 10, 2022.
For details of the structure of the Global Offering, including its conditions, and the
procedures for applications for the Hong Kong Offer Shares, see sections headed “Structure of
the Global Offering” and “How to Apply for Hong Kong Offer Shares” in this prospectus,
respectively.
If the Global Offering does not become unconditional or is terminated in accordance with
its terms, the Global Offering will not proceed. In such a case, the Company will make an
announcement as soon as practicable thereafter.
EXPECTED TIMETABLE
(1)
–iv–
IMPORTANT NOTICE TO INVESTORS
This prospectus is issued by us solely in connection with the Hong Kong Public
Offering and does not constitute an offer to sell or a solicitation of an offer to sell or a
solicitation of an offer to buy any security other than the Hong Kong Offer Shares offered
by this prospectus pursuant to the Hong Kong Public Offering. This prospectus may not
be used for the purpose of, and does not constitute, an offer or invitation in any other
jurisdiction or in any other circumstances. No action has been taken to permit a public
offering of the Offer Shares in any jurisdiction other than Hong Kong and no action has
been taken to permit the distribution of this prospectus in any jurisdiction other than
Hong Kong. The distribution of this prospectus and the offering of the Offer Shares in
other jurisdictions are subject to restrictions and may not be made except as permitted
under the applicable securities laws of such jurisdictions pursuant to registration with or
authorization by the relevant securities regulatory authorities or an exemption therefrom.
You should rely only on the information contained in this prospectus and the Application
Forms to make your investment decision. The Hong Kong Public Offering are made solely
on the basis of the information contained and the representations made in this prospectus.
We have not authorized anyone to provide you with information that is different from what
is contained in this prospectus. Any information or representation not contained in this
prospectus must not be relied on by you as having been authorized by us, the Joint
Sponsors, the Joint Representatives, the Joint Global Coordinators, the Joint
Bookrunners, the Joint Lead Managers, any of the Underwriters, any of our or their
respective directors, officers, employees, agents or representatives of any of them or any
other person or party involved in the Global Offering.
Page
EXPECTED TIMETABLE ........................................... i
CONTENTS ....................................................... v
SUMMARY ....................................................... 1
DEFINITIONS ..................................................... 39
GLOSSARY ....................................................... 55
FORWARD-LOOKING STATEMENTS ................................. 58
RISK FACTORS ................................................... 60
THE SPIN-OFF AND DISTRIBUTION ................................. 111
CONTENTS
–v–
INFORMATION ABOUT THIS PROSPECTUS AND
THE GLOBAL OFFERING ......................................... 117
WAIVERS FROM COMPLIANCE WITH THE LISTING RULES AND
EXEMPTIONS FROM COMPLIANCE WITH THE COMPANIES
(WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE ..... 122
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING ..... 128
CORPORATE INFORMATION ....................................... 134
INDUSTRY OVERVIEW ............................................. 136
REGULATIONS .................................................... 159
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE .......... 185
BUSINESS ........................................................ 198
RELATIONSHIP WITH CHINA JINMAO ............................... 310
CONNECTED TRANSACTIONS ...................................... 348
DIRECTORS AND SENIOR MANAGEMENT ............................ 366
SUBSTANTIAL SHAREHOLDERS ..................................... 386
SHARE CAPITAL .................................................. 388
OUR CORNERSTONE INVESTORS ................................... 392
FINANCIAL INFORMATION......................................... 404
FUTURE PLANS AND USE OF PROCEEDS ............................. 483
UNDERWRITING .................................................. 500
STRUCTURE OF THE GLOBAL OFFERING............................ 515
HOW TO APPLY FOR HONG KONG OFFER SHARES ................... 530
APPENDIX I ACCOUNTANTS’ REPORT .......................... I-1
APPENDIX II UNAUDITED PRO FORMA FINANCIAL
INFORMATION .................................. II-1
CONTENTS
–vi–
APPENDIX III PROFIT ESTIMATE ................................ III-1
APPENDIX IV SUMMARY OF ARTICLES OF ASSOCIATION .......... IV-1
APPENDIX V STATUTORY AND GENERAL INFORMATION .......... V-1
APPENDIX VI DOCUMENTS TO BE DELIVERED TO THE
REGISTRAR OF COMPANIES AND AVAILABLE
FOR INSPECTION ............................... VI-1
CONTENTS
– vii –
This summary aims to give you an overview of the information contained in this
prospectus. As it is a summary, it does not contain all the information that may be
important to you and is qualified in its entirety by and should be read in conjunction with,
the full prospectus. You should read the whole prospectus, including the appendices,
before you decide to invest in the Offer Shares. There are risks associated with any
investment. Some of the particular risks in investing in the Offer Shares are set forth in
the section headed “Risk Factors” of this prospectus. You should read that section
carefully before you decide to invest in the Offer Shares.
OVERVIEW
We are a fast-growing upscale property management and city operation service provider
in China. According to China Index Academy, the average property management fee for
properties under our management was significantly higher than the industry average of the Top
100 Property Management Companies in 2018, 2019 and 2020. According to China Index
Academy, we are an industry-leading company in terms of multiple indicators in the three
dimensions of scope of service, service standards and service fees. China Jinmao, our
Controlling Shareholder, is a top tier property developer in China. We provide a full range of
high-quality property management and value-added services to one of the fastest-growing
portfolios of high-end residential properties, according to China Index Academy. We also
manage and operate a diversified and growing portfolio of commercial properties primarily
comprising office buildings and shopping malls, as well as public properties such as schools,
government facilities and other public spaces. As of September 30, 2021, the total GFA under
management was approximately 23.2 million sq.m. According to China Index Academy, the
property management industry in China is highly competitive and fragmented. Our market
share in terms of GFA under management and total revenue in 2020 was approximately 0.07%
and 0.15% of the property management market in China. We were ranked the 5th in terms of
revenue per sq.m. among the Top 100 Property Management Companies headquartered in the
Beijing-Tianjin-Hebei Region in 2020. We were ranked the second in terms of GFA under
management for upscale property management service projects among the Top 100 Property
Management Companies in Beijing in 2020.
Capitalizing on our leading brand reputation, extensive resources and experience, and
comprehensive technological capabilities, together with our business partners, we are
committed to developing a lifestyle service platform that is centered around living and working
activities of property users. Through our platform, we seek to synergize different pillars of our
services to deliver an integrated and elevated living experience, improve property users’
quality of life and vitalize property management for owners.
We are engaged in three business lines, namely (i) property management services, (ii)
value-added services to non-property owners, and (iii) community value-added services. We
also provide city operation services, the scope of which spans across our three business lines.
We were established over 25 years ago to focus on the provision of property management
services in China. In addition to property management services, we offer value-added services
to non-property owners (such as sales assistance, consultancy and other value-added services).
We also offer a variety of community value-added services, which are provided mainly to the
owners and residents of the properties we manage.
SUMMARY
–1–
Our contracted GFA reached 45.7 million sq.m. as of September 30, 2021, covering 47
cities in 22 provinces, autonomous regions and municipalities in China, 67.8% of which are in
first-tier and second-tier cities in China. As of the Latest Practicable Date, our property
management portfolio covered residential properties and a wide range of non-residential
properties, including commercial properties (such as office buildings and shopping malls) and
public and other properties (such as schools, government facilities and other public spaces).
Our total GFA under management as of September 30, 2021 was 23.2 million sq.m. across 35
cities in 20 provinces, autonomous regions and municipalities in China, encompassing 96
residential projects and 41 non-residential projects. As of September 30, 2021, our GFA under
management for residential properties and non-residential properties was approximately 19.7
million sq.m. and 3.5 million sq.m., representing 85.0% and 15.0% of our total GFA under
management, respectively. Our GFA under management refers to contracted GFA of properties
for which we have started to provide property management services pursuant to the relevant
property management service contracts, whereas our contracted GFA refers to GFA under
management and GFA to be managed by us under operating property management contracts,
including both delivered and undelivered GFA.
We experienced rapid growth during the Track Record Period. Our revenue increased
from RMB574.5 million in 2018 to RMB788.3 million in 2019 and further to RMB944.2
million in 2020, representing a CAGR of 28.2% from 2018 to 2020. Our revenue in the nine
months ended September 30, 2020 and 2021 was RMB665.3 million and RMB1,048.7 million,
respectively. Meanwhile, our profit for the year increased from RMB17.5 million in 2018 to
RMB22.6 million in 2019 and further to RMB77.1 million in 2020, representing a CAGR of
110.0% from 2018 to 2020. Our profit for the nine months ended September 30, 2020 and 2021
was RMB53.3 million and RMB109.4 million, respectively.
BUSINESS MODEL
Our business includes the following three business lines:
• Property management services. We provide a range of property management
services to property owners and residents, as well as property developers, including,
among others, security, cleaning, greening, gardening and repair and maintenance
services for the operation of common area facilities. Our property management
portfolio covers residential properties, in particular, high-end ones, and a wide range
of non-residential properties, including (i) commercial properties, such as office
buildings and shopping malls, and (ii) public and other properties, such as schools,
government facilities and other public spaces.
• Value-added services to non-property owners. We provide value-added services to
non-property owners, including (i) sales assistance services to property developers
to assist with their sales and marketing activities at property sales venues and
display units, and (ii) consultancy and other value-added services such as pre-
delivery and consultancy services, mainly to property developers.
SUMMARY
–2–
• Community value-added services. We provide community value-added services
mainly to property owners and residents of our managed properties to address their
daily lifestyle needs, which mainly consist of: (i) platform services for interior
decoration, (ii) community living services such as housekeeping, new retail and
catering services, (iii) community space operation services such as elevator
advertising services and car park space management services, and (iv) real estate
brokerage services.
Additionally, we provide city operation services in multiple forms to assist governments
and enterprises in the optimization, innovation and distribution of urban resources and the
delivery of value-added public services to citizens. The service scope of our city operation
services spans across our three business lines.
The following table sets out the breakdown of our revenue by business line for the periods
indicated:
For the year ended December 31,
For the nine months ended
September 30,
2018 2019 2020 2020 2021
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
Revenue
Property management
services 335,117 58.3 462,277 58.6 567,481 60.1 409,498 61.6 578,238 55.2
— Residential properties 164,568 28.6 201,501 25.6 276,914 29.3 199,400 30.0 335,210 32.0
— Non-residential properties 170,549 29.7 260,776 33.0 290,567 30.8 210,098 31.6 243,028 23.2
Value-added services to
non-property owners 178,613 31.1 250,838 31.8 294,401 31.2 198,982 29.9 371,624 35.4
Community value-added
services
(1)
60,773 10.6 75,208 9.6 82,328 8.7 56,842 8.5 98,823 9.4
Total revenue 574,503 100.0 788,323 100.0 944,210 100.0 665,322 100.0 1,048,685 100.0
Note:
(1) Includes gross rental income from investment properties operating leases.
Our overall revenue increased from RMB574.5 million in 2018 to RMB788.3 million in
2019, further to RMB944.2 million in 2020 and our revenue increased from RMB665.3 million
in the nine months ended September 30, 2020 to RMB1,048.7 million in the nine months ended
September 30, 2021, due to an increase in revenues generated from our three business lines as
we expanded our business scale.
SUMMARY
–3–
Our revenue from property management services increased throughout the Track Record
Period, mainly attributable to an increase in our GFA under management, which was 10.2
million sq.m., 12.7 million sq.m., 17.7 million sq.m. and 23.2 million sq.m. as of December 31,
2018, 2019 and 2020 and September 30, 2021. Our revenue from value-added services to
non-property owners increased from RMB178.6 million in 2018 to RMB250.8 million in 2019
and further to RMB294.4 million in 2020, primarily due to an increase in the number of sales
activities conducted by property developers to whom we provided services. Our revenue from
value-added services to non-property owners increased from RMB199.0 million in the nine
months ended September 30, 2020 to RMB371.6 million in the same period of 2021 primarily
due to increased revenue from preliminary planning and design services and post-delivery
services as we expanded our service offerings. Our revenue from community value-added
services increased from RMB60.8 million in 2018 to RMB75.2 million in 2019 and further to
RMB82.3 million in 2020 primarily due to increased revenue from community space operation
services and platform services for interior decoration as we managed more projects. Our
revenue from community value-added services increased from RMB56.8 million in the nine
months ended September 30, 2020 to RMB98.8 million in the same period in 2021 primarily
due to an increase in the number of communities under our management as a result of our
expansion of business scale.
The following table sets out the breakdown of our revenue by source of projects for the
periods indicated:
For the year ended December 31, Nine months ended September 30,
2018 2019 2020 2020 2021
Revenue Revenue Revenue Revenue Revenue
Amount % Amount % Amount % Amount % Amount %
(RMB in thousands, except percentages)
Property management
services 335,117 58.3 462,277 58.6 567,481 60.1 409,498 61.6 578,238 55.2
— Properties developed by
Jinmao Group and
Sinochem Group (and
their respective joint
ventures and associates) 308,277 53.6 431,282 54.7 524,854 55.6 380,716 57.3 534,714 51.0
— Properties developed by
Independent Third Parties 26,840 4.7 30,995 3.9 42,627 4.5 28,782 4.3 43,524 4.2
Value-added services to
non-property owners 178,613 31.1 250,838 31.8 294,401 31.2 198,982 29.9 371,624 35.4
— Properties developed by
Jinmao Group and
Sinochem Group (and
their respective joint
ventures and associates) 176,539 30.7 247,956 31.4 284,019 30.1 192,601 28.9 360,499 34.4
— Properties developed by
Independent Third Parties 2,074 0.4 2,882 0.4 10,382 1.1 6,381 1.0 11,125 1.0
Community value-added
services 60,773 10.6 75,208 9.6 82,328 8.7 56,842 8.5 98,823 9.4
— Properties developed by
Jinmao Group and
Sinochem Group (and
their respective joint
ventures and associates) 59,921 10.5 74,547 9.5 81,604 8.6 56,702 8.5 97,347 9.3
— Properties developed by
Independent Third Parties 852 0.1 661 0.1 724 0.1 140 0.0 1,476 0.1
Total 574,503 100.0 788,323 100.0 944,210 100.0 665,322 100.0 1,048,685 100.0
SUMMARY
–4–
The following table sets out the breakdown of our revenue by type of properties for the
periods indicated:
For the year ended December 31, Nine months ended September 30,
2018 2019 2020 2020 2021
Revenue Revenue Revenue Revenue Revenue
Amount % Amount % Amount % Amount % Amount %
(RMB in thousands, except percentages)
Property management
services 335,117 58.3 462,277 58.6 567,481 60.1 409,498 61.6 578,238 55.2
— Residential properties 164,568 28.6 201,501 25.6 276,914 29.3 199,400 30.0 335,210 32.0
— Non-residential properties 170,549 29.7 260,776 33.0 290,567 30.8 210,098 31.6 243,028 23.2
Value-added services to
non-property owners 178,613 31.1 250,838 31.8 294,401 31.2 198,982 29.9 371,624 35.4
— Residential properties 167,972 29.2 236,522 30.0 280,418 29.7 187,567 28.2 352,463 33.6
— Non-residential properties 10,641 1.9 14,316 1.8 13,983 1.5 11,415 1.7 19,161 1.8
Community value-added
services 60,773 10.6 75,208 9.6 82,328 8.7 56,842 8.5 98,823 9.4
— Residential properties 28,813 5.0 31,861 4.0 40,342 4.3 30,957 4.7 62,785 6.0
— Non-residential properties 31,960 5.6 43,347 5.6 41,986 4.4 25,885 3.8 36,038 3.4
Total 574,503 100.0 788,323 100.0 944,210 100.0 665,322 100.0 1,048,685 100.0
The following table sets out the breakdown of our revenue by types of ultimate paying
customers for the periods indicated:
For the year ended December 31, Nine months ended September 30,
2018 2019 2020 2020 2021
Revenue Revenue Revenue Revenue Revenue
Amount % Amount % Amount % Amount % Amount %
(RMB in thousands, except percentages)
Property management
services 335,117 58.3 462,277 58.6 567,481 60.1 409,498 61.6 578,238 55.2
— Jinmao Group and
Sinochem Group (and
their respective joint
ventures and associates) 95,020 16.5 90,509 11.5 102,611 10.9 78,009 11.7 105,609 10.1
— Independent Third Parties 240,097 41.8 371,768 47.1 464,870 49.2 331,489 49.9 472,629 45.1
Value-added services to
non-property owners 178,613 31.1 250,838 31.8 294,401 31.2 198,982 29.9 371,624 35.4
— Jinmao Group and
Sinochem Group (and
their respective joint
ventures and associates) 164,457 28.6 232,210 29.5 279,610 29.6 190,796 28.7 353,669 33.7
— Independent Third Parties 14,156 2.5 18,628 2.3 14,791 1.6 8,186 1.2 17,955 1.7
Community value-added
services 60,773 10.6 75,208 9.6 82,328 8.7 56,842 8.5 98,823 9.4
— Jinmao Group and
Sinochem Group (and
their respective joint
ventures and associates) 20,540 3.6 28,546 3.6 28,568 3.0 19,661 3.0 24,527 2.3
— Independent Third Parties 40,233 7.0 46,662 6.0 53,760 5.7 37,181 5.5 74,296 7.1
Total 574,503 100.0 788,323 100.0 944,210 100.0 665,322 100.0 1,048,685 100.0
SUMMARY
–5–
Our revenue generated from value-added services to non-property owners attributable to
property developers which are related parties increased in the nine months ended
September 30, 2021 compared to the same period of 2020 primarily due to an increase in
revenue generated from preliminary planning and design services and post-delivery services
provided to Jinmao Group and its joint ventures and associates.
The following table sets out the breakdown of our gross profit and gross profit margin by
business line for the periods indicated:
For the year ended December 31,
For the nine months ended
September 30,
2018 2019 2020 2020 2021
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
Property management
services 37,105 11.1 54,868 11.9 100,978 17.8 77,831 19.0 101,163 17.5
Value-added services to
non-property owners 48,373 27.1 68,558 27.3 101,170 34.4 64,231 32.3 171,157 46.1
Community value-added
services
(1)
29,556 48.6 28,097 37.4 32,641 39.6 21,739 38.2 38,575 39.0
Total/Overall 115,034 20.0 151,523 19.2 234,789 24.9 163,801 24.6 310,895 29.6
Note:
(1) Includes gross rental income from investment properties operating leases.
Our overall gross profit margin decreased to 19.2% in 2019 from 20.0% in 2018 primarily
due to decreased gross profit for community value-added services as a result of increased
investments in our smart management systems. Our overall gross profit margin increased to
24.9% in 2020 from 19.2% in 2019 primarily due to (i) the higher gross profit margin of our
property management business, as detailed below, and (ii) increased revenue from pre-delivery
services and community space operation services, which typically generate a higher gross
profit margin compared to other services we offered. Our overall gross profit margin increased
to 29.6% in the nine months ended September 30, 2021 from 24.6% in the same period in 2020
primarily due to the contribution from our new consultancy and other value-added service
offerings such as preliminary planning and design services and post-delivery services which
typically have higher profit margin.
For analysis of the trend in our gross profit margin of each business line during the Track
Record Period, see “Financial Information — Period to Period Comparison”.
SUMMARY
–6–
The following table sets out the breakdown of gross profit and gross profit margin by
source of projects for the periods indicated:
For the year ended December 31, Nine months ended September 30,
2018 2019 2020 2020 2021
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
Property management
services 37,105 11.1 54,868 11.9 100,978 17.8 77,831 19.0 101,163 17.5
— Properties developed
by Jinmao Group and
Sinochem Group (and
their respective joint
ventures and
associates) 38,548 12.5 54,557 12.6 97,375 18.6 75,386 19.8 97,410 18.2
— Properties developed
by Independent Third
Parties -1,443 -5.4 311 1.0 3,603 8.5 2,445 8.5 3,753 8.6
Value-added services to
non-property owners 48,373 27.1 68,558 27.3 101,170 34.4 64,231 32.3 171,157 46.1
— Properties developed
by Jinmao Group and
Sinochem Group (and
their respective joint
ventures and
associates) 47,149 26.7 67,115 27.1 97,266 34.2 61,852 32.1 169,429 47.0
— Properties developed
by Independent Third
Parties 1,224 59.0 1,443 50.1 3,904 37.6 2,379 37.3 1,728 15.5
Community value-added
services 29,556 48.6 28,097 37.4 32,641 39.6 21,739 38.2 38,575 39.0
— Properties developed
by Jinmao Group and
Sinochem Group (and
their respective joint
ventures and
associates) 29,650 49.5 28,043 37.6 32,551 39.9 21,661 38.2 38,177 39.2
— Properties developed
by Independent Third
Parties -94
(1)
-11.0 54 8.2 90 12.4 78 55.7 398 27.0
Total 115,034 20.0 151,523 19.2 234,789 24.9 163,801 24.6 310,895 29.6
Note:
(1) This is attributable to our one-off and non-recurring cleaning services provided to a government facility and
not representative of our revenue model for community value-added services.
For analysis of the trend in our gross profit margin by source of projects during the Track
Record Period, see “Financial Information — Key Factors Affecting our Results of Operations
— Business Mix”.
SUMMARY
–7–
The following table sets out the breakdown of gross profit and gross profit margin by type
of properties for the periods indicated:
For the year ended December 31, Nine months ended September 30,
2018 2019 2020 2020 2021
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
Property management
services 37,105 11.1 54,868 11.9 100,978 17.8 77,831 19.0 101,163 17.5
— Residential properties 2,712 1.6 5,301 2.6 36,788 13.3 33,729 16.9 54,159 16.2
— Non-residential
properties 34,393 20.2 49,567 19.0 64,190 22.1 44,102 21.0 47,004 19.3
Value-added services to
non-property owners 48,373 27.1 68,558 27.3 101,170 34.4 64,231 32.3 171,157 46.1
— Residential properties 44,758 26.6 63,136 26.7 93,647 33.4 57,656 30.7 159,366 45.2
— Non-residential
properties 3,615 34.0 5,422 37.9 7,523 53.8 6,575 57.6 11,791 61.5
Community value-added
services 29,556 48.6 28,097 37.4 32,641 39.6 21,739 38.2 38,575 39.0
— Residential properties 12,031 41.8 3,581 11.2 14,524 36.0 12,155 39.3 24,819 39.5
— Non-residential
properties 17,525 54.8 24,516 56.6 18,117 43.2 9,584 37.0 13,756 38.2
Total 115,034 20.0 151,523 19.2 234,789 24.9 163,801 24.6 310,895 29.6
For analysis of the trend in our gross profit margin by type of properties during the Track
Record Period, see “Financial Information — Key Factors Affecting our Results of Operations
— Business Mix”.
We manage a diverse portfolio of properties covering residential properties, in particular,
high-end ones, and non-residential properties, including (i) commercial properties, such as
office buildings, skyscrapers and shopping malls, and (ii) public and other properties, such as
schools, government facilities and other public spaces. The following table sets out the
breakdowns of our revenue from property management services by property type:
For the year ended December 31,
For the nine months ended
September 30,
2018 2019 2020 2020 2021
Revenue Revenue Revenue Revenue Revenue
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
Residential properties 164,568 49.1 201,501 43.6 276,914 48.8 199,400 48.7 335,210 58.0
Non-residential properties 170,549 50.9 260,776 56.4 290,567 51.2 210,098 51.3 243,028 42.0
Total 335,117 100.0 462,277 100.0 567,481 100.0 409,498 100.0 578,238 100.0
SUMMARY
–8–
The following table sets out the breakdowns of our (i) GFA under management, and (ii)
number of properties under management by geographic region, as of the dates indicated:
As of December 31, As of September 30,
2018 2019 2020 2021
GFA under
management
Number of
properties
under
management
GFA under
management
Number of
properties
under
management
GFA under
management
Number of
properties
under
management
GFA under
management
Number of
properties
under
management
(’000
sq.m.) (%)
(’000
sq.m.) (%)
(’000
sq.m.) (%)
(’000
sq.m.) (%)
Eastern region
(1)
3,034.4 29.7 22 4,304.1 34.0 28 8,048.2 45.6 45 12,690.3 54.6 76
Northern region
(2)
2,649.8 25.9 16 2,640.8 20.9 20 3,109.4 17.6 25 3,362.0 14.5 27
Central region
(3)
2,013.5 19.7 7 2,581.1 20.4 9 2,834.1 16.0 12 3,130.3 13.5 13
Southern region
(4)
1,131.8 11.1 2 1,735.4 13.7 4 1,971.8 11.2 6 2,022.1 8.7 8
Southwestern
region
(5)
1,393.6 13.6 4 1,399.2 11.0 5 1,587.1 9.0 8 1,776.6 7.6 11
Northwestern
region
(6)
– – – – – – 100.9 0.6 1 259.5 1.1 2
Total 10,223.1 100.0 51 12,660.6 100.0 66 17,651.5 100.0 97 23,240.8 100.0 137
Notes:
(1) “Eastern region” refers to Shanghai, Zhejiang province, Jiangsu province, Jiangxi province, Shandong
province, Fujian province and Anhui province;
(2) “Northern region” refers to Beijing, Tianjin, Shanxi province, Hebei province and the central area of Inner
Mongolia (Hohhot, Baotou and Ulanqab);
(3) “Central region” refers to Hubei province, Hunan province and Henan province;
(4) “Southern region” refers to Guangxi Zhuang autonomous region, Guangdong province and Hainan province;
(5) “Southwestern region” refers to Chongqing, Sichuan province, Yunnan province, Guizhou province and Tibet;
(6) “Northwestern region” refers to Gansu province, Ningxia Hui autonomous region, Shaanxi province, Xinjiang
Uygur autonomous region and the western area of Inner Mongolia autonomous region (Alxa League, Bayannur,
Wuhai and Ordos).
During the Track Record Period, the properties under our management were principally
developed by Jinmao Group and Sinochem Group and their joint ventures and associates while
the rest were developed or owned by other independent-third-party property developers.
SUMMARY
–9–
The following table sets out the breakdown of our Group’s (i) contracted GFA, (ii)
undelivered GFA, and (iii) number of properties for contracted GFA by source of projects as
of the dates indicated:
As of December 31,
As of
September 30,
2018 2019 2020 2021
Contracted GFA (’000
sq.m.) 21,861.2 30,788.4 40,525.5 45,730.2
— Properties developed by
Jinmao Group and
Sinochem Group (and
their respective joint
ventures and associates) 20,823.2 29,950.5 37,835.9 41,379.0
— Properties developed by
Independent Third Parties 1,038.0 837.9 2,689.6 4,351.2
Undelivered GFA (’000
sq.m.) 11,638.1 18,127.8 22,874.0 22,489.4
— Properties developed by
Jinmao Group and
Sinochem Group (and
their respective joint
ventures and associates) 11,638.1 18,026.9 22,343.1 21,260.3
— Properties developed by
Independent Third Parties – 100.9 530.9 1,229.1
Number of properties for
contracted GFA 107 148 190 228
— Properties developed by
Jinmao Group and
Sinochem Group (and
their respective joint
ventures and associates) 99 137 164 188
— Properties developed by
Independent Third Parties 8 11 26 40
SUMMARY
–10–
The following table sets out the breakdowns of our Group’s (i) contracted GFA, (ii)
undelivered GFA, and (iii) number of properties for contracted GFA by type of properties as
of the dates indicated:
As of December 31,
As of
September 30,
2018 2019 2020 2021
Contracted GFA (’000
sq.m.) 21,861.2 30,788.4 40,525.5 45,730.2
— Residential properties 19,461.8 27,559.4 36,444.9 41,355.4
— Non-residential properties 2,399.4 3,229.0 4,080.6 4,374.8
Undelivered GFA (’000
sq.m.) 11,638.1 18,127.8 22,874.0 22,489.4
— Residential properties 11,591.8 17,129.5 21,989.1 21,592.1
— Non-residential properties 46.3 998.3 884.9 897.3
Number of properties for
contracted GFA 107 148 190 228
— Residential properties 85 118 152 182
— Non-residential properties 22 30 38 46
The following tables set out the breakdowns of our (i) revenue from property management
services by source of projects, and (ii) GFA under management, and number of properties under
management by source of projects for the periods or as of the dates indicated:
For the year ended December 31,
For the nine months ended
September 30,
2018 2019 2020 2020 2021
Revenue Revenue Revenue Revenue Revenue
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
Properties developed by
Jinmao Group and
Sinochem Group (and their
respective joint ventures
and associates)
(1)
308,277 92.0 431,282 93.3 524,854 92.5 380,716 93.0 534,714 92.5
Properties developed by
Independent Third
Parties
(2)
26,840 8.0 30,995 6.7 42,627 7.5 28,782 7.0 43,524 7.5
Total 335,117 100.0 462,277 100.0 567,481 100.0 409,498 100.0 578,238 100.0
SUMMARY
–11–
Notes:
(1) “Properties developed by Jinmao Group and Sinochem Group (and their respective joint ventures and
associates)” refers to properties solely developed by Jinmao Group or Sinochem Group or jointly developed
by Jinmao Group or Sinochem Group and other parties.
(2) “Properties developed by Independent Third Parties” refers to properties that were not developed by Jinmao
Group or Sinochem Group, either solely or jointly with other parties.
As of December 31, As of September 30,
2018 2019 2020 2021
GFA under
management
Number of
properties
under
management
GFA under
management
Number of
properties
under
management
GFA under
management
Number of
properties
under
management
GFA under
management
Number of
properties
under
management
(’000
sq.m.) (%)
(’000
sq.m.) (%)
(’000
sq.m.) (%)
(’000
sq.m.) (%)
Properties developed by
Jinmao Group and
Sinochem Group (and their
respective joint ventures
and associates)
(1)
9,185.1 89.8 43 11,923.7 94.2 56 15,492.8 87.8 76 20,118.7 86.6 105
Properties developed by
Independent Third Parties
(2)
1,038.0 10.2 8 736.9 5.8 10 2,158.7 12.2 21 3,122.1 13.4 32
Total 10,223.1 100.0 51 12,660.6 100.0 66 17,651.5 100.0 97 23,240.8 100.0 137
Notes:
(1) “Properties developed by Jinmao Group and Sinochem Group (and their respective joint ventures and
associates)” refers to properties solely developed by Jinmao Group or Sinochem Group or jointly developed
by Jinmao Group or Sinochem Group and other parties.
(2) “Properties developed by Independent Third Parties” refers to projects not developed by Jinmao Group or
Sinochem Group, either solely or jointly with other parties.
Based on information available to us, as of December 31, 2018, 2019 and 2020 and June
30, 2021, we managed approximately 91.0%, 93.0%, 89.0% and 89.0% of the total GFA of the
properties developed by Jinmao Group and its joint ventures and associates. To the best of our
knowledge, as the properties developed by Sinochem Group and its joint ventures and
associates are mainly for self-use purposes, Sinochem Group does not maintain GFA data for
such properties, and therefore our managed GFA as a percentage of the total GFA of the
properties developed by Sinochem Group and its joint ventures and associates is not available.
SUMMARY
–12–
The following table sets out the expiration schedule of our preliminary property
management service contracts for residential properties as of September 30, 2021:
Preliminary property management service
contracts for residential properties
Contracted GFA Number of contracts
(’000 sq.m.) (%) (%)
Property management service contracts
without fixed term
(1)
25,048.7 62.5 138 67.3
Property management service contracts
under which we provided services
beyond contract expiration
(2)
4,385.4 10.9 19 9.3
Property management service contracts
with fixed terms expiring in
— Year ending December 31, 2021 261.5 0.6 3 1.5
— Year ending December 31, 2022 679.0 1.7 4 1.9
— Year ending December 31, 2023
and beyond 9,730.3 24.3 41 20.0
Sub-total 10,670.8 26.6 48 23.4
Total 40,104.9 100.0 205 100.0
Notes:
(1) A property management service contract without fixed term primarily refers to a preliminary property
management service contract entered into with the property developer which does not have a fixed term
and can be terminated when the property owners’ association is formed and the property owners select
the property service provider with a replacement property management service contract entered into by
the property owners’ association.
(2) We continued to provide services under these property management service contracts despite their
expired contract terms as of September 30, 2021. This was mainly because the relevant property owners’
general meetings of such properties are yet to be convened or the property owners’ associations are yet
to be formed to renew our property management service contracts or to select a replacing property
management service provider, or that we are still in the negotiation process with the property owners’
associations for the renewal of our engagement.
SUMMARY
–13–
The following table sets out the expiration schedule of our property management service
contracts for residential properties entered into with property owners’ associations as of
September 30, 2021:
Property management service contracts for
residential properties entered into with
property owner ’s associations
Contracted GFA Number of contracts
(’000 sq.m.) (%) (%)
Property management service contracts
without fixed term ————
Property management service contracts
under which we provided services
beyond contract expiration 103.3 8.3 4 36.4
Property management service contracts
with fixed terms expiring in
— Year ending December 31, 2021 106.2 8.5 1 9.1
— Year ending December 31, 2022 182.0 14.5 1 9.1
— Year ending December 31, 2023
and beyond 858.9 68.7 5 45.4
Sub-total 1,147.1 91.7 7 63.6
Total 1,250.4 100.0 11 100.0
The following table sets out the expiration schedule of our property management service
contracts for non-residential properties as of September 30, 2021:
Property management service contracts
for non-residential properties
Contracted GFA Number of contracts
(’000 sq.m.) (%) (%)
Property management service contracts
without fixed term 1,172.3 26.8 10 19.6
Property management service contracts
under which we provided services
beyond contract expiration 189.0 4.3 3 5.9
Property management service contracts
with fixed terms expiring in
— Year ending December 31, 2021 1,255.0 28.7 10 19.6
— Year ending December 31, 2022 574.4 13.1 12 23.5
— Year ending December 31, 2023 and
beyond 1,184.1 27.1 16 31.4
Sub-total 3,013.5 68.9 38 74.5
Total 4,374.8 100.0 51 100.0
SUMMARY
–14–
During the Track Record Period, we terminated two property management service
contracts which did not match with our profitability criteria on a voluntary basis.
OUR CUSTOMERS AND SUPPLIERS
We have a large, growing and loyal customer base primarily consisting of (i) property
owners and residents for our property management and community value-added services, (ii)
property developers for our value-added services to non-property owners and property
management service, and (iii) other customers such as advertising companies for our
community value-added services. We typically do not grant a credit term to individual
customers for our property management services and other customers for our community
value-added services. We typically grant a credit term of 90 days to 180 days to property
developers.
China Jinmao is the Controlling Shareholder of our Company for the purpose of the
Listing Rules. Sinochem Group is an indirect controlling shareholder of China Jinmao and
consolidated the accounts of China Jinmao and its subsidiaries during the Track Record Period.
When calculating our five largest customers for the Track Record Period, we aggregated
revenue contribution from customers under common control and their subsidiaries, joint
ventures and associates. As a result, our single largest customer during the Track Record Period
was Sinochem Group and its subsidiaries, joint ventures and associates, which include China
Jinmao and its subsidiaries (excluding our Group), joint ventures and associates. For further
details, see “Connected Transactions” and Note 29 of the Accountants’ Report in Appendix I
to this prospectus. For the years ended December 31, 2018, 2019 and 2020 and the nine months
ended September 30, 2021, revenue from our single largest customer in each year/period for
the Track Record Period amounted to RMB280.0 million, RMB351.3 million, RMB410.8
million and RMB483.8 million, representing 48.7%, 44.6%, 43.5% and 46.1% of our total
revenue, respectively. For the same periods, revenue from our five largest customers in each
year/period for the Track Record Period, in aggregate amounted to RMB336.6 million,
RMB405.6 million, RMB461.8 million and RMB528.4 million, representing 58.5%, 51.5%,
48.8% and 50.4% of our total revenue, respectively.
Starting from 2020, we proactively reinforced our efforts to seek property management
engagements for projects developed by property developers that are Independent Third Parties,
in order to benefit more from economies of scale, gain additional revenue sources, diversify
our property management portfolio, and reduce reliance on our single largest customer,
Sinochem Group. As of September 30, 2021, our contracted GFA from properties developed by
Independent Third Parties was 4.4 million sq.m.
During the Track Record Period, most of our five largest suppliers were sub-contractors
providing cleaning, product purchasing and security services. For the years ended December
31, 2018, 2019 and 2020 and the nine months ended September 30, 2021, purchase from our
single largest supplier in each year/period for the Track Record Period amounted to RMB22.4
million, RMB52.9 million, RMB63.0 million and RMB125.1 million, representing 10.7%,
16.7%, 15.6% and 24.0% of our total purchase amount, respectively. For the years ended
December 31, 2018, 2019 and 2020 and the nine months ended September 30, 2021, purchase
SUMMARY
–15–
from our five largest suppliers in each year/period for the Track Record Period, amounted to
in aggregate RMB76.3 million, RMB121.8 million, RMB148.5 million and RMB193.9 million,
representing 36.4%, 38.4%, 36.9% and 37.1% of our total purchase amount, respectively.
COMPETITVE STRENGTHS
Our competitive strengths include the following:
• We are a leading and well-recognized comprehensive property management service
provider in China with a strong focus on core cities.
• Leveraging the support from our Controlling Shareholder, China Jinmao, we have
achieved a remarkable project pipeline and will continue to capitalize on highly
visible and sustainable growth opportunities.
• We are also a leader in the high-end property management services market and
provide premium property management services.
• As a pioneer in city operation service sector in China, we are well positioned to
rapidly scale up and further diversify our city operation property portfolio and
service offerings.
• Our advanced technology and digitalization have enabled us to deliver smart
property management.
• We have an experienced, visionary and pragmatic management team and a
comprehensive talent development system.
BUSINESS STRATEGIES
Our business strategies include the following:
• Further expand and diversify our portfolio under management through various
channels, achieving economies of scale.
• Continue to focus on select major cities with high growth potential, optimize our
premium services and further improve our brand recognition and influence.
• Further develop a wide variety of distinguished new value-added services to
diversify our sources of income and to increase our customer loyalty.
• Continue to enhance our technological capabilities, thereby increasing service
quality and operational efficiency.
• Continue to improve our talent training and incentive mechanisms to support
sustainable and rapid growth of our business.
SUMMARY
–16–
SUMMARY OF FINANCIAL INFORMATION
The following tables set out our summary of financial informations for the Track Record
Period and should be read together with our consolidated financial information, including the
accompanying notes thereto, as set out in the Accountants’ Report included in Appendix I to
this prospectus. Our historical results presented below are not necessarily indicative of the
results that may be expected for any future period.
Consolidated statements of profit or loss
For the year ended December 31,
For the nine months
ended September 30,
2018 2019 2020 2020 2021
(RMB’000) (RMB’000) (RMB’000) (RMB’000) (RMB’000)
Revenue 574,503 788,323 944,210 665,322 1,048,685
Cost of sales (459,469) (636,800) (709,421) (501,521) (737,790)
Gross profit 115,034 151,523 234,789 163,801 310,895
Other income and gains 11,746 74,712 74,908 58,630 41,048
Selling and distribution
expenses (2,301) (954) (1,808) (1,185) (10,213)
Administrative expenses (82,346) (117,150) (134,920) (95,633) (148,702)
Other expenses, net (5,606) (4,441) (1,258) (32) (6,256)
Finance costs (10,165) (70,280) (64,186) (51,021) (33,537)
Profit before tax 26,362 33,410 107,525 74,560 153,235
Income tax expense (8,875) (10,786) (30,401) (21,231) (43,884)
Profit for the year/period 17,487 22,624 77,124 53,329 109,351
Attributable to:
— Owners of the parent 17,487 22,624 77,124 53,329 108,702
— Non-controlling interests ––––649
17,487 22,624 77,124 53,329 109,351
SUMMARY
–17–
Consolidated statements of comprehensive income
Year ended December 31,
Nine months ended
September 30,
2018 2019 2020 2020 2021
(RMB’000) (RMB’000) (RMB’000) (RMB’000) (RMB’000)
PROFIT FOR THE
YEAR/PERIOD 17,487 22,624 77,124 53,329 109,351
OTHER COMPREHENSIVE
LOSS
Other comprehensive loss that
will not be reclassified to
profit or loss in subsequent
periods:
Exchange differences on
translation of financial
statements of the Company ––––(2)
OTHER COMPREHENSIVE
LOSS FOR THE
YEAR/PERIOD, NET OF TAX ––––(2)
TOTAL COMPREHENSIVE
INCOME FOR THE
YEAR/PERIOD 17,487 22,624 77,124 53,329 109,349
Attributable to:
Owners of the parent 17,487 22,624 77,124 53,329 108,700
Non-controlling interests ––––649
17,487 22,624 77,124 53,329 109,349
Our net profit increased from RMB53.3 million in the nine months ended September 30,
2020 to RMB109.4 million in the nine months ended September 30, 2021. The increase was
primarily attributable to increased revenue from our all three business lines as we expanded our
business scale and service offerings.
Our net profit increased from RMB22.6 million in 2019 to RMB77.1 million in 2020. The
significant increase was primarily attributable to (i) increased revenue from our property
management services and (ii) enhanced economies of scale and effective cost-control
measures.
SUMMARY
–18–
Our net profit increased from RMB17.5 million in 2018 to RMB22.6 million in 2019. The
increase was primarily attributable to increased revenue from our property management
services and value-added services to non-property owners.
For details, see “Financial Information — Period to Period Comparison”.
Non-HKFRS Measures
To supplement our consolidated financial statements which are presented in accordance
with HKFRS, we also presented adjusted profit and total comprehensive income, adjusted net
profit margin and adjusted gearing ratio as additional financial measures. See “Financial
Information — Non-HKFRS Measures” for detailed definitions and methods of calculation.
These non-HKFRS measures eliminate the effect of borrowings and loans due from
related parties and borrowings related to the ABS arrangement, which are not related to our
ordinary course of business. We believe that these non-HKFRS measures facilitate comparison
of our financial performance and position by eliminating the impact of items, and therefore
provide more useful information to investors and others in understanding and evaluating our
consolidated results of operations and financial position in the same manner as our
management. Our presentation of these non-HKFRS measures may not be comparable to
similarly titled measures presented by other companies. The use of these measures has
limitations as an analytical tool, and you should not consider them in isolation from, or as a
substitute for analysis of, our results of operations or financial condition as reported under
HKFRS.
The following table reconciles our adjusted profit during the Track Record Period
presented to the most directly comparable financial measure calculated and presented in
accordance with HKFRS:
For the year ended December 31,
For the nine months
ended September 30,
2018 2019 2020 2020 2021
(RMB
’000)
(RMB
’000)
(RMB
’000)
(RMB
’000)
(RMB
’000)
Profit for the year/period 17,487 22,624 77,124 53,329 109,351
Less:
— Other income and
gains related to
borrowings and loans
due from related
parties 9,864 69,991 63,750 50,803 32,408
Add:
— Finance costs related
to borrowings and
loans due from the
third parties 9,864 69,991 63,750 50,803 32,841
Adjusted profit 17,487 22,624 77,124 53,329 109,784
SUMMARY
–19–
The following table reconciles our adjusted total equity as of the dates indicated to the
most directly comparable financial measure calculated and presented in accordance with
HKFRS:
As of December 31,
As of
September 30,
2018 2019 2020 2021
(RMB
’000)
(RMB
’000)
(RMB
’000)
(RMB
’000)
Total equity 79,655 107,831 49,134 145,494
Less:
— Other income and gains
and finance costs
related to interest-
bearing borrowing – – – (433)
Adjusted total equity 79,655 107,831 49,134 145,927
The following table reconciles our adjusted interest-bearing borrowings and lease
liabilities as of the dates indicated to the most directly comparable financial measure calculated
and presented in accordance with HKFRS:
As of December 31,
As of
September 30,
2018 2019 2020 2021
(RMB
’000)
(RMB
’000)
(RMB
’000)
(RMB
’000)
Sum of long-term and
short-term interest-
bearing borrowings and
lease liabilities 1,346,825 1,220,460 1,098,788 26,452
Less:
— Borrowings related to
the 2018 ABS 1,341,000 1,214,997 1,080,992 –
Adjusted interest-bearing
borrowings and lease
liabilities 5,825 5,463 17,796 26,452
Our adjusted gearing ratio is nil during the Track Record Period.
SUMMARY
–20–
The following table sets forth the impact of the 2018 ABS on our net profits and net profit
margins after excluding the other income and finance costs and our gearing ratios after
excluding interest-bearing borrowings in relation to the 2018 ABS from our financial results
during the Track Record Period as of the dates and for the periods indicated:
As of and for the years ended
December 31,
As of and for
the nine months
ended September 30,
2018 2019 2020 2020 2021
(RMB’000, except for the percentages)
Before adjusting for
the 2018 ABS:
Profit for the
year/period 17,487 22,624 77,124 53,329 109,351
Net profit margin
(1)
3.0% 2.9% 8.2% 8.0% 10.4%
Gearing ratio
(2)
1,683.5% 1,126.8% 2,200.1% N/A –
After adjusting for
the 2018 ABS:
Profit for the
year/period 17,487 22,624 77,124 53,329 109,784
Net profit margin
(1)
3.0% 2.9% 8.2% 8.0% 10.5%
Gearing ratio
(2)
–––N/A–
Notes:
(1) Net profit margin is calculated based on our profit for the year/period divided by our total revenue in
the same year/period, multiplied by 100%.
(2) Gearing ratio is calculated based on interest-bearing borrowings excluding lease liabilities divided by
total equity, multiplied by 100%.
For details, see “Financial Information — Indebtedness — Borrowings — 2018 ABS” and
“Financial Information — Non-HKFRS Measures”.
SUMMARY
–21–
Summary of consolidated statements of financial position
As of December 31,
As of
September 30,
2018 2019 2020 2021
(RMB’000) (RMB’000) (RMB’000) (RMB’000)
NON-CURRENT ASSETS
Property, plant and equipment 10,916 17,889 33,615 38,245
Investment properties 14,510 11,640 10,590 9,459
Right-of-use assets 1,926 2,433 15,970 24,982
Intangible assets 192 6,155 7,084 6,108
Deferred tax assets 1,578 1,607 2,457 4,085
Other receivables and
other assets 1,215,623 1,086,022 941,593 3,374
Total non-current assets 1,244,745 1,125,746 1,011,309 86,253
CURRENT ASSETS
Inventories 6,400 5,493 5,199 5,044
Trade receivables 88,801 155,291 203,713 451,537
Prepayments, other receivables
and other assets 440,526 544,576 644,196 515,762
Restricted cash – – – 1,278
Cash and cash equivalents 160,030 155,113 270,818 274,169
Total current assets 695,757 860,473 1,123,926 1,247,790
CURRENT LIABILITIES
Trade payables 82,897 90,655 112,036 150,737
Other payables and accruals 317,279 401,709 520,641 621,713
Contract liabilities 98,148 146,917 206,391 258,992
Interest-bearing borrowings 126,000 134,000 144,000 –
Lease liabilities 1,547 2,063 5,572 10,713
Tax payable 13,119 16,661 22,735 5,326
Total current liabilities 638,990 792,005 1,011,375 1,047,481
NET CURRENT ASSETS 56,767 68,468 112,551 200,309
TOTAL ASSETS LESS
CURRENT LIABILITIES 1,301,512 1,194,214 1,123,860 286,562
SUMMARY
–22–
As of December 31,
As of
September 30,
2018 2019 2020 2021
(RMB’000) (RMB’000) (RMB’000) (RMB’000)
NON-CURRENT LIABILITIES
Other payables — — 123,657 123,657
Interest-bearing borrowings 1,215,000 1,080,997 936,992 —
Lease liabilities 4,278 3,400 12,224 15,739
Deferred tax liabilities 2,579 1,986 1,853 1,672
Total non-current liabilities 1,221,857 1,086,383 1,074,726 141,068
Net assets 79,655 107,831 49,134 145,494
Equity attributable to owners of
the parent
Share capital N/A N/A —* 66,947
Reserves 79,655 107,831 49,134 72,798
79,655 107,831 49,134 139,745
Non-controlling interests — — — 5,749
Total equity 79,655 107,831 49,134 145,494
Note:
* The amount is less than RMB1,000.
Our net assets increased from RMB79.7 million as of December 31, 2018 to RMB107.8
million as of December 31, 2019 primarily attributable to increased profits as a result of our
business growth. Our net assets decreased from RMB107.8 million as of December 31, 2019
to RMB49.1 million as of December 31, 2020 primarily attributable to the dividends declared
by certain subsidiaries to their then shareholders. Our net assets increased from RMB49.1
million as of December 31, 2020 to RMB145.5 million as of September 30, 2021 primarily
attributable to increased profits as a result of our business growth.
Our net current assets increased from RMB56.8 million as of December 31, 2018 to
RMB68.5 million as of December 31, 2019 primarily attributable to increased amounts due
from related parties generally in line with our business growth. Our net current assets increased
from RMB68.5 million as of December 31, 2019 to RMB112.6 million as of December 31,
2020, primarily attributable to increased cash and bank balances due to increased proceeds
SUMMARY
–23–
from our business operations. Our net current assets increased from RMB112.6 million as of
December 31, 2020 to RMB200.3 million as of September 30, 2021 primarily attributable to
increased amounts due from related parties generally in line with our business growth.
Summary of consolidated statements of cash flows
For the year ended December 31,
For the nine months
ended September 30,
2018 2019 2020 2020 2021
(RMB’000) (RMB’000) (RMB’000) (RMB’000) (RMB’000)
Operating cash flows before
movements in working
capital 37,676 47,070 124,801 85,533 174,235
Movement in working capital (53,288) (24,164) 35,442 (62,387) (74,680)
Cash generated from/(used in)
operations (15,612) 22,906 160,243 23,146 99,555
Interest received 1,243 864 1,313 958 2,085
Income tax paid (5,456) (7,866) (25,310) (18,621) (63,102)
Net cash flows (used in)/from
operating activities (19,825) 15,904 136,246 5,483 38,538
Net cash flows (used in)/from
investing activities (1,334,955) 176,878 170,550 100,618 1,097,222
Net cash flows from/(used in)
financing activities 1,326,180 (197,699) (191,091) (116,090) (1,132,409)
Net (decrease)/increase in cash
and cash equivalents (28,600) (4,917) 115,705 (9,989) 3,351
Cash and cash equivalents at
beginning of the year/period 188,630 160,030 155,113 155,113 270,818
Cash and cash equivalents at
end of the year/period 160,030 155,113 270,818 145,124 274,169
Our cash and cash equivalents increased from RMB155.1 million at the end of 2019 to
RMB270.8 million at the end of 2020 primarily due to increased net cash flows from operating
activities as a result of the increase in our net profit.
SUMMARY
–24–
We had net operating cash outflows of RMB19.8 million in 2018, primarily attributable
to our profit before tax of RMB26.4 million, as adjusted for non-cash and non-operating items,
which primarily include (i) finance costs of RMB10.2 million and (ii) loan interest income of
RMB9.9 million. The amount was further adjusted by changes in income tax paid of RMB5.5
million and working capital. The changes in working capital primarily included (i) an increase
in other payables and accruals by RMB53.8 million attributable to increased amounts due to
related parties, (ii) an increased in trade payables by RMB30.0 million due to the increased
purchases of materials from suppliers and the increased procurement of security and cleaning
services and (iii) an increased in contract liabilities by RMB21.7 million due to increased
advance payments made by customers for property management services in line with the
enlarged portfolio of properties under our management, partially offset by an increase in
prepayments, other receivables and other assets of RMB146.5 million generally in line with our
business growth. For details about our cash flows, see “Financial Information — Liquidity and
Capital Resources — Cash Flows”.
Key financial ratios
The following table sets out our key financial ratios as of the dates or for the periods
indicated:
As of/for the year ended
December 31,
As of/for the nine
months ended
September 30,
2018 2019 2020 2020 2021
Current ratio
(1)
1.1 1.1 1.1 N/A 1.2
Quick ratio
(2)
1.1 1.1 1.1 N/A 1.2
Return on equity
(3)
22.0% 21.0% 157.0% N/A 75.2%
Return on total assets
(4)
0.9% 1.1% 3.6% N/A 8.2%
Gross profit margin
(5)
20.0% 19.2% 24.9% 24.6% 29.6%
Net profit margin
(6)
3.0% 2.9% 8.2% 8.0% 10.4%
Notes:
(1) Current ratio is calculated by dividing total current assets by total current liabilities as of the date
indicated.
(2) Quick ratio is calculated by dividing total current assets less inventories by total current liabilities as
of the date indicated.
(3) Return on equity is calculated by dividing profit for the year/period by the closing balances of total
equity for the relevant year/period and multiplied by 100%.
(4) Return on total assets is calculated by dividing profit for the year/period by the closing balances of total
assets for the relevant year/period and multiplied by 100%.
(5) Gross profit margin is calculated by dividing gross profit by total revenue for the relevant year/period.
(6)
Net profit margin is calculated by dividing profit by total revenue for the relevant year/period.
SUMMARY
–25–
Our return on equity increased significantly from 21.0% in 2019 to 157.0% in 2020,
primarily due to a significant increase in our profit from 2019 to 2020 and a significant
decrease in total equity from 2019 to 2020 due to the distribution arising from the
Reorganization.
Our return on total assets increased from 1.1% in 2019 to 3.6% in 2020 mainly as a result
of an increase in our profit from 2019 to 2020.
Our gross profit margin increased from 19.2% in 2019 to 24.9% in 2020 primarily due to
(i) the higher gross profit margin of our property management business, and (ii) our increased
revenue from pre-delivery services and community space operation services. Such services
typically generate higher gross profit margin compared to other services we offer.
Our net profit margin increased from 2.9% in 2019 to 8.2% in 2020 primarily due to the
expansion of existing services that carry higher gross profit margins, such as pre-delivery
services and community space operation services and cost control measures through sub-
contracting to enhance the efficiency of our cost structures. Our net profit margin increased
from 8.0% in the nine months ended September 30, 2020 to 10.4% in the same period in 2021
primarily due to the contribution from our new consultancy and other value-added services
offerings such as preliminary planning and design services and post-delivery services, which
typically have higher profit margin.
OUR BUSINESS RELATIONSHIP WITH AND RELIANCE ON JINMAO GROUP AND
SINOCHEM GROUP
Immediately upon completion of the Bonus Issue, the Distribution and the Global
Offering (without taking into account the Distribution Adjustment and any Shares which may
be issued pursuant to the exercise of the Offer Size Adjustment Option or the Over-allotment
Option), China Jinmao will directly control approximately 67.5% of the issued share capital of
our Company. Hence, upon Listing, China Jinmao will continue to constitute our Controlling
Shareholder under the Listing Rules.
Upon completion of the Spin-off, the businesses of our Group and Jinmao Group will be
clearly delineated. Jinmao Group principally assumes the roles of owner, investor and/or
operator in respect of the properties developed or invested by Jinmao Group with the purpose
of maximizing Jinmao Group’s investment interests and brand value in such self-developed
properties; whereas our Group is principally an asset light service provider without holding any
ownership interest in its managed properties, with its property management services aimed at
keeping the properties under management safe, clean and functional and its other value-added
services aimed at facilitating the sales and marketing activities of property developers and
addressing the lifestyle needs of existing residents. While our Group and Jinmao Group operate
in the same market segments of residential and commercial properties and are both operating
on a national scale, the nature of their operations complements and does not compete with each
other. Whilst there exist limited overlapping or similar businesses, we believe that these will
not materially affect the business delineation between our Group and Jinmao Group.
SUMMARY
–26–
China Jinmao is indirectly owned as to approximately 35.3% by Sinochem Group, a
large-scale conglomerate under the supervision of the SASAC. The business of Sinochem
Group covers a range of sectors including energy, chemicals, agriculture, real estate and
finance. Jinmao Group is the platform enterprise of Sinochem Group in the development of real
estate business. We have provided principally property management services for properties
developed Jinmao Group and its joint ventures and associates. During the Track Record Period,
we also provided property management services for one project developed by a subsidiary of
Sinochem Group (not being a member of Jinmao Group and its joint ventures and associates).
For the years ended December 31, 2018, 2019 and 2020 and the nine months ended
September 30, 2021, revenue generated from our property management services attributable to
projects developed by Jinmao Group and Sinochem Group and their joint ventures and
associates accounted for approximately 92.0%, 93.3%, 92.5% and 92.5% of our total revenue
from property management service segment, respectively. As of December 31, 2018, 2019 and
2020 and September 30, 2021, our GFA under management from projects developed by Jinmao
Group and Sinochem Group and their joint ventures and associates amounted to approximately
9.2 million sq.m., 11.9 million sq.m., 15.5 million sq.m. and 20.1 million sq.m., respectively,
representing approximately 89.8%, 94.2%, 87.8% and 86.6% of our total GFA under
management, respectively.
While we expect our cooperation with and reliance on Jinmao Group and Sinochem
Group and their joint ventures and associates to continue in the future, we began to allocate
more resources to speed up the business development with independent third-party property
developers in 2020. As a result, the total GFA under our management for projects developed
by independent third-party property developers increased substantially from approximately 0.7
million sq.m. as of December 31, 2019 to approximately 2.2 million sq.m. as of December 31,
2020, and our revenue from property management services attributable to projects developed
by independent third-party property developers also increased from approximately RMB31.0
million for the year ended December 31, 2019 to approximately RMB42.6 million for the year
ended December 31, 2020. As of September 30, 2021, we managed a total of 32 projects
developed by independent third-party property developers with an aggregate GFA under
management of approximately 3.1 million sq.m., representing approximately 13.4% of our total
GFA under management as of the same date. We have also made remarkable achievements in
our extension of value-added services to Independent Third Parties. We have successfully
acquired seven engagements in 2020 with a total contract amount of approximately RMB20.6
million and secured 11 engagements during the nine months ended September 30, 2021 with
a total contract amount of approximately RMB23.3 million for the provision of value-added
services to non-property owners who are Independent Third Parties. Our Directors are of the
view that our Group has adopted and will adopt realistic and effective measures to expand our
services to Independent Third Parties going forward.
SUMMARY
–27–
Our Group has entered into certain transactions with China Jinmao (for itself and on
behalf of its associates) and its ultimate controlling shareholder, Sinochem Holdings (for itself
and on behalf of its associates) in the ordinary and usual course of our business which will
constitute continuing connected transactions of our Company under the Listing Rules upon the
Listing. We have applied for, and the Stock Exchange has granted us, a waiver from strict
compliance with certain requirements under Chapter 14A of the Listing Rules.
Nature of Transaction Waiver sought
Proposed Annual Cap for the
Year Ending December 31,
2022 2023
(RMB’000) (RMB’000)
Continuing connected transactions with China Jinmao and its associates
Trademark Licensing N/A Nil Nil
Cost Sharing Services N/A Nil Nil
Property Management Services Waiver from announcement,
circular and independent
shareholders’ approval
requirements
140,000 182,000
Sales Assistance Services Waiver from announcement,
circular and independent
shareholders’ approval
requirements
330,000 390,000
Property Agency Services Waiver from announcement,
circular and independent
shareholders’ approval
requirements
160,000 220,000
Consultancy and Other Value-
added Services
Waiver from announcement,
circular and independent
shareholders’ approval
requirements
536,000 615,000
Continuing connected transactions with Sinochem Holdings and its associates
Property Management Services
and Value-added Services
Waiver from announcement,
circular and independent
shareholders’ approval
requirements
64,000 83,000
For further details, please refer to the sections headed “Relationship with China Jinmao”
and “Connected Transactions” in this prospectus.
SUMMARY
–28–
USE OF PROCEEDS
We estimate the net proceeds of the Global Offering which we will receive, assuming an
Offer Price of HK$7.83 per Offer Share (being the mid-point of the Offer Price range stated
in this prospectus), will be approximately HK$728.9 million, after deduction of underwriting
commissions and estimated expenses payable by us in connection with the Global Offering and
assuming the Offer Size Adjustment Option and the Over-allotment Option are not exercised.
We currently intend to use the net proceeds of the Global Offering for the following purposes
and in the amounts set forth below:
• approximately 55%, or HK$400.9 million, will be used to pursue selective strategic
investment and acquisition opportunities with companies engaged in property
management, city operation services and/or community operations and to expand
our business scale and solidify our leading industry position, among which,
approximately 50%, or HK$364.4 million, will be used to acquire, invest in or
cooperate with other property management companies and professional service
providers in the upstream and downstream of city operation services which are
suitable for and complementary to our business operations and strategies, and
approximately 5%, or HK$36.4 million, will be used to acquire or invest in
companies which provide community products and services complementary to those
of ours. As of the Latest Practicable Date, we had not identified or committed to any
acquisition targets for our use of net proceeds from the Global Offering;
• approximately 22%, or HK$160.4 million, will be used to upgrade our systems for
smart management services and for the development of our smart communities and
smart city solutions, aiming to offer a higher-quality living experience with more
convenience for our property owners and residents and further enhance cost-
efficiency for our property management and city operation services, among which,
approximately 10%, or HK$72.9 million, will be used to purchase and upgrade
hardware for the deployment of smart devices and Internet of Things facilities,
approximately 10%, or HK$72.9 million, will be used to develop smart city
solutions, and approximately 2%, or HK$14.6 million, will be used for the upgrade
and maintenance of our digitalized management and service platforms, in particular,
our “Jinxiaomao” ( ) system and “Home” ( ) mobile application;
• approximately 13%, or HK$94.8 million, will be used to further develop our
community value-added services in an effort to diversify our service offering and
enhance profitability, among which, approximately 7%, or HK$51.0 million, will be
used to develop our existing community living services, approximately 3%, or
HK$21.9 million, will be used to develop our existing platform services for interior
decoration, real estate brokerage services and community space operation services,
and approximately 3%, or HK$21.9 million, will be used to expand our business
outreach to the provision of new community value-added services; and
• approximately 10%, or HK$72.9 million, will be used for working capital and
general corporate purpose.
SUMMARY
–29–
Many of our peers listed on the Stock Exchange are looking for potential target property
management companies in the PRC, and therefore we may face fierce competition in exploring
suitable acquisition targets and materializing our acquisition plan in the PRC. See “Risk
Factors — Risks relating to Our Business and Industry — Our mergers and acquisitions may
not achieve the desired benefits. We may face difficulties in integrating acquired operations
with our existing business” for details.
For more information, see “Future Plans and Use of Proceeds”.
THE SPIN-OFF AND DISTRIBUTION
Our Listing will constitute a spin-off from China Jinmao. China Jinmao submitted a
spin-off proposal to the Stock Exchange pursuant to Practice Note 15 of the Listing Rules in
relation to the Spin-off, and the Stock Exchange had confirmed that China Jinmao may proceed
with the Spin-off. The reduction of China Jinmao’s shareholding interest in our Company
following completion of the Spin-off does not constitute a notifiable transaction of China
Jinmao under the Listing Rules.
The board of directors of China Jinmao considers that the Spin-off is in the interests of
China Jinmao and the shareholders of China Jinmao taken as a whole based on the following
reasons: (i) allowing China Jinmao and its shareholders an opportunity to realize the value of
investment in our Group under a separate standalone platform for the business of our Group;
(ii) enabling our Group to build our identity as a separately listed group, to have a more defined
business focus and efficient resources allocation, to have a separate fund-raising platform and
to broaden our investor base through the Global Offering; (iii) enabling us to enhance our
corporate profile with more streamlined business, thereby increasing our ability to attract
strategic investors for potentially forming strategic partnerships directly with us, which could
provide synergies for our Group; (iv) increasing the brand awareness of “Jinmao”; (v) enabling
a more focused development, strategic planning and better allocation of resources for Jinmao
Group and our Group with respect to our respective businesses; and (vi) as our Company is
expected to remain as a subsidiary of China Jinmao upon completion of the Spin-off and the
Global Offering, it enables China Jinmao to continue to benefit from any potential upside in
the business of our Group through consolidation of our Group’s accounts and receipt of
dividend income from our Group.
As part of the Spin-off, on February 18, 2022, the board of directors of China Jinmao
declared the Distribution to the Qualifying Jinmao Shareholders, being registered holders of
Jinmao Shares whose names appear on the register of members of China Jinmao on the Record
Date. The Distribution will be implemented through a distribution in specie to be satisfied by
way of our Company allotting and issuing an aggregate of 191,680,031 Shares to the
Qualifying Jinmao Shareholders in proportion to their shareholdings in China Jinmao on the
Record Date (subject to the Distribution Adjustment), representing approximately 21.3% of the
issued share capital of our Company immediately following the completion of the Spin-off and
the Global Offering (without taking into account the Distribution Adjustment and assuming the
Offer Size Adjustment Option and the Over-allotment Option are not exercised). Pursuant to
the Distribution, the Qualifying Jinmao Shareholders will be entitled to one Share for every
66.20 Jinmao Shares held on the Record Date (subject to the Distribution Adjustment).
SUMMARY
–30–
The Distribution is conditional on the Global Offering becoming unconditional in all
respects. If such condition is not satisfied, the Distribution will not be made and the Spin-off
will not take place.
For more information, see “The Spin-off and Distribution” in this prospectus.
GLOBAL OFFERING
This prospectus is published in connection with the Hong Kong Public Offering as part
of the Global Offering. The Global Offering comprises: (i) the Hong Kong Public Offering of
10,142,000 Shares (subject to reallocation and the Offer Size Adjustment Option) for
subscription by the public in Hong Kong as described in “Structure of the Global Offering —
The Hong Kong Public Offering” in this prospectus; and (ii) the International Offering of
91,269,500 Shares (subject to reallocation, the Offer Size Adjustment Option and the
Over-allotment Option) outside the United States in offshore transactions in reliance on
Regulation S.
The Offer Shares will represent approximately 11.3% of the issued share capital of our
Company immediately following the completion of the Bonus Issue and the Global Offering,
assuming the Offer Size Adjustment Option and the Over-allotment Option are not exercised.
If the Offer Size Adjustment Option and the Over-allotment Option are exercised in full, the
Offer Shares will represent approximately 14.4% of the issued share capital of our Company
immediately following completion of the Bonus Issue and the Global Offering.
OFFERING STATISTICS
All statistics in the following table are based on the assumptions that (i) the Global
Offering has been completed and 101,411,500 Offer Shares are issued pursuant to the Global
Offering, and (ii) 901,411,500 Shares are in issue immediately following the completion of the
Bonus Issue and the Global Offering.
Based on an Offer
Price of HK$7.52
per Share
Based on an Offer
Price of HK$8.14
per Share
Market capitalization of our
Shares
(1)
HK$6,778.6 million HK$7,337.5 million
Unaudited pro forma adjusted net
tangible assets attributable to
owners of the parent per Share
HK$0.97
(RMB0.79)
HK$1.04
(RMB0.85)
Notes:
(1) The calculation of market capitalization is based on 901,411,500 Shares expected to be in issue
immediately upon completion of the Bonus Issue and the Global Offering assuming the Offer Size
Adjustment Option and the Over-allotment Option are not exercised.
SUMMARY
–31–
RECENT DEVELOPMENT AND MATERIAL ADVERSE CHANGE
As of December 31, 2021, we had an aggregate contracted GFA of 57.6 million sq.m.
covering a total of 266 properties, out of which 200 properties with a contracted GFA of 43.9
million sq.m. were developed by Jinmao Group or Sinochem Group or their respective joint
ventures and associates, and 66 were other sources of projects with a contracted GFA of 13.7
million sq.m., respectively.
As of December 31, 2021, we managed 175 properties with an aggregate GFA under
management of 36.4 million sq.m. covering 38 cities in 20 provinces, municipalities and
autonomous regions in China, out of which residential properties and non-residential properties
accounted for 64.4% and 35.6% of our total GFA under management, respectively.
For the three months ended December 31, 2021, we confirmed successful tenders for 14
property management service engagements for properties covering an aggregate GFA of 2.1
million sq.m.
Recently we have entered into cooperation agreements with Zhejiang Hualong Industrial
Group Co., Ltd. ( ), a wholly-owned subsidiary of Sinochem
Lantian, Jinmao Investment Consulting (Shenzhen) Co., Ltd. ( ( ) )
Beijing Zhongguancun Science City Construction Holding Co., Ltd. (
) and Nanjing Dongbubaoju Investment and Development Co., Ltd. (
) to provide property management and city operation services in connection
with 19 projects with a total contacted GFA expected to be approximately 2.3 million sq.m..
These projects represent a diverse property profile comprising residential properties,
commercial properties, high-end office buildings and industrial parks.
As a large scale state-owned enterprise, Jinmao Group continues to achieve growth and
maintain sound financial ratios in 2021. In December 2021 alone, due to the tightened
regulation on real estate market and the macroeconomic environment, Jinmao Group recorded
a contracted sales amount of RMB21,985 million, representing a year-over-over decrease of
28.6%. However, Jinmao Group recorded an accumulative contracted sales amount of
RMB235,603 million in the twelve months ended December 31, 2021, representing a
year-over-year growth of 2%. As of December 31, 2021, Jinmao Group recorded a subscribed
(but not contracted) property sales amount of RMB6,501 million. As of July 31, 2021, Jinmao
Group held land reserves of 85.5 million sq.m., according to China Index Academy. Based on
the information currently available and to the best of our Directors’ knowledge after due and
careful inquiry, our Directors are of the view that, as of the Latest Practicable Date, there had
been no material adverse impact on the property management projects to be delivered by
Jinmao Group to our Group.
SUMMARY
–32–
Our Directors have confirmed that, since September 30, 2021 and up to the date of this
prospectus, there has been no material adverse change in our financial or trading position or
prospects and no event has occurred that would materially and adversely affect the information
shown in our consolidated financial statements set out in the Accountants’ Report included in
Appendix I to this prospectus.
RECENT REGULATORY DEVELOPMENT
The PRC government promulgated a series of regulatory notices to regulate the real estate
market as well as property management industry, aiming to promote the stable and healthy
development of the real estate market and the property management industry.
These regulatory notices include the Notice on Strengthening and Improving Residential
Property Management ( ) (Jian Fang Gui [2020]
No. 10) (the “Notice 10”) and the Notice on Continued Regulation and Standardization of the
Real Estate Market Order ( ) (Jian Fang [2021]
No. 55) (the “Notice 55”) issued by the Ministry of Housing and Urban-Rural Development
(“MOHURD”) and other competent departments. The Notice 10 provides guidance and aims
to enhance the quality of property management services, and therefore is expected to have a
positive impact on the development of property management service industry, according to the
China Index Academy. The Notice 55 requires the implementation of policies to highlight the
key rectification points and focus on the rectification of real estate development, housing sales,
housing leasing and property services. As advised by China Index Academy, the Notice 55
primarily refines or reiterates certain general requirements, but does not impose new
compliance requirements, on the property development and property management service
industries, and therefore is not expected to have negative impact on the property management
companies that offer high quality services, constantly operate in compliance with laws and
regulations and have relevant internal control policies in place to ensure the compliance.
In August 2020, the MOHURD and the PBOC proposed restrictive rules that limit the
growth of real estate companies’ interest-bearing debt and financing activities in a symposium
jointly held by the agencies. The rules lay out three red line standards on debt-to-asset ratio,
net gearing ratio and cash to short-term debt ratio applicable to property developers (the
“Three Red Line”). For details, see “Industry Overview — Industry Growth Drivers —
Proposed Regulations on “Three Red Line” Standards”. The Three Red Line standards require
that (i) the debt-to-asset ratio (excluding receipts in advance) shall not exceed 70%, (ii) the net
gearing ratio shall not exceed 100%, and (iii) the cash to short-term debt ratio shall not be
lower than 1.0. Based on the interim results of China Jinmao for the six months ended June 30,
2021, as of June 30, 2021, China Jinmao’s debt-to-asset ratio (excluding receipts in advance),
net gearing ratio and cash to short-term debt ratio were 69%, 52% and 1.26, respectively, each
having met the relevant standard set by the “Three Red Line” regulations. Based on the
foregoing, and after due inquiry with China Jinmao, we believe that the “Three Red Line”
regulations do not have a material adverse impact on China Jinmao’s usual course of business
and planned operations.
SUMMARY
–33–
On December 28, 2020, PBOC and China Banking and Insurance Regulatory Commission
(the “CBIRC”) jointly promulgated the Notice on Establishment of a Concentration
Management System for Real Estate Loans of Financial Institutions in the Banking Industry
( ) (the “Joint Notice”),
imposing a limitation on the proportion of balance of real estate loans and personal housing
loans to the total loan balance of the financial institutions. According to China Index Academy,
the Joint Notice mainly affects residential properties, and in the short term, in light of the Joint
Notice, some banks and financial institutions may be reluctant to provide financing to personal
housing mortgages, which in turn affects purchasing power of personal housing buyers,
residential property sales and the growth of real estate sector. However, according to China
Index Academy, in the long run, the overall impact of the Joint Notice on the real estate
industry is expected to be neutral and therefore unlikely to have material adverse impact on the
property management industry.
On October 23, 2021, the Standing Committee of NPC passed a resolution to authorize
the State Council to carry out pilot projects for real estate tax reform in certain regions (the
“Real Estate Tax Reform Policy”), according to which, real estate tax is proposed to be
imposed on land users and property owners of various types of properties in the pilot regions,
such as residential or non-residential properties, except for rural homestead and buildings (the
“Real Estate Tax Reform ”). According to China Index Academy, the Real Estate Tax Reform
Policy may affect the availability of newly constructed projects for the property management
market; however, the Real Estate Tax Reform Policy is not expected to have a material adverse
impact on projects under management or change the landscape for property demand and supply
in the long run.
Our Directors are of the view that the aforesaid recent regulatory developments are not
expected to have material adverse impact on our operation and financial performance, and
nothing has come to the attention of the Joint Sponsors that would cause the Joint Sponsors to
disagree with the Directors’ view above. For further details of the aforementioned recent
regulatory developments and the impacts on our business and financial performance, see
“Regulations”, “Risk Factors — Risks Relating to Our Business and Industry — We are subject
to the regulatory environment and measures affecting the PRC property management and real
estate industries” and “Business — Recent Regulatory Development”.
On November 14, 2021, the Cyberspace Administration of China (the “CAC”) published
the Administration of Cyber Data Security (Draft for Comments) ( (
) ) (the “Draft Regulations”). According to the Article 2 of the Draft Regulations,
it applies to the activities relating to the use of networks to carry out data processing activities
within the territory of the PRC. As advised by our PRC Legal Advisors, we are of the view that
once the Draft Regulations becomes effective in the current form, it will be applicable to our
certain PRC domestic entity and the relevant requirements shall be complied.
SUMMARY
–34–
On January 4, 2022, the CAC and other twelve PRC regulatory authorities jointly revised
and promulgated the Measures for Cybersecurity Review ( ) (the
“Measures”), which came into effect on February 15, 2022. The Measures for Cybersecurity
Review ( ) which took effect on June 1, 2020 was abolished at the same
time. According to the Measures, if a Critical Information Infrastructure Operator (the “CIIO”)
anticipates that its procurement of network products and services affect or may affect national
security after the network products and services being put into use, it shall apply for
cybersecurity review to the Cybersecurity Review Office. The Measures also requires that
network platform operators possessing personal information of more than 1 million users that
seek for listing in a foreign country are obliged to apply for a cybersecurity review by the
Cybersecurity Review Office. According to the Critical Information Infrastructure Security
Protection Regulations ( ) promulgated by the State
Counsel on July 30, 2021 and taking effect on September 1, 2021, protection work departments
are responsible for organizing the identification of CII within their industries and sectors and
notifying operators about the identification results. As of the date of this Prospectus, we have
not received any notification from relevant regulatory authorities regarding our identification
as a CIIO. Therefore, the obligation for CIIO to proactively apply for cybersecurity review
shall not be applicable to us as of the date of this Prospectus. As advised by our PRC legal
advisors, given the fact that, the number of users that we process personal information as of
the Latest Practical Date was significantly less than “one million users” threshold, as well as
the differentiation made by Article 13 of the Draft Regulations by the CAC which clarifies that
“listing in a foreign country” does not include “listing in Hong Kong”, the obligations under
the Measures to proactively apply for cybersecurity review by a network platform operator
seeking listing in a foreign country shall not be applicable to the proposed listing in Hong
Kong. As advised by our PRC legal advisors, except the above voluntary filings, regulatory
authorities may initiate cybersecurity reviews if it is of the opinion that the network products
and services as well as data processing activities affect or may affect national security. Since
there remain uncertainties with respect to the interpretation and applicability of the criteria for
determining the risks that “affect or may affect national security” based on the risk factors set
out in Article 10 of the Measures, we cannot preclude the possibility that the risk factors may
apply to us as network platform operators, and we may need to conduct cybersecurity review.
For details, see “Business — Standardization and Smart Management — Online Service
Platform”.
PROFIT ESTIMATE FOR THE YEAR ENDED DECEMBER 31, 2021
On the basis set out in Appendix III to this prospectus, and in the absence of unforeseen
circumstances, we estimate that our unaudited consolidated profit attributable to the parent of
our Company for the year ended December 31, 2021 to be not less than RMB170.0 million
(equivalent to approximately HK$209.0 million). For details about the estimate of our
consolidated profit for the year ended December 31, 2021, see “Appendix III — Profit
Estimate.”
SUMMARY
–35–
IMPACT OF THE OUTBREAK OF COVID-19 ON OUR BUSINESS
Due to PRC governments’ measures to contain the spread of the virus such as restrictions
on mobility and travel and cancellation of public activities, our operations have, to a certain
extent, been impacted by delays in business activities and commercial transactions as well as
general uncertainties surrounding the duration of the governments’ extended business and
travel restrictions. Moreover, we took a series of measures in response to the outbreak to
protect our employees, including, among others, temporary closure of our offices, remote
working arrangements for our employees, and travel restrictions or suspension. In 2020 and the
nine months ended September 30, 2021, according to the management account, we incurred
additional expenses of RMB6.9 million and RMB1.5 million, respectively, for the disinfection
of managed properties and the purchase of personal protective equipment and sanitizing
materials. The recent emergence of the Omicron virus variant, a COVID-19 virus variant that
is significantly more infectious than its predecessors, has created more uncertainties for our
business operations under the COVID-19 pandemic. For details, see “Business — Impact of the
Outbreak of COVID-19 on our Business” and “Risk Factors — Our business operations and
financial performance have been and may continue to be affected by the outbreak of
COVID-19.”
RISK FACTORS
Our business is subject to certain risks involved in our operations, including but not
limited to risks relating to our business and industry, risks relating to conducting business in
the PRC and risks relating to the Spin-off and the Global Offering. We believe that the
following are some of the major risks that we face: (i) we may not be able to procure new
service contracts as planned or at desirable pace or favourable terms and a substantial portion
of the properties under our management during the Track Record Period were developed by
Jinmao Group; (ii) our future growth may not materialize as planned and failure to manage any
future growth effectively may have a material adverse effect on our business, financial position
and results of operations; (iii) termination or non-renewal of our property management service
contracts for a significant number of properties could have a material adverse effect on our
business, financial position and results of operations; (iv) our business, financial performance
and prospects may be materially and adversely affected if we are unable to control operating
costs, and maintain or improve our level of profitability; (v) we may not be able to fully collect
service fees from customers and as a result, may incur impairment losses on receivables or cash
outflow of operating activities; (vi) our business operations and financial performance have
been and may continue to be affected by the outbreak of COVID-19; (vii) We may face
difficulties in integrating acquired operations with our existing business and may need to make
an impairment with respect to goodwill and other intangible assets for such mergers and
acquisitions; and (viii) our historical results of operations may not be indicative of our future
performance due to our mergers and acquisitions.
SUMMARY
–36–
In addition, we are facing competition with industry peers, in particular those listed on the
Stock Exchange which are actively seeking quality acquisition or investment targets in the
market to achieve their expansion goals, and there is no assurance that we could identify
suitable targets that meet our selection criteria. Our future acquisitions are also subject to other
uncertainties and risks, including, without limitation, potential ongoing financial obligations
and unforeseen or hidden liabilities, failure to achieve the intended objectives, benefits or
revenue-enhancing opportunities, and diversion of resources and management’s attention. For
details, see “Risk Factors — Risks Relating to Our Business and Industry — Our mergers and
acquisitions may not achieve the desired benefits. We may face difficulties in integrating
acquired operations with our existing business”.
As different interpretations and standards may be applied for determining the materiality
of a risk, you should carefully consider all of the information set out in this prospectus,
including the risks and uncertainties described in the section headed “Risk Factors”.
DIVIDEND POLICY AND DISTRIBUTABLE RESERVES
No dividend was declared or paid by our Company during the Track Record Period and
up to the Latest Practicable Date. Certain subsidiaries now comprising our Group had provided
for or paid dividends of RMB123.7 million and RMB28.2 million to their then shareholders in
2020, respectively. Our dividend distribution record, if any, in the past may not be used as a
reference or basis to determine the level of dividends that may be declared or paid by us in the
future. Any declaration of dividends is subject to our results of operations, working capital and
cash position, future business and earnings, capital requirements, contractual restrictions, if
any, as well as any other factors which our Directors may consider relevant from time to time.
In addition, any declaration and payment as well as the amount of the dividends will be subject
to the provisions of our Articles of Association and the Hong Kong Companies Ordinance. Any
future declarations and payments of dividends will be at the discretion of our Directors and
may require the approval of our Shareholders. For details, see “Financial Information —
Dividends”. As of September 30, 2021, our Company had no distributable reserves. Certain
subsidiaries now comprising our Group had distributable reserves as of September 30, 2021.
For details, see “Financial Information — Distributable Reserves”.
LISTING EXPENSES
The total listing expenses for the Listing of the Shares are estimated to be approximately
HK$65.2 million (assuming an Offer Price of HK$7.83 per Share, being the mid-point of the
indicative Offer Price range), among which, approximately HK$23.6 million is directly
attributable to the issuance of Shares and will be charged to equity upon completion of the
Listing, and approximately HK$41.6 million will be charged to our consolidated statement of
comprehensive income. During the Track Record Period, we incurred listing expenses of
RMB12.5 million, which were charged to our consolidated statement of comprehensive
income. Our total listing expenses account for approximately 8.2% of our gross proceeds from
the Global Offering (assuming an Offer Price of HK$7.83 per Share, being the mid-point of the
indicative Offer Price range and not taking into account the Offer Size Adjustment Option and
SUMMARY
–37–
the Over-allotment Option). The aforementioned estimated listing expenses of approximately
HK$65.2 million include (i) professional fees paid and payable to the professional parties for
their services rendered in relation to the Listing and the Global Offering which are
non-underwriting related expenses, including sponsor fees, fees paid and payable to legal
advisers, reporting accountants, the internal control consultant and the independent industry
consultant of approximately HK$35.1 million, (ii) other non-underwriting related fees and
expenses of approximately HK$11.0 million, and (iii) the underwriting commission (including
SFC transaction levy, Stock Exchange trading fee and FRC transaction levy) of approximately
HK$19.1 million, payable to the Underwriters in connection with the offering of Offer Shares
under the Global Offering. The listing expenses above are the latest practicable estimates and
are provided for reference only and actual amounts may differ. Our Directors do not expect
such expenses to have a material adverse impact on our financial results for the year ending
December 31, 2021.
SUMMARY
–38–
In this prospectus, unless the context otherwise requires, the following expressions shall
have the following meanings.
“Application Form(s)” GREEN Applications Form(s) in connection with the
Hong Kong Public Offering
“Articles” or “Articles of
Association”
the articles of association of the Company adopted on
February 18, 2022, which will become effective upon the
Listing Date, as amended from time to time, a summary
of which is set out in Appendix IV to this prospectus
“associate(s)” has the meaning ascribed thereto under the Listing Rules
“Beijing-Tianjin-Hebei Region” a region of China covering the municipalities of Beijing
and Tianjin and the province of Hebei
“Beneficial Jinmao Shareholders” any beneficial owner of Jinmao Shares whose Jinmao
Shares are registered, as shown in the register of
members of China Jinmao, in the name of a registered
Jinmao Shareholder on the Record Date
“Board” or “Board of Directors” the board of Directors of our Company
“Bonus Issue” a total of 799,999,998 Shares for allotment and issuance
without payment and as fully-paid Shares by our
Company to China Jinmao prior to completion of the
Global Offering, of which 191,680,031 Shares (subject to
the Distribution Adjustment) shall be allotted and issued,
at the direction of China Jinmao, to the Qualifying
Jinmao Shareholders pursuant to the Distribution, details
of which are set out in “History, Reorganization and
Corporate Structure — Bonus Issue” in this prospectus
“Business Day” or “business
day”
a day on which banks in Hong Kong are generally open
for normal banking business to the public and which is
not a Saturday, Sunday or public holiday in Hong Kong
“CCASS” the Central Clearing and Settlement System established
and operated by HKSCC
“CCASS Clearing Participant” a person admitted to participate in CCASS as a direct
clearing participant or general clearing participant
DEFINITIONS
–39–
“CCASS Custodian Participant” a person admitted to participate in CCASS as a custodian
participant
“CCASS EIPO” the application for the Hong Kong Offer Shares to be
issued in the name of HKSCC Nominees and deposited
directly into CCASS to be credited to your or a
designated CCASS Participant’s stock account through
causing HKSCC Nominees to apply on your behalf,
including by (i) instructing your broker or custodian who
is a CCASS Clearing Participant or a CCASS Custodian
Participant to give electronic application instructions via
CCASS terminals to apply for the Hong Kong Offer
Shares on your behalf, or (ii) if you are an existing
CCASS Investor Participant, giving electronic
application instructions through the CCASS Internet
System (https://ip.ccass.com) or through the CCASS
Phone System (using the procedures in HKSCC’s “An
Operating Guide for Investor Participants” in effect from
time to time). HKSCC can also input electronic
application instructions for CCASS Investor Participants
through HKSCC’s Customer Service Center by
completing an input request
“CCASS Investor Participant” a person admitted to participate in CCASS as an investor
participant who may be an individual, joint individuals or
a corporation
“CCASS Participant” a CCASS Clearing Participant, a CCASS Custodian
Participant or a CCASS Investor Participant
“China” or “PRC” the People’s Republic of China, but for the purpose of
this prospectus and for geographical reference only and
except where the context requires, references in this
prospectus to “China” and the “PRC” do not include
Hong Kong, Macau and Taiwan
“China Clear” China Securities Depository and Clearing Corporation
Limited ( )
“China Index Academy” China Index Academy, our independent industry
consultant
DEFINITIONS
–40–
“China Jinmao” China Jinmao Holdings Group Limited (
) (formerly known as Franshion Properties
(China) Limited ( ( ) )) (stock code:
00817.HK), a company incorporated in Hong Kong on
June 2, 2004 with limited liability, the shares of which
are listed on the Main Board of the Stock Exchange, and
our Controlling Shareholder
“Chuangmao Technology” ( ) (Chuangmao Technology
(Beijing) Co., Ltd.), a limited liability company
established in the PRC on February 14, 2020 and an
indirect wholly-owned subsidiary of our Company
“close associate(s)” has the meaning ascribed thereto in the Listing Rules
“Companies Ordinance” or
“Hong Kong Companies
Ordinance”
the Companies Ordinance (Chapter 622 of the Laws of
Hong Kong), as amended or supplemented from time to
time
“Companies (Winding Up and
Miscellaneous Provisions)
Ordinance”
Companies (Winding Up and Miscellaneous Provisions)
Ordinance (Chapter 32 of the Laws of Hong Kong), as
amended and supplemented from time to time
“Company”, “our Company”,
“the Company”, “we” or “us”
Jinmao Property Services Co., Limited (
) (formerly known as Hanmao Limited
( ) and Jinmao Property Development Co.,
Limited ( )), a company
incorporated in Hong Kong with limited liability on
September 14, 2020
“connected person” has the meaning ascribed thereto in the Listing Rules
“connected transaction” has the meaning ascribed thereto in the Listings Rules
“Controlling Shareholder(s)” has the meaning ascribed thereto in the Listing Rules and,
unless the context otherwise requires, means China
Jinmao, Sinochem Hong Kong, Sinochem Corporation,
Sinochem Group and Sinochem Holdings
“core connected person” has the meaning ascribed thereto in the Listing Rules
“COVID-19” a viral respiratory disease caused by the severe acute
respiratory syndrome coronavirus 2, believed to have
first emerged in late 2019
DEFINITIONS
–41–
“CRIC Research” the research arm of CRIC ( ), a real estate
big data application service provider in China
“Director(s)” the director(s) of our Company
“Deed of Non-Competition” the deed of non-competition dated February 21, 2022
entered into by China Jinmao with and in favour of our
Company (for itself and as trustee for each of the
members of our Group), as further described under
“Relationship with China Jinmao — Deed of
Non-Competition” in this prospectus
“Distribution” the conditional special dividend declared by the board of
directors of China Jinmao on February 18, 2022 to be
satisfied by way of a distribution in specie of an
aggregate of 191,680,031 Shares to the Qualifying
Jinmao Shareholders, subject to the Distribution
Adjustment and the satisfaction of the conditions
described in the section headed “The Spin-off and
Distribution” in this prospectus
”Distribution Adjustment” the downward adjustment to the number of Shares to be
distributed under the Distribution as may be made by
China Jinmao in circumstances where the Offer Size
Adjustment Option is exercised, as further described
under the section headed “The Spin-off and Distribution”
in this prospectus
“EIT Law” the Enterprise Income Tax Law of the PRC (
), as amended, supplemented or
otherwise modified from time to time
“Excluded Jurisdiction(s)” those jurisdictions outside Hong Kong in respect of
which the board of directors of China Jinmao has
determined, after making relevant enquires and based on
legal advice received, that it is necessary or expedient not
to distribute Shares to the Jinmao Shareholders or the
Beneficial Jinmao Shareholders located or resident in
those jurisdictions pursuant to the Distribution, on
account of either the legal restrictions under the
applicable laws of such jurisdictions and/or the
requirements of the relevant regulatory bodies or stock
exchanges in those jurisdictions
DEFINITIONS
–42–
“Extreme Conditions” any extreme conditions or events, the occurrence of
which will cause interruption to the ordinary course of
business operations in Hong Kong and/or that may affect
the Listing Date
“FG Consulting” FG Consulting ( ), an independent
consulting company with a focus on customer
relationship research in the PRC real estate industry
“FRC” Financial Reporting Council
“Global Offering” the Hong Kong Public Offering and the International
Offering
“GREEN Application Form(s)” the application form(s) to be completed by the White
Form eIPO Service Provider, Computershare Hong
Kong Investor Services Limited
“Group”, “our Group”
or “the Group”
our Company and its subsidiaries or, where the context so
requires, in respect of the period before our Company
became the holding company of its present subsidiaries,
the businesses operated by such subsidiaries as if they
were subsidiaries of our Company at that time or their
predecessors, as the case may be
“Guangdong Tumao” (Guangdong Tumao
Commercial Property Operation Co., Ltd.), a limited
liability company established in the PRC on December 6,
2021 and an indirect non-wholly-owned subsidiary of our
Company
“HK$” or “Hong Kong dollars”
or “HK dollars” or “cents”
Hong Kong dollars and cents respectively, the lawful
currency of Hong Kong
“HKSCC” Hong Kong Securities Clearing Company Limited, a
wholly-owned subsidiary of Hong Kong Exchanges and
Clearing Limited
“HKSCC Nominees” HKSCC Nominees Limited, a wholly-owned subsidiary
of HKSCC
“Hong Kong” or “HK” the Hong Kong Special Administrative Region of
the PRC
DEFINITIONS
–43–
“Hong Kong Offer Shares” the 10,142,000 new Shares being initially offered by our
Company for subscription together with, where relevant,
any additional Shares which may be offered pursuant to
the exercise of the Offer Size Adjustment Option, at the
Offer Price pursuant to the Hong Kong Public Offering
(subject to reallocation) as further described in the
section headed “Structure of the Global Offering” in this
prospectus
“Hong Kong Public Offering” the offer by our Company of the Hong Kong Offer Shares
for subscription by the public in Hong Kong (subject to
reallocation) for cash at the Offer Price (plus brokerage
of 1%, SFC transaction levy of 0.0027%, Stock Exchange
trading fee of 0.005% and FRC transaction levy of
0.00015%), on the terms and subject to conditions set out
in this prospectus and the Application Forms
“Hong Kong Share Registrar” Computershare Hong Kong Investor Services Limited
“Hong Kong Stock Exchange”
or “Stock Exchange”
The Stock Exchange of Hong Kong Limited
“Hong Kong Underwriters” the underwriters of the Hong Kong Public Offering
whose names are set out in “Underwriting — Hong Kong
Underwriters”
“Hong Kong Underwriting
Agreement”
the underwriting agreement dated February 24, 2022
relating to the Hong Kong Public Offering and entered
into among, inter alia, the Joint Representatives, the Joint
Sponsors, the Hong Kong Underwriters and our
Company, as further described in “Underwriting”
“Huimao Building” ( ) (Huimao Building
Technology (Beijing) Co., Ltd.), a limited liability
company established in the PRC on March 5, 2021 and an
indirect wholly-owned subsidiary of our Company
“Independent Third Party(ies)” person(s) or company(ies) and their respective ultimate
beneficial owner(s), who/which, to the best of our
Directors’ knowledge, information and belief, having
made all reasonable enquiries, is/are not connected with
our Company or our connected persons as defined under
the Listing Rules
DEFINITIONS
–44–
“International Offer Shares” the 91,269,500 new Shares (subject to reallocation and
the Over-allotment Option) initially being offered
together with, where relevant, any additional Shares
which may be offered pursuant to the exercise of the
Offer Size Adjustment Option, by our Company pursuant
to the International Offering
“International Offering” the offer of the International Offer Shares at the Offer
Price in offshore transactions outside the United States in
accordance with Regulation S under the U.S. Securities
Act or any other available exemption from registration
under the U.S. Securities Act, as further described in the
section headed “Structure of the Global Offering” in this
prospectus
“International Underwriters” the group of international underwriters expected to enter
into the International Underwriting Agreement to
underwrite the International Offering
“International Underwriting
Agreement”
the underwriting agreement expected to be entered into
on or around the Price Determination Date by, among
others, our Company, the Joint Representatives and the
International Underwriters in respect of the International
Offering, as further described in “Underwriting”
“Jiashan Jiamao” (Jiashan Jiamao
Urban Public Resources Management Co., Ltd.), a
limited liability company established in the PRC on
February 9, 2021 and an indirect non-wholly-owned
subsidiary of our Company
“Jinmao Group” China Jinmao and its subsidiaries which for the purpose
of this prospectus and unless the context otherwise
requires, excludes our Group
“Jinmao Overseas
Shareholder(s)”
Jinmao Shareholders whose addresses, as shown on the
register of members of China Jinmao on the Record Date,
are in any jurisdiction other than Hong Kong
DEFINITIONS
–45–
“Jinmao PM” ( ) (Sinochem Jinmao
Property Management (Beijing) Co., Ltd) (formerly
known as (Beijing
Century Chemsunny Property Management Co., Ltd.), a
limited liability company established in the PRC on
January 16, 2007 and a direct wholly-owned subsidiary
of our Company
“Jinmao PRC Stock Connect
Investor(s)”
the PRC southbound trading investor(s) through
Shanghai-Hong Kong Stock Connect and Shenzhen-Hong
Kong Stock Connect who hold Jinmao Shares through
China Clear as nominee
“Jinmao Shanghai” ( ) (Jinmao (Shanghai)
Property Management Co., Ltd.) (formerly known as
(Shanghai Jinmao Property
Management Co., Ltd.) and
(Shanghai Jinmao Yingtai Facilities Management
Co., Ltd.)), a limited liability company established in the
PRC on September 18, 1995 and an indirect wholly-
owned subsidiary of our Company
“Jinmao Share(s)” the issued share(s) of China Jinmao
“Jinmao Shareholder(s)” the holder(s) of Jinmao Share(s)
“Joint Bookrunners” ABCI Capital Limited, CCB International Capital
Limited, China International Capital Corporation Hong
Kong Securities Limited, CLSA Limited, CMB
International Capital Limited, Essence International
Securities (Hong Kong) Limited, The Hongkong and
Shanghai Banking Corporation Limited, Huarong
International Securities Limited, Huatai Financial
Holdings (Hong Kong) Limited and Shenwan Hongyuan
Securities (H.K.) Limited (in alphabetical order)
“Joint Global Coordinators” China International Capital Corporation Hong Kong
Securities Limited, CLSA Limited, Essence International
Securities (Hong Kong) Limited and The Hongkong and
Shanghai Banking Corporation Limited (in alphabetical
order)
DEFINITIONS
–46–
“Joint Lead Managers” ABCI Securities Company Limited, CCB International
Capital Limited, China International Capital Corporation
Hong Kong Securities Limited, CLSA Limited, CMB
International Capital Limited, Essence International
Securities (Hong Kong) Limited, The Hongkong and
Shanghai Banking Corporation Limited, Huarong
International Securities Limited, Huatai Financial
Holdings (Hong Kong) Limited, Livermore Holdings
Limited and Shenwan Hongyuan Securities (H.K.)
Limited (in alphabetical order)
“Joint Representatives” China International Capital Corporation Hong Kong
Securities Limited and The Hongkong and Shanghai
Banking Corporation Limited (in alphabetical order)
“Joint Sponsors” China International Capital Corporation Hong Kong
Securities Limited and HSBC Corporate Finance (Hong
Kong) Limited (in alphabetical order)
“Latest Practicable Date” February 16, 2022, being the latest practicable date prior
to the printing of this prospectus for the purpose of
ascertaining certain information contained in this
prospectus
“Listing” the listing of our Shares on the Main Board of the Stock
Exchange
“Listing Committee” the Listing Committee of the Stock Exchange
“Listing Date” the date, expected to be on or around Thursday,
March 10, 2022, from which the Shares are listed and
dealings in the Shares are first permitted to take place on
the Stock Exchange
“Listing Rules” the Rules Governing the Listing of Securities on The
Stock Exchange of Hong Kong Limited (as amended,
supplemented or otherwise modified from time to time)
“Main Board” the stock market (excluding the option market) operated
by the Stock Exchange which is independent from and
operated in parallel with the Growth Enterprise Market of
the Stock Exchange
DEFINITIONS
–47–
“Maotong PM” ( ) (Maotong Property
Management (Shanghai) Co., Ltd.), a limited liability
company established in the PRC on March 8, 2021 and an
indirect wholly-owned subsidiary of our Company
“MOFCOM” Ministry of Commerce of the PRC (
)
“National Bureau of Statistics” National Bureau of Statistics of China ( )
“Nanjing Ninggao” (Nanjing Ninggao
International Property Consultancy Co., Ltd.), a limited
liability company established in the PRC on April 23,
2004 and an indirect wholly-owned subsidiary of our
Company
“Nanjing Xinmao” (Nanjing Xinmao Asset
Management Co., Ltd.), a limited liability company
established in the PRC on December 13, 2021 and an
indirect non-wholly-owned subsidiary of our Company
“NDRC” the National Development and Reform Commission of
the PRC ( )
“Non-Qualifying Jinmao
Shareholder(s)”
Jinmao Overseas Shareholders whose names appeared in
the register of members of China Jinmao on the Record
Date and whose addresses as shown in such register are
in any of the Excluded Jurisdictions and any Jinmao
Shareholders or Beneficial Jinmao Shareholders at that
time who are otherwise known by China Jinmao to be
residents in any of the Excluded Jurisdictions
“NPC” National People’s Congress of the PRC and its Standing
Committee (
)
DEFINITIONS
–48–
“Offer Price” the final Hong Kong dollar price per Offer Share of not
more than HK$8.14 and expected to be not less than
HK$7.52 (exclusive of brokerage of 1%, the SFC
transaction levy of 0.0027%, the Stock Exchange trading
fee of 0.005% and FRC transaction levy of 0.00015%) at
which the Hong Kong Offer Shares are to be subscribed
under the Hong Kong Public Offering and the
International Offer Shares are to be offered under the
International Offering, to be determined in the manner
further described in “Structure of the Global Offering —
Pricing and Allocation”
“Offer Share(s)” the Hong Kong Offer Shares and the International Offer
Shares, together with, where relevant, any additional
Shares which may be issued by our Company pursuant to
the exercise of the Offer Size Adjustment Option and the
Over-allotment Option
“Offer Size Adjustment Option” the option under the Hong Kong Underwriting
Agreement, exercisable by the Company on or before the
Price Determination Date, pursuant to which the
Company may issue and allot to an aggregate of
15,211,500 additional Shares at the Offer Price, to cover
additional market demand, if any, as described in the
section headed “Structure of the Global Offering” in this
prospectus
“Over-allotment Option” the option we expect to grant to the International
Underwriters, exercisable by the Joint Representatives
(for themselves and on behalf of the International
Underwriters) under the International Underwriting
Agreement at any time from the Listing Date until the
30th day from the last day for lodging applications under
the Hong Kong Public Offering, which may require us to
allot and issue up to an aggregate of not more than 15%
of the total number of Offer Shares available under the
Global Offering, including the Shares offered pursuant to
the exercise of the Offer Size Adjustment Option, if any,
which will be equal to 15,211,500 Offer Shares, assuming
the Offer Size Adjustment Option is not exercised, or
17,493,000 Offer Shares, assuming the Offer Size
Adjustment Option is fully exercised, at the Offer Price
to cover over-allocations in the International Offering, if
any. See “Structure of the Global Offering — Over-
Allotment Option” for more details
DEFINITIONS
–49–
“PBOC” the People’s Bank of China ( ), the central
bank of the PRC
“PRC Company Law” Company Law of the PRC ( ), as
amended
“PRC government” or “State” the central government of the PRC, including all
governmental subdivisions (including provincial,
municipal and other regional or local government
entities) and its organs or, as the context requires, any of
them
“PRC Legal Advisors” Tian Yuan Law Firm, legal advisors to our Company as to
PRC laws
“Pearl River Delta” a network of cities in Guangdong Province covering
Dongguan, Foshan, Guangzhou, Huizhou, Jiangmen,
Shenzhen, Zhaoqing, Zhongshan and Zhuhai as well as
the Special Administrative Regions of Hong Kong and
Macau
“Price Determination Agreement” the agreement to be entered into by the Joint
Representatives and us on the Price Determination Date
to record and fix the pricing of the Offer Shares
“Price Determination Date” the date, expected to be on or about Thursday, March 3,
2022, on which the Offer Price will be determined, or
such later time as the Joint Representatives (for
themselves and on behalf of the Underwriters) and we
may agree, but in any event, not later than Wednesday,
March 9, 2022
“Qualifying Jinmao
Shareholder(s)”
Jinmao Shareholder(s) whose names appeared in the
register of members of China Jinmao on the Record Date,
other than Non-Qualifying Jinmao Shareholders
“Record Date” February 23, 2022, being the record date for determining
the entitlement of the Qualifying Jinmao Shareholders to
the Distribution
“Regulation S” Regulation S under the U.S. Securities Act
DEFINITIONS
–50–
“Relevant Persons” the Joint Sponsors, the Joint Representatives, the Joint
Global Coordinators, the Joint Bookrunners, the Joint
Lead Managers, the Underwriters, any of their or the
Company’s respective directors, officers, employees,
partners, agents, advisers and any other parties involved
in the Global Offering
“Reorganization” the reorganization arrangements undergone by our Group
in preparation for the Listing, which are more particularly
described in the section headed “History, Reorganization
and Corporate Structure — Reorganization” in this
prospectus
“RMB” or “Renminbi” Renminbi, the lawful currency of the PRC
“SAFE” State Administration of Foreign Exchange of the PRC (
)
“SASAC” State-owned Assets Supervision and Administration
Commission of the State Council of the PRC (
)
“SAT” State Administration of Taxation of the PRC (
)
“SFC” the Securities and Futures Commission of Hong Kong
“SFO” or “Securities and
Futures Ordinance”
the Securities and Futures Ordinance (Chapter 571 of the
Laws of Hong Kong), as amended or supplemented from
time to time
“Shanghai Jinmao Investment” (Shanghai Jinmao
Investment Management Group Co., Ltd.), a limited
liability company established in the PRC on November
15, 2007 and a wholly-owned subsidiary of China Jinmao
“Share(s)” ordinary share(s) of our Company
“Shareholder(s)” holder(s) of our Shares
“Sinochem Corporation” (Sinochem Corporation), a joint
stock limited liability company established in the PRC on
June 1, 2009 and a wholly-owned subsidiary of Sinochem
Group
DEFINITIONS
–51–
“Sinochem Group” (Sinochem Group Co., Ltd)
(formerly known as (Sinochem
Corporation) and (China National
Chemicals Import & Export Corporation)), a state-owned
enterprise established in the PRC on August 11, 1981 and
a wholly-owned subsidiary of Sinochem Holdings
“Sinochem Holdings” (Sinochem Holdings
Corporation Ltd.), a state-owned enterprise established in
the PRC on May 6, 2021 which is wholly owned by the
SASAC
“Sinochem Hong Kong” ( ) (Sinochem Hong Kong (Group)
Company Limited) (formerly known as Sinochem Hong
Kong (Holdings) Company Limited), a company
incorporated in Hong Kong on December 1, 1989 with
limited liability which is wholly owned by Sinochem
Corporation
“Sinochem Hotel” (Sinochem International
Property and Hotel Management Co., Ltd.), a limited
liability company established in the PRC on October 15,
1993 and a wholly-owned subsidiary of China Jinmao
“Sinochem Lantian” (Sinochem Lantian Co., Ltd.), a
limited liability company established in the PRC on
August 23, 2000 and a wholly-owned subsidiary of
Sinochem Group
“Spin-off” the separate listing of our Shares on the Main Board by
way of the Distribution and the Global Offering
“Stabilizing Manager” China International Capital Corporation Hong Kong
Securities Limited
“State Council” State Council of the PRC ( )
“Stock Borrowing Agreement” the stock borrowing agreement expected to be entered
into on or around the Price Determination Date between
China Jinmao and the Stabilizing Manager (or its
affiliates) pursuant to which the Stabilizing Manager may
borrow up to 17,493,000 Shares from China Jinmao to
facilitate the settlement of over-allocations in the
International Offering
DEFINITIONS
–52–
“subsidiary” or “subsidiaries” has the meaning ascribed thereto under the Listing Rules
“substantial shareholder(s)” has the meaning ascribed thereto in the Listing Rules
“Takeovers Code” the Codes on Takeovers and Mergers and Share Buy-
backs issued by the SFC, as amended, supplemented or
otherwise modified from time to time
“Track Record Period” the period comprising the three financial years ended
December 31, 2018, 2019, 2020 and the nine months
ended September 30, 2021
“Underwriters” the Hong Kong Underwriters and the International
Underwriters
“Underwriting Agreements” the Hong Kong Underwriting Agreement and the
International Underwriting Agreement
“U.S. Securities Act” the United States Securities Act of 1933, as amended,
supplemented or otherwise modified from time to time,
and the rules and regulations promulgated thereunder
“United States” or “U.S.” the United States of America, its territories, its
possessions and all areas subject to its jurisdiction
“US$”, “USD” or “U.S. dollars” United States dollars, the lawful currency of the United
States
“White Form eIPO” the application for the Hong Kong Offer Shares to be
issued in the applicant’s own name by submitting
applications online through the designated website of the
White Form eIPO Service Provider, at
www.eipo.com.hk
“White Form eIPO Service
Provider”
Computershare Hong Kong Investor Services Limited
“Yangtze River Delta” a region of China covering the municipality of Shanghai
and the provinces of Anhui, Jiangsu and Zhejiang
“Yuelin Hangzhou” ( ) (Yuelin (Hangzhou)
Real Estate Agency Co., Ltd.), a limited liability
company established in the PRC on July 29, 2020 and an
indirect wholly-owned subsidiary of our Company
DEFINITIONS
–53–
“Zhonglan Xinmao” (Zhejiang Zhonglan
Xinmao Park Management Co., Ltd.), a limited liability
company established in the PRC on August 19, 2021 and
an indirect non-wholly-owned subsidiary of our
Company
“Zhoushan Dongda Jinmao” (Zhoushan Dongda
Jinmao Urban Property Services Co., Ltd.), a limited
liability company established in the PRC on July 19,
2021 and an indirect non-wholly-owned subsidiary of our
Company
“Zijin Xinmao” (Beijing Zijin Xinmao
Property Services Co., Ltd.), a limited liability company
established in the PRC on September 30, 2021 and an
indirect non-wholly-owned subsidiary of our Company
“%” per cent
The English translation of the PRC entities, enterprises, nationals, facilities, regulations
in Chinese or another language included in this prospectus is for identification purposes only.
To the extent there is any inconsistency between the Chinese names of the PRC entities,
enterprises, nationals, facilities, regulations and their English translations, the Chinese names
shall prevail.
DEFINITIONS
–54–
This glossary contains certain definitions and other terms related to our business and
used in this prospectus. Such terms and their meanings may not correspond to standard
industry definitions or usage.
“AI” artificial intelligence
“average property management
fee(s)”
weighted average property management fee(s) charged
per sq.m. per month, which is calculated by dividing (i)
the sum of the products of the monthly property
management fee chargeable for each of the properties
under management and the GFA under management as of
the relevant date for each of such property by (ii) the total
GFA under management of all properties under
management as of the relevant date, excluding a small
portion of projects to which we charged a package price
of property management fees on individual project basis
“CAGR” compound annual growth rate, calculated as (existing
value / basic value) ^ (1 / years) - 1
“collection rate” aggregate property management fees for a certain period
collected up to the Latest Practicable Date and
attributable to the same period divided by the aggregate
amount of property management fees to which we are
entitled during the same period
“commission basis” a revenue generating model for our property management
services whereby our fee income from property
management consists only of either a fixed percentage or
fixed amount of, the property management fees received
or receivable from the customers while the remainder of
such property management fees would be used to cover
the expenses incurred in our management of the relevant
properties and any excess or shortfall of the property
management fees (after deducting the relevant expenses)
belong to or are borne by the relevant customers
“commercial property(ies)” properties for business use, in commercial, food, supply
and sales, and catering service and other sectors
GLOSSARY
–55–
“common area(s)” common areas jointly owned by the property owners,
including, among others, staircases, railings, hallways,
basements and gardens parking lots, facility rooms,
management offices, swimming pools and club houses, as
well as the passageways and landscape area within the
communities we manage
“contracted GFA” GFA under management and GFA to be managed by us
under operating property management contracts,
including both delivered and undelivered GFA
“GFA” gross floor area
“GFA under management” contracted GFA of properties for which we have started to
provide property management services pursuant to the
relevant property management service contracts
“IBA” internet building automation, an operational system
designed by our Company
“IoT” or “Internet of Things” a network of physical devices, vehicles, buildings and
other items embedded with electronics, software, sensors
and network connectivity that enable these items to
collect and exchange data
“lump sum basis” a revenue generating model for our property management
services under which we generally charge a pre-
determined property management fee which represents
“all-inclusive” fees for all of the property management
services we provide in accordance with the property
management service contract we entered into
“project renewal rate” calculated as the number of property management service
contracts with fixed contract terms expired and
subsequently renewed by us during a period divided by
the total number of property management service
contracts with fixed contract terms expired and property
management service contracts we terminated on a
voluntary basis during the same period
GLOSSARY
–56–
“residential community(ies)”
or “residential property(ies)”
properties which are purely residential or mixed-use
properties containing residential units and ancillary
facilities that are non-residential in nature such as
commercial or office units but excluding pure
commercial properties
“sq.m.” square meter(s)
“tier-one cities” or
“first-tier cities”
according to the China Index Academy, comprised of the
four cities of Beijing, Shanghai, Guangzhou and
Shenzhen, following the classification standards of the
National Bureau of Statistics of China
“tier-two cities” or
“second-tier cities”
according to the China Index Academy, comprised of
provincial capital cities, capital cities of autonomous
regions and other sub-provincial cities in the PRC,
following the classification standards of the National
Bureau of Statistics of China
“tier-three and tier-four cities” according to the China Index Academy, comprised of
cities in the PRC other than tier- one and tier- two cities,
following the classification standards of the National
Bureau of Statistics of China
“Top 100 Property Management
Companies”
an annual ranking of China-based property management
companies by overall competitiveness published by the
China Index Academy based on a number of key
indicators, including management scale, operational
performance, service quality, growth potential and social
responsibility
“Undelivered GFA” contracted GFA that has not been delivered yet
GLOSSARY
–57–
This prospectus includes forward-looking statements. All statements other than
statements of historical facts contained in this prospectus, including, without limitation, those
regarding our future financial position, our strategies, plans, objectives, goals, targets and
future developments in the markets where we participate or are seeking to participate, and any
statements preceded by, followed by or that include the words “believe,” “expect,” “estimate,”
“predict,” “aim,” “intend,” “will,” “may,” “plan,” “consider,” “anticipate,” “seek,” “should,”
“could,” “would,” “continue,” or similar expressions or the negative thereof, are forward-
looking statements. These forward-looking statements involve known and unknown risks,
uncertainties and other factors, some of which are beyond our control, which may cause our
actual results, performance or achievements, or industry results, to be materially different from
any future results, performance or achievements expressed or implied by the forward-looking
statements. These forward-looking statements are based on numerous assumptions regarding
our present and future business strategies and the environment in which we will operate in the
future. Important factors that could cause our actual performance or achievements to differ
materially from those in the forward-looking statements include, among other things, the
following:
• our business strategies, operating plans and objectives;
• the amount and nature of, and potential for, future development of our business;
• our dividend policy;
• our prospective financial information and certain statements in the section headed
“Financial Information” in this prospectus with respect to trends in prices, volumes,
operations, margins, overall market trends, risk management and exchange rates;
• various business opportunities that we may pursue;
• our ability to identify and successfully take advantage of new business development
opportunities;
• our ability to identify and integrate suitable acquisition targets;
• our ability to control or reduce costs;
• our ability to identify, measure, monitor and control risks in our business, including
our ability to improve our overall risk profile and risk management practice;
• the actions and developments of our capital partners, suppliers, customers and
competitors;
• future developments, trends and conditions in the industry and markets in which we
operate;
FORWARD-LOOKING STATEMENTS
–58–
• general economic, market and business conditions in Hong Kong, the PRC and
overseas;
• changes in the regulatory and operating conditions in the industry and markets in
which we operate;
• exchange rate fluctuations and restrictions;
• expected growth of and changes in the PRC real estate and property management
industries;
• the future competitive environment for the PRC property management industry;
• development and effect of the COVID-19 pandemic;
• capital market(s) developments; and
• the other risk factors discussed in this prospectus as well as other factors beyond our
control.
Additional factors that could cause actual performance or achievements to differ
materially include, but are not limited to, those discussed in “Risk Factors” and elsewhere in
this prospectus. We caution you not to place undue reliance on these forward-looking
statements, which reflect our view only as of the date of this prospectus, in particular given the
rapidly changing nature of the PRC economy and the property management industry. You
should read this prospectus in its entirety and with the understanding that the actual future
results may be materially different from what we expect. Subject to the requirements of
applicable laws, rules and regulations, we undertake no obligation to update or revise any
forward-looking statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking events discussed in
this prospectus might not occur in the way we expect, or at all. All forward-looking statements
contained in this prospectus are qualified by reference to the cautionary statements set out in
this section as well as the risks and uncertainties discussed in “Risk Factors”.
FORWARD-LOOKING STATEMENTS
–59–
Investing in our Shares involves risks. You should carefully consider all of the
information in this prospectus including the risks and uncertainties described below
before making an investment in our Shares, in light of the circumstances and your own
investment objectives. Our business, financial position and results of operations could be
materially and adversely affected by any of these risks and uncertainties. The trading
price of our Shares could decline due to any of these risks, and you may lose all or part
of your investment. In addition to the risks described below, there may be other risks and
uncertainties not currently known to us or that we currently deem to be immaterial which
may in the future become material risks. You should pay particular attention to the fact
that our principal operations are conducted in China and are governed by a legal and
regulatory environment that may differ significantly from that of other countries.
RISKS RELATING TO OUR BUSINESS AND INDUSTRY
A substantial portion of the properties under our management during the Track Record
Period were developed by Jinmao Group.
A substantial portion of our property management service contracts during the Track
Record Period were related to the management of properties developed by Jinmao Group (and
its joint ventures and associates). Our revenue from the management of these properties
accounted for 92.0%, 93.3%, 92.5% and 92.5% of our revenue from property management
services for the years ended December 31, 2018, 2019 and 2020 and the nine months ended
September 30, 2021, respectively. Our GFA under management attributable to properties
developed by Jinmao Group and Sinochem Group (and their respective joint ventures and
associates) accounted for 89.8%, 94.2%, 87.8% and 86.6% of our total GFA under management
as of December 31, 2018, 2019 and 2020 and as of September 30, 2021, respectively.
As we do not have control over the management strategy of Jinmao Group, any measures
that the PRC government may adopt to further regulate the real estate market, or the
macro-economic or other factors that may affect the business operations and prospects of
Jinmao Group, any adverse development in the operations of Jinmao Group or its ability to
develop new properties may affect our ability to procure the relevant new service contracts for
property management services, value-added services to non-property owners and community
value-added services. We cannot assure you that Jinmao Group will continue to engage us to
provide property management services, value-added services to non-property owners or
community value-added services for any properties they develop, particularly because the
appointment of property management companies for the preliminary property management
service contracts of residential and non-residential properties in the same property management
area is generally subject to a tender and bidding process under the Regulations on Property
Management (2018 Revision) ( ) (2018 ) and the Interim Measures for
Bid-Inviting and Bidding Management of Preliminary Property Management (
). Moreover, the aforementioned properties developed by Jinmao
Group (and its joint ventures and associates) included those jointly developed by Jinmao Group
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and other parties in which Jinmao Group did not hold a controlling interest. As Jinmao Group
does not have control or significant influence over these projects and the other parties
developing the properties may have various reasons, including commercial considerations, for
engaging property management companies other than us, we cannot guarantee that we would
be engaged to provide property management services to such projects or to renew our existing
service contracts upon expiry.
We may not be able to procure new service contracts as planned or at desirable pace or
favorable terms.
During the Track Record Period, we generally procured new property management
service contracts through a tender and bidding process. The selection of a property
management company depends on a number of factors, including but not limited to the quality
of services provided, the level of pricing and the operating capabilities of the property
management company. Tender success is ultimately at discretion of the inviting party, and our
efforts may be hindered by factors beyond our control, which may include, among others,
changes in general economic conditions, evolving government regulations as well as supply
and demand dynamics within the property management industry. We cannot assure you that we
will be able to procure new property management service contracts in the future as planned or
at desirable pace or favorable terms.
During the Track Record Period and up to the Latest Practicable Date, we had procured
property management service contracts from sources of projects other than those developed by
Jinmao Group (or its joint ventures or associates) and procured contracts for value-added
services to non-property owners from property developers other than Jinmao Group (or its joint
ventures or associates). However, we cannot assure you that we can continue to procure these
service contracts from other sources or other customers as planned or at desirable pace or
favorable terms as we compete with other property management companies without the
inherent advantages we have in projects sourced from Jinmao Group. Moreover, we cannot
guarantee that the gross profit margins of property management services provided to projects
developed by Independent Third Parties would be comparable to margins of those developed
by Jinmao Group (and its joint ventures and associates), mainly because the nature of the
projects developed by Independent Third Parties differs from those developed by Jinmao
Group and we may need to offer more favorable terms as we expand our business to secure
engagements from Independent Third Parties. As a result, our profitability may decrease in the
future as we expand our property management portfolio to projects developed by Independent
Third Parties if the gross profit margin attributable to such projects are lower than that
attributable to properties developed by Jinmao Group (and its joint ventures and associates).
In addition, we usually enter into preliminary property management service agreements
with property developers during the later stages of property development. We cannot assure
you that we will be able to maintain our high success rate in obtaining such preliminary
property management service agreements from the Jinmao Group (and its joint ventures and
associates) or other developers. In addition, such contracts are transitional in nature and
facilitate the transfer of legal and actual control of the properties from property developers to
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property owners. A preliminary property management service agreement typically expires
when another property management service provider is selected through the property owners’
general meeting and the property management service agreement entered into between the
property owners’ association and the newly selected property management service provider
becomes effective. We cannot guarantee that the property owners’ associations will retain our
services instead of replacing us with our competitors. Our customers select property
management companies based on service quality and cost, and we cannot assure you that we
will always be able to balance them on favorable terms to their satisfaction.
Our historical results may not be indicative of our future prospects, our future growth
may not materialize as planned and failure to manage any future growth effectively may
have a material adverse effect on our business, financial position and results of operations
We experienced rapid growth in revenue and profitability historically during the Track
Record Period. Our revenue increased from RMB574.5 million in 2018 to RMB944.2 million
in 2020, representing a CAGR of 28.2%. Our revenue increased by 57.6% from RMB665.3
million in the nine months ended September 30, 2020 to RMB1,048.7 million in the nine
months ended September 30, 2021. Our net profit increased from RMB17.5 million in 2018 to
RMB77.1 million in 2020, representing a CAGR of 110.0%. Our net profit increased by
105.0% from RMB53.3 million in the nine months ended September 30, 2020 to RMB109.4
million in the same period in 2021. We benefit from organic growth primarily through
increasing the total GFA under management and the number of properties that we manage in
both existing and new markets. In addition, to a lesser extent, we are also expanding the
value-added services we provide with diversified service types and an enlarged customer base.
Our GFA under management was 10.2 million sq.m., 12.7 million sq.m., 17.7 million sq.m. and
23.2 million sq.m. as of December 31, 2018, 2019 and 2020 and September 30, 2021,
respectively.
However, our expansion is based upon our forward-looking assessment of market
prospect and there is no guarantee that we will continue to succeed in our business expansion
efforts going forward. We cannot guarantee that our assessment will always turn out to be
correct or we can grow our business as planned. Our expansion plans may be affected by a
number of factors beyond our control. Such factors include challenges from rising labor and
other operating costs, intensive competition for business opportunities, changes in China’s
economic condition and regulatory environment in general and in the real estate and property
management markets in particular, changes in the supply and demand for property management
and value-added services, as well as availability of suitable and capable employees and
third-party service providers for our expansion efforts, and the evolving needs and preference
of customers and business partners. We may also encounter unanticipated delays in projects of
our contracted GFA, which may slow down the growth of our GFA under management.
To succeed in our business expansion in obtaining new service engagements and
expanding market share and customer base, we will need to recruit, train and retain competent
employees, select third-party service providers as suppliers, strengthen cooperation with other
business partners, continue to build our operations and reputation, and understand the evolving
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needs and preference of our customers and business partners, within a relatively short period
of time. We may have limited knowledge of the local property management service markets or
have little or no prior business experience in the new markets that we may expand into. In
addition, we may face difficulties in adapting to the administrative and regulatory
environments in new markets, which could be substantially different from those in our
established markets. We may not have the same level of familiarity with business practices of
the new markets or strength of relationships with third-party service providers and other
business partners in such markets as we do in our established markets. We may have limited
ability to leverage our brand name in new markets in the way that we have done so in our
established markets, and may face more intense competition from other property management
companies or property developers that manage their own properties in those new markets.
Moreover, compared to our historical results of operations, we may not experience the same
rate of growth of gross profit and gross profit margin of the property management services in
the future as we expand our portfolio to cover more properties in new locations or markets,
especially during the initial stages of entry when economy of scale has yet to be achieved.
Furthermore, our future growth depends on our management’s ability to continuously
improve our administrative, technical, operational and financial infrastructure. Our ability to
maintain our future growth also depends on our ability to recruit, retain, train, supervise and
manage additional officers and employees, replicate our business model, allocate our human
resources and manage our relationships with a growing number of customers, suppliers and
other business partners. Our historical results and growth may not be indicative of our future
prospects and results of operations. There can be no assurance that our future growth will
materialize at a desirable rate, if at all, or that we will be able to manage our future growth
effectively, and such failure would have a material adverse effect on our business, financial
position and results of operations. Successful implementation of our expansion plans may also
stretch our human resources thinly which may impact our ability to maintain high quality
services.
Termination or non-renewal of our property management service contracts for a
significant number of properties could have a material adverse effect on our business,
financial position and results of operations
During the Track Record Period, we generated a substantial part of our revenue from
property management services. For the years ended December 31, 2018, 2019 and 2020 and for
the nine months ended September 30, 2020 and 2021, revenue generated from our property
management services accounted for 58.3%, 58.6%, 60.1%, 61.6% and 55.2% of our total
revenue, respectively. As of December 31, 2018, 2019 and 2020 and September 30, 2021, our
contracted GFA were 21.9 million sq.m., 30.8 million sq.m., 40.5 million sq.m. and 45.7
million sq.m., respectively. As of December 31, 2018, 2019 and 2020 and September 30, 2021,
the number of property management contracts were 131, 182, 233 and 267, respectively. Our
preliminary property management service contracts entered into with developers generally do
not have a fixed term and can be terminated when the property owners select another property
management service provider through the property owners’ general meeting and a replacing
property management service contract entered into by the property owners’ association takes
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effect. During the Track Record Period, none of our preliminary property management service
contracts entered into with developers was terminated by developers or by property owners
through the property owners’ general meeting. The property management service contracts we
entered into with property owners’ associations generally have fixed terms which will need to
be renewed upon expiry and can be terminated for cause. For details, see “Business — Property
Management Services Contracts — Property management service contracts for residential
communities”. There is no assurance that our services can be provided at a satisfactory level
for us to be selected by the relevant property owners to enter into subsequent property
management service contracts.
Even where we succeed in entering into property management service contracts with
property owners’ associations, we cannot guarantee that they will be renewed upon expiration.
If such contracts are not renewed or are terminated for cause, there is no guarantee that we
would be able to find other business opportunities and enter into alternative property
management service contracts on favorable terms, or at all. Termination or non-renewal of a
significant number of management service contracts could have a material and negative impact
on our revenue from property management services.
In addition, the development and operational success of our community value-added
services, to certain extent, rely upon the number of properties we manage. Therefore, any
failure to renew our property management service contracts or termination of such contracts
could also adversely affect the performance of our other businesses.
The performance and prospects of our city operation services depend upon the continued
public spending and investment by local PRC governments
City operation services mainly include the integration, optimization, transformation and
distribution of urban resources by governments and enterprises and the delivery of value-added
public services to citizens, which are affected by the level of public spending and investment
by local PRC governments. Public spending and investment by local PRC governments is
subject to various factors such as macroeconomic environment, real estate market condition
and government’s economic policies, many of which are beyond our control. As a result, any
reduction of public spending and investment in urban planning, operations and development by
local PRC governments, may cause a decrease in the number of engagements we obtain for our
city operation services. To the extent that local PRC governments significantly reduce public
spending and investment in urban planning, operations and development, our business,
financial position and results of operation may be materially and adversely affected. In
addition, our city operation services commenced in 2014. Given our limited operating history
in this sector, we cannot assure you that our city operation business will be able to maintain
the growth rate as in the past, or that we will be able to successfully implement our plans to
expand such services.
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Our business, financial performance and prospects may be materially and adversely
affected if we are unable to control operating costs, and maintain or improve our level of
profitability
The property management industry is labor intensive. To maintain and improve our profit
margins, it is critical for us to control and reduce our labor and sub-contracting costs as well
as other operating costs. For the years ended December 31, 2018, 2019 and 2020 and the nine
months ended September 30, 2020 and 2021, staff cost accounted for 32.3%, 32.1%, 30.2%,
32.4% and 27.6%, respectively, of our total cost of sales, and our sub-contracting cost
(representing security, maintenance, cleaning and greening cost) accounted for 28.0%, 29.7%,
31.9%, 30.8% and 29.9%, respectively, of our total cost of sales. We face upward pressures in
our labor and sub-contracting costs from various aspects, including but not limited to:
• increase in minimum wages. Minimum wages across China are set at the regional
level based largely on standards determined by relevant local governments. The
minimum wages in some of the regions in which we operate have increased
substantially in recent years, directly impacting our labor costs. In addition, the
competition for recruiting qualified employees in the PRC property management
industry is intense, which could require us to pay higher wages in our recruitment
and make greater efforts on employee retention, resulting in a corresponding
increase in our labor costs;
• increase in headcount. As we expand our operations, we expect our headcount to
continue to increase. In addition to our labor cost, this increase in headcount also
increases other associated costs such as those related to training and quality control
measures. We will also need to retain and continuously recruit qualified employees
to meet our growing demands for talent; and
• delay in implementing cost-saving measures. There is a lapse in time between our
commencement of property management services for a particular property and any
implementation of our measures to achieve the standardization of procedures,
operational optimization and smart management to reduce our relevant operating
costs. Before we carry out such measures, our ability to mitigate the impact of cost
increases is limited.
As our business expands and our services and property management portfolio diversify,
we cannot assure you that we will be able to control or reduce our operating costs and improve
our cost structure and efficiency while continuously improving our service quality. As it may
be practically difficult for us to negotiate with property owners to raise the property
management fees or otherwise negotiate for a raise in our other service fees with our
customers, we cannot assure you that we will be able to successfully pass increased costs
through to the prices (including the property management fees) that we charge to our clients,
so as to maintain our profitability. If we cannot successfully control cost and maintain
profitability, our business, financial condition and results of operations may be materially and
adversely affected.
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We may be subject to losses and our profit margins may decrease if we fail to control costs
or raise the property management fee in performing our property management services
on a lump sum basis
During the Track Record Period, we generated substantially all of our revenue from
property management services on a lump sum basis, which accounted for 96.8%, 98.7%, 98.5%
and 98.7% of our total revenue from property management services for the years ended
December 31, 2018, 2019 and 2020 and the nine months ended September 30, 2021,
respectively. On a lump sum basis, we generally charge property management fees at a
pre-determined fixed lump sum price, representing “all-inclusive” fees for the property
management services provided. These property management fees are fixed regardless of the
actual amount of property management costs we incur. On a lump sum basis, we recognize as
revenue the full amount of property management fees we charge to customers, and recognize
as our cost of sales the actual costs we incur in connection with rendering our property
management services. For further details, see “Business — Property Management Services —
Revenue Model of Property Management Services”. In the event that we fail to accurately
estimate our actual costs prior to negotiating and entering into our property management
service contracts and the amount of property management fees that we charge proves
insufficient to cover all the costs we incur for rendering the property management services, we
are not entitled to collect the shortfall from the relevant property owners, residents or property
developers. As a result, we may suffer losses and may not be able to rectify such situations
until the expiry of such unprofitable contracts. As of December 31, 2018, 2019 and 2020 and
September 30, 2021, we had 8, 11, 14 and 15 property management projects managed on a
lump sum basis which had incurred losses during the Track Record Period, respectively. The
property management service revenue from these projects accounted for 2.6%, 2.6%, 2.1% and
1.8% of our total revenue for the years ended December 31, 2018, 2019 and 2020 and the nine
months ended September 30, 2021, according to the management account, respectively. We had
continued to manage certain of those projects with a view to gradually improving their
profitability through various cost-saving measures or through negotiating new terms upon
expiry of such contracts. However, we cannot ensure that these measures will be effective for
improving the profitability of such projects. For further details of our loss-making projects, see
“Business — Property Management Services — Revenue Model of Property Management
Services”.
We can negotiate with property owners to raise the property management fees upon
contract renewal or through obtaining approval from the requisite number of property owners
under applicable PRC laws and regulations. However, we may not be successful in raising
property management fees. In such cases and when there is a shortfall in working capital after
deducting the property management costs, our profit margins would be adversely affected or
our scope of services may need to be adjusted in order to maintain profitability under these
engagements. In such events, we may seek different measures to cut costs with a view to
reducing the shortfall. However, such mitigating measures may not be successful in raising our
profit margin, and our cost-saving efforts may negatively affect the quality of our property
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management services, which in turn would further reduce customers’ willingness to pay us
higher property management fees and, accordingly, adversely affect our overall reputation,
business operations and financial position beyond the unprofitable contracts.
We may be subject to losses and our profit margins may decrease if we fail to manage our
costs in projects to which we charge a package price
During the Track Record Period, we charged certain non-residential property management
projects under our management a package price of property management fees on a per project
basis without reference to GFA. The projects to which we charged a package price are
non-residential properties such as schools and government facilities. We take into account
factors such as the nature and scope of the specific property management services to be
provided, our cost expected to be incurred, reasonable target profit margins and competition
from peer companies (including pricing of property management services provided to
comparable properties) when determining the package price of property management fees. In
the event that we fail to accurately estimate our actual costs prior to negotiating and entering
into our property management services contracts and the package price of property
management fees that we charge proves insufficient to cover all the costs we incur for
rendering the services, we may suffer losses and may not be able to rectify such situations until
the expiry of such unprofitable contracts.
During the Track Record Period, according to the management account, the revenue
generated from projects to which we charged a package price of property management fees was
RMB16.4 million, RMB11.8 million, RMB17.5 million, RMB12.3 million and RMB20.9
million in 2018, 2019, 2020 and nine months ended September 30, 2020 and 2021. According
to the management account, we incurred gross losses of RMB3.6 million, RMB3.0 million,
RMB2.1 million and RMB1.7 million in 2018, 2019, 2020 and the nine months ended
September 30, 2020 and gross profit of RMB2.1 million in the nine months ended September
30, 2021 for these projects. Our profitability for these projects has improved through various
cost-saving measures we made. However, we cannot ensure that these measures will continue
to be effective, in which cases, our overall reputation, business operations and financial
position could be adversely affected.
We had net operating cash outflows of RMB19.8 million in 2018 and may experience net
operating cash outflow in the future
Although we generated net operating cash inflows of RMB15.9 million, RMB136.2
million, RMB5.5 million and RMB38.5 million in 2019, 2020 and the nine months ended
September 30, 2020 and 2021, respectively, we had net operating cash outflows of RMB19.8
million in 2018, primarily attributable to our profit before tax of RMB26.4 million, as adjusted
for non-cash and non-operating items, which primarily include (i) finance costs of RMB10.2
million and (ii) loan interest income of RMB9.9 million. The amount was further adjusted by
changes in income tax paid of RMB5.5 million and working capital. The changes in working
capital primarily included (i) an increase in other payables and accruals by RMB53.8 million
attributable to increased amounts due to related parties, (ii) an increased in trade payables by
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RMB30.0 million due to the increased purchases of materials from suppliers and the increased
procurement of security and cleaning services and (iii) an increased in contract liabilities by
RMB21.7 million due to increased advance payments made by customers for property
management services in line with the enlarged portfolio of properties under our management,
partially offset by an increase in prepayments, other receivables and other assets of RMB146.5
million generally in line with our business growth.
We cannot assure you that we will not experience net operating cash outflow in the future.
If we fail to generate sufficient cash flow from our operations, or if we fail to maintain
sufficient cash or obtain additional external financing, our liquidity position may be adversely
affected. If we do not have sufficient cash flows to fund our business, operations and capital
expenditure, our business, financial position and results of operations will be materially and
adversely affected.
We may not be able to fully collect service fees from customers and as a result, may incur
impairment losses on receivables or cash outflow of operating activities
We may encounter difficulties in collecting service fees from customers, such as property
management fees from property owners and residents. With respect to office building and
shopping mall management, we mainly collect fees from tenants of subleased offices and
stores. Even though we seek to collect overdue property management fees through various
collection measures, we cannot guarantee that such measures will be effective. Before
accepting new engagements, we may assess the historical collectability of property
management fees for these properties. However, there is no assurance that such assessment
would enable us to accurately predict our future property management fee collection rate.
Moreover, although most of the property management fees were paid to us through non-cash
methods such as bank transfers during the Track Record Period, certain property owners and
residents may choose to pay their property management fees in cash, which may impose cash
management risks on us. Our costs of operations remain fixed whether or not we can collect
service fees.
The carrying amount of our trade receivables amounted to RMB88.8 million, RMB155.3
million, RMB203.7 million and RMB451.5 million as of December 31, 2018, 2019 and 2020
and September 30, 2021, respectively. The balance of our allowance for impairment of trade
receivables was RMB4.1 million, RMB3.2 million, RMB3.6 million and RMB4.6 million as of
December 31, 2018, 2019 and 2020 and September 30, 2021, respectively. Although our
management’s estimates and the related assumptions were made in accordance with
information available to us at the time the allowance was determined, such estimation or
assumptions may need to be adjusted if new information becomes known. In the event that the
actual recoverability is lower than expected, or that our past allowance for impairment of trade
receivables becomes insufficient in light of the new information, we may need to make more
of such impairment allowance, which may in turn materially and adversely affect our business,
financial position and results of operations.
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The collection of our trade receivables is subject to seasonal fluctuations
We experienced seasonal fluctuations in the collection of our trade receivables during the
Track Record Period and expect to continue experiencing such seasonal fluctuations going
forward. For instance, our collection rate of property management fees was 98.5%, 96.8% and
94.1% for the years ended December 31, 2018, 2019 and 2020, respectively. We may also
encounter lower collection rates of trade receivables for value-added services to non-property
owners during the first few months in a year, in particular, during the Chinese Lunar New Year.
In general, our trade receivable amounts increase throughout the year and decrease toward the
end of the year when property owners, tenants and residents settle their outstanding property
management fee balances with us.
Seasonal fluctuations in our property management fee collection rates and trade
receivables require that we manage our liquidity carefully so as to provide our business with
adequate cash for operations. If we are unable to collect service fees from customers or
experience a prolonged delay in receiving such fees, our cash flow position and our ability to
meet our working capital requirements may be adversely affected.
We are exposed to risks associated with engaging third-party sub-contractors to perform
certain property management services and value-added services
In conducting our business, we delegate certain non-core services, such as cleaning,
greening, maintenance and security services, to third-party sub-contractors. We select our
sub-contractors based on factors such as market reputation, qualifications, prices and track
record. For the years ended December 31, 2018, 2019 and 2020 and the nine months ended
September 30, 2020 and 2021, our sub-contracting costs (representing security, maintenance,
cleaning and greening cost) accounted for 28.0%, 29.7%, 31.9%, 30.8% and 29.9% of our total
cost of sales, respectively. However, we cannot guarantee that they will always perform in
accordance with our expectations and we may not be able to monitor the services of our
sub-contractors as directly and effectively as when monitoring the work of our own employees.
They may take actions contrary to our or our customers’ instructions or requests, or be unable
or unwilling to fulfil their obligations or meet our quality standards. They may have financial
difficulty, or may not have obtained or renewed on a timely basis the relevant business permits,
licenses, registrations or filings for the provision of their services. As a result, we may have
disputes with our sub-contractors, or may receive complaints from our customers or be held
responsible for their actions, either of which could lead to damages to our reputation,
additional expenses and business disruptions, and potentially expose us to litigation and
damage claims. Upon the expiration of contracts with our current sub-contractors, there can be
no assurance that we will be able to renew such contracts or find suitable replacements in a
timely manner, on terms acceptable to us, or at all. In addition, if our third-party
sub-contractors fail to maintain a stable team of qualified labor or are unable to access a stable
supply of qualified labor, the work process may be interrupted. Any interruption to the
sub-contractors’ work process may potentially result in a breach of the contract that we entered
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into with our customers for which we remain ultimately responsible. Any of such events could
materially and adversely affect our service quality, reputation, as well as our business, financial
position and results of operations.
Our business operations and financial performance have been and may continue to be
affected by the outbreak of COVID-19
Since December 2019, a growing number of countries and regions around the world,
including the PRC, have encountered outbreaks of COVID-19, a highly contagious disease
known to cause respiratory illness. On March 11, 2020, the World Health Organization made
the assessment that COVID-19 can be characterized as a pandemic. COVID-19 has
subsequently spread to over 100 countries and territories globally and the death toll and
number of infected cases are continuing to rise. The outbreaks have had an adverse impact on
the livelihood of people in, and the economy of, the PRC. In response to the COVID-19
outbreak, various measures have been implemented, including restrictions on travel and public
transport, prolonged closures of workplaces and public places, social-distancing measures and
mandatory quarantines, which have led to a noticeable reduction in regional and national
economic activities during the affected periods.
The outlook of the real estate market, economy slowdown, negative business sentiment
or other factors that we cannot foresee could potentially have an indirect impact on the property
management market and our business operation and financial condition may be adversely
affected. For instances, such events may disrupt our businesses and cause temporary
suspension or shortage of labor and sub-contracting services for our business operations, as
well as delays in construction, sales and delivery of properties for us to subsequently provide
property management and value-added services. For instance, for our property management
services relating to non-residential properties, certain property owners and tenants of the
relevant business premises, such as office buildings and shopping malls, had to temporarily
suspend their operations during the outbreak. For our value-added services to non-property
owners, due to the delay in construction, sales and marketing activities and delivery of some
of the property development projects by our customers caused by temporary lock-down in
response to the COVID-19 outbreak in the first half of 2020, we had experienced a relatively
slower growth in revenue from our value-added services to non-property owners. For our
community value-added services, we had experienced a slow-down in business for our platform
services for interior decoration as a result of the outbreak. In addition, if any of our employees
or workers of our sub-contractors were suspected of contracting or contracted an epidemic
disease, we may be required to quarantine some or all of our employees and sub-contracting
workers, disinfect the properties or even scale-down or close some of our business to prevent
the spread of the disease, and our operations and financial conditions could be adversely
affected. Further, according to the management account, in 2020 and the nine months ended
September 30, 2021, we had to incur additional expenses of RMB6.9 million and RMB1.5
million, respectively, for the disinfection of managed properties and the purchase of personal
protective equipment and sanitizing materials. During the first half of 2020, we incurred lower
selling and marketing expenses since we have been focusing on implementing and enhancing
hygiene and precautionary measures across the properties under our management and canceled
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most of the community events and activities as affected by the outbreak of COVID-19. For
further details of the impact of COVID-19 outbreak, see the section headed “Business —
Impact of the Outbreak of COVID-19 on Our Business”.
In addition, the outbreaks could cause disruption to our suppliers, subcontractors and
customers such as property developers and tenants. The operations of such suppliers,
subcontractors and customers could be disrupted by worker absenteeism, quarantines, or other
travel or health-related restrictions as a result of COVID-19 outbreak or concern over
COVID-19. If any of these suppliers, subcontractors and customers are so affected, they may
experience difficulties in maintaining their financial strength and performing their obligations
under their agreements with us, such as provision of services or payment obligations, the
failure of which may adversely affect our business and results of operations. In response, we
have increased our collection efforts of receivables. We also enhanced our supplier and
subcontractor management, and paid particular attention to their performance of contract
obligations during the pandemic when evaluating future engagement. However, there can be no
assurance that such response measures will be effective.
While there has been improvement in the COVID-19 situation in the PRC where we
operate, we are uncertain as to when the outbreak of COVID-19 will continue to be contained,
and we also cannot predict if the impact will be long-lasting. Furthermore, there is no assurance
that another major COVID-19 or other disease outbreak will not happen in the future. In
particular, the recent emergence of the Omicron virus variant, a COVID-19 virus variant which
is significantly more infectious than its predecessors, has created more uncertainties for our
business operations under the COVID-19 pandemic. This could materially and adversely affect
the overall business sentiment, cause our business to suffer in ways that we cannot predict and
affect our business, financial condition and results of operations. Over a longer term, if the
outbreak continues and impacts the broader economy, some of the property owners may face
difficulty in honoring their payment obligations under our property management contracts. If
any of these events eventuate, our business, financial condition and results of operations may
be adversely affected.
Individual projects may not be as profitable as expected due to unexpected costs,
unanticipated delays, early termination of engagements or undesirable results
When we submit proposals to bid for projects, we provide cost estimates. We believe
these estimates reflect our best judgment regarding the efficiencies of our methodologies and
professionals as we plan to deploy them on projects. Any increased or unexpected costs or
unanticipated delays in connection with these projects, including delays caused by factors
beyond our control, could make these projects less profitable or unprofitable, which would
have an adverse effect on our profitability. We suffered losses from certain property
management projects during the Track Record Period. For details, see “— Our business,
financial performance and prospects may be materially and adversely affected if we are unable
to control operating costs, and maintain or improve our level of profitability.”
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In addition, as large projects involve multiple engagements or stages, there is a risk that
clients may choose not to retain us for additional stages of a project or that clients may cancel
or delay their original operational plans or additional planned engagements. These
terminations, cancellations or delays could result from factors unrelated to our services
provided or the progress of the project, but could be related to business or financial condition
of the client or the economy generally. Our results of operation could suffer as a result.
We also undertake some major engagements where a portion of our compensation is tied
to the results of our services. Accordingly, if these engagements do not result in demonstrable
benefits to our clients, our profitability on these engagements will suffer.
Our business strategies are subject to uncertainties and risks, and therefore our future
growth may not materialize as planned
Our business strategies are based upon our assessment of market prospects and the current
information available to us. There can be no assurance that our assessment will turn out to be
correct at all times or we can grow our business as planned, and our related costs incurred may
not be recovered. Our business strategy may be affected by a number of factors beyond our
control. Such factors include changes to the PRC economic condition in general and the PRC
property management services market, in particular, government regulations or policies,
changes in supply and demand for our services as well as the competitive landscape. As a
result, there can be no assurance that our business strategies will be fully implemented, our
future growth will materialize and that we will be able to manage our future growth effectively
or sustain our profitability. Failure to do so would have a material adverse impact on our
business, prospects, financial condition and results of operations.
We are subject to the regulatory environment and measures affecting the PRC property
management and real estate industries
Our operations are affected by the regulatory environment and measures affecting the
property management industry in the PRC. In particular, the fees that property management
companies may charge in connection with property management services are subject to
regulation and supervision by relevant regulatory authorities in the PRC. For example, the
relevant price administration department and construction administration department of the
State Council are jointly responsible for the supervision over and administration of fees
charged in relation to property management services for preliminary property management
service contracts and such fees may need to follow PRC government guidance prices. Although
government-imposed price controls on property management fees may continue to relax over
time pursuant to the Circular of the National Development and Reform Commission on
Relaxing Price Controls in Certain Services (
)( [2014]2755 ), which became effective on December 17, 2014, the property
management fees we charge, such as those for preliminary property management service
contracts, may still need to follow guidance prices imposed by local governments in different
regions in China. In addition, if the property management fees we charge are not ratified by the
relevant PRC authorities or otherwise not in compliance with the relevant requirements for
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government guidance prices, we may be subject to applicable administrative penalties and our
property management fees in excess of the guidance price may be confiscated by the relevant
PRC authorities. For more information, see “Business — Property Management Services —
Property Management Fees — Pricing of Property Management Fees”. Government-imposed
limits and other regulatory requirement on property management fees could have a negative
impact on our earnings. In addition, the government from time to time publishes notices to
regulate the market orders and address the recent issues in the real estate and property
management industries. For example, in July 2021, the MOHURD, along with other
governmental agencies, jointly published the Notice on the Continuous Rectification and
Regulation of the Real Estate Market( 8
). The Notice addresses issues such as illegal construction activities, illegal
advertising in property development activities, failure to deliver agreed-on and quality
property management services and illegal use of common areas. We cannot guarantee that the
government regulations on property management fees and other matters concerning the
property management industry will not have an adverse effect on our business, financial
condition and results of operations, which may be material.
In addition, as we expand our business operations into new geographic regions and
broaden the range of services we perform, we are subject to an increasing number of provincial
and local rules and regulations for various aspects of our business operations. In addition, as
the size and scope of our operations had increased during the Track Record Period, the
difficulty of ensuring compliance with the various local property management regulations and
the potential for loss resulting from non-compliance have increased. If we fail to comply with
the related local regulations, especially in respect of new markets that we may be less familiar
with, we may be subject to penalties by the competent PRC authorities. The laws and
regulations applicable to our business, whether national, provincial or local, may also change
in ways that materially increase our costs of compliance, and restrict our ability to pass on such
costs to our end customers and any failure to comply could result in significant financial
penalties which could have a material adverse effect on our reputation, business, financial
position and results of operations.
Moreover, we may also be affected by the PRC government regulations on the real estate
industry. The PRC government had in the past introduced various restrictive measures to
discourage speculation in the real estate market and has exerted considerable direct and
indirect influence on the development of the PRC real estate industry by imposing industry
policies and other economic measures, such as control over the supply of land for property
development, control of foreign exchange, real estate financing and taxation. Through these
policies and measures, the PRC government may restrict or reduce property development
activities, place limitations on the ability of commercial banks to make loans to property
purchasers, impose additional taxes and levies on property sales and affect the delivery
schedule and occupancy rates of the properties we service. Any such governmental regulations
and measures may affect the PRC real estate industry, thus limiting our business growth and
resulting in a material adverse effect on our business, financial position and results of
operations. In particular, the PRC government may introduce other initiatives or implement
more stringent measures in the future, such as setting caps on certain debt ratios, with a view
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to controlling the increase of the debt levels in the real estate sector. For example, the PRC
government continues to implement stringent real estate industry policies, including the “two
centralized” land supply policy, and strengthens financial regulations. Such potential initiatives
or measures, once in place, may further limit property developers’ access to capital and slow
down the overall growth of the real estate sector and expansion of property developers,
including Jinmao Group (and its joint ventures and associates), which may in turn negatively
impact the growth of the property management industry and the supply of new properties for
management by property management companies like us, especially with respect to the
expansion of new contracts from Independent Third Party developers who may be more
sensitive to the potential changes at least in the short term. As such, our business, financial
condition and results of operations could be materially and adversely affected. For example,
the Standing Committee of NPC authorized the State Council to carry out pilot projects for the
Real Estate Tax Reform in certain regions on October 23, 2021, according to which real estate
tax is proposed to be imposed on land users and property owners of various types of properties
in the pilot regions, such as residential or non-residential properties, except for rural homestead
and buildings.
According to the symposium jointly held by the MOHURD and the PBOC in August
2020, the MOHURD and the PBOC proposed restrictive rules that limit the growth of real
estate companies’ interest-bearing debt and financing activities. The rules lay out three red line
standards on debt-to-asset ratio, net gearing ratio and cash to short-term debt ratio applicable
to property developers. For details, see “Industry Overview – Industry Growth Drivers –
Proposed regulations on three red line standards”. These rules may slow down the growth of
the whole real estate sector, affecting the expansion of property developers such as China
Jinmao and in turn imposing adverse impact on our growth. As of June 30, 2021, all of China
Jinmao’ relevant financial ratios as of June 30, 2021 did not exceed any of the aforementioned
three red line standards based on the interim results of China Jinmao for the six months ended
June 30 2021. Nevertheless, in the event that China Jinmao or other property developer
customers are unable to obtain sufficient financing to support their expansion of business
which results in a delay in the delivery of new properties to be managed by us, the growth of
our GFA under management, our business and financial condition may be materially and
adversely affected.
Our property management service contracts may have been obtained without going
through the required tender and bidding process
Under PRC laws and regulations, property developers are typically required to enter into
a preliminary property management service contract for residential properties with a property
management company through a tender and bidding process. A residential property developer
may be required to take rectification measures within a prescribed period and would be fined
if it fails to comply with such tender and bidding requirements under PRC laws for entering
into preliminary property management service contracts. In addition, a public tender process
may also be required under PRC laws and regulations for PRC government, public institutions
and bodies with public fiscal funds to engage property management service providers for
management of properties, such as government buildings and public service facilities.
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The percentage of contracted GFA or revenue generated from projects without going
through the required tender and bidding process of the total contracted GFA or revenue is
minimal. We cannot assure you that we would obtain the preliminary property management
service contracts by going through the required tender and bidding process under PRC laws,
especially where such tender and bidding process needs to be initiated by the relevant property
developers. As advised by our PRC Legal Advisers, there are currently no specific laws and
regulations in the PRC which set out administrative penalties upon property management
companies for failing to enter into preliminary property management service contracts with
property developers through a required tender and bidding process. However, as further
advised by our PRC Legal Advisers, such preliminary property management service contracts
may be determined to be invalid by the local judicial authorities depending on the
circumstances of the case. If such events occur, the relevant property developer may need to
organize a tender and bidding process to select a property management service provider for the
relevant property management projects. If we do not win the tender and bidding, we may not
continue our property management services for the relevant projects and, as a result, our
revenue and business may be negatively impacted.
We are in a competitive business with various competitors and if we do not compete
successfully against existing and new competitors, our business, financial position, results
of operations and prospects may be materially and adversely affected
The PRC property management industry is competitive and fragmented. See “Industry
Overview — Competition”. Our major competitors include national and regional property
management companies. Competition may intensify as our competitors expand their service
offerings or as new competitors enter our existing or new markets. We compete with our
competitors on a number of factors, including operation scale, service quality and price,
customer base, technical capabilities, brand recognition and financial resources. Our
competitors may have better track records, longer operating histories and greater financial,
technical, sales, marketing and other resources, as well as greater brand recognition and larger
customer bases. As a result, these competitors may be able to devote more resources to the
development, promotion, sale, and support of their services. Some of our competitors are also
part of corporate group developers and therefore enjoy similar advantages in tendering for
projects developed by their affiliates and limiting our ability to compete for such opportunities.
In addition to competition from established competitors, emerging companies may enter the
property management industry in our existing or new markets offering terms that may be
disruptive to the market. The emerging companies may have stronger capital resources and
greater financial and technological resources compared to us. There can be no assurance that
we will be able to continue to compete effectively or maintain or improve our market position,
and such failure could have a material adverse effect on our business, financial position and
results of operations.
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We believe our current success can be partially attributed to our standardization and smart
management of operations in providing our services. We plan to continue with such efforts to
enhance the quality and consistency of our services, improve our service efficiency and reduce
costs. Our competitors may emulate our business model, and we may lose competitive
advantages that have distinguished ourselves from our competitors. If we fail to continue to
improve such practices or be innovative in our service provisions and operations, we may not
be able to compete successfully in the market. If we do not compete successfully against
existing and new competitors, our business, financial position, results of operations and
prospects may be materially and adversely affected.
Brands are our key assets and affect how we are perceived in the market. Any
inappropriate use of any of “Jinmao Property Management Service” ( ) or related
trade names or trademarks and deterioration in the “Jinmao Property Management
Service” ( ) brand image could adversely affect our business
Brands are our key assets. We provide property management services and value-added
services under the trade name of “Jinmao Property Management Service” ( ). Our
ability to attract and retain customers is highly dependent upon the external perceptions of our
level of service, trustworthiness, business practices, management, workplace culture, financial
condition, our response to unexpected events and other subjective qualities. The success of our
business depends substantially upon our continued ability to increase brand recognition and
further grow brand equity. Our reliance on third party service providers for certain operations
may also pose a risk to our overall brand image. See “Risk Factors — We are exposed to risks
associated with engaging third-party sub-contractors to perform certain property management
services and value-added services”.
As certain trade names such as
, and are shared by us and
members of Jinmao Group, if we or these entities or our or their respective directors,
management personnel or other employees take action that damages such brand names or
corporate image, or if any material negative publicity is associated with any of them, for
example, as a result of regulatory investigations into, or other proceedings involving,
wrongdoing or corrupt practices engaged in by any such entity or person, our brand image and
reputation as well as our market value may be adversely affected.
Meanwhile, unauthorized use of our brand names or related trademarks could diminish
the value of our brands, market reputation and competitive advantages. Negative perceptions
or publicity regarding these matters, even if related to seemingly isolated incidents and whether
or not factually correct, could erode trust and confidence and damage our reputation among
existing and potential clients, which could make it difficult for us to attract new customers and
maintain existing ones.
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We believe our continued success depends on our ability to preserve, grow and leverage
the value of such brands. The protection of our brands, including related trademarks, may
require the expenditure of significant financial and operational resources. Moreover, the steps
we take to protect our brands may not adequately protect our rights or prevent third parties
from infringing or misappropriating our trademarks. Even when we detect infringement or
misappropriation of our trademarks, we may not be able to enforce all such trademarks. Any
unauthorized use by third parties of our brands may adversely affect our brands. Furthermore,
as we continue to expand our business, there is a risk that we may face claims of infringement
or other alleged violations of third-party intellectual property rights, which may restrict us
from leveraging our brands in a manner consistent with our business goals.
Our business is subject to third-party payment platform processing related risks
We accept payments through a variety of methods, including payments with credit cards
and debit cards issued by banks in the PRC, as well as payments through third-party online
payment platforms. For certain payment methods, including credit and debit cards, we may pay
interchange and other fees, which may rise over time, thereby increasing our operating costs.
We may also be subject to fraud and other illegal activities in connection with the various
payment methods we use, including e-commerce payment options. We are also subject to
various rules and requirements, regulatory or otherwise, governing electronic funds transfers,
which are subject to change or reinterpretation that could make it difficult or impossible for us
to comply with. If we fail to comply with these rules or requirements, we may be subject to
fines and higher transaction fees and lose our ability to accept credit and debit card payments
from customers, process electronic funds transfers or facilitate other types of online payments,
and our business, financial position and results of operations could be adversely affected.
Moreover, transactions conducted through third-party payment platforms involve the
transmission of confidential information such as credit card numbers, personal information and
billing addresses over public networks. In recent years, the use of third-party payment
platforms in China has grown in parallel with consumer confidence in their security and
efficiency. However, we do not have control over the security measures taken by providers of
our third-party payment platforms. In the event that the security and integrity of these
third-party payment platforms are compromised, we may experience material adverse effects
on our ability to process property management service fees or third-party claims on funds
transferred to us from such payment platforms. We may also be perceived as partially
responsible for failures to secure personal information and be subjected to claims alleging
possible liability brought by our customers. Furthermore, the PRC government may yet
promulgate new laws and policies to regulate the use of third-party payment platforms; such
measures may increase our compliance and operational costs, for example by requiring that we
pay higher transaction fees.
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Some of our community value-added services were recently launched with limited history
Some of our community value-added services were recently launched, such as new retail
services and community space operation services. We have limited experience in operating
such businesses in a competitive market. We have encountered and expect to continue to
encounter risks and difficulties frequently experienced in relation to new business offerings,
and those risks and difficulties may be heightened in a rapidly evolving market. Some of the
risks may affect our ability to:
• retain customers and qualified employees;
• maintain stable cooperation with strategic partners to offer certain businesses, such
as home improvement services;
• maintain effective control of our development as well as operating costs and
expenses;
• develop and maintain internal personnel, systems, controls and procedures to
comply with the extensive regulatory requirements applicable to the relevant
industries;
• respond to competitive market conditions in the relevant industries or build the scale
of these value-added services; and
• respond to changes in our regulatory environment.
Our failure to achieve any of the above may jeopardize our ability to offer newly
introduced community value-added services, as well as other new service offerings we plan to
launch, which in turn would cause an adverse effect on our business and prospects, and
financial position, results of operations and cash flows.
Our community value-added services may not grow as planned and the development of
our online service platform may not be successful
We plan to grow our community value-added services by expanding our service offerings
and customer base. For further information on our community value-added services, see
“Business — Community Value-added Services”. However, there is no assurance that we could
grow such business as planned, and our related costs incurred may not be recovered. We need
to recruit qualified employees with relevant experience to grow our community value-added
services. As the market is competitive, there is no assurance that we will be able to recruit
sufficient number of qualified employees to support our growth plan. In addition, the
development of community value-added services also relies on our ability to tap our existing
customer base from our managed properties for community value-added services, as well as our
ability to identify and explore business partners with suitable products and services to be
offered through our community value-added services. However, our current planning may be
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changed or certain community value-added services that we plan to offer may not materialize
due to changes in demand from customers and market trends. If our community value-added
services fail to attract our customers or satisfy their needs, or prove to be otherwise
unsatisfactory, and we fail to grow our community value-added business as planned, our results
of operations, profitability and business prospects could be adversely affected.
In addition, we utilize our online service platform, mainly comprising our “Home ( )”
mobile application, as the gateway for users to access our services both online and offline with
a view to enhancing customer experience and loyalty, as well as our brand recognition. The
future development of such service platform depends on our ability to enhance the
functionality of such service platform, as well as our ability to stay abreast of emerging
life-style and consumer preferences to attract and appeal to users. We cannot assure you that
our users will be able to have access to their desired products and services through our service
platform, which may result in users losing interest in our service platform and thus using our
service platform less frequently. Any of the foregoing may adversely affect our business, our
results of operations and our financial position.
We are exposed to liability and reputational risks in relation to work safety and
occurrence of accidents
Work injuries and accidents may occur during the ordinary course of our business. For
instance, certain repair and maintenance services performed by our employees or third-party
sub-contractors may involve the handling of tools and operation of heavy machinery and
therefore, are subject to inherent occupational risk of accidents. Our ability to balance such
risks is limited as the repair and maintenance of hazardous facilities such as elevators and fire
control systems is part of the property management business. Hence, we are exposed to risks
in relation to work safety, including but not limited to claims for injuries, fatal or otherwise,
sustained by our employees or sub-contractors. Such occurrences may also result in damage to,
or destruction of, properties of the communities. In addition, we are exposed to claims that may
arise due to employees’ or third-party sub-contractors’ negligence or recklessness when
performing our services and we may be held liable for the losses which may subsequently
damage our reputation within the property management industry. We may also experience
business disruptions and be required to implement additional safety measures or modify our
business procedures and/or model as a result of any governmental or other investigations. Any
of the foregoing could adversely affect our reputation, business, financial position and results
of operations.
We, our shareholders and affiliates, our customers and suppliers and other parties that
have collaborative relationships with us are subject to governmental economic and trade
sanctions laws that could subject us or them to liability
We, our shareholders and affiliates, our customers and suppliers and other parties that
have collaborative relationships with us are subject to various economic and trade sanctions
laws. For example, U.S. economic sanctions prohibit the provision of products and services to
countries, governments, and persons targeted by U.S. sanctions. United Kingdom financial
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sanctions and European Union sanctions also have similar regime to prohibit the provision of
products and services to countries, governments and persons on their respective target list. In
addition, political tensions between the U.S. and China have escalated in recent years, and the
United States has threatened to impose further sanctions, export controls, trade embargoes, and
other heightened regulatory requirements on China and Chinese companies for alleged
activities both inside and outside of China. Sinochem Group Co., Ltd., the controlling
shareholder of Jinmao Group, was identified as an entity on the CCMC List by the US
Government on November 12, 2020, and was subsequently removed from the list in June 2021.
If we, our shareholders and affiliates, our customers and suppliers or other parties that
have collaborative relationships with us become targeted under sanctions, trade or export
control restrictions, this may result in significant interruption in our business, regulatory
investigations and reputational harm to us. Our failure to employ appropriate safeguards with
respect to customers, suppliers or business partners located in countries that are targets of
governmental economic sanctions may result in a violation of such laws and regulations.
Non-compliance with applicable governmental economic and trade sanctions laws could
subject us to adverse media coverage, investigations, severe administrative, civil and possibly
criminal sanctions, and expenses related to remedial measures and legal expenses, which could
materially and adversely affect our reputation, business, financial condition, results of
operations and prospects.
We may fail to effectively implement our risk management and internal control policies
and procedures or detect and prevent any fraud, negligence or other misconduct
committed by our employees, sub-contractors, customers or other third parties
We are exposed to fraud, negligence or other misconduct committed by our employees,
sub-contractors or other third parties that could subject us to financial losses and sanctions
imposed by governmental authorities as well as harm to our reputation. Examples of such
behavior include crimes such as theft, vandalism, embezzlement and bribery. We have
established risk management and internal control systems consisting of policies and procedures
that are designed to identify, assess and manage risks arising from our operations and monitor
our overall compliance. Details on risk categories identified by our management, internal and
external reporting mechanism, remedial measures and contingency management have been
codified in our policies. Our risk control department is responsible for supervising the
compliance with our internal control and risk management policies and will timely conduct
routine inspections and report for any non-compliance to ensure our compliance with relevant
laws and regulations.
However, we cannot assure you that our risk management and internal control systems
will always enable us to identify non-compliance and/or suspicious transactions in a timely
manner, or at all, or that they will always enable us to detect, prevent and take remedial
measures in relation to fraud, negligence or other misconduct (accidental or otherwise)
committed by our employees, subcontractors or other third parties in a timely and effective
manner. Moreover, although we may have limited control over the behavior of these parties,
we may be viewed as at least partially responsible for their conduct on contractual or tortious
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grounds or be targeted for litigations or proceedings for strategic reasons. We may become, or
be joined as, a defendant in litigation or other administrative or investigative proceedings and
be held accountable for injuries or damages sustained by our customers or other parties. To the
extent that we cannot recover related costs from the employees, sub-contractors or other third
parties involved, we may experience material adverse effects on our business, financial
position and results of operations. We may also attract negative publicity, damaging our
reputation and brand value or placing us in a position where we may be required to compensate
the injured parties even in the absence of a legal requirement to do so.
Damage to the common areas of the properties we manage may adversely affect our
business, results of operations and financial position
The common areas of the properties we manage may suffer damage as a result of
occurrences beyond our control, including but not limited to natural disasters, accidents or
intentional damage. Where the damage is caused by natural disasters such as earthquakes,
floods or typhoons, or accidents or intentional harm such as fires, the damage caused may be
material and extensive. Although a residential community is required under PRC laws to
establish a special fund to pay for the repair and maintenance costs of common areas, there is
no guarantee that such fund will be sufficient.
As the property management service provider, we may be viewed as responsible for
restoring the common areas and at times we need to allocate additional resources to assist the
police and other governmental authorities in investigating criminal actions that may have been
involved in connection with damage caused to the common areas. In the event that there is any
shortfall in the special funds necessary to cover all the costs involved, we may have to
compensate for the difference and fix the damages with our own resources first before we
attempt to collect the amount of the shortfall from the property owners, property developers
and residents later on. To the extent that our attempts are unsuccessful, we may experience
material adverse effects on our business, financial position and results of operations. As we
intend to continue growing our business, the likelihood of such occurrences may rise in
proportion to any increases in the number of our managed properties and the expansion of our
geographic coverage. Moreover, we may expand into markets that are geographically located
in areas susceptible to natural disasters, such as earthquakes or typhoons.
Accidents or injuries suffered by our residents, our employees or other personnel at
properties under our management may adversely affect our reputation and subject us to
liabilities
We could be held liable for accidents or injuries or other harm to residents or other people
at properties under our management, including those caused by or otherwise arising in
connection with property facilities or employees. We could also face claims alleging that we
were negligent, or that we provided inadequate maintenance to property facilities or
inadequately supervised our employees and therefore may be held liable for accidents or
injuries suffered by our residents or other people at properties under our management. We have
implemented a series of risk management policies in terms of personal safety in order to
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effectively reduce risk of injuries or fatalities. These policies cover areas such as general
security, fire safety and safety equipment management. We regularly inspect electricity and
other common area utility equipment to early-detect and repair wear and tear. We routinely
hold training and information sessions on various aspects of safety management which improve
our staff’s safety awareness and provide clear guidance on ensuring personal safety. In
addition, we maintain certain liability insurance. However, these policies and insurance
coverage may not be adequate to fully protect us from these kinds of incidents and the resulting
claims and liabilities. A liability claim against us or any of our employees could adversely
affect our reputation. Further, such a claim may create unfavorable publicity, cause us to pay
compensation, incur costs in defending such claim and divert the time and attention of our
management, all of which may have a material adverse effect on our business, prospects,
financial condition and results of operations.
Negative publicity, including adverse information on the internet, about us, our
Shareholders and affiliates, the properties we manage, our brand, management and other
aspects of our business operations may have a material adverse effect on our business,
reputation and the trading price of our Shares
Negative publicity about us, our Shareholders and affiliates, the properties we manage,
our brand, management and other aspects of our business operations may arise from time to
time. They may appear, among other things, in the form of comments on internet postings and
other media sources, and we cannot assure you that other types of negative publicity will not
arise in the future. For example, if our services fail to meet our customers’ needs or
expectations in any way, our customers may disseminate negative comments about our services
on social media platforms. Our sub-contractors may also become the subject of negative
publicity for various reasons, such as customer complaints about the quality of their services.
In addition, third-party merchants we cooperate with in connection with the value-added
services we provide may also be subject to negative publicity as a result of customers’
complaints about the quality of their products and services. Any public relation incidents with
respect to such business partners may adversely affect the provision of products or services for
our value-added services and indirectly affect our reputation. Moreover, negative publicity
about other service platforms for property management services or value-added services in
China may arise from time to time and cause customers to lose confidence in the operations
of our service platform. Such occurrences, regardless of veracity, may damage our reputation
and we may lose customer confidence. In the long term, this would affect our future ability to
attract and retain new customers and employees. We may suffer material adverse effects to our
business and brand that in turn reduce the trading price of our Shares and diminish our
competitive position.
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Our business may be adversely affected if we fail to obtain, or experience material delays
in obtaining requisite government approvals or licenses in carrying out our operations
We are required to obtain and maintain governmental approvals in the form of licenses,
permits and certificates or complete certain registrations or filings for our business operations,
which, in general, are only issued or renewed after certain conditions have been satisfied. We
cannot guarantee that we will not encounter material delays or difficulties in fulfilling the
necessary conditions to obtain and/or renew all necessary governmental approvals for our
operations in a timely manner, or at all. Moreover, we anticipate that the PRC governmental
authorities will promulgate new laws, regulations and policies in relation to the conditions for
issuance or renewal of these governmental approvals from time to time and we cannot
guarantee that we will be able to adapt to and meet these new conditions for us to obtain and/or
renew the relevant governmental approvals in a timely manner, or at all. Loss of or failure to
obtain or renew our permits, licenses and certificates necessary for our business operations,
may stall our business development plans and operations, increase our compliance costs and
leading to adverse impact on our business, financial condition and results of operations.
As we charged higher average property management fees to Jinmao Group and its joint
ventures and associates compared to Independent Third Party property developers
during the Track Record Period, our profitability may decrease if we reduce reliance on
Jinmao Group or its joint ventures and associates in the future
Historically, we charged higher average property management fees for residential
properties developed by Jinmao Group and joint ventures and associates of Jinmao Group
compared to those developed by independent third-party property developers. As of December
31, 2018, 2019 and 2020 and September 30, 2021, our average property management fee per
sq.m. was RMB3.41, RMB3.43, RMB3.56 and RMB3.46, respectively, for residential
properties developed by Jinmao Group. In the same periods, our average property management
fee per sq.m. was RMB3.83, RMB3.93, RMB3.73 and RMB3.46, respectively, for residential
properties developed by Jinmao Group’s joint ventures and associates. By contrast, as of
December 31, 2020 and September 30, 2021, our average property management fee per sq.m.
was RMB2.62 and RMB3.37, respectively, for residential properties developed by independent
third-party developers. We did not provide property management services to third-party
property developers in 2018 and 2019.
While we plan to continue to work with Jinmao Group and its joint ventures and
associates, we also plan to increase our efforts to obtain new engagements for properties
developed by independent third-party property developers. However, we cannot assure you that
properties developed by independent third-party property developers will be as of high quality
as the ones developed by Jinmao Group and its joint ventures and associates. As we continue
to expand our business operations by exploring opportunities with independent third-party
property developers and increasing the percentage of revenue from property management
services to properties developed by independent third-party developers, if the properties under
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management developed by independent third-party developers are located in lower tier cities,
and/or of lower classification such that high management fees cannot be charged, and/or if they
are not profitable, our results of operations in terms of profitability may be materially
adversely affected.
Our success depends upon the retention of our senior management, as well as our ability
to attract and retain qualified and experienced employees
Our continued success is highly dependent upon the efforts of our senior management
who have constantly contributed to our business operations, financial performance, as well as
technical and administrative capabilities. For their biography and industry experience, see
“Directors and Senior Management”. Our success is also dependent upon other key employees,
including our regional head and the head of departments at our headquarters level. If any of our
senior management or other key employees leaves and we are unable to promptly hire and
integrate a qualified replacement, our business, financial position and results of operations may
be materially and adversely affected. Unexpected resignations may also leave key operations
without supervisors and materially and adversely affect the implementation of our business
strategies.
In addition, the future growth of our business will depend, in part, on our ability to attract
and retain qualified personnel in all aspects of our business, including but not limited to
corporate management and property management personnel. If we are unable to attract and
retain these qualified personnel, our growth may be limited and our business, financial position
and operating results could be materially and adversely affected.
We have incurred and may continue to incur equity-settled share option expenses. The
issuance of share options may cause dilution to our existing shareholders and may affect
the market price of our shares
In 2018, 2019, 2020 and the nine months ended September 30, 2020 and 2021, we
recognized equity-settled share option expenses in our consolidated statement of profit or loss
of RMB1.0 million, RMB3.8 million, RMB3.6 million, RMB2.7 million and RMB1.3 million
in connection with the grant of share options to certain management of our Group pursuant to
the share option scheme of Jinmao Group in order to provide incentives and rewards to them.
For details for our equity-settled share option expenses, see Note 29 to the Accountants’ Report
in Appendix I to this prospectus.
Equity-settled share option expenses have affected our net profit and may reduce our net
profit in the future, and any additional share options to be issued pursuant to any share option
schemes that may be adopted by us will dilute the ownership interests of our existing
Shareholders and could result in a decline in the value of our Shares.
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We may experience failures in or disruptions to our information technology systems
We rely on our information technology systems to manage key operational functions such
as processing financial data and facilitating communications, and to provide services to
customers through online service platform(s). We cannot assure you that damages or
interruptions caused by power outages, computer viruses, hardware and software failures,
telecommunication failures, fires, natural disasters, security breaches and other similar
occurrences relating to our information systems will not occur from time to time. We may, as
a result, experience occasional system interruptions, delays or other technical problems that
would adversely affect our business operations or render our services unavailable or difficult
to access, and prevent us from promptly responding or providing services to our customers,
which may compromise our reputation and reduce the attractiveness of our services. In
addition, we may incur significant costs in restoring any damaged information technology
systems. If we are unable to effectively maintain and upgrade our systems and network
infrastructure and take steps necessary to improve the efficiency of our systems, there may be
system interruptions or delays which would adversely affect our business operations on an
ongoing basis. Moreover, our services utilizing any online platform, such as mobile
applications, are subject to security risks, including security breaches and identity theft. We
must be able to provide secured transmission of confidential information over public networks
when providing such services. Any penetration of network security or other misappropriation
or misuse of personal information could cause interruptions in the operations of our business
and subject us to increased costs, litigation and other liabilities, which could negatively affect
our financial and operating results and damage our reputation. Failures in or disruptions to our
information technology systems and loss or leakage of confidential information could cause
transaction errors, processing inefficiencies and the loss of customers and business and could
subject us to liabilities. We may thus experience material adverse effects on our business,
results of operations and prospects.
Our failure to protect confidential information of our customers, employees and third
parties or our information technology systems against security breaches, any actual or
perceived failure by us or third parties to comply with applicable data protection laws and
regulations or privacy policies could harm our business, financial condition and results of
operations
During the course of our business, in particular but without limitation, through the
operations of our information technology systems including our online service platform, we
may from time to time collect and use personal data such as addresses and phone numbers and
other information from our customers, employees, and third parties. We also, in the course of
business, collect information such as video and still photographs, text and voice messages, and
other material which may include personal data or sensitive information about such persons.
Our data security measures may be breached due to employee error, malfeasance, system errors
or vulnerabilities, or otherwise. Outside parties may also attempt to fraudulently or otherwise
wrongfully induce employees to disclose sensitive information in order to gain access to the
data we collect. While we have taken steps to protect the confidential information that we have
access to, our data security measures could be breached. As techniques used to sabotage or
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obtain unauthorized access to systems change frequently and generally are not recognized until
sometime after they are launched against a target, we may be unable to anticipate these attacks
or to implement adequate preventative measures. Any accidental or willful security breaches
or other unauthorized access to our systems and platforms could cause confidential customer
and other third party information to be leaked and used for unlawful purposes. Security
breaches or unauthorized access to confidential information could also expose us to liability
related to the loss of the information, time-consuming and expensive litigation and negative
publicity. If security measures are breached because of third-party action, employee error,
malfeasance or otherwise, or if design flaws in our technology infrastructure are exposed and
exploited, our reputation and brand could be severely damaged and we could incur significant
liability which may have a material adverse impact on our business, financial condition and
results of operations.
Laws and regulations related to cyber security are relatively new and evolving in the PRC,
and their interpretation and enforcement involve significant uncertainties. The evolving PRC
regulations regarding (i) data collection, usage and transfer; and (ii) cyber security may lead
to future restrictions and the establishment of new regulatory agencies, and we may bear more
legal responsibilities and compliance costs, which may have an adverse effect on our prospects.
On June 10, 2021, the Standing Committee of the National People’s Congress promulgated the
PRC Data Security Law, which came into effect in September 2021. The Data Security Law
provides for a security review procedure for the data activities that may affect national security.
On January 4, 2022, the CAC and other twelve PRC regulatory authorities jointly revised the
Measures which came into effect on February 15, 2022. The Measures requires that if a CIIO
anticipates that its procurement of network products and services affect or may affect national
security after the network products and services being put into use, it shall apply for
cybersecurity review to the Cybersecurity Review Office. In addition, Network Platform
Operators possessing personal information of more than 1 million users that seek for listing in
a foreign country are obliged to apply for a cybersecurity review by the Cybersecurity Review
Office. See “Regulations — Legal Supervision over the Internet Information Services —
Information Security.” However, the Measures provide no further explanation or interpretation
for “listing in a foreign country”. As advised by our PRC legal advisors, substantial
uncertainties exist with respect to the interpretation and applicability of the Measures,
especially the criteria for the determination of the risks that “affect or may affect national
security” based on the factors set out in Article 10 of the Measures, we cannot preclude the
possibility that the risk factors may apply to us as network platform operators and we may need
to conduct cybersecurity review. In addition, on November 14, 2021, the CAC published a
discussion draft of Regulations on the Administration of Cyber Data Security (Draft for
Comments) ( ( ) ) (the “Draft Regulations”), which
regulates the specific requirements in respect of the data processing activities conducted by
data processors through internet in the view of personal data protection, important data safety,
data cross-broader safety management and obligations of internet platform operators. As
advised by our PRC Legal Advisors, we are classified as data processors under the Draft
Regulations and shall comply with the relevant requirements under the Draft Regulations after
its official adoption (assuming if it is implemented in its current form). Furthermore, the Draft
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Regulations not only reiterates that a data processor which processes personal information of
more than one million persons and is applying for listing in foreign countries should apply for
the cybersecurity review, but also specifically requires that if the listing in Hong Kong by a
data processor affects or may affect national security, the data processor shall apply for
cybersecurity review in accordance with the relevant PRC laws and regulations. See
“Regulations — Legal Supervision over the Internet Information Services — Information
Security” for further information. There have been no clarifications from the authorities as to
the standards for determining such activities that “affects or may affect national security”. The
Draft Regulations were released for public comment only and its operative provisions and the
anticipated adoption or effective dates may be subject to change with substantial uncertainty.
It also remains uncertain whether the future regulatory changes would impose additional
restrictions on companies like us. We cannot predict the impact of the Measures and the Draft
Regulations, if any, at this stage, and we will closely monitor and assess any development in
the rule-making process. If the enacted version of the Draft Regulations mandates clearance of
cybersecurity review and other specific actions to be completed by companies like us, we face
uncertainties as to whether such clearance can be timely obtained, or at all. If we are not able
to comply with the cybersecurity and data privacy requirements in a timely manner, or at all,
we may be subject to government enforcement actions and investigations, fines, penalties,
suspension of our non-compliant operations, removal of our app from the relevant application
stores, or revocation of our business licenses and permits, among other sanctions, which could
materially and adversely affect our business and results of operations.
We may need to make allowance for impairment of prepayments, other receivables and
other assets
As of December 31, 2018, 2019 and 2020 and September 30, 2021, our current portion
of prepayments, other receivables and other assets was RMB440.5 million, RMB544.6 million,
RMB644.2 million and RMB515.8 million; our non-current portion of prepayments, other
receivables and other assets was RMB1,215.6 million, RMB1,086.0 million, RMB941.6
million and RMB3.4 million as of the same dates, respectively. Our prepayments, other
receivables and other assets mainly include (i) amounts due from related parties, (ii) deposits
of ABS arrangement, (iii) prepayments primarily in relation to utility fees and lease payments,
(iv) deposits placed for contract performance, tender and bidding process and leases, (v)
advances to employees, and (vi) payments on behalf of residents and tenants, and (vii) others.
Amounts due from related parties mainly represent: (i) advances to related parties which are
non-trade in nature, (ii) receivables in relation to payments made on behalf of related parties,
(iii) interest receivable in relation to loans to related parties, and (iv) performance guarantees
and bidding guarantees placed with related parties.
There is no guarantee that related parties, suppliers and service providers will perform
their obligations in a timely manner, and we are subject to credit risk in relation to
prepayments, other receivables and other assets. We make allowance for impairment of
prepayments, other receivables and other assets when we determine the chances of recovering
the relevant amounts due are remote. We conduct assessments on the recoverability of
prepayments, other receivables and other assets based on, among others, our historical
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settlement records, our relationship with relevant counterparties, payment terms, current
economic trends and to a certain extent, the larger economic and regulatory environment,
which involve the use of various judgments, assumptions and estimates by our management.
The balance of our allowance for impairment of prepayments, other receivables and other
assets was RMB0.9 million, RMB1.7 million, RMB1.6 million and RMB2.1 million as of
December 31, 2018, 2019 and 2020 and September 30, 2021, respectively. As our
management’s estimates and related assumptions were made in accordance with information
available to us at the time the allowance was determined, there is no assurance that our
expectations or estimates will remain accurate for the future. If we are not able to recover the
amount as scheduled, we may need to make allowance for impairment of prepayments, other
receivables and other assets and our business, financial position and results of operations may
be adversely affected.
We may fail to recover payments on behalf of property owners of the properties managed
on a commission basis
For the years ended December 31, 2018, 2019 and 2020 and the nine months ended
September 30, 2020 and 2021, revenue generated from our property management services on
a commission basis accounted for 3.2%, 1.3%, 1.5%, 1.0% and 1.3%, respectively, of our total
revenue from property management services. When we are contracted to manage communities
on a commission basis, we essentially act as an agent of the property owners and residents. As
at the end of a reporting period, if the working capital of a management office accumulated in
our treasury function is insufficient to cover the expenses the management office has incurred
and paid through our treasury function to arrange for property management services at the
relevant community, the shortfall is recognized as other receivables subject to impairment.
Estimates may need to be made on whether or not the management offices have the ability
to settle payments on behalf of property owners and whether there is any objective evidence
of impairment, taking into account factors such as the likelihood of subsequent settlement and
write-off amounts, if any. If a residential community consistently carries account payables that
are higher than their account receivables, this indicates to us that the payments made on the
behalf of those property owners and residents may have lower recoverability.
Our management estimates and the assumptions on which they are based have been made
with information currently available to us, and they may have to be adjusted if new information
becomes known. There is also a limited amount of publicly available information to facilitate
making these estimates and assumptions. In the event that actual recoverability is lower than
initially expected, or that our allowance for bad debts becomes insufficient in light of new
information, we may need to increase our allowances and thereby suffer material adverse
effects on our business, financial position and results of operations.
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There are uncertainties about the recoverability of our deferred tax assets, which could
adversely affect our results of operations
We recorded deferred tax assets of RMB1.6 million, RMB1.6 million, RMB2.5 million
and RMB4.1 million, respectively, as of December 31, 2018, 2019 and 2020 and September 30,
2021. We periodically assess the probability of the realization of deferred tax assets, using
significant judgments and estimates with respect to, among other things, historical operating
results, expectations of future earnings and tax planning strategies. In particular, deferred tax
assets can only be recognized to the extent that it is probable that future taxable profits will
be available against which the unused tax credits can be utilized. However, we cannot assure
you that future earnings will be consistent with our current expectations, which could prove to
be inaccurate due to factors beyond our control, such as general economic conditions and
negative developments in the regulatory environment. If our future earnings are not consistent
with our current expectations, we may not be able to recover our deferred tax assets which
could have an adverse effect on our results of operations.
Our failure to protect our intellectual property rights could have a negative impact on our
business and competitive position
We have registered and were in the process of registering a number of intellectual
property rights in the PRC as of the Latest Practicable Date. We consider these intellectual
properties to be essential business assets and key to customer loyalty and essential to our future
growth. The success of our business depends substantially upon our continued ability to use
any of our brand, trade names and trademarks to increase brand recognition and to further
develop our brand. The unauthorized reproduction of our trade names or trademarks could
diminish the value of our brand and our market reputation and competitive advantages. For
details, see “Business — Intellectual Property Rights”. Our measures to protect intellectual
property rights may afford limited protection and policing unauthorized use of proprietary
information can be difficult and expensive. In addition, enforceability, scope and validity of
laws governing intellectual property rights in the PRC are uncertain and still evolving, and
could involve substantial risks to us. If we were unable to detect unauthorized use of, or take
appropriate steps to enforce, our intellectual property rights, it could have a material adverse
effect on our business, operating results and financial position.
We have been licensed by Jinmao Group to use several of its trademarks for our operation
on a non-transferable and royalty-free basis. For details, see “Business — Intellectual Property
Rights” and “Connected Transactions — Continuing Connected Transactions which are fully
exempt from the reporting, annual review, announcement, circular and independent
Shareholders’ approval requirements — Trademark License Deed”. If the relevant licensor(s)
cease to authorize such trademarks to us, our business, financial position and results of
operations may be materially and adversely affected. We are also exposed to the risk that a
third-party may successfully challenge the licensor’s ownership of, or our right to use, the
relevant licensed trademarks or if a third-party uses such trademarks without authorization.
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Third parties may assert or claim that we have infringed their intellectual property rights,
which may disrupt and affect our business
We cannot assure you that we will be successful in registering any of our intellectual
properties, or that our operations or any aspects of our business do not or will not infringe upon
or otherwise violate trademarks, patents, copyrights, know-how or other intellectual property
rights held by third parties, or otherwise violate any laws of applicable jurisdictions. We may
be challenged by third parties, including competitors as well as other entities or individuals,
for infringement of their intellectual property rights, including, without limitation,
unauthorized use of software and software piracy. We may not be fully aware of other parties’
intellectual property rights involved in our systems, applications and business operations and
there may be third-party trademarks, patents, copyrights, know-how or other intellectual
property rights that are infringed by our services or other aspects of our business without our
awareness. To the extent that our employees or other parties use intellectual property owned
by others in their work for us, disputes may arise as to the rights in related know-how and
inventions. Any liability claim in relation to intellectual property rights that is made or
threatened to be made against us in the future, regardless of its merits, could result in costly
litigation and strain our administrative and financial resources. We may have to incur
considerable time and costs in dealing with any claims, disputes or litigation, and if they are
successful, we may be subject to substantial damages, royalty payments, restrictions from
conducting our business and other stringent requirements unfavorable to our business and
operations. We may also be required to indemnify other parties or pay settlement costs, and to
obtain licenses, modify applications or refund fees, each of which may be expensive and
time-consuming. Such processes may create a distraction for our management which could
affect our business operations. Additionally, the interpretation and application of the
intellectual property right laws and the procedures and standards for granting intellectual
property rights in China are uncertain and still evolving, and we cannot assure you that PRC
courts or regulatory authorities would agree with our analysis. If we were found to have
violated the intellectual property rights of others, we may be subject to liability for our
infringement or may be prohibited from using such intellectual property, and we may incur
licensing fees or be forced to develop alternatives of our own. As a result, our business and
results of operations may be materially and adversely affected.
Our insurance may not sufficiently cover, or may not cover at all, losses and liabilities we
may encounter
We maintain certain insurance coverage, primarily public liability insurance to cover
liabilities for damages suffered by third parties arising out of our business operations, employer
liability insurance, commercial health insurance, property insurance for our business related
facilities and vehicle insurance. For further details, see “Business — Insurance”. We believe
our insurance coverage is in line with industry practice for similar property management
companies in the PRC. However, we cannot assure you that our insurance coverage will be
sufficient or available to cover damages, liabilities or losses we may incur in the course of our
business. Moreover, there are certain losses for which insurance is not available in the PRC on
commercially practicable terms, such as losses suffered due to business interruptions,
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earthquakes, typhoons, flooding, epidemics, war or civil disorder. If we are held responsible for
any such damages, liabilities or losses due to insufficiency or unavailability of insurance, there
could be a material adverse effect on our business, financial position and results of operations.
We may be involved in legal and other disputes and claims from time to time arising from
our operations
We may, from time to time, be involved in disputes with and subject to claims by our
customers, such as property developers, property owners or residents, to whom we provide
property management and other services. Disputes may also arise if such third parties are
dissatisfied with our services. For instance, property owners may take legal actions against us
if they perceive that our services are inconsistent with the prescribed service standards
contained in the property management service contracts, or otherwise inconsistent with our
legal duties to them, for example, in relation to our varied relationships with residents and
other parties with whom we work in delivering community value-added services. Furthermore,
we may from time to time be involved in disputes with and subject to claims by other parties
involved in our business, including without limitation our employees, third-party
subcontractors, business partners, other third parties who sustain injuries or damages while
visiting properties under our management or otherwise in connection with our business
operations. Any such dispute or claim may lead to legal or other proceedings or cause negative
publicity against us, thereby resulting in damage to our reputation, substantial costs and
diversion of resources and management’s attention from our business activities. Any such
dispute, claim or proceeding may have a material adverse effect on our business, financial
position and results of operations.
Our mergers and acquisitions may not achieve the desired benefits. We may face
difficulties in integrating acquired operations with our existing business
We plan to expand our business in part through mergers or acquisitions of other property
management companies and other businesses that are complementary to our existing business
and integration of their operations into ours. However, there can be no assurance that we will
be able to identify suitable opportunities, especially in light of the competitive market
environment of the property management industry in China. We may face fierce competition
for high-quality property management or other companies that could be potential acquisition
and/or investment targets. We are facing competition with industry peers, including those listed
on the Stock Exchange which are also actively seeking quality acquisition or investment targets
in the market to achieve their expansion goals. Even if we do manage to identify suitable
opportunities, we may not be able to complete the mergers and acquisitions on terms favorable
or acceptable to us or in a timely manner, or at all. The inability to identify suitable merger and
acquisition targets or to complete acquisitions may materially and adversely affect our
competitiveness and prospects.
In addition, mergers and acquisitions involve uncertainties and risks and we may fail to
integrate the acquired operations with our existing business or achieve the desired benefits
from such transactions, which could have a material adverse effect on our results of operations.
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Such uncertainties and risks include, without limitation: (i) the size and complexity of the
business of the target; (ii) potentially dilutive issuance of equity securities and/or significant
cash outflows in our efforts to finance the relevant transactions; (iii) additional hidden costs
associated with such transactions, potential ongoing financial obligations and unforeseen or
hidden liabilities; (iv) potential increase in depreciation charges or amortization in the event
that the target is rich in fixed assets; (v) failure to effectively integrate the target’s operations
with our existing business, particularly when integrating the existing workforce and business
systems with such target(s); (vi) failure to achieve the intended objectives, benefits or
revenue-enhancing opportunities; (vii) the risks of operating in new markets, unfamiliarity
with new regulatory regimes, differences in corporate cultures; and (viii) the inability to retain
the personnel of the target.
Such difficulties could disrupt our ongoing business, distract our management and
employees or increase our expenses, any of which could materially and adversely affect our
business, financial position and results of operations. Although we plan to improve service
quality, reduce operating cost and increase the profitability of the targets, we cannot assure you
that our historical mergers or acquisitions or any other future target would achieve our desired
strategic objectives or expected return on investment.
Furthermore, a portion of the net proceeds raised from the Global Offering will be used
to pursue strategic investment and acquisition opportunities. For more information, see “Future
Plans and Use of Proceeds — Use of Proceeds”. As of the Latest Practicable Date, we had not
identified or committed to any acquisition targets for our use of net proceeds from the Global
Offering. In the event that we fail to identify suitable acquisition opportunities or our future
acquisition transactions fail to consummate for other reasons beyond our control, we would not
have effectively applied our proceeds from the Global Offering as currently intended.
We may need to make an impairment with respect to intangible assets
We had intangible assets of RMB0.2 million, RMB6.2 million, RMB7.1 million and
RMB6.1 million as of December 31, 2018, 2019 and 2020 and September 30, 2021,
respectively. We may need to make an impairment with respect to intangible assets mainly as
a result of our mergers and acquisitions. We generally test intangible assets, such as customer
relationships, for impairment as at the end of a financial year, or more frequently if events or
circumstances indicate that such intangible assets might be impaired. Examples of such events
or circumstances include, but are not limited to, a significant adverse change in business
performance and/or expected future business performance driven by factors including but not
limited to degradation in business or legal climates, an adverse regulatory action, unanticipated
competition or an inability to execute our strategy initiatives. If we fail to achieve our desired
objectives, potential benefits or other revenue-enhancing opportunities that motivated our
relevant acquisitions or if any unforeseen circumstances otherwise decreases the expected cash
flows from acquired assets, the recoverable amount can be lower than the carrying amount on
our financial statements. Under such circumstance, we may need to record impairments against
our intangible assets in our financial statements, which may reduce our assets and materially
and adversely affect our financial position.
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We may require additional funding to finance our operations and future acquisitions,
which may not be available on terms acceptable to us or at all, and if we are unable to
raise funds, the value of your investment in us may be negatively impacted
To fund our future growth plans, including to diversify our business and operational
model by acquiring or investing in other property management and value-added service
providers, we need to secure additional funding to finance our future capital expenditures.
There can be no assurance that we will be able to secure funding on terms acceptable to us or
in a timely manner, or at all. If our internally generated capital resources are insufficient to
finance our capital expenditure and growth plans, we may have to seek additional financing
from third parties, including banks, joint venture partners and other strategic investors. We may
also consider raising funds through the issuance of new Shares, which would lead to the
dilution of our existing Shareholders’ interests in our Company. If we are unable to obtain
financing in a timely manner, at a reasonable cost and on acceptable terms, we may be forced
to delay our expansion plans, or downsize or abandon such plans, which may adversely affect
our business, financial condition and results of operations, as well as our future prospects.
The government grants and preferential tax treatment that we enjoy in the PRC may be
altered or terminated
For the years ended December 31, 2018, 2019 and 2020 and the nine months ended
September 30, 2020 and 2021, we had government grants income of RMB0.5 million, RMB1.6
million, RMB3.4 million, RMB2.7 million and RMB1.5 million, respectively, which mainly
represented financial support funds from local government for our business development.
Some of our subsidiaries are qualified to enjoy preferential enterprise income tax rate. We
cannot assure you that the PRC policies on government grants or preferential tax treatment will
not change or that any government grant or preferential tax treatment we enjoy or will be
entitled to enjoy will not be terminated or renewed. Alteration or discontinuation of such
government grants or preferential tax treatment, resulting from changes to the PRC laws,
regulations and policies or our failure to meet any requisite conditions for renewal, may
adversely affect our business and results of operations.
If we fail to fulfill our obligations under our contracts with customers, our business,
results of operations and financial condition may be adversely affected
As of December 31, 2018, 2019 and 2020 and September 30, 2021, our contract liabilities
amounted to RMB98.1 million, RMB146.9 million, RMB206.4 million and RMB259.0 million,
respectively. Our contract liabilities primarily arise from the advance payments made by
customers while the underlying services are yet to be provided. See “Financial Information —
Description of Selected Consolidated Statement of Financial Position — Contract Liabilities.”
If we fail to fulfill our obligations under our contracts with customers, we may not be able
to convert such contract liabilities into revenue, and our customers may also require us to
refund the property management fees we have received, which may adversely affect our cash
flow and liquidity condition, our ability to meet our working capital requirements and our
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results of operations and financial condition. In addition, if we fail to fulfill our obligations
under our contracts with customers, it may adversely affect our relationship with such
customers, which may also affect our reputation and results of operations in the future.
Our reputation may be adversely affected by customer complaints relating to the services
provided by us even if they may be frivolous or vexatious
Our customers may file complaints or claims against us regarding our services. We
provide property management and other services to individual property owners and residents,
which includes addressing the everyday needs of their homes and their families. These property
owners and residents, even though living in the same property under our management, come
from all walks of life and may have a variety of expectations on how their properties and
neighborhoods should be managed. As a result, during our ordinary course of business, we
need to strike a balance among these varying expectations among different groups of property
owners and residents. In addition, we may also receive complaints or claims from non-property
owner customers, such as property developers, if they are dissatisfied with our services.
Although we have established procedures to monitor the quality of our services and have
set up communication channels through which customers may provide feedback and lodge
complaints, there is no assurance that all property owners’ and residents’ expectations and
demands can be addressed in a timely and effective manner. There is no guarantee that certain
individual property owners and residents and/or groups of property owners and residents of a
property under our management will not have specific demands or expectations which are
beyond what we can provide within our normal course of operations. Furthermore, there is no
guarantee that, in an effort to compel us to meet these demands, such property owners and
residents will not attempt to exert pressure on us by means beyond our control, such as by
making frivolous or vexatious complaints directly to us, online, or through various media
sources, or by complaining to the relevant authorities. Any such events or any negative
publicity about them even if untruthful, may distract our management’s attention and may have
an adverse effect on our business, our reputation and the trading price of our Shares.
Failure to pay the social insurance premium and housing provident funds for and on
behalf of our employees in accordance with the relevant PRC laws and regulations may
have an adverse impact on our financial conditions and results of operation
Under the PRC Social Insurance Law and the Regulations on the Administration of
Housing Funds, employees are required to participate in pension insurance, unemployment
insurance, maternity insurance, work-related injury insurance, medical insurance and housing
funds, and employers are required, together with their employees or separately, to pay the
contributions to social insurance and housing funds for their employees. In 2018 and the nine
months ended September 30, 2021, some of our subsidiaries did not fully contribute to the
social insurance and housing provident funds for or on behalf of certain employees, mainly
because we are not required to make such contributions to certain employees such as interns
and employees who are rehired after retirement or we engaged third-party human resources
agencies to pay social insurance premium and housing provident funds for some of our
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employees. If the relevant competent government authority is of the view that this third-party
agency arrangement does not satisfy the requirements under the relevant PRC laws and
regulations, in respect of housing provident fund, we may be ordered to pay the outstanding
balance to the relevant local authority within a prescribed period of time. As advised by our
PRC Legal Advisers, the relevant PRC authorities may demand that we pay the outstanding
social insurance contributions by a stipulated deadline and we may be liable to a late payment
fee equal to 0.05% of the outstanding amount for each day of delay; if we fail to make such
payments, we may be liable to a fine of one to three times the amount of the outstanding
contributions. Our PRC Legal Advisers have also advised us that, under the relevant PRC laws
and regulations, we may be ordered to pay the outstanding housing provident fund
contributions within a prescribed period of time, and if we fail to make such payments,
application may be made to a people’s court in the PRC for compulsory enforcement.
As of the Latest Practicable Date, none of these subsidiaries had been subject to any
administrative penalties for the aforementioned matters, nor were we aware of any material
employee complaints or involved in any material disputes with our employees with respect to
social insurance or housing provident funds. However, we cannot assure you that we will not
receive any complaint or demand for payment of social insurance and housing provident funds
from our employees in the future. We cannot assure you that the relevant PRC authorities
would not notify and require us in the future to pay the outstanding contributions by a
stipulated deadline. As advised by our PRC Legal Advisors, if we can pay the outstanding
balance to the relevant authorities within a certain period of time when we are required to do
so, the likelihood of us being subject to fines by the relevant government authorities is low. For
details, see “Business — Employees — Social Insurance and Housing Provident Fund
Contributions”.
We may be subject to penalties from the PBOC or adverse judicial rulings as a result of
providing loan financings
In 2018, we entered into an asset-based securities arrangement (the “2018 ABS”) with a
third-party securities company. The ABS was secured by the right of receipt of the property
management fees for certain properties under our management. In connection with the 2018
ABS, we made loans (the “2018 Loan”) to a subsidiary of Jinmao Group with an aggregate
principal amount of RMB1,460.0 million at the same effective interest rate as the 2018 ABS.
See “Financial Information — Indebtedness — Borrowings — 2018 ABS.” As a result, in 2018,
2019 and 2020 and the nine months ended September 30, 2020 and 2021, we incurred interest
income from a related party of RMB9.9 million, RMB70.0 million, RMB63.8 million,
RMB50.8 million and RMB32.4 million, respectively, and interest expense of RMB9.9 million,
RMB70.0 million, RMB63.8 million, RMB50.8 million and RMB32.8 million, respectively.
The Article 61 of the General Lending Provisions ( ) issued by the PBOC
prohibits any financing arrangements or lending transactions between non-financial
institutions. Further, pursuant to Article 73 of the General Lending Provisions, the PBOC may
impose on the non-compliant lender a fine of one to five times the income received by the
lender from such loans. Notwithstanding the General Lending Provisions, the Supreme
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People’s Court has made new interpretations concerning financing arrangements and lending
transactions between non-financial institutions in the Provisions of the Supreme People’s Court
on Several Issues concerning the Application of Law in the Trial of Private Lending
Cases ( ) (the “Judicial
Interpretations on Private Lending Cases ”) which came into effect on September 1, 2015
and amended on August 19, 2020 and December 29, 2020. According to Article 10 of the
Judicial Interpretations on Private Lending Cases, the Supreme People’s Court recognizes the
validity of financing arrangements and lending transactions between non-financial institutions
so long as certain requirements, such as the interest rates charged, are satisfied and there is no
violation of mandatory provisions of laws and regulations.
As of the Latest Practicable Date, we had not received any notice of claim or was subject
to any investigation or penalty relating to the interest-bearing loans to related parties and we
had not been subject to any administrative penalty in respect of such interest-bearing loans by
government authorities as of the Latest Practicable Date. However, the final determination of
the relevant regulatory authorities could be different, and we may be subject to penalties from
the PBOC or adverse judicial rulings as a result of our provision of loan financings to related
parties during the Track Record Period or any prior periods. Any of these penalties or adverse
judicial rulings could have a material adverse effect on our business, financial position and
results of operations.
Our leased property interests may be defective and our right to lease the properties
affected by such defects may be challenged, which could cause significant disruption to
our business
As of the Latest Practicable Date, with respect to 62 of our 199 leased properties, the
relevant lessors had not provided us with valid property ownership certificates or relevant
authorization documents evidencing their rights to lease the properties to us. All such leased
properties were used as offices and employee dormitories. The absence of the property
ownership certificates limits our ability to determine whether the lessors have the right to lease
the properties to us, and if any of the lessors are not the legal owners and have not been duly
authorized by the legal owners, the relevant lease agreements may be deemed invalid, and as
a result, we may face challenges from the legal owners of the properties or other third parties,
and may be forced to vacate the relevant properties and relocate our offices. We may incur
additional expenses during the process, and our business, financial condition and results of
operations may be negatively affected.
Pursuant to applicable PRC laws and regulations, property lease agreements must be filed
with the local branch of the Ministry of Housing and Urban-Rural Development of the PRC.
The filing of such leases will require the cooperation of the lessors. As of the Latest Practicable
Date, we had not filed leases for 195 of the 199 properties we leased in China, primarily due
to the difficulty of procuring our lessors’ cooperation to file such leases. As advised by our
PRC Legal Advisor, the lack of filing will not affect the validity and enforceability of the lease
agreements, but we might be ordered to rectify this non-filing by competent authorities and if
we fail to rectify within a prescribed period, a fine ranging from RMB1,000 to RMB10,000
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may be imposed on us for each non-filed lease. In the event that we are required by the
competent authorities to register the lease agreements, we may be subject to fines for the
failure to register the lease agreements, which could have adverse impact on our business,
financial condition and results of operations. For details, see “Business — Properties”.
We are subject to environmental protection laws and regulations and any inability to
comply with our environmental responsibilities may subject us to liability
We are subject to environmental protection laws, regulations and decrees that impose
fines for violation of such laws, regulations or decrees. In addition, there is a growing
awareness of environmental issues, and we may sometimes be expected to meet a standard
which is higher than the requirement under the prevailing environmental laws and regulations
in the PRC. In addition, there is no assurance that more stringent environmental protection
requirements will not be imposed in the future. If we are unable to comply with existing or
future environmental laws and regulations or are unable to meet public expectations in relation
to environmental matters, our reputation may be damaged or we may be required to pay
penalties or fines or take remedial actions and our operations may be suspended, any of which
may materially and adversely impact our business, financial condition, results of operations
and prospects.
An occurrence of a natural disaster, widespread health epidemic or other outbreaks could
have a material adverse effect on our business, financial condition and results of
operations
Our business could be materially and adversely affected by natural disasters, such as
snowstorms, earthquakes, fires or floods, the outbreak of a widespread health epidemic or
pandemic, including COVID-19, SARS, H5N1 or H7N9 flu, H1N1 flu, swine influenza, avian
influenza and MERS, or other events, such as wars, acts of terrorism, environmental accidents,
power shortage or communication interruptions. For details, see “— Our business operations
and financial performance have been and may continue to be affected by the outbreak of
COVID-19.” The occurrence of such a disaster or prolonged outbreak of an epidemic illness
or other adverse public health developments in the PRC or elsewhere may severely restrict the
level of economic activity in affected areas, and could materially disrupt our business and
operations. Such events could also significantly affect our industry and cause a temporary
closure of the facilities we or our business partners use for our operations, which would
severely disrupt our operations and have a material adverse effect on our business, financial
condition and results of operations. Our operations could be disrupted if any of our employees
or employees of our business partners were suspected of having any of the epidemic illnesses,
since this could require us or our business partners to quarantine some or all of such employees
or disinfect the facilities used for our operations. In addition, our revenue and profitability
could be materially reduced to the extent that a natural disaster, health epidemic or other
outbreak harms the global or PRC economy in general. Our operations could also be severely
disrupted if our customers were affected by such natural disasters, health epidemics or other
outbreaks.
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Our business is significantly influenced by various factors affecting our industry and
general economic conditions
Our business, financial position and results of operations are and will continue to be
dependent on various factors affecting the property management industries and general
economic conditions, most of which are beyond our control. For example, limited flexibility
in charging property management fees can adversely affect profit margins in the event of rising
labor cost. Furthermore, any economic slowdown, recession or other developments in the PRC
social, political, economic or legal environment or bank lending policies could result in fewer
new property development projects, or a decline in the purchasing power of residents living in
the communities we manage or provide consultancy services to, resulting in a lower demand
for our services and lower revenue and income contribution for us. As such, our business,
financial position and results of operations would be materially and adversely affected.
RISKS RELATING TO CONDUCTING BUSINESS IN THE PRC
Changes in the economic, political and social conditions and government policies in China
may have an adverse effect on our business
Given that our business operations are conducted in the PRC, our business and results of
operations are subject to the economic, political and social policies and conditions of the PRC.
The development of the economy in China is unique in many respects, including its
structure, level of development, and growth rate. Although the PRC government has
implemented measures emphasizing the utilization of market forces in the development of the
Chinese economy, it still exercises macroeconomic control through means including allocation
of resources and setting monetary policy. The PRC government also continues to play a
significant role in regulating industries by imposing industrial policies. There is no assurance
that the economic, foreign currency, political or legal systems of China will not develop in a
way that is detrimental to our business operations. Our results of operations, financial
condition and prospects may also be adversely affected by changes in foreign currency, social
policies and conditions in the PRC.
In addition, while the PRC government has undergone various economic reforms in the
last few decades, many of such reforms are expected to be refined, adjusted and modified from
time to time based on economic and social conditions. In addition, the scope, application and
interpretation of the laws and regulations relating to such reforms may not be entirely clear.
Such refinement, adjustment or modification may impact our business operations in ways that
we cannot predict, and any uncertainty in the scope, application and interpretation of the
relevant laws and regulations may materially and adversely affect our results of operations and
financial condition.
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The macroeconomic conditions and real estate markets of the PRC have been and may
continue to be adversely affected by the COVID-19 pandemic
According to the data released by the National Bureau of Statistics, China’s GDP in 2020
was RMB101,598.6 billion, representing an increase of 2.3% from 2019. According to the data
published by the National Bureau of Statistics, the cumulative contracted sales GFA of
commodity properties was 1.8 billion sq.m. in 2020, representing an increase of 2.6% from
2019. The cumulative completed GFA in 2020 was 912.0 million sq.m., representing a decrease
of 4.9% from 2019.
The PRC property management industry may be adversely affected as the COVID-19
pandemic has curbed the real estate market. The property management companies may be
unable to enter into new agreements as expected when the property developers stop expanding.
The growth of property management companies may also slow down as the properties they
were contracted to manage experience delays in delivery as a result of the COVID-19
pandemic. According to China Index Academy, the PRC property management industry is
under pressure in the short term as property management companies are required to suspend
certain services and incur additional costs to comply with additional regulations and
government measures. For more details, see “Risk Factors — Risks Relating to Our Business
and Industry — Our business operations and financial performance have been and may
continue to be affected by the outbreak of COVID-19.”
Governmental control of currency conversion may limit our ability to use capital
effectively
The PRC government, in certain cases, imposes controls on the convertibility of
Renminbi into foreign currencies and the remittance of currency out of China. See
“Regulations — Legal Supervisions over Foreign Exchange”. We receive substantially all our
revenue in Renminbi. Under our current structure, our income is primarily derived from
dividend payments from our PRC subsidiaries. Shortages in the availability of foreign currency
may restrict the ability of our PRC subsidiaries to remit sufficient foreign currency to pay
dividends or other payments to us, or otherwise satisfy their foreign currency denominated
obligations, if any. If the foreign exchange control system prevents us from obtaining sufficient
foreign currency to satisfy our currency demands, we may not be able to pay dividends in
foreign currencies to our Shareholders.
The PRC government may also at its discretion restrict access in the future to foreign
currencies for current account transactions. Under existing PRC foreign exchange regulations,
payments of certain current account items can be made in foreign currencies without prior
approval from the local branch of the SAFE by complying with certain procedural
requirements. However, approval from appropriate government authorities is required where
Renminbi is to be converted into foreign currency and remitted out of China to pay capital
expenses such as the repayment of indebtedness denominated in foreign currencies. The
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restrictions on foreign exchange transactions under capital accounts could also affect our
subsidiaries’ ability to obtain foreign exchange through debt or equity financing, including by
means of loans or capital contribution from us.
Fluctuation in the value of the Renminbi may have a material adverse effect on our
business
We conduct substantially all our business in Renminbi. However, following the Global
Offering, we may also maintain a significant portion of the proceeds from the offering in Hong
Kong dollars before they are used in our PRC operations. The value of the Renminbi against
the US dollar, Hong Kong dollar and other currencies may be affected by changes in the PRC’s
policies and international economic and political developments. As a result of these and any
future changes in currency policy, the exchange rate may become volatile, the Renminbi may
be revalued further against the US dollar or other currencies or the Renminbi may be permitted
to enter into a full or limited free float, which may result in an appreciation or depreciation in
the value of the Renminbi against the US dollar or other currencies. Fluctuations in exchange
rates may adversely affect the value, translated or converted into US dollars or Hong Kong
dollars (which are pegged to the US dollar), of our cash flows, revenues, earnings and financial
position, and the value of, and any dividends payable to us by our PRC subsidiaries. For
example, an appreciation of the Renminbi against the US dollar or the Hong Kong dollar would
make any new Renminbi-denominated investments or expenditures more costly to us, to the
extent that we need to convert US dollars or Hong Kong dollars into Renminbi for such
purposes.
Inflation in China could negatively affect our profitability and growth
Economic growth in China has, in the past, been accompanied by periods of high
inflation. In response, the PRC government has implemented policies from time to time to
control inflation, such as restricting the availability of credit by imposing tighter bank lending
policies or higher interest rates. The PRC government may take similar measures in response
to future inflationary pressures. Rampant inflation without the PRC government’s mitigation
policies would likely increase our costs, thereby materially reducing our profitability. There is
no assurance that we will be able to pass any additional costs to our customers. On the other
hand, such control measures may also lead to slower economic activity and we may see reduced
demand for our properties.
Our ability to access credit and capital markets in the future may be adversely affected
by factors beyond our control
Interest rate increases by the PBOC or market disruptions may increase our cost of
borrowing or adversely affect our ability to access sources of liquidity upon which we may rely
to finance our operations and satisfy our obligations as they become due. We intend to continue
to make investments to support our business growth and may require additional funds to
respond to business challenges. There can be no assurance that the anticipated cash flow from
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our operations will be sufficient to meet all of our cash requirements, or that we will be able
to secure external financing at competitive rates, or at all. Any such failure may adversely
affect our ability to finance our operations, meet our obligations or implement our growth
strategy.
PRC regulations of loans and direct investment by offshore holding companies to PRC
entities may delay or prevent us from using the proceeds of the Global Offering to make
loans or additional capital contributions to our PRC subsidiaries
In utilizing the proceeds from the Global Offering or any further offering, as an offshore
holding company of our PRC subsidiaries, we may make loans to our PRC subsidiaries, or we
may make additional capital contributions to our PRC subsidiaries. Any loans provided by us
to our PRC subsidiaries are subject to PRC regulations. For example, loans by us to our PRC
subsidiaries in China to finance their activities cannot exceed statutory limits and must be
registered or filed on record. We may also decide to finance our PRC subsidiaries through
capital contributions. These capital contributions must be filed to MOFCOM through the
National Enterprise Credit Information Publicity System. In addition, the PRC government also
restricts the convertibility of foreign currencies into Renminbi and use of the proceeds. On
March 30, 2015, SAFE promulgated Circular 19, which took effect and replaced previous
SAFE regulations from June 1, 2015. SAFE further promulgated Circular 16, effective on June
9, 2016, which, among other things, amend certain provisions of Circular 19. According to
SAFE Circular 19 and SAFE Circular 16, the flow and use of the Renminbi capital converted
from foreign currency dominated registered capital of a foreign-invested company is regulated
such that Renminbi capital may not be used for business beyond its business scope or to
provide loans to persons other than affiliates unless otherwise permitted under its business
scope. Violations of the applicable circulars and rules may result in severe penalties, including
substantial fines as set forth in the Foreign Exchange Administration Regulations. The
applicable foreign exchange circulars and rules may significantly limit our ability to convert,
transfer and use the net proceeds from the Global Offering or any offering of additional equity
securities in China, which may adversely affect our business, financial condition and results of
operations. We cannot assure you that we will be able to obtain these government registrations
or to complete filing procedures on a timely basis, or at all, with respect to future loans or
capital contributions by us to our subsidiaries or any of their respective subsidiaries. If we fail
to complete such registrations or filing procedures, our ability to use the proceeds of the Global
Offering and to capitalize our PRC operations may be negatively affected, which could
adversely and materially affect our liquidity and our ability to fund and expand our business.
We rely on dividends paid by our subsidiaries for our cash needs, and any limitation on
the ability of our subsidiaries to make payments to us could have a material adverse effect
on our ability to conduct our business
We conduct all of our business through our subsidiaries incorporated in the PRC. We rely
on dividends paid by these subsidiaries for our cash needs, including the funds necessary to pay
any dividends and other cash distributions to our Shareholders, to service any debt we may
incur and to pay our operating expenses. The payment of dividends by entities established in
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the PRC is subject to limitations. Payment of dividends is permitted only out of accumulated
profits as determined in accordance with accounting standards and regulations in the PRC.
Each of our PRC subsidiaries is also required to set aside at least 10% of its after-tax profit
based on PRC laws and regulations each year to its general reserves or statutory capital reserve
fund until the aggregate amount of such reserves reaches 50% of its respective registered
capital. Our statutory reserves are not distributable as loans, advances or cash dividends. We
anticipate that in the foreseeable future our PRC subsidiaries will need to continue to set aside
10% of their respective after-tax profits to their statutory reserves. In addition, if any of our
PRC subsidiaries incurs debt on its own behalf in the future, the instruments governing the debt
may restrict its ability to pay dividends or make other distributions to us. Any limitations on
the ability of our PRC subsidiaries to transfer funds to us could materially and adversely limit
our ability to grow, make investments or acquisitions that could be beneficial to our business,
pay dividends and otherwise fund and conduct our business.
In addition, under the PRC Enterprise Income Tax Law, or EIT Law, the EIT
Implementation Rules, the Notice of the State Administration of Taxation on Negotiated
Reduction of Dividends and Interest Rates (
)(“Notice 112”), which was issued on January 29, 2008, the Arrangement Between the
Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of
Double Taxation on Income and Prevention of Fiscal Evasion with respect to Taxes on Income
( ) (the “Double Tax
Avoidance Arrangement”), which became effective on December 8, 2006, and the
Announcement of the State Administration of Taxation on the Determination of “Beneficial
Owners” in the Tax Treaties ( “ ”
)(“Notice 9”), which became effective on April 1, 2018, dividends from our PRC
subsidiaries paid to us may be subject to a withholding tax at a rate of 10%, or at a rate of 5%
if our Company is considered as a “beneficial owner” that is generally engaged in substantial
business activities and entitled to treaty benefits under the Double Tax Avoidance Arrangement.
Furthermore, the ultimate tax rate will be determined by treaty between the PRC and the tax
residence of the holder of the PRC subsidiary. We are actively monitoring the withholding tax
and are evaluating appropriate organizational changes to minimize the corresponding tax
impact.
We may be considered a “PRC resident enterprise” under the EIT Law and income tax
on the dividends that we receive from our PRC operating subsidiaries may increase
Our Company was incorporated in Hong Kong. We conduct our business through
operating subsidiaries in the PRC. Under the EIT Law, enterprises established under the laws
of foreign countries or regions and whose “de facto management bodies” are located within the
PRC are considered “PRC resident enterprises” and thus will generally be subject to enterprise
income tax at the rate of 25% on their global income. SAT released the Notice Regarding the
Determination of Chinese-Controlled offshore Incorporated Enterprises as PRC Tax Resident
Enterprises on the Basis of De Facto Management Bodies (
)(“Circular 82”) on April 22, 2009
(which was amended on December 29, 2017) setting out the standards and procedures for
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determining whether the “de facto management body” of an enterprises registered outside of
China and controlled by PRC enterprises or PRC enterprises group is located within China.
Under Circular 82, a foreign enterprise controlled by a PRC enterprise or a PRC enterprise
group is considered a PRC resident enterprise if all of the following apply: (i) the senior
management and core management departments in charge of daily business operations are
located mainly within China; (ii) financial and human resources decisions are subject to
determination or approval by persons or bodies in China; (iii) major assets, accounting books,
company seals and minutes and files of board and shareholders’ meetings are located or kept
within China; and (iv) at least half of the enterprise’s directors with voting rights or senior
management reside within China. In addition, Circular 82 also requires that the determination
of “de facto management body” shall be based on the principle that substance is more
important than form. Further to Circular 82, SAT issued the Chinese-Controlled Offshore
Incorporated Resident Enterprises Income Tax Regulation (Trial Implementation) (
( ) ), which took effect on September 1, 2011 and
amended on June 1, 2015, June 28, 2016 and June 15, 2018 to provide more guidance on the
implementation of Circular 82 and clarify the reporting and filing obligations of such
“Chinese-controlled offshore incorporated resident enterprises”.
Currently, our management is primarily based in the PRC, and may continue to be based
in the PRC in the future. If we were considered a PRC resident enterprise, we would be subject
to enterprise income tax at the rate of 25% on our global income and the filing obligations of
such enterprise income tax to the relevant PRC authorities, and any dividend or gain on the sale
of our Shares received by our non-resident enterprise shareholders may be subject to a
withholding tax at a rate of up to 10%. In addition, although the EIT Law provides that
dividend payments between qualified PRC resident enterprises are exempted from enterprise
income tax, it remains unclear as to the detailed qualification requirements for this exemption
and whether dividend payments by our PRC operating subsidiaries to us would meet such
qualification requirements if we were considered a PRC resident enterprise for this purpose. If
our global income were to be taxed under the EIT Law, our financial position and results of
operations would be materially and adversely affected.
Dividends payable by us to our foreign investors and gains on the sale of our Shares may
become subject to withholding taxes under the PRC tax laws
Under the EIT Law and EIT Implementation Rules, our foreign corporate Shareholders
may be subject to a 10% income tax upon any gains realized from the transfer of their Shares
and dividend distributable to such foreign corporate Shareholder, if such income is regarded as
income from “sources within the PRC”. According to the EIT Implementation Rules, whether
income generated from transferring equity investments is to be regarded as sources within the
PRC or from foreign territory shall depend upon the locations in which the enterprises
accepting the equity investment are located. However, it is unclear whether income received
by our Shareholders will be deemed to be income from sources within the PRC and whether
there will be any exemption or reduction in taxation for our foreign corporate Shareholders due
to the promulgation of the EIT Law. If our foreign corporate Shareholders are required to pay
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PRC income tax on the transfers of our Shares that they hold or on the gains on the sale of our
Shares by them, the value of our foreign corporate Shareholders’ investments in our Shares
may be materially and adversely affected.
We face uncertainty relating to the Public Announcement on Several Issues Concerning
Enterprise Income Tax for Indirect Transfer of Assets by Non-Resident Enterprises (
) (“SAT Circular No. 7”) issued by
the PRC State Administration of Taxation
On February 3, 2015, SAT issued the SAT Circular No. 7, which abolished certain
provisions in the Circular on Strengthening the Administration of Enterprise Income Tax on
Non-PRC Resident Enterprises’ Share Transfers (
)(“SAT Circular No. 698”), previously issued by the SAT on December 10,
2009. SAT Circular No. 7 provides comprehensive guidelines relating to indirect transfers by
a non-PRC resident enterprise of assets (including equity interests) of a PRC resident
enterprise (“PRC Taxable Assets”). For example, SAT Circular No. 7 specifies that the PRC
tax authorities are entitled to reclassify the nature of an indirect transfer of PRC Taxable
Assets, when a non-PRC resident enterprise transfers PRC Taxable Assets indirectly by
disposing of equity interests in an overseas holding company directly or indirectly holding such
PRC Taxable Assets. The PRC tax authorities may disregard the existence of such overseas
holding company and consider the transaction to be a direct transfer of PRC Taxable Assets,
if such transfer is deemed to have been conducted for the purposes of avoiding PRC EIT and
lack any other reasonable commercial purpose. Although SAT Circular No. 7 contains certain
exemptions (including (i) where a non-resident enterprise derives income from the indirect
transfer of PRC Taxable Assets by acquiring and selling shares of a listed overseas holding
company which holds such PRC Taxable Assets on a public market; and (ii) where there is an
indirect transfer of PRC Taxable Assets, but if the non-resident enterprise had directly held and
disposed of such PRC Taxable Assets, the income from the transfer would have been exempted
from PRC EIT under an applicable tax treaty or arrangement), it remains unclear whether any
exemptions under SAT Circular No. 7 will be applicable to the transfer of our Shares or to any
future acquisition by us outside of the PRC involving PRC Taxable Assets, or whether the PRC
tax authorities will reclassify such transaction by applying SAT Circular No. 7. SAT Circular
No. 7 may be determined by the tax authorities to be applicable to our Reorganization, if such
transaction were determined by the tax authorities to lack reasonable commercial purpose. As
a result, we may be subject to tax under SAT Circular No. 7 and may be required to expend
valuable resources to comply with SAT Circular No. 7 or to establish that we should not be
taxed under SAT Circular No. 7, which may have a material adverse effect on our business,
financial condition, results of operations and prospects.
Uncertainty with respect to the PRC legal system could adversely affect us and may limit
the legal protection available to you
Our operations and assets in the PRC are governed by the PRC laws and regulations. The
PRC legal system is based on written statutes, and prior court decisions can only be cited as
reference. Since 1979, the PRC government has promulgated laws and regulations in relation
RISK FACTORS
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to economic matters such as foreign investment, corporate organization and governance,
commerce, taxation, finance, foreign exchange and trade, with a view to developing a
comprehensive system of commercial law. However, China has not developed a fully integrated
legal system and enacted laws and regulations may not sufficiently cover all aspects of
economic activities in China, or may be unclear or inconsistent. In particular, since the
property management service industry is in its early developmental stage in the PRC, the laws
and regulations relating to this industry are unspecific and may not be comprehensive. Because
of the limited volume of published decisions and their non-binding nature, the interpretation
and enforcement of PRC laws and regulations involve uncertainties and can be inconsistent.
Even where adequate laws exist in China, the enforcement of existing laws or contracts based
on existing laws may be uncertain or sporadic, and it may be difficult to obtain swift and
equitable enforcement of a judgment by a PRC court. In addition, the PRC legal system is
based in part on government policies and internal rules (some of which are not published on
a timely basis or at all) that may have a retroactive effect. As a result, we may not be aware
of our violation of these policies and rules until sometime after such violation. Finally, any
litigation in China may be protracted and result in substantial costs and the diversion of
resources and management’s attention. The materialization of all or any of these uncertainties
could have a material adverse effect on our financial position and results of operations.
It may be difficult to effect service of process on our Directors or executive officers who
reside in the PRC or to enforce against us or them in the PRC any judgements obtained
from non-PRC courts
A majority of our Directors and senior management members reside in the PRC and
substantially all of the assets of those people and of our Company are located in the PRC.
Therefore, it may be difficult for investors to effect service of process upon those persons
inside the PRC or to enforce against us or them in the PRC any judgements obtained from
non-PRC courts unless in accordance with the provisions of the international treaties concluded
or acceded to by the relevant jurisdiction and the PRC. The PRC does not have treaties
providing for the reciprocal recognition and enforcement of judgements of courts with the
United States, the United Kingdom, Japan and many other developed countries and regions.
However, judgments rendered by Hong Kong courts may be recognized and enforced in the
PRC if the requirements set forth by the Arrangement on Mutual Recognition and Enforcement
of Judgments in Civil and Commercial Matters by Courts of Mainland and of the Hong Kong
Special Administrative Region Pursuant to Agreed Jurisdiction by Parties Concerned (
) (the
“2006 Arrangement”) are met. On January 18, 2019, the Supreme People’s Court and the
Hong Kong SAR Government signed the Arrangement on Reciprocal Recognition and
Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and
of the Hong Kong Special Administrative Region (
) (the “2019 Arrangement”), which seeks to establish a
mechanism with greater clarity and certainty for recognition and enforcement of judgments in
wider range of civil and commercial matters between Hong Kong and the PRC. The 2019
Arrangement discontinued the 2006 Arrangement and the 2019 Arrangement will only take
effect after the promulgation of a judicial interpretation by the Supreme People’s Court and the
RISK FACTORS
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completion of the relevant legislative procedures in the Hong Kong SAR. The 2019
Arrangement will, upon its effectiveness, supersedes the 2006 Arrangement. Therefore, before
the 2019 Arrangement becomes effective, recognition and enforcement in the PRC of
judgements of a court in any of these jurisdictions may be difficult or even impossible.
RISKS RELATING TO THE SPIN-OFF AND THE GLOBAL OFFERING
Purchasers of Shares in the Global Offering will experience immediate dilution and may
experience further dilution if we issue additional Shares in the future
The Offer Price of our Shares is expected to be higher than the net tangible assets per
Share immediately prior to the Global Offering. Therefore, purchasers of our Shares in the
Global Offering will experience an immediate dilution in net tangible asset value per Share. In
addition, in order to expand our business, we may consider offering and issuing additional
securities in the future. Purchasers of our Shares may experience dilution in the net tangible
asset value per Share of their investments in Shares if we issue additional securities in the
future at a price which is lower than the net tangible asset value per Share prior to the issuance
of such additional securities.
There is no prior public market for our Shares and an active trading market may not
develop
Prior to the Global Offering, there was no public market for our Shares. An active public
market may not develop or be sustained after the Global Offering. The initial Offer Price range
for our Shares was the result of, and the Offer Price will be the result of, negotiations among
us and the Joint Representatives on behalf of the Underwriters and may not be indicative of
prices that will prevail in the trading market after the Global Offering.
We have applied for the listing of, and permission to deal in, our Shares on the Stock
Exchange. However, even if approved, being listed on the Stock Exchange does not guarantee
that an active trading market for our Shares will develop or be sustained. If an active market
for our Shares does not develop after the Global Offering, the market price and liquidity of our
Shares may be adversely affected. As a result, you may not be able to resell your Shares at
prices equal to or greater than the price paid for the Shares in the Global Offering.
The liquidity and market price of our Shares may be volatile, which may result in
substantial losses for investors purchasing our Shares pursuant to the Global Offering
The price and trading volume of our Shares may be volatile as a result of the following
factors, as well as others, which are discussed in this “Risk Factors” section or elsewhere in
this prospectus, some of which are beyond our control:
• actual or anticipated fluctuations in our results of operations (including variations
arising from foreign exchange rate fluctuations);
RISK FACTORS
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• news regarding loss of key personnel by us or recruitment of key personnel by our
competitors;
• announcements of competitive developments, acquisitions or strategic alliances in
our industry;
• changes in earnings estimates or recommendations by financial analysts;
• potential litigation or regulatory investigations;
• changes in general economic conditions or other developments affecting us or our
industry;
• price movements on international stock markets, the operating and stock price
performance of other companies, other industries and other events or factors beyond
our control; and
• release of any lock-up or other transfer restrictions on the outstanding Shares or
sales or perceived sales of additional Shares by our Company or other Shareholders.
In addition, the securities markets have from time to time experienced significant price
and volume fluctuations that are not related or disproportionate to the operating performance
of particular companies. This may include a general global economic downturn, substantial
volatility in equity securities markets, and volatility and tightening of liquidity in credit
markets. While it is difficult to predict how long these conditions will last, they could continue
to present risks for an extended period of time. If we experience such fluctuations, results of
operations and financial position could be materially and adversely affected. Moreover, market
fluctuations may also materially and adversely affect the market price of our Shares.
The market price of our Shares when trading begins could be lower than the Offer Price
as a result of, among other things, adverse market conditions or other adverse
developments that could occur between the time of sale and the time trading begins
The Offer Price will be determined on the Price Determination Date. However, the Offer
Shares will not commence trading on the Stock Exchange until they are delivered, which is
expected to be on the fifth business day after the Price Determination Date. As a result,
investors may not be able to sell or otherwise deal in the Offer Shares during that period.
Accordingly, holders of the Offer Shares are subject to the risk that the price of the Offer
Shares when trading begins could be lower than the Offer Price as a result of adverse market
conditions or other adverse developments that may occur between the time of sale and the time
trading begins.
RISK FACTORS
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Future or perceived sales of substantial amounts of our Shares could affect their market
price
The market price of our Shares could decline as a result of future sales of substantial
amounts of our Shares or other related securities, or the perception that such sales may occur.
Our ability to raise future capital at favorable times and prices may also be materially and
adversely affected. Our Shares held by the relevant Controlling Shareholders are currently
subject to certain lock-up undertakings. For details, see “Underwriting — Underwriting
Arrangements and Expenses”. However, there is no assurance that following the expiration of
the lock-up periods, these Shareholders will not dispose of any Shares. We cannot predict the
effect of any future sales of the Shares by any of our Shareholders on the market price of our
Shares.
Our Controlling Shareholders have substantial control over our Company and their
interests may not be aligned with the interests of the other Shareholders
Prior to and immediately following the completion of the Global Offering, our
Controlling Shareholders will remain having substantial control over their interests in the
issued share capital of our Company. Subject to, among others, the Articles of Association and
the Listing Rules, the Controlling Shareholders by virtue of their controlling beneficial
ownership of the share capital of the Company, will be able to exercise significant control and
exert significant influence over our business or otherwise on matters of significance to us and
other Shareholders by voting at the general meeting of the Shareholders and at Board meetings.
The interests of the Controlling Shareholders may differ from the interests of other
Shareholders and the Shareholders are free to exercise their votes according to their interests.
To the extent that the interests of the Controlling Shareholders conflict with the interests of
other Shareholders, the interests of other Shareholders can be disadvantaged and harmed.
Our management has significant discretion as to how to use the net proceeds of the Global
Offering, and you may not necessarily agree on how we use them
Our management may use the net proceeds from the Global Offering in ways that you may
not agree with or that do not yield a favorable return to our Shareholders. By investing in our
Shares, you are entrusting your funds to our management, upon whose judgment you must
depend, for the specific uses we will make of the net proceeds from the Global Offering. For
more information, see “Future Plans and Use of Proceeds”.
Our dividend policy is subject to the discretion of our Directors and we may not declare
dividends on our Shares in the future
We did not declare or pay any dividend during the Track Record Period. The amount of
dividends actually distributed to our Shareholders will depend upon our earnings and financial
position, operating requirements, capital requirements and any other conditions that our
Directors may deem relevant and will be subject to the approval of our Shareholders. There is
no assurance that dividends of any amount will be declared or distributed in any year in the
future. For further details, see “Financial Information — Dividends”.
RISK FACTORS
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Facts and statistics in this prospectus should not be unduly relied upon
Certain facts and other statistics in this prospectus that do not relate directly to our
operations, including those relating to the PRC, the PRC economy and the PRC property
management industry as well as those relating to Jinmao Group and other companies other than
our Group, have been derived from various official government publications, the market
research report and publicly available or other third-party sources. We believe that the sources
of the information are appropriate sources for such information, and we have taken reasonable
care in extracting and reproducing such information. However, we cannot guarantee the quality
or reliability of these sources, and such information may not be consistent with other publicly
available information.
Due to possibly flawed or ineffective collection methods or discrepancies between
published information and market practice and other problems, the facts and statistics herein
may be inaccurate or may not be comparable to facts and statistics produced with respect to
other economies. Further, we cannot assure you that they are stated or compiled on the same
basis or with the same degree of accuracy (as the case may be) in other publications or
jurisdictions. Therefore, you should not rely unduly upon such facts and statistics contained in
this prospectus.
The entire prospectus should be read carefully and any information contained in press
articles, media and/or research reports regarding our Company, our business, our
industry, the Spin-off or the Global Offering not contained in this prospectus should not
be relied upon
There may be certain coverage in the press and/or media regarding our Company, our
business, our industry, the Spin-off and the Global Offering. There had been, prior to the
publication of this prospectus, and there may be, subsequent to the date of this prospectus but
prior to the completion of the Global Offering, press and/or media coverage regarding our
Company, our business, our industry, the Spin-off and the Global Offering containing, among
other matters, certain financial information, projections, valuations and other forward-looking
information about us and the Global Offering. We do not accept any responsibility for any such
press or media coverage or the accuracy or completeness of any such information disseminated
in the articles or media and that such information was not sourced from or authorized by our
Company.
We make no representation as to the appropriateness, accuracy, completeness or
reliability of any such information, publication or underlying assumptions. To the extent that
any of the information in the media or publications other than this prospectus is inconsistent
or conflicts with the information contained in this prospectus, we disclaim it. Accordingly, you
should read the entire prospectus carefully and should make investment decisions about us on
the basis of the information contained in this prospectus only and should not rely on any other
information.
RISK FACTORS
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Forward-looking statements contained in this prospectus are subject to risks and
uncertainties
This prospectus contains certain statements that are “forward-looking” and indicated by
the use of forward-looking terms such as “aim”, “anticipate”, “believe”, “could”, “estimate”,
“expect”, “going forward”, “intend”, “ought to”, “may”, “plan”, “potential”, “project”, “seek”,
“should”, “will” or “would” or similar expressions. You are cautioned that any forward-looking
statement involves risks and uncertainties and any or all of the assumptions relating to the
forward-looking statements could prove to be inaccurate. As a result, the forward-looking
statement could be incorrect. The inclusion of forward-looking statements in this prospectus
should not be regarded as a representation by us that the plans and objectives will be achieved,
and you should not place undue reliance on such statements.
RISK FACTORS
–110–
THE SPIN-OFF
China Jinmao submitted a spin-off proposal to the Stock Exchange pursuant to Practice
Note 15 of the Listing Rules in relation to the Spin-off, and the Stock Exchange had confirmed
that China Jinmao may proceed with the Spin-off. The reduction of China Jinmao’s
shareholding interest in our Company following completion of the Spin-off does not constitute
a notifiable transaction of China Jinmao under the Listing Rules. Following completion of the
Spin-off, Jinmao Group will continue to operate the business of city operations and property
development, commercial leasing and retail operations, as well as hotel operations. For details
of the retained business of Jinmao Group, see the section headed “Relationship with China
Jinmao”.
Reasons for the Spin-Off
The board of directors of China Jinmao considers that the Spin-off is in the interests of
Jinmao Group and the Jinmao Shareholders taken as a whole and the Spin-off will position
each of Jinmao Group and our Group better for growth in their respective businesses and
deliver clear benefits to both for the following reasons:
(a) the Spin-off will allow China Jinmao and its shareholders an opportunity to realize
the value of investment in our Group under a separate standalone platform for the
business of our Group, and will improve the operational and financial transparency
of each of Jinmao Group and our Group, which will enable the market to appraise
and assess the value and performance of our Group more effectively, and will in turn
unlock the value of both our Group and Jinmao Group;
(b) Jinmao Group and our Group will operate in different business segments and intend
to have different growth paths and different business strategies without being in
competition against each other. The Spin-off will enable our Group to build its
identity as a separately listed group, to have a more defined business focus and
efficient resources allocation, to have a separate fund-raising platform and to
broaden its investor base through the Global Offering. The Spin-off would allow our
Group to gain direct access to capital markets for equity and/or debt financing to
fund its existing operations and future expansion without reliance on China Jinmao,
thereby improving its operating and financial management efficiencies, and also
allowing Jinmao Group to optimize its capital allocation across the retained business
of Jinmao Group;
THE SPIN-OFF AND DISTRIBUTION
– 111 –
(c) the Spin-off will enable our Group to enhance its corporate profile with more
streamlined business, thereby increasing its ability to attract strategic investors
interested in such segment and potentially forming strategic partnerships directly
with our Group, which could provide synergies for our Group;
(d) leveraging on the attraction of having a standalone listing platform, the Spin-off will
increase the brand awareness of “Jinmao” and in turn benefit the businesses of our
Group and Jinmao Group;
(e) the Spin-off will enable more focused development, strategic planning and better
allocation of resources for our Group and Jinmao Group with respect to their
respective businesses. Both our Group and Jinmao Group will benefit from the
efficient decision-making process under the separate management structure geared
towards their respective needs for seizing emerging business opportunities,
especially with a proven and dedicated management team for our Group to focus on
its development, which will improve its ability to attract and motivate talents; and
(f) as our Company is expected to remain as a subsidiary of China Jinmao upon
completion of the Spin-off and the Global Offering, China Jinmao will continue to
benefit from any potential upside in the business of our Group through consolidation
of our Group’s accounts and receipt of dividend income from our Group.
The Spin-off by China Jinmao complies with the requirements of Practice Note 15 of the
Listing Rules. China Jinmao will give due regard to the interests of its shareholders by
providing Qualifying Jinmao Shareholders with an assured entitlement to the Shares by way of
the Distribution, being a distribution in specie of the Shares, if the Spin-off proceeds. Details
of the Distribution are set out below.
THE SPIN-OFF AND DISTRIBUTION
–112–
DISTRIBUTION
Information on the Distribution
On February 18, 2022, the board of directors of China Jinmao declared the Distribution
to the Qualifying Jinmao Shareholders, being registered holders of Jinmao Shares whose names
appear on the register of members of China Jinmao on the Record Date. The Distribution will
be implemented through a distribution in specie to be satisfied by way of our Company
allotting and issuing an aggregate of 191,680,031 Shares to the Qualifying Jinmao
Shareholders in proportion to their shareholdings in China Jinmao on the Record Date (subject
to the Distribution Adjustment as described below), representing approximately 21.3% of the
issued share capital of our Company immediately following the completion of the Spin-off and
the Global Offering (without taking into account the Distribution Adjustment and assuming the
Offer Size Adjustment Option and the Over-allotment Option are not exercised). Pursuant to
the Distribution, the Qualifying Jinmao Shareholders will be entitled to one Share for every
66.20 Jinmao Shares held on the Record Date (the “Distribution Basis”, subject to the
Distribution Adjustment).
Fractional entitlements of Qualifying Jinmao Shareholders to our Shares under the
Distribution will be disregarded and will instead be aggregated and sold by China Jinmao on
the market and the aggregate proceeds of such sale (net of expenses and taxes) will be retained
for the benefit of China Jinmao.
China Jinmao has appointed Computershare Hong Kong Investor Services Limited to
provide matching services, on a best efforts basis, to the Qualifying Jinmao Shareholders to
facilitate the trading of odd lots of Shares which the Qualifying Jinmao Shareholders may
receive under the Distribution. For further details, please refer to the announcement dated
February 18, 2022 issued by China Jinmao.
Distribution Adjustment
If the Offer Size Adjustment Option (as described in the section headed “Structure of the
Global Offering — Offer Size Adjustment Option” in this prospectus) is exercised, China
Jinmao may make a downward adjustment to the number of Shares to be distributed under the
Distribution, provided that such adjustment will not result in the number of Shares held in
public hands upon completion of the Spin-off and the Global Offering falling below the public
float percentage as required under the Listing Rules.
THE SPIN-OFF AND DISTRIBUTION
–113–
The following tables set out the impact of the Offer Size Adjustment Option on the
Distribution:
(a) Assuming the Over-allotment Option is not exercised:
If the Offer Size
Adjustment Option is
not exercised and no
Distribution Adjustment
is made
If the Offer Size
Adjustment Option is
exercised in full and the
Distribution Adjustment
is made accordingly
Number Percentage Number Percentage
Shares to be issue under the
Global Offering 101,411,500 11.25% 116,623,000 12.72%
Shares to be distributed to
the Qualifying Jinmao
Shareholders under the
Distribution 191,680,031 21.26% 174,039,474 18.99%
including:
— Sinochem Hong Kong 67,616,133 7.50% 61,393,334 6.70%
— Mr. Jiang Nan 122,356 0.01% 111,095 0.01%
— Other Qualifying Jinmao
Shareholders whose
shareholding will be
counted toward the public
float 123,941,542 13.75% 112,535,045 12.28%
Shares to be held by China
Jinmao upon completion of
the Bonus Issue and the
Distribution 608,319,969 67.49% 625,960,526 68.29%
Total number of issued
Shares upon completion of
the Spin-off and the Global
Offering 901,411,500 100% 916,623,000 100%
Distribution Basis 66.20 Jinmao Shares for
one Share
72.91 Jinmao Shares for
one Share
Public float 25.00% 25.00%
THE SPIN-OFF AND DISTRIBUTION
–114–
(b) Assuming the Over-allotment Option is exercised in full:
If the Offer Size
Adjustment Option is
not exercised and no
Distribution Adjustment
is made
If the Offer Size
Adjustment Option is
exercised in full and the
Distribution Adjustment
is made accordingly
Number Percentage Number Percentage
Shares to be issue under the
Global Offering 116,623,000 12.72% 134,116,000 14.36%
Shares to be distributed to
the Qualifying Jinmao
Shareholders under the
Distribution 191,680,031 20.91% 174,039,474 18.63%
including:
— Sinochem Hong Kong 67,616,133 7.38% 61,393,334 6.57%
— Mr. Jiang Nan 122,356 0.01% 111,095 0.01%
— Other Qualifying Jinmao
Shareholders whose
shareholding will be
counted toward the public
float 123,941,542 13.52% 112,535,045 12.05%
Shares to be held by China
Jinmao upon completion of
the Bonus Issue and the
Distribution 608,319,969 66.37% 625,960,526 67.01%
Total number of issued
Shares upon completion
of the Spin-off and the
Global Offering 916,623,000 100% 934,116,000 100%
Distribution Basis 66.20 Jinmao Shares for
one Share
72.91 Jinmao Shares for
one Share
Public float 26.24% 26.41%
THE SPIN-OFF AND DISTRIBUTION
–115–
Condition to the Distribution
The Distribution is conditional on the Global Offering becoming unconditional in all
respects. If such condition is not satisfied, the Distribution will not be made and the Spin-off
will not take place. Subject to the Distribution becoming unconditional, we expect to dispatch
share certificates to Qualifying Jinmao Shareholders who are entitled to receive Shares under
the Distribution on or before Wednesday, March 9, 2022. Share certificates will only become
valid if the Distribution becomes unconditional.
Information for Jinmao PRC Stock Connect Investors
According to the “Stock Connect Shareholding Search” available on the Stock
Exchange’s website (www.hkexnews.hk), as at Latest Practicable Date, China Clear held
1,157,491,292 Jinmao Shares, representing approximately 9.12% of the total issued Jinmao
Shares. China Clear is a CCASS Participant with HKSCC Nominees. Jinmao PRC Stock
Connect Investors may hold our Shares pursuant to the Distribution through China Clear.
Pursuant to the Shanghai Stock Exchange Measures for the Implementation of Shanghai-Hong
Kong Stock Connect ( ) revised and effective on
September 30, 2016 and last amended on February 1, 2021 and the Shenzhen Stock Exchange
Measures for the Implementation of Shenzhen-Hong Kong Stock Connect (
) promulgated and effective on September 30, 2016 and last amended
on February 1, 2021, the Jinmao PRC Stock Connect Investors (or the relevant China Clear
participants, as the case may be) whose stock accounts in China Clear are credited with our
Shares may only sell them on the Stock Exchange under the Shanghai Stock Connect and
Shenzhen Stock Connect.
Jinmao PRC Stock Connect Investors should seek advice from their intermediary
(including broker, custodian, nominee or China Clear participant) and/or other professional
advisers for details of the logistical arrangements as required by China Clear.
Non-Qualifying Jinmao Shareholders
Non-Qualifying Jinmao Shareholders (if any) will be entitled to the Distribution but will
not receive Shares. Instead, the Shares which they would otherwise receive pursuant to the
Distribution will be sold by China Jinmao on their behalf as soon as reasonably practicable
after commencement of dealings in the Shares on the Stock Exchange and they will receive a
cash amount equal to the net proceeds of such sale, provided that if the amount that a
Non-Qualifying Jinmao Shareholder would be entitled to receive is less than HK$100, such
sum will be retained for the benefit of China Jinmao. The proceeds of such sale, net of
expenses, will be paid to the Non-Qualifying Jinmao Shareholders (if any) in Hong Kong
dollars. Such payment is expected to be made on or before Tuesday, April 12, 2022.
None of China Jinmao, our Company or the Joint Sponsors take any responsibility for the
sale of such Shares or the payment of the net proceeds of the sale of such Shares to any such
underlying Beneficial Jinmao Shareholder. China Jinmao reserves the right, in its absolute
discretion, to allow the participation of any Jinmao Shareholder in the Distribution.
THE SPIN-OFF AND DISTRIBUTION
–116–
DIRECTORS’ RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS
This prospectus includes particulars given in compliance with the Companies (Winding
Up and Miscellaneous Provisions) Ordinance, the Securities and Futures (Stock Market
Listing) Rules (Chapter 571V of the Laws of Hong Kong) (as amended) and the Listing Rules
for the purpose of giving information to the public with regard to our Group. Our Directors
(including any proposed director who is named as such in this prospectus) collectively and
individually accept full responsibility for the accuracy of the information contained in this
prospectus. Our Directors, having made all reasonable enquiries, confirm that to the best of
their knowledge and belief, the information contained in this prospectus is accurate and
complete in all material respects and not misleading or deceptive, and there are no other
matters the omission of which would make any statement in this prospectus misleading.
INFORMATION ON THE GLOBAL OFFERING
The Hong Kong Offer Shares are offered solely on the basis of the information contained
and representations made in this prospectus and the Application Forms and on the terms and
subject to the conditions set out herein and therein. No person is authorized to give any
information in connection with the Global Offering or to make any representation not
contained in this prospectus and the relevant Application Forms, and any information or
representation not contained herein and therein must not be relied upon as having been
authorized by our Company, the Joint Sponsors, the Joint Representatives, the Joint Global
Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Underwriters, any of their
respective directors, agents, employees or advisors or any other party involved in the Global
Offering.
Neither the delivery of this prospectus nor any offering, sale or delivery made in
connection with the Offer Shares should, under any circumstances, constitute a representation
that there has been no change or development reasonably likely to involve a change in our
affairs since the date of this prospectus or imply that the information contained in this
prospectus is correct as of any date subsequent to the date of this prospectus.
Details of the structure of the Global Offering, including its conditions, are set out in the
section headed “Structure of the Global Offering” in this prospectus.
UNDERWRITING
This prospectus is published solely in connection with the Hong Kong Public Offering,
which forms part of the Global Offering. For applicants under the Hong Kong Public Offering,
this prospectus and the Application Forms set out the terms and conditions of the Hong Kong
Public Offering.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
–117–
The Listing is sponsored by the Joint Sponsors and the Global Offering is managed by the
Joint Global Coordinators. The Hong Kong Public Offering is fully underwritten by the Hong
Kong Underwriters under the terms of the Hong Kong Underwriting Agreement and is subject
to us and the Joint Representatives (for themselves and on behalf of the Underwriters) agreeing
on the Offer Price. The International Offering is expected to be fully underwritten by the
International Underwriters subject to the terms and conditions of the International
Underwriting Agreement, which is expected to be entered into on or around the Price
Determination Date.
If, for any reason, our Company and the Joint Representatives (for themselves and on
behalf of the Underwriters) are unable to reach an agreement on the Offer Price on or before
Wednesday, March 9, 2022, the Global Offering will not proceed and will lapse. For full
information about the Underwriters and the underwriting arrangements, please see the section
headed “Underwriting” in this prospectus.
PROCEDURES FOR APPLICATION FOR HONG KONG OFFER SHARES
The procedures for applying for Hong Kong Offer Shares are set out in the section headed
“How to Apply for Hong Kong Offer Shares” in this prospectus and on the relevant Application
Forms.
RESTRICTIONS ON OFFER OF THE OFFER SHARES AND SALE OF SHARES
Each person acquiring the Hong Kong Offer Shares under the Hong Kong Public Offering
will be required to, or be deemed by his acquisition of the Offer Shares to, confirm that he is
aware of the restrictions on offers of the Offer Shares described in this prospectus and the
relevant Application Forms and that he is not acquiring, and has not been offered, any Offer
Shares in circumstances that contravene any such restrictions.
No action has been taken to permit a public offering of the Offer Shares in any
jurisdiction other than in Hong Kong, or the distribution of this prospectus and/or Application
Forms in any jurisdiction other than Hong Kong. Accordingly, this prospectus and/or
Application Forms may not be used for the purpose of, and does not constitute, an offer or
invitation in any jurisdiction or in any circumstances in which such an offer or invitation is not
authorized or to any person to whom it is unlawful to make such an offer or invitation. The
distribution of this prospectus and the offering of the Offer Shares in other jurisdictions are
subject to restrictions and may not be made except as permitted under the applicable securities
laws of such jurisdictions pursuant to registration with or authorization by the relevant
securities regulatory authorities or an exemption therefrom.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
–118–
APPLICATION FOR LISTING ON THE STOCK EXCHANGE
We have applied to the Stock Exchange for the granting of the listing of, and permission
to deal in, the Shares in issue and to be issued pursuant to the Bonus Issue and the Global
Offering (including the additional Shares which may be issued pursuant to the exercise of the
Offer Size Adjustment Option and the Over-allotment Option).
Save as disclosed in this prospectus, no part of our Company’s share or loan capital is
listed on or dealt in on any other stock exchange and no such listing or permission to list is
being or proposed to be sought in the near future.
Under section 44B(1) of the Companies (Winding Up and Miscellaneous Provisions)
Ordinance, any allotment made in respect of any application will be invalid if the listing of,
and permission to deal in, the Shares on the Stock Exchange is refused before the expiration
of three weeks from the date of the closing of the application lists, or such longer period (not
exceeding six weeks) as may, within the said three weeks, be notified to our Company by the
Stock Exchange.
COMMENCEMENT OF DEALINGS IN THE SHARES
Dealings in the Shares on the Stock Exchange are expected to commence at 9:00 a.m. on
Thursday, March 10, 2022. The Shares will be traded in board lots of 500 Shares each. The
stock code of the Shares will be 00816.
ADMISSION OF THE SHARES INTO CCASS
Subject to the granting of the listing of, and permission to deal in, our Shares on the Stock
Exchange and our compliance with the stock admission requirements of HKSCC, our Shares
will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in
CCASS with effect from the Listing Date or any other date as determined by HKSCC.
Settlement of transactions between Exchange Participants (as defined in the Listing Rules) is
required to take place in CCASS on the second settlement day after any trading day. All
activities under CCASS are subject to the General Rules of CCASS and CCASS Operational
Procedures in effect from time to time. Investors should seek the advice of their stockbroker
or other professional advisors for details of the settlement arrangements as such arrangements
may affect their rights and interests.
All necessary arrangements have been made enabling the Shares to be admitted into
CCASS.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
–119–
REGISTER OF MEMBERS AND STAMP DUTY
Our Company’s register of members will be maintained by our registrar, Computershare
Hong Kong Investor Services Limited, in Hong Kong.
All Offer Shares issued pursuant to applications made in the Hong Kong Public Offering
and the International Offering will be registered on the register of members of our Company
in Hong Kong in order to enable them to be traded on the Stock Exchange. Dealings in the
Shares registered on our register of members will be subject to Hong Kong stamp duty.
PROFESSIONAL TAX ADVICE RECOMMENDED
Potential investors in the Global Offering are recommended to consult their professional
advisors if they are in any doubt as to the taxation implications of subscribing for, purchasing,
holding or disposal of, and dealing in our Shares (or exercising rights attached to them). None
of us, the Joint Sponsors, the Joint Representatives, the Joint Global Coordinators, the Joint
Bookrunners, the Joint Lead Managers, the Underwriters, any of their respective affiliates,
directors, employees, agents or advisers or any other person or party involved in the Global
Offering accepts responsibility for any tax effects on, or liabilities of, any person resulting
from the subscription, purchase, holding or disposal of, dealing in, or the exercise of any rights
in relation to, our Shares.
OVER-ALLOTMENT AND STABILIZATION
Details of the arrangement relating to the Over-allotment Option and stabilization are set
out under the section headed “Structure of the Global Offering” in this prospectus. Assuming
that the Over-allotment Option is exercised in full, our Company may be required to issue up
to an additional 15,211,500 new Shares if the Offer Size Adjustment Option is not exercised
or an additional 17,493,000 new Shares if the Offer Size Adjustment Option is exercised in full.
EXCHANGE RATE CONVERSION
Unless we indicate otherwise, the translation of Renminbi into Hong Kong dollars and of
Renminbi into U.S. dollars, and vice versa, in this prospectus was made at the following rates:
• RMB0.8134 to HK$1.00 (being the prevailing rate set by PBOC on February 16,
2022)
• RMB6.3463 to US$1.00 (being the prevailing rate set by PBOC on February 16,
2022)
No representation is made that the amounts denominated in one currency could actually
be converted into the amounts denominated in another currency at the rates indicated, or at all.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
– 120 –
LANGUAGE
If there is any inconsistency between the English version of this prospectus and the
Chinese translation of this prospectus, the English version of this prospectus shall prevail.
However, translated English names of Chinese laws and regulations, governmental authorities,
departments, entities (including certain of our subsidiaries), institutions, natural persons,
facilities, certificates, titles and the like included in this prospectus and for which no official
English translation exists are unofficial translations for identification purposes only; and in the
event of any inconsistency, the Chinese names (as appropriate) prevail.
ROUNDING
Certain amounts and percentage figures included in this prospectus have been subject to
rounding adjustments, or have been rounded to a set number of decimal places.
Any discrepancies in any table or chart between totals and sums of amounts listed therein
are due to rounding.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
– 121 –
In preparation for the Listing, our Company has applied for the following waivers and
exemptions from strict compliance with the relevant provisions of the Listing Rules and the
Companies (Winding Up and Miscellaneous Provisions) Ordinance:
WAIVER IN RELATION TO CONNECTED TRANSACTIONS
Our Group has entered into, and expects to continue after the Listing, certain transactions
which will constitute non-exempt continuing connected transactions under the Listing Rules
upon the Listing. Our Company has applied to the Stock Exchange for, and the Stock Exchange
has granted us, a waiver from strict compliance with the announcement, circular and
independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules in
respect of the continuing connected transactions as disclosed in “Connected Transactions —
Continuing Connected Transactions which are Subject to the Reporting, Annual Review,
Announcement, Circular and Independent Shareholders’ Approval Requirements”. For further
details, please refer to the section headed “Connected Transactions” in this prospectus.
WAIVER IN RELATION TO MANAGEMENT PRESENCE
Rule 8.12 of the Listing Rules requires our Company to have a sufficient management
presence in Hong Kong. This normally means that at least two of our Company’s executive
Directors must be ordinarily resident in Hong Kong. Since our Company’s headquarters and
core operations are based in the PRC, and all of our executive Directors and senior
management team ordinarily reside in the PRC, our Company does not have, and for the
foreseeable future will not have, sufficient management presence in Hong Kong for the purpose
of satisfying the requirements of the Listing Rules.
Accordingly, we have applied to the Stock Exchange for, and the Stock Exchange has
granted us, a waiver from strict compliance with Rule 8.12 of the Listing Rules on the
condition that the following arrangements be made for maintaining regular communication
with the Stock Exchange:
(a) our Company has appointed Ms. Zhou Liye, an executive director of the Company,
and Ms. Ho Wing Tsz Wendy, the company secretary of the Company, as our
Company’s authorized representatives for the purpose of Rule 3.05 of the Listing
Rules to serve as our Company’s principal channel of communication with the Stock
Exchange. Ms. Ho Wing Tsz Wendy ordinarily resides in Hong Kong, whereas Ms.
Zhou Liye ordinarily resides in the PRC and possesses valid travel documents and
is able to renew such travel documents when they expire in order to visit Hong
Kong. Each of our authorized representatives will be available to meet with the
Stock Exchange to discuss any matters in relation to our Company within a
reasonable period of time and will be readily contactable by phone and email to deal
with enquiries from the Stock Exchange. As and when the Stock Exchange wishes
WAIVERS FROM COMPLIANCE WITH THE LISTING RULES AND EXEMPTIONS
FROM COMPLIANCE WITH THE COMPANIES (WINDING UP AND
MISCELLANEOUS PROVISIONS) ORDINANCE
– 122 –
to contact the Directors on any matter, each of our Company’s authorized
representatives will have the means to contact all of the Directors promptly at all
times. Our Company will promptly inform the Stock Exchange of any change in our
authorized representatives;
(b) our Company has provided our Company’s authorized representatives with our
Directors’ respective office phone numbers, mobile phone numbers, fax numbers
and e-mail addresses to the extent possible; and our Directors will provide our
Company’s authorized representatives with the phone numbers of their places of
accommodation if they expect to travel or otherwise be out of office. Therefore, our
Company’s authorized representatives would have the means for contacting all
Directors promptly at all times as and when the Stock Exchange wishes to contact
our Directors on any matters;
(c) our Company has provided the Stock Exchange with the contact details of our
Directors (including their respective office phone numbers, mobile phone numbers,
fax numbers and e-mail addresses, to the extent possible) to facilitate the
communication with the Stock Exchange. Furthermore, each Director who does not
ordinarily reside in Hong Kong has confirmed that he possesses or is able to apply
for valid travel documents to visit Hong Kong and is able to meet with the Stock
Exchange within a reasonable period after requested by the Stock Exchange;
(d) in accordance with Rule 3A.19 of the Listing Rules, our Company has appointed
First Shanghai Capital Limited as our Company’s compliance advisor, to act as an
additional channel of communication with the Stock Exchange at least for the period
commencing on the Listing Date and ending on the date on which our Company
complies with Rule 13.46 of the Listing Rules in respect of the financial results for
the first full financial year commencing immediately after the Listing Date. Our
Company’s compliance advisor will be available to respond to any inquiries from
the Stock Exchange concerning our Company and will act as the principal channel
of communication with the Stock Exchange when the Authorized Representatives
are not available. In addition, our Company’s compliance advisor will also advise on
the on-going compliance requirements and other issues arising under the Listing
Rules after the Listing Date; and
(e) our Company will retain a Hong Kong legal advisor to advise our Company on
on-going compliance requirements and other issues arising under the Listing Rules
and other applicable laws and regulations in Hong Kong (as amended and
supplemented from time to time) after the Listing.
WAIVERS FROM COMPLIANCE WITH THE LISTING RULES AND EXEMPTIONS
FROM COMPLIANCE WITH THE COMPANIES (WINDING UP AND
MISCELLANEOUS PROVISIONS) ORDINANCE
– 123 –
WAIVER IN RELATION TO RULE 4.04(1) OF THE LISTING RULES AND
EXEMPTION FROM COMPLIANCE WITH PARAGRAPH 27 OF PART I AND
PARAGRAPH 31 OF PART II OF THE THIRD SCHEDULE TO THE COMPANIES
(WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE
Pursuant to Rule 4.04(1) of the Listing Rules, the accountant’s report contained in this
prospectus must include, inter alia, the results of our Company in respect of each of the three
financial years immediately preceding the issue of this prospectus or such shorter period as
may be acceptable to the Stock Exchange.
Pursuant to section 38(1) of the Companies (Winding Up and Miscellaneous Provisions)
Ordinance, this prospectus shall include an accountants’ report which contains the matters
specified in the Third Schedule to the Companies (Winding Up and Miscellaneous Provisions)
Ordinance.
Pursuant to paragraph 27 of Part I of the Third Schedule to the Companies (Winding Up
and Miscellaneous Provisions) Ordinance, our Company is required to include in this
prospectus a statement as to the gross trading income or sales turnover (as the case may be)
of our Company during each of the three financial years immediately preceding the issue of this
prospectus as well as an explanation of the method used for the computation of such income
or turnover and a reasonable breakdown of the more important trading activities.
Pursuant to paragraph 31 of Part II of the Third Schedule to the Companies (Winding Up
and Miscellaneous Provisions) Ordinance, our Company is required to include in this
prospectus a report by our Company’s auditor with respect to profits and losses and assets and
liabilities of the Company in respect of each of the three financial years immediately preceding
the issue of this prospectus.
Pursuant to section 38A(1) of the Companies (Winding Up and Miscellaneous Provisions)
Ordinance, the SFC may issue, subject to such conditions (if any) as the SFC thinks fit, a
certificate of exemption from compliance with the relevant requirements under the Companies
(Winding Up and Miscellaneous Provisions) Ordinance if, having regard to the circumstances,
the SFC considers that the exemption will not prejudice the interests of the investing public and
compliance with any or all of such requirements would be irrelevant or unduly burdensome, or
is otherwise unnecessary or inappropriate.
Paragraph 4.4(1) of Guidance Letter HKEX-GL25-11 provides that where an applicant
issues its listing document within two months after the latest year end, a Rule 4.04(1) waiver
would be subject to the following conditions: (i) the applicant must list on the Stock Exchange
within three months after the latest year end; (ii) the applicant must obtain a certificate of
exemption from the SFC on compliance with the requirements under the Companies (Winding
Up and Miscellaneous Provisions) Ordinance; (iii) a profit estimate for the latest financial year
(which must comply with Rules 11.17 to 11.19 of the Listing Rules) must be included in the
WAIVERS FROM COMPLIANCE WITH THE LISTING RULES AND EXEMPTIONS
FROM COMPLIANCE WITH THE COMPANIES (WINDING UP AND
MISCELLANEOUS PROVISIONS) ORDINANCE
– 124 –
listing document or the applicant must provide justification why a profit estimate cannot be
included in the listing document; and (iv) there must be a directors’ statement in the listing
document that there is no material adverse change to its financial and trading positions or
prospect with specific reference to the trading results from the end of the stub period to the
latest financial year end.
The accountant’s report for each of the three years ended December 31, 2018, 2019 and
2020 and the nine months ended September 30, 2021 has been prepared and is set out in
Appendix I to this prospectus.
Pursuant to the relevant requirements set out above, our Company is required to produce
three full years of audited accounts for the years ended December 31, 2019, 2020 and 2021.
However, an application has been made to the Stock Exchange for a waiver from strict
compliance with Rule 4.04(1) of the Listing Rules, and such waiver has been granted by the
Stock Exchange on the conditions that:
(a) this prospectus will be issued on or before February 25, 2022 and our Shares will
be listed on or before March 31, 2022, i.e. three months after the latest financial year
end;
(b) we will include in this prospectus a profit estimate for the year ended December 31,
2021 in compliance with Rules 11.17 to 11.19 of the Listing Rules and a statement
from our Directors that after performing all due diligence work which they consider
appropriate, there is no material and adverse change to the financial and trading
positions or prospects of our Company, with specific reference to the trading results
from October 1, 2021 to December 31, 2021;
(c) our Company obtains a certificate of exemption from the SFC on strict compliance
with paragraph 27 of Part I and paragraph 31 of Part II of the Third Schedule to the
Companies (Winding Up and Miscellaneous Provisions) Ordinance; and
(d) we will publish the preliminary results announcement for the financial year ended
December 31, 2021 by not later than March 31, 2022 and the annual report for the
financial year ended December 31, 2021 by not later than April 30, 2022,
respectively, in compliance with Rules 13.46(1) and 13.49(1) of the Listing Rules.
An application has also been made to the SFC for a certificate of exemption from strict
compliance with the requirements under section 38(1) in respect of paragraph 27 of Part I and
paragraph 31 of Part II of the Third Schedule to the Companies (Winding Up and
Miscellaneous Provisions) Ordinance and a certificate of exemption has been granted by the
SFC under section 38A(1) of the Companies (Winding Up and Miscellaneous Provisions)
WAIVERS FROM COMPLIANCE WITH THE LISTING RULES AND EXEMPTIONS
FROM COMPLIANCE WITH THE COMPANIES (WINDING UP AND
MISCELLANEOUS PROVISIONS) ORDINANCE
– 125 –
Ordinance on the conditions that (i) the particulars of the exemption will be set out in this
prospectus; and (ii) this prospectus will be issued on or before February 25, 2022 and our
Shares will be listed on or before March 31, 2021, i.e. three months after the latest financial
year end.
The applications to Stock Exchange for a waiver from strict compliance with Rule 4.04(1)
of the Listing Rules and to the SFC for a certificate of exemption from strict compliance with
the requirements under section 38(1) in respect of paragraph 27 of Part I and paragraph 31 of
Part II of the Third Schedule to the Companies (Winding Up and Miscellaneous Provisions)
Ordinance have been made on the grounds, among others, that strict compliance with the above
requirements would be unduly burdensome and waiver and exemption from strict compliance
would not prejudice the interests of the investing public as:
(a) there would not be sufficient time for our Company and the reporting accountants
of our Company (the “Reporting Accountants”) to finalize the audited financial
statements for the year ended December 31, 2021 for inclusion in this prospectus.
If the financial information for the year ended December 31, 2021 is required to be
audited, our Company and the Reporting Accountants would have to carry out
substantial volume of work to prepare, update and finalize the accountant’s report
and this prospectus, and the relevant sections of this prospectus will need to be
updated to cover such additional period;
(b) Our Directors and the Joint Sponsors herein confirm that after performing all due
diligence work which they consider appropriate, up to the date of this prospectus,
there has been no material adverse change to the financial and trading positions or
prospects of our Group since October 1, 2021 (immediately following the date of the
latest audited statement of financial position in the accountant’s report set out in
Appendix I to this prospectus) up to December 31, 2021 and there has been no event
which would materially affect the information shown in the accountant’s report as
set out in Appendix I to this prospectus, the section headed “Financial Information”
in this prospectus, the profit estimate for the year ended December 31, 2021 as set
out in Appendix III to this prospectus and the information regarding our Company’s
recent development subsequent to the Track Record Period and up to the Latest
Practicable Date, since October 1, 2021;
(c) our Company is of the view that the accountant’s report covering the three years
ended December 31, 2018, 2019 and 2020 and the nine months ended September 30,
2021, together with the profit estimate for the year ended December 31, 2021 (in
compliance with Rules 11.17 to 11.19 of the Listing Rules) included in this
prospectus have already provided the potential investors with adequate and
reasonably up-to-date information in the circumstances to form a view on the track
record and earnings trend of our Company; and our Directors and the Joint Sponsors
confirm that all information which is necessary for the investing public to make an
WAIVERS FROM COMPLIANCE WITH THE LISTING RULES AND EXEMPTIONS
FROM COMPLIANCE WITH THE COMPANIES (WINDING UP AND
MISCELLANEOUS PROVISIONS) ORDINANCE
– 126 –
informed assessment of the business, assets and liabilities, financial position,
trading position, management and prospects has been included in this prospectus.
Therefore, the waiver and exemption would not prejudice the interests of the
investing public; and
(d) we will comply with the requirements under Rules 13.46(1) and 13.49(1) of the
Listing Rules in respect of the publication of our annual results and annual report.
Our Company currently expects to issue our annual results and annual report for the
financial year ended December 31, 2021 on or before March 31, 2022 and April 30,
2022, respectively. In this regard, our Directors consider that the Shareholders of our
Company, the investing public as well as potential investors of our Company will be
kept informed of the financial results of our Group for the financial year ended
December 31, 2021.
CONSENT IN RESPECT OF ALLOCATION OF OFFER SHARES TO CONNECTED
CLIENT OF A JOINT GLOBAL COORDINATOR
Paragraph 5(1) of Appendix 6 to the Listing Rules provides that no allocations will be
permitted to “connected clients” of the lead broker or any distributors without the prior written
consent of the Stock Exchange.
Canny Elevator (as defined in the section headed “Our Cornerstone Investors” in this
prospectus) has agreed to be a cornerstone investor in the Global Offering. For the purpose of
the cornerstone investment, Canny Elevator has engaged UBS SDIC Fund Management (as
defined in the section headed “Our Cornerstone Investors” in this prospectus), an asset
manager that is a qualified domestic institutional investor as approved by the relevant PRC
authority, to subscribe for and hold the relevant Offer Shares on behalf of Canny Elevator on
a discretionary basis. As UBS SDIC Fund Management and Essence International Securities
(Hong Kong) Limited, which is Joint Global Coordinator, Joint Bookrunner, Joint Lead
Manager and Underwriter, are members of a group of companies controlled by State
Development & Investment Corp. Ltd. ( ), UBS SDIC Fund
Management is a “connected client” of Essence International Securities (Hong Kong) Limited
under paragraph 13(7) of Appendix 6 to the Listing Rules.
We have applied to the Stock Exchange for, and the Stock Exchange has granted, a written
consent under paragraph 5(1) of Appendix 6 to the Listing Rules to permit UBS SDIC Fund
Management, which is a “connected client” of Essence International Securities (Hong Kong)
Limited, to subscribe for and hold the Offer Shares on behalf of Canny Elevator as a
cornerstone investor subject to certain conditions. For further details, please refer to the section
headed “Our Cornerstone Investors” in this prospectus.
WAIVERS FROM COMPLIANCE WITH THE LISTING RULES AND EXEMPTIONS
FROM COMPLIANCE WITH THE COMPANIES (WINDING UP AND
MISCELLANEOUS PROVISIONS) ORDINANCE
– 127 –
DIRECTORS
Name Address Nationality
Executive Directors
Mr. Xie Wei ( ) Suite 302, Unit 3, 3/F,
No.1 Ruyuanju Nanli,
Haidian District, Beijing
Chinese
Ms. Zhou Liye ( ) Suite 1201, Unit 2, No.1
Building, Guozi Lane,
Xicheng District, Beijing
Chinese
Non-executive Directors
Mr. Jiang Nan ( ) Suite B, 8/F, Block 7, Residence
Bel-Air Phase 1, 28 Bel-Air Avenue,
Hong Kong SAR
Chinese
Ms. He Yamin ( )
(formerly known as
He Liyuan ( ))
Suite 2601, No.102
Building, Nanhu East
Garden I, Chaoyang
District, Beijing
Chinese
Ms. Qiao Xiaojie ( )
(formerly known as )
No. 402, 23/F,
Balizhuang Beili, Haidian
District, Beijing
Chinese
Independent non-executive
Directors
Dr. Chen Jieping ( ) No. 10-1001, Lane 188,
Mingyue Road, Pudong,
Shanghai
Chinese
Dr. Han Jian ( ) Suite 102, Unit 1, No. 27 Building,
Heshiyuan, Haidian District,
Beijing
American
Mr. Sincere Wong ( ) Suite E, 59/F, The Harbourside
Tower 1, 1 Austin Road West,
Kowloon, Hong Kong SAR
Chinese
For more information on our Directors, please refer to the section headed “Directors and
Senior Management” in this prospectus.
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 128 –
PARTIES INVOLVED IN THE GLOBAL OFFERING
Joint Sponsors and Joint Representatives
(in alphabetical order)
China International Capital Corporation
Hong Kong Securities Limited
29/F, One International Finance Centre
1 Harbour View Street
Central
Hong Kong
HSBC Corporate Finance (Hong Kong)
Limited
1 Queen’s Road Central
Hong Kong
Joint Global Coordinators
(in alphabetical order)
China International Capital Corporation
Hong Kong Securities Limited
29/F, One International Finance Centre
1 Harbour View Street
Central
Hong Kong
CLSA Limited
18/F, One Pacific Place
88 Queensway
Hong Kong
Essence International Securities
(Hong Kong) Limited
39/F, One Exchange Square
Central, Hong Kong
The Hongkong and Shanghai Banking
Corporation Limited
1 Queen’s Road Central
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 129 –
Joint Bookrunners
(in alphabetical order)
ABCI Capital Limited
11/F, Agricultural Bank of China Tower
50 Connaught Road Central
Hong Kong
CCB International Capital Limited
12/F, CCB Tower
3 Connaught Road Central
Central, Hong Kong
China International Capital Corporation
Hong Kong Securities Limited
29/F, One International Finance Centre
1 Harbour View Street
Central
Hong Kong
CLSA Limited
18/F, One Pacific Place
88 Queensway
Hong Kong
CMB International Capital Limited
45/F, Champion Tower
3 Garden Road,
Central, Hong Kong
Essence International Securities
(Hong Kong) Limited
39/F, One Exchange Square
Central, Hong Kong
The Hongkong and Shanghai Banking
Corporation Limited
1 Queen’s Road Central
Hong Kong
Huarong International Securities Limited
Unit A, 16/F & Unit A, 17/F
Two Pacific Place
88 Queensway, Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 130 –
Huatai Financial Holdings (Hong Kong)
Limited
62/F, The Center
99 Queen’s Road Central
Hong Kong
Shenwan Hongyuan Securities
(H.K.) Limited
Level 19, 28 Hennessy Road
Hong Kong
Joint Lead Managers
(in alphabetical order)
ABCI Securities Company Limited
10/F, Agricultural Bank of China Tower
50 Connaught Road Central
Hong Kong
CCB International Capital Limited
12/F, CCB Tower
3 Connaught Road Central
Central, Hong Kong
China International Capital Corporation
Hong Kong Securities Limited
29/F, One International Finance Centre
1 Harbour View Street
Central
Hong Kong
CLSA Limited
18/F, One Pacific Place
88 Queensway
Hong Kong
CMB International Capital Limited
45/F, Champion Tower
3 Garden Road
Central, Hong Kong
Essence International Securities
(Hong Kong) Limited
39/F, One Exchange Square
Central, Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 131 –
The Hongkong and Shanghai Banking
Corporation Limited
1 Queen’s Road Central
Hong Kong
Huarong International Securities Limited
Unit A, 16/F & Unit A, 17/F
Two Pacific Place
88 Queensway, Hong Kong
Huatai Financial Holdings (Hong Kong)
Limited
62/F, The Center
99 Queen’s Road Central
Hong Kong
Livermore Holdings Limited
Unit 1214A, 12/F
Tower II Cheung Sha Wan Plaza
833 Cheung Sha Wan Road
Kowloon, Hong Kong
Shenwan Hongyuan Securities
(H.K.) Limited
Level 19, 28 Hennessy Road, Hong Kong
Legal advisors to our Company As to Hong Kong and U.S. law:
Latham & Watkins LLP
18/F, One Exchange Square
8 Connaught Place
Central, Hong Kong
As to PRC law:
Tian Yuan Law Firm
10/F, China Pacific Insurance Plaza
28 Fengsheng Hutong
Xicheng District, Beijing, PRC
Legal advisors to the Joint Sponsors
and the Underwriters
As to Hong Kong and U.S. law:
Fangda Partners
26/F, One Exchange Square
8 Connaught Place
Central, Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 132 –
As to PRC law:
Beijing Jingtian & Gongcheng Law Firm
34/F, Tower 3, China Central Place
77 Jianguo Road
Beijing, China
Reporting accountants and
independent auditors
Ernst & Young
Certified Public Accountants
Registered Public Interest Entity Auditor
27/F, One Taikoo Place
979 King’s Road
Quarry Bay, Hong Kong
Independent industry consultant China Index Academy
11/F, Building A
No. 20 Guogongzhuang Middle Street
Fengtai District, Beijing, PRC
Receiving banks Bank of China (Hong Kong) Limited
1 Garden Road
Hong Kong
Bank of Communications Co., Ltd.
Hong Kong Branch
Unit B B/F & G/F, Unit C G/F, 1-3/F, 16/F
Room 01 & 18/F
Wheelock House
20 Pedder Street
Central
Hong Kong
Compliance advisor First Shanghai Capital Limited
19th Floor, Wing On House
71 Des Voeux Road Central
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 133 –
Registered office Rm 4702-03, 47/F
Office Tower Convention Plaza
1 Harbour Road, Wanchai
Hong Kong
Corporate headquarters and
principal place of business
in the PRC
2F, Sinochem Tower
A2 Fuxingmenwai Avenue
Beijing, PRC
Company’s website www.jinmaowy.com
(The contents on this website do not form
part of this prospectus)
Company secretary Ms. Ho Wing Tsz Wendy ( )
(Chartered Secretary, Chartered Governance
Professional and a fellow of both The Hong
Kong Chartered Governance Institute and
The Chartered Governance Institute in
United Kingdom)
Level 54, Hopewell Centre
183 Queen’s Road East
Hong Kong
Authorized representatives
(for the purpose of the
Listing Rules)
Ms. Zhou Liye ( )
Suite 1201, Unit 2, No.1
Building, Guozi Lane,
Xicheng District, Beijing
Ms. Ho Wing Tsz Wendy ( )
(Chartered Secretary, Chartered Governance
Professional and a fellow of both The Hong
Kong Chartered Governance Institute and
The Chartered Governance Institute in
United Kingdom)
Level 54, Hopewell Centre
183 Queen’s Road East
Hong Kong
Audit committee Dr. Chen Jieping ( ) (Chairperson)
Mr. Sincere Wong ( )
Ms. Qiao Xiaojie ( )
CORPORATE INFORMATION
– 134 –
Remuneration and Nomination
committee
Dr. Han Jian ( ) (Chairperson)
Dr. Chen Jieping ( )
Ms. He Yamin ( )
Strategy and Investment committee Mr. Jiang Nan ( ) (Chairperson)
Mr. Xie Wei ( )
Ms. Zhou Liye ( )
Mr. Sincere Wong ( )
Hong Kong Share Registrar Computershare Hong Kong Investor
Services Limited
Shops 1712-1716, 17th Floor
Hopewell Centre
183 Queen’s Road East
Wanchai
Hong Kong
Principal bank DBS Bank Ltd., Hong Kong Branch
18th Floor, The Center
99 Queen’s Road Central
Hong Kong
CORPORATE INFORMATION
– 135 –
This industry overview section contains information and statistics that are derived
from government publications, other publications and the market research report
prepared by China Index Academy, which was commissioned by us.
The information extracted from the official government publications have not been
independently verified by us, the Joint Sponsors, the Joint Representatives, Joint Global
Coordinators, Joint Bookrunners, Joint Lead Managers, any of the Underwriters, any of
our or their respective directors, officers, employees, agents or representatives or any
other person involved in the Listing (other than China Index Academy) and no
representation is given as to their correctness or accuracy. Accordingly, the information
from official government sources contained herein may not be accurate and should not be
unduly relied upon.
RESEARCH BACKGROUND AND METHODOLOGIES
We have commissioned China Index Academy to prepare a market research report (“CIA
Report”) on the property management industry in China at a total sum of RMB0.8 million and
supplemented these with data obtained from public sources where applicable. China Index
Academy is an independent real estate research institute founded by experts with over 500
professional analysts. China Index Academy has extensive experience in researching and
tracking the property management industry in the PRC, and has conducted research on the Top
100 Property Management Companies since 2008. In its research, China Index Academy
considers primarily property management companies that have on average managed at least ten
properties or an aggregate GFA of 500,000 sq.m. for the previous three years. China Index
Academy uses research parameters and assumptions and gathers data from a multitude of
primary and secondary sources, including data from property management companies
(including data from reported statistics, websites and marketing materials), surveys it has
conducted, data gathered from the China Real Estate Index System, the China Real Estate
Statistics Yearbooks, public data from governmental authorities and data gathered for prior
reports it has published. China Index Academy derives its rankings of overall strength of
property management companies primarily by evaluating each property management
company’s property management scale, operational performance, service quality, growth
potential and social responsibility. China Index Academy assesses the growth potential of a
property management company primarily in terms of revenue growth, growth of total GFA
under management, reserved GFA, and the number and composition of employees. In this
section, the data analysis is primarily based on the Top 100 Property Management Companies
in China.
INDUSTRY OVERVIEW
– 136 –
When preparing the CIA Report, China Index Academy assumed that: (i) the social,
economic and political conditions in China and the world will remain stable during the forecast
period; (ii) government policies on the property management industry in the PRC will remain
unchanged during the forecast period; (iii) all published data by the relevant statistics bureaus
are accurate; and (iv) all information relating to residential sales transactions collected from
the relevant local housing administrative bureaus is accurate.
OVERVIEW OF THE DEVELOPMENT OF THE REAL ESTATE MARKET IN THE
PRC
The gross domestic product, or GDP, of the PRC reached RMB101.6 trillion in 2020,
representing a CAGR of 8.01% from RMB74.6 trillion in 2016, according to China Index
Academy. In contrast with the traditional growth drivers, the new GDP growth drivers focus
on optimizing the economic structure and improving quality of life.
According to China Index Academy, driven by rapid economic growth, favorable
monetary policies, and strong demands, the real estate market in the PRC has experienced rapid
development in the past 20 years. Total property development investment amount increased
from RMB10.2 trillion in 2016 to RMB14.1 trillion in 2020, representing a CAGR of 8.4%, and
total residential property investment amount increased from RMB6.9 trillion in 2016 to
RMB10.4 trillion in 2020, representing a CAGR of 11.0%, according to China Index Academy.
The GFA of contracted sales from commodity properties increased from 1.6 billion sq.m. in
2016 to 1.8 billion sq.m. in 2020, representing a CAGR of 2.9%, according to China Index
Academy. The total GFA of commodity residential properties under construction increased
from 7.6 billion sq.m. in 2016 to 9.3 billion sq.m. in 2020, representing a CAGR of 5.1%,
according to China Index Academy. Such growth has provided an excellent opportunity for the
development of the property management industry.
The following chart sets forth the GFA of contracted sales from commodity properties, the
cumulative GFA of completed commodity properties and the total property development
investment amount for the years indicated.
Source: China Index Academy
INDUSTRY OVERVIEW
– 137 –
THE PROPERTY MANAGEMENT INDUSTRY IN THE PRC
Overview
The property management industry emerged in 1981 in the PRC, when the first domestic
property management company was founded in the Shenzhen Special Economic Zone.
Followed by the official promulgation of the Provisions on Property Management (
) in 2003, Property Law of People’s Republic of China ( )
in 2007 and Notice by the Ministry of Housing and Urban-rural Development and Other
Departments of Strengthening and Improving the Administration of Residential Property (
) in 2021, the regulatory framework for the property
management industry gradually took shape and matured. Meanwhile, an open and fair market
system for the industry was established, which has boosted the significant growth of the PRC
property management industry. The PRC property management industry now services a wide
range of properties, including residential properties, commercial properties, offices, public
properties, industrial parks, schools, hospitals and other properties.
The following chart sets forth the historical and projected market size of the property
management industry in China in terms of GFA under management for the years indicated:
0
5
10
15
20
25
30
35
Unit: billion sq.m.
18.5
19.5
21.1
23.9
25.9
27.4
29.0
31.1
33.3
34.8
2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E
Source: China Index Academy
Property Management Services
According to China Index Academy, in recent years, the aggregate GFA under
management and the number of properties managed by the Top 100 Property Management
Companies have increased rapidly as a result of rapid urbanization and continual growth in per
capita disposable income in China. According to China Index Academy, the average GFA under
management by the Top 100 Property Management Companies increased from 27.3 million
sq.m. in 2016 to 48.8 million sq.m. in 2020, representing a CAGR of 15.7%. Meanwhile, the
average number of properties managed by the Top 100 Property Management Companies
reached 244 in 2020, representing a CAGR of 10.1% from 2016. The market share of the Top
100 Property Management Companies increased from 29.4% in 2016 to 49.7% in 2020.
INDUSTRY OVERVIEW
– 138 –
The following chart sets forth the average GFA under management and the aggregate
market share of the Top 100 Property Management Companies for the years indicated:
4,278.83
2,000.00
2,725.09
15.40%
29.4%
32.4%
38.9%
43.6%
49.7%
16.10%
17.52%
15.08%
14.02%
3,163.83
4,878.72
2016 2017
2018 2019 2020
2,500.00
3,000.00
3,500.00
4,000.00
4,500.00
5,000.00
5,500.00
Unit: 0’000 sq.m.
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
3,718.13
Average GFA under management
Year-on-year growth rate Market share
Source: China Index Academy
While residential properties account for the majority of the total GFA under management
by the Top 100 Property Management Companies, property management companies in China
have also sought to diversify the types of properties they manage. The following chart sets
forth the GFA under management by the Top 100 Property Management Companies by property
type in 2020.
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
66.27%
68.88%
6.66%
Residential properties
Commercial
properties
Office properties
Public properties
Industrial parks
Schools
Hospitals
Other
types of properties
6.63%
7.56%
8.40%
2.27%
1.75%
6.49%
6.43%
2.79%
2.86%
1.98%
1.45%
5.98%
3.60%
2020 2019
Source: China Index Academy
INDUSTRY OVERVIEW
– 139 –
According to China Index Academy, in the PRC, property management service fees are
the primary revenue source for property management companies. Property management fees
may be charged either on a lump sum basis or commission basis. According to China Index
Academy, the lump sum model for property management fees is the dominant revenue model
in the property management industry in the PRC, especially for residential properties, as it
improves efficiency by simplifying the collective decision-making processes by property
owners and residents in the event of large expenditures, and provides more incentives to
property management service providers to optimize their operations, thereby enhancing
profitability. It is also an industry norm to charge certain projects, which are usually
non-residential projects, a package price of property management fees on a per project basis
without reference to any GFA, according to China Index Academy.
The following chart sets forth the average property management fees for residential
properties and non-residential properties in different tiers of cities in China of the Top 100
Property Management Companies in 2020.
0
5
10
15
PRC Tier-one cities Tier-two cities Tier-three and tier-four cities
Residential properties
Average property
management fee 3.84
Average property
management fee 6.64
Average property
management fee 3.36
Average property
management fee 3.31
Industrial parks
Commercial properties Ofce properties Public properties
Schools Hospitals
Other types of properties
Unit: RMB/m
2
/month
Source: China Index Academy
The average property management fees for residential properties and commercial
properties in tier-one and tier-two cities were generally higher compared to tier-three and
tier-four cities in 2020.
According to China Index Academy, the revenue from property management services of
the Top 100 Property Management Companies has achieved steady growth through both
organic growth and external acquisitions. The average revenue from property management
services of the Top 100 Property Management Companies increased from RMB519.3 million
in 2016 to RMB914.4 million in 2020, representing a CAGR of 15.2%, according to China
Index Academy.
INDUSTRY OVERVIEW
– 140 –
The following chart sets forth the average revenue from property management services
for the Top 100 Property Management Companies during the years indicated.
0
300
600
900
1,200
1,500
Unit: RMB million
2016
627.8
519.3
742.1
886.2
713.3
1,040.2
1,173.4
914.4
817
607
2017 2018 2019 2020
Average revenue from operation Average revenue from property management service fees
Source: China Index Academy
Meanwhile, the average operating cost of the Top 100 Property Management Companies
reached RMB885.7 million in 2020. With cost control measures through new technologies
adopted in the industry, the average operating cost to average revenue ratio of the Top 100
Property Management Companies decreased from 78.8% in 2016 to 75.5% in 2020.
The following chart sets forth the average operating costs and the operating cost to
revenue ratio of the Top 100 Property Management Companies during the years indicated.
742.1
886.2
1,040.2
627.8
494.5
576.5
677.4
790.3
1,173.4
885.7
78.8%
77.7%
Average revenue of Top 100 Companies
(in RMB million)
Average operating cost ratio of Top 100
Companies
Average operating cost of Top 100
Companies (in RMB million)
76.4%
76.0%
75.5%
2016 2017 2018 2019 2020
0
200
400
600
800
1,000
1,200
1,400
73.0%
74.0%
75.0%
76.0%
77.0%
78.0%
79.0%
80.0%
Source: China Index Academy
INDUSTRY OVERVIEW
– 141 –
THE PROPERTY MANAGEMENT INDUSTRY IN THE EASTERN REGION AND
NORTHERN REGION IN CHINA
The Eastern Region
The eastern region in China includes Shanghai, Jiangsu Province, Anhui Province, Fujian
Province, Jiangxi Province and Shandong Province. According to China Index Academy, the
region is one of the most developed economic regions in China with an urbanization rate of
67.7% in 2020. Its GDP increased to RMB3.9 billion in 2020, representing a CAGR of 5.8%
from 2016 to 2020. There are approximately 62.4 thousand property management companies
in 2020, accounting for 31.2% of the total property management companies in China.
The GFA under management in the eastern region increased to 8.8 billion sq.m. in 2020
from 7.0 billion sq.m. in 2016, representing a CAGR of 5.8%. The GFA under management in
the eastern region accounted for 34.0% of the total GFA under management in China in 2020.
The GFA under management is estimated to reach 11.3 billion sq.m. in 2025 in the eastern
region. The following chart sets forth the GFA under management in the eastern region in
China for the years indicated:
70.18
73.85
77.67
82.3
88.04
92.59
98.50
104.59
108.52
112.58
2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E
0
20
40
60
80
100
120
GFA under management (in 100 million sq.m.)
Source: China Index Academy
The Northern Region
The northern region in China includes Beijing, Tianjin, Hebei Province, Shanxi Province
and Inner Mongolia (including Hohhot, Baotou and Ulanqab). According to China Index
Academy, the urbanization rate in the northern region is 67.2% in 2020. Its GDP increased to
RMB1.1 billion in 2020, representing a CAGR of 3.3% from 2016 to 2020. There are
approximately 29.2 thousand property management companies in 2020, accounting for 14.6%
of the total property management companies in China.
INDUSTRY OVERVIEW
– 142 –
According to China Index Academy, the GFA under management in the northern region
increased to 2.8 billion sq.m. in 2020 from 2.2 billion sq.m. in 2016, representing a CAGR of
6.6%. The GFA under management in the northern region accounted for 10.9% of the total GFA
under management in China in 2020. The GFA under management is estimated to reach 3.7
billion sq.m. in 2025 in the northern region. The following chart sets forth the GFA under
management in the northern region in China for the years indicated:
21.83
23.02
24.39
26.40
28.20
29.86
31.68
33.35
35.40
37.35
2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E
0
10
20
25
30
35
40
5
15
GFA under management (in 100 million sq.m.)
Source: China Index Academy
Value-added Services
Property management companies in the PRC are continuously diversifying the extent and
content of value-added services. The average revenue from value-added services of the Top 100
Property Management Companies in the PRC was RMB259.0 million in 2020, representing a
CAGR of 24.3% from RMB108.5 million in 2016.
The following chart sets forth the average revenue from value-added services of the Top
100 Property Management Companies during the years indicated.
0
300
600
900
1,200
1,500
Unit: RMB million
2016
627.8
108.5
742.1
886.2
172.9
1,040.2
1,173.4
259.0
223.1
135.1
2017 2018 2019 2020
Average revenue from operation Average revenue from value-added services
Source: China Index Academy
INDUSTRY OVERVIEW
– 143 –
In terms of specific types of value-added services, the Top 100 Property Management
Companies primarily focus on offline value-added services, especially housekeeping, other
household related services, community space operations services, real estate brokerage
services and e-commerce services. According to China Index Academy, revenue from
community space operations services as a percentage of the community value-added service
revenues of the Top 100 Property Management Companies increased by 4.4% from 24.4% in
2019 to 28.8% in 2020. Revenue from real estate brokerage services, e-commerce services,
housekeeping services, household services and community finance services, each as a
percentage of the community value-added service revenues of the Top 100 Property
Management Companies, decreased from 19.6%, 15.3%, 11.6%, 10.5% and 2.1% in 2019 to
16.9%, 14.5%, 4.4%, 8.3% and 1.0% in 2020, respectively, according to China Index Academy.
Property management companies also provide value-added services to non-property
owners, including sales assistance services to property developers to assist with their sales and
marketing activities, and consultancy and other value-added services such as engineering
services. Leveraging on the front-line property management expertise, property management
companies have in-depth knowledge of customer preferences and have an edge on addressing
customers’ needs. In 2020, the average revenue generated from value-added services of Top
100 Property Management Companies reached to RMB259 million, representing a CAGR of
24.3%. The average revenue generated from value-added services to non-property owners of
Top 100 Property Management Companies was RMB122 million and RMB142 million in 2019
and 2020, accounting for 54.7% and 54.9% of revenue generated from value-added services in
the same years, respectively.
The percentage of revenue generated from value-added services increased from 17.3% in
2016 to 22.1% in 2020, and is expected to reach to 35.5% in 2025. The below chart sets forth
the revenue generated from property management services and value-added services of Top 100
Property Management Companies for the years indicated.
519.3
607.0
713.3
817.0
914.4
1,002.3
1,097.2
1,192.1
1,287.0
1,381.8
108.5
135.1
172.9
223.1
259.0
335.4
427.7
515.9
625.9
760.6
17.3%
18.2%
19.5%
21.4%
22.1%
25.1%
28.0%
30.2%
32.7%
35.5%
0
200
400
600
800
1,000
1,200
1,400
1,600
2016 2017 2018
Average revenue from property
management services (in RMB million)
Percentage of property
mana
g
ement services
Average revenue from value-added
services (in RMB million)
Percentage of value-added services
2019 2020 2021E 2022E 2023E 2024E 2025E
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
82.7%
81.8%
80.5%
78.6%
77.9%
74.9%
72.0%
69.8%
67.3%
67.5%
Source: China Index Academy
INDUSTRY OVERVIEW
– 144 –
INDUSTRY GROWTH DRIVERS
According to China Index Academy, growth of the property management industry in the
PRC depends on the following key drivers:
Favorable Policies
Introduction of favorable laws, regulations and policies serves as a critical foundation for
the health and growth of China’s property management industry. The promulgation of the
Provisions on Property Management ( ) in June 2003 by the State Council
was a milestone in the regulatory history of the PRC property management industry.
Subsequently, a series of favorable policies supporting the development of the property
management industry have come into effect, including the Circular of the NDRC on the
Opinions of Relaxing Price Controls in Certain Services (
), which was issued in December 2014 and requires provincial level price
administration authorities to abolish all price control or guidance policies on non-government
supported properties other than government-supported housing, housing reform properties,
properties in old residential areas and preliminary property management services, and the
Guiding Opinions of the General Office of the State Council on Accelerating the Development
of the Resident Service Industry to Promote the Upgrade of Consumption Structure (
), which was issued in
November 2015, aiming to further standardize the provision of property management services
as part of the industrial upgrade and diversification of the resident service sectors. In addition,
the decentralization reforms in governmental functions and responsibilities lead to more
demand for property management services for public and other properties and creates more
opportunities for property management companies to expand their scale of property
management services for public and other properties. These laws and policies jointly create and
will continue to offer a supportive environment and accelerate the development of the industry
and property management companies in the PRC. In August 2014, the NDRC released the
Guiding Opinion on the Promotion of the Healthy Development of Smart Cities (
), which laid out a comprehensive plan for the development of
smart cities in the PRC. In December 2018, the NDRC and the CAC promulgated the Notice
on Continuing to Evaluate the Development of New Smart Cities and Further Promoting the
Rapid and Healthy Development of New Smart Cities (
). Other relevant government authorities
also promulgated detailed policies related to the various aspects of developing smart cities.
These policies provide comprehensive policy support and clear guidance on smart city
development for property management companies in the PRC.
INDUSTRY OVERVIEW
– 145 –
Proposed Regulations on “Three Red Line” Standards
According to the symposium jointly held by the MOHURD and the PBOC in August
2020, the MOHURD and the PBOC proposed restrictive rules that limits the growth of real
estate companies’ interest-bearing debt and financing activities. The rules lay out three
standards, which include:
• Red line I: the debt-to-asset ratio, excluding advances from customers, not higher
than 70%;
• Red line II: the net gearing ratio not higher than 100%; and
• Red line III: the cash to short-term debt ratio not lower than 1.0 time.
In accordance with the above standards, real estate companies would be categorized into
four tiers by color, on which restrictions would be applied to different extents:
• Red tier: companies whose financial ratios exceed all three red lines are not allowed
to increase their interest-bearing debt;
• Orange tier: companies whose financial ratios exceed two red lines are allowed to
expand their interest-bearing debt at a maximum annual rate of 5%;
• Yellow tier: companies whose financial ratios exceed one red line are allowed to
expand their interest-bearing debt at a maximum annual rate of 10%; and
• Green tier: companies whose financial ratios do not exceed any of the three red lines
are allowed to expand their interest-bearing debt at a maximum annual rate of 15%.
According to China Index Academy, the proposed regulations on the “Three Red Line”
are primarily for the purpose of restraining the overly aggressive expansion of certain heavily
indebted property developers, enhancing the marketization, regulation and transparency of
financing of property developers. The proposed regulations on the “Three Red Line” standards
are expected to speed up real estate companies’ deleveraging process and promote the healthy
development of the PRC real estate industry. The short-term investment along with the
short-term financings in the real estate industry are expected to decrease. In the long run, the
land auction market will become more stable and the cost of long-term financings are expected
to decrease.
Certain property developers are no longer able to achieve rapid and large-scale expansion
through use of financial leverages, which may slow down the growth of the real estate market
and have an adverse impact on the property management industry. The proposed regulations are
expected to have less negative impact on real estate companies which have advantages in
capital sufficiency, such as large property developers and state-owned companies and therefore
less likely to have a material negative impact on the business and financial performance of the
INDUSTRY OVERVIEW
– 146 –
property management service providers affiliated to such real estate companies, since many of
their projects are sourced from related parties. Property management industry will become
attractive due to its light asset mode and property management companies need to enhance
their abilities to source projects from independent third parties to diversify its revenue source,
provide more comprehensive service offerings and achieve economies of scale.
Growth in Demand Driven by the Acceleration of Urbanization Process in the PRC and
the Increase in Per Capita Disposable Income
The level of urbanization and per capita disposable income in the PRC have increased
significantly in recent years and have accelerated the growth of the property management
industry. According to China Index Academy, the urbanization rate, being the percentage of the
population living in urban areas, in China increased from 34.8% in 1999 to 63.9% in 2020, with
the urban population increasing by approximately 20.6 million each year. The PRC property
management industry is expected to continue to grow in tandem with such rising level of
urbanization. Moreover, according to China Index Academy, per capita disposable income of
the urban population has also steadily increased to RMB43,834 in 2020, representing a CAGR
of 6.9% from 2016, driving increasing demand for better living conditions and quality property
management services, and creating growth opportunities for property management companies.
Growth in Supply
Following the rapid urbanization and continuous growth in per capita disposable income,
the supply of commodity properties also surged in China. According to China Index Academy,
the total GFA of contracted sales from commodity properties in China increased from 1.6
billion sq.m. in 2016 to 1.8 billion sq.m. in 2020 at a CAGR of 2.9%, whereas the total GFA
of the commodity properties being newly constructed increased from 1.7 billion sq.m. in 2016
to 2.2 billion sq.m. in 2020 at a CAGR of 6.7%. The continuous expansion of the real estate
market has provided favorable opportunities for the development of the property management
industry.
MARKET TRENDS
Key market trends of the property management industry in the PRC include:
Increasing Market Concentration
The property management industry in the PRC is fragmented and competitive. In order to
expand the GFA under management and realize economies of scale to strengthen market
positions, large-scale property management companies actively accelerate their expansions by
means of both organic growth and acquisitions of small- and medium-sized property
management companies. Many of property management companies already listed on the Stock
Exchange are also looking for potential target property management companies in the PRC.
Subsequently, the market continues to become more concentrated. According to China Index
Academy, the average GFA under management of the Top 100 Property Management
INDUSTRY OVERVIEW
– 147 –
Companies increased from 27.3 million sq.m. in 2016 to 48.8 million sq.m. in 2020 at a CAGR
of 15.7%. Meanwhile, the total GFA under management of property management companies in
the PRC increased from 2016 to 2020 at a CAGR of 8.8%.
The following chart sets forth the average GFA under management, the aggregate market
share in terms of the total GFA under management and the year-on-year growth rate of the Top
100 Property Management Companies for the years indicated:
–
1,000.00
2,000.00
3,000.00
4,000.00
5,000.00
6,000.00
7,000.00
8,000.00
9,000.00
2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E
29.44%
15.40%
32.42%
16.10%
17.52%
14.02%
12.40%
14.86%
12.15%
11.17%
8.93%
38.85%
43.61%
49.71%
52.10%
56.50%
59.10%
61.30%
63.90%
2,725.09
627.84
886.18
1,040.15
1,173.39
1,337.70
1,524.90
1,708.00
1,912.90
2,142.40
742.10
3,163.83
3,718.13
4,278.83
4,878.72
5,483.55
6,298.32
7,063.55
7,852.43
8,553.78
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
15.08%
Average GFA under
management (0’000 sq. m.)
Revenue from
operation (RMB million)
Year-on-yea
r
growth rate
Market share
Source: China Index Academy
Diversifying Revenue Sources and Managed Property Types
With the widespread adoption of the Internet, mobile applications, cloud computing,
artificial intelligence, and other related technologies, along with policy support from the PRC
government, property management companies increasingly engage in developing intelligent
and smart management systems. Integrating online and offline information and resources, they
aim to digitalize, automate, modernize and connect their various services and provide a
one-stop service platform to property owners, residents and tenants. Property management
companies also keep diversifying their revenue streams by offering various value-added
services with a higher profitability. These mainly include pre-delivery services and consultancy
services to property developers and community value-added service to property owners and
residents, such as community space operations services, e-commerce services, real estate
brokerage services and other various bespoke services. In addition, leveraging further
urbanization and favorable policies in the PRC, property management companies have begun
to offer municipal services leveraging their professional property management experience and
well-developed service capabilities. Moreover, property management companies are also
increasingly diversifying the types of managed non-residential properties as management of
such properties generally has a higher profit margin as compared to residential properties.
INDUSTRY OVERVIEW
– 148 –
The following chart sets forth the value-added service revenues of the Top 100 Property
Management Companies by service type for the years indicated:
Elderly
care services
Automobile
services
Household
services
Housekeeping
services
Other services
E-commerce
services
Real-estate
brokerage
Space
operation
Community
nance
0%
6%
12%
18%
24%
30%
24.36%
28.76%
19.55%
16.94%
15.28%
14.49%
12.47%
18.42%
11.58%
4.39%
10.48%
8.30%
2.85%
4.08%
2.11%
0.99%
1.32%
1.52%
2019 2020
Source: China Index Academy
Professionalized Staff and Enhanced Service Quality
To enhance service quality and reduce labor costs, most of the Top 100 Property
Management Companies have set up their own internal standardized operating procedures and
are increasingly adopting information technologies in their daily operations. They are also
increasingly outsourcing labor-intensive aspects of their operations to subcontractors while
placing greater emphasis on recruiting and training professionalized and skilled employees to
facilitate the implementation of smart management and information technologies and promote
innovations to maintain their leading market positions.
Marketization
In the past, the property management services had long been provided by the affiliates of
property development companies. In recent years, due to the increasingly higher level of
marketization of the PRC property management industry, property management companies
have been exploring new projects and developing various value-added services so as to
enhance their respective competitiveness and meet market demand.
The PRC government also published regulations for enhanced marketization in both the
real estate and property management markets. For example, in July 2021, the MOHURD, along
with other governmental agencies, jointly published the Notice on the Continuous Rectification
and Regulation of the Real Estate Market ( 8
). The Notice addresses issues such as illegal construction activities,
illegal advertising in property development activities, failure to deliver agreed-on and quality
property management services and illegal use of common areas. For details, see “Regulations
— Legal Supervision Over Property Management Services”. According to China Index
Academy, the Notice represents the continuous efforts of the PRC government to regulate the
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property management services market and the requirements imposed therein were not new to
the property management service providers in the PRC, but rather a reiteration of the existing
laws and regulations. With support of the Notice, the real estate industry and the property
management industry are expected to become more transparent. Market players that provide
quality services are expected to show strong development potentials.
Standardization of Services as the Basis for Expansion and Efficient Operation
One critical step of market expansion of property management companies is to provide
standardized services, which is also one of the trends of the PRC property management
industry. It allows property management companies to improve their service quality, and is the
foundation for the sustainable expansion of business operation across regions. An increasing
number of leading property management companies are making efforts to enhance the
standardization of property management services, such as intelligent system in communities,
including access control system and parking system.
INDUSTRY RISKS AND CHALLENGES
According to China Index Academy, the risks faced by the property management industry
in the PRC mainly include:
• Competition. Property management industry in the PRC is increasingly competitive.
As a result, property owners have more choices and are placing greater emphasis on
professional and standardized services.
• Cost control. Property management companies in the PRC charge property
management fees primarily on a lump sum basis. They charge fees at a
predetermined fixed price per sq.m. per month, representing all-inclusive fees for
the property management services provided. As a result, when total costs and
expenses incurred exceed the amount of property management fees they receive, the
property management companies will bear the shortfall and may not charge
additional fees from property developers, property owners or residents during the
agreement terms.
• Limited sources of property management agreements. The top property management
companies in the PRC are typically either subsidiaries or affiliated companies of
property development companies. In the event that the related property development
companies stop engaging the property management companies as their property
management service providers, the performance of the property management
companies may be adversely affected.
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• Increasing labor costs. The property management industry in the PRC is labor-
intensive. Staff costs as a percentage of cost of sales of the Top 100 Property
Management Companies was 57.8%, 59.1% and 58.3% for the years ended 31
December 2018, 2019 and 2020, respectively, according to China Index Academy.
The minimum wage in various regions has increased in recent years. Given the
increasing market concentration, the Top 100 Property Management Companies
need to recruit more staff to expand their property management scale and thus are
expected to pay increasing staff salaries and benefits, as well as relevant training and
management expenses.
• Shortage of talent. The property management industry is in need of a large number
of talent to improve service quality and to expand property management scale.
Development of property management companies may be hindered if they are not
able to recruit a sufficient number of suitable talent.
• Risks from mergers and acquisitions. Many property management companies in the
PRC expanded their business scales through mergers and acquisitions. However,
mergers and acquisitions may subject them to various risks due to the complexity
and size of their business operations, unfamiliarity in corporate cultures and the
inability to retain key personnel.
• Legal risks. As a property management service provider, we are exposed to risks in
relation to work safety, including but not limited to claims for injuries, fatal or
otherwise, sustained by our employees or sub-contractors. We are also exposed to
claims that may arise due to employees’ or third-party sub-contractors’ negligence
or recklessness when performing our services and we may be held jointly liable for
the losses incurred by our residents, tenants or property owners under PRC laws.
For more information on industry related risks, see “Risk Factors — Risks Relating to
Our Business and Industry”.
COMPETITION
Competition Landscape
The property management industry is fragmented and competitive in the PRC with
approximately 200,000 participants in the property management industry in 2020, according to
China Index Academy. As an upscale property management and city operation service provider
with a diversified property management portfolio, we primarily compete against large national
and regional property management companies in the PRC in terms of our property management
services. For value-added services, we compete against other property management companies
as well as relevant industry participants providing similar services.
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The following tables set forth top five market players among the Top 100 Property
Management Companies in terms of GFA under management and total revenue in 2020. As we
have not obtained consent from these market players to disclose their identities in this
prospectus and, as advised by China Index Academy, it is subject to confidentiality obligations
to these market players with respect to the underlying data and information used to calculate
the market share of each market player, we set forth below a description of their background
information instead.
Ranking Name
Market Share
in terms of
GFA under
management
1. Company A 1.79%
2. Company B 1.47%
3. Company C 1.45%
4. Company D 1.39%
5. Company E 1.16%
Ranking Name
Market Share
in terms of
total revenue
1. Company A 2.50%
2. Company E 1.69%
3. Company F 1.62%
4. Company C 1.61%
5. Company B 1.29%
Source: China Index Academy
Notes:
1. Company A is a property management service provider founded in 1992 and principally engaged in
property management services for residential, commercial and public properties in more than 350 cities
in China. Company A is listed on the Main Board of the Stock Exchange.
2. Company B is a property management service provider and principally engaged in comprehensive
property management services in more than 190 cities in China. Company B is listed on the Main Board
of the Stock Exchange.
3. Company C is a property management service provider founded in 1992, which owns more than 20
property management brands and is principally engaged in property management services, community
services, public and city services in approximately 200 cities in China. Company C is listed on the Main
Board of the Stock Exchange.
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4. Company D is a company which provides property management services, intelligent building services
and community services in more than 270 cities in China. Company D is listed on the Main Board of
the Stock Exchange.
5. Company E is a property management service provider founded in 1997 and principally engaged in
provides services for residential properties, office buildings, theme parks, industrial parks and public
properties in more than 310 cities in China. Company E is listed on the Main Board of the Stock
Exchange.
6. Company F is a residential property management service provider founded in 1998 which provides
services in more than 180 cities in China. Company F is listed on the Main Board of the Stock Exchange.
According to China Index Academy, the property management industry in China is highly
competitive and fragmented. Our market share in terms of GFA under management and total
revenue in 2020 was approximately 0.07% and 0.15%, respectively. We were deeply rooted in
the eastern region and northern region in China. According to China Index Academy, our
market share in the eastern and northern regions in China in terms of GFA under management
in 2020 was approximately 0.09% and 0.11%, respectively. We were ranked the 5th in terms
of revenue per sq.m. among the Top 100 Property Management Companies headquartered in
the Beijing-Tianjin-Hebei Region in 2020. We were ranked the second in terms of GFA under
management for upscale property management service projects among the Top 100 Property
Management Companies in Beijing in 2020.
We intend to expand our business scale through strategic acquisitions or investments.
According to China Index Academy, there are more than 4,000 players among the property
management companies in the PRC with a GFA under management of at least 1.0 million sq.m.
in 2020, and amongst these companies, around 600 of them are not affiliated with property
developers in China. Such property management companies may be more receptive to our
acquisition or investment efforts, as support from us as a listed property management company
and Jinmao Group may enhance their ability to compete.
In spite of the large number of potential acquisition or investment targets meeting certain
aspects of our selection criteria, we are facing competition with industry peers, in particular
those listed on the Stock Exchange which are actively looking for acquisition or investment
opportunities in the market, and there is no assurance that we could eventually identify suitable
targets. Our future acquisitions are also subject to other uncertainties and risks, including,
without limitation, potential ongoing financial obligations and unforeseen or hidden liabilities,
failure to achieve the intended objectives, benefits or revenue-enhancing opportunities, and
diversion of resources and management attention. For details, see “Risk Factors — Risks
Relating to Our Business and Industry — Our mergers and acquisitions may not achieve the
desired benefits. We may face difficulties in integrating acquired operations with our existing
business”.
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Not many participants in the upscale property management and city operation service
market in China are able to successfully manage a diversified portfolio of properties, including
residential properties, commercial properties such as office buildings and shopping malls,
industrial parks and public properties, and realize synergies across different property types.
Since 1995, we have established the high-end residential property service brand represented by
Jin Mao Mansion, the large-scale commercial complex property management brand represented
by Lanxiu City, and the high-end office property management brand represented by Kaichen
World Trade Center. In 2021, we ranked the 1st among the top 10 companies on CRIC
Research’s short list of “China’s Property Service Force High-End Service Brand” (“
”). We were also honored as “Leading Upscale Property Management
Service Enterprise in China” (“ ”) and “Leading Specialized
Operation Brand Enterprise in China” (“ ”) in 2020.
According to China Index Academy, we ranked 17th among “2021 Top 100 Property
Management Companies in China” (“2021 ”) by overall strength.
China Index Academy ranks the overall strength of property management companies by
evaluating the following aspects: (i) property management scale, taking into account total
assets, number of properties under management, GFA under management and number of cities
where the company operates; (ii) operational performance, taking into account the total
revenue, gross profit, net profit, revenue per employee and operating costs as a percentage to
total revenue; (iii) service quality, taking into account customer satisfaction rate, property
management fee collection rate, property management contract renewal rate and number of
star-level communities; (iv) growth potential, taking into account revenue growth, growth of
GFA under management, reserved GFA and number and composition of employees; and (v)
social responsibility, taking into account amount of tax paid, number of job opportunities
created, total GFA under management of affordable housing and amount of enterprise donation.
Many participants in this market typically focus on providing property management
services, while only a few service providers successfully integrated property management
services and city operation services, and achieved a balanced and upscale quality in each
segment. Property management services are further divided into traditional property
management services and other services. Traditional property management services typically
include security, repair and maintenance, cleaning and sanitation, and greening. Other services
include value-added services to property developers and community value-added services. We
were honored as “China’s Leading Specialized Property Management Service Enterprise —
MOCO Service System” (“ —MOCO ”), “Leading
Technology Empowered Property Management Enterprise in China” (“
”) and “Leading Smart City Service Provider in China” (“ ”) in
2021.
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Entry Barriers
According to China Index Academy, entry barriers for the property management industry
in the PRC mainly include:
• Brand. Brand reputation is key to the development and expansion of property
management companies. As consumers are demanding higher quality property
management services and the players in the property management industry are
growing, it is critical for property management companies to offer services of
superior quality. Brand reputation therefore increasingly becomes an entry barrier in
the industry. We and other top property management companies have built a brand
reputation in the PRC through decades of services and operations. In contrast, newer
entrants without an established brand and cultivated business relationships with
industry participants face a greater challenge when penetrating into the market.
• Experience. Urban city services usually require service providers to have rich
project experience. During bidding process, bidders are required to show past
business performance and other relevant supporting materials. Service providers
need to formulate comprehensive solutions that tailor to individual needs of end
customers, including front-end design, mid-end project implementation, and
follow-up operation and maintenance services. It is difficult for new entrants to
establish such comprehensive service capabilities within a short period of time.
• Technical barriers and capital threshold. The property management industry
involves different service areas, and the technical standards and requirements vary
greatly. For example, urban city services involve new facilities and equipment
maintenance scenarios covering underground integrated pipe corridors, ground
pipeline maintenance, traffic governance, river water quality, etc. In addition, due to
expansion of business scale, property management companies are increasingly
inclined to adopt automated and intelligent technologies, such as network
interoperability, information fusion, intelligent building management,
communication automation, big data and cloud computing. Companies are replacing
intensive manual labor tasks with intelligent management systems and equipment,
introducing corporate information management systems, and promoting the idea of
a smart community. Management efficiency has improved and the industry is
moving towards a technology driven industry. This will further increase the capital
threshold for new entrants in the property management industry.
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• Operations and management. As the property management industry becomes
increasingly competitive, experience and capabilities of core management members
of industry players play a critical role in maintaining core competitiveness.
Established property management companies typically have developed their unique
management competencies in terms of property management procedures, application
of information systems, and financial management, and are therefore better
positioned to manage large properties.
• Professional talent. Property management depends on manual labor, not only for the
performance of property management services but also for implementing and
innovating technological solutions such as big data and internet technologies.
Furthermore, the innovation of property management business models, especially
the launch of value-added services to property owners and property developers,
requires significant support from talented employees. In addition to professional
technical capabilities, they must also have an in-depth understanding of the business
processes, management standards, related technologies and application scenarios,
and be able to provide reasonable design based on regional characteristics. It is
increasingly difficult for property management companies to recruit and retain
talented individuals who are up to date with the technological advances in the
industry to help achieve the above-mentioned goals.
IMPACT OF THE OUTBREAK OF COVID-19
The outbreak of COVID-19 has affected China’s macro economy and certain industries
such as tourism, public transportation and catering during January and February 2020.
However, according to the China Index Academy, the COVID-19 outbreak has only had
short-term impact on property development industry and property management industry and is
expected to have limited impact on these industries in the medium- and long-term.
According to China Index Academy, the total GDP of the PRC for the first half of 2021
was RMB53,216.7 billion, representing an increase of 12.7% from the same period of 2020.
The real estate investment in the PRC amounted to RMB7,200 billion in the first half of 2021,
representing an increase of 15.0% from the same period of 2020, according to China Index
Academy. According to the China Index Academy, the nationwide cumulative GFA of
contracted sales of commodity residential properties and GFA of newly constructed commodity
residential properties both demonstrated significant improvement in the first quarter of 2021
compared to the same period of 2020. As the COVID-19 outbreak has been brought under
control in China and economic activities have gradually resumed, the property development
industry and property management industry are also on track to recovery as purchase demand
for commodity housing continues to resume.
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The short-term impact of the COVID-19 outbreak on the property management industry
in China would be primarily on increased costs of sales and management efforts. Given that
property management companies were at the front line of the battle against the COVID-19
outbreak in China, they had to bear the financial burden of additional procurement costs for
protective supplies such as masks, gloves and disinfectant for property management staff and
for performing additional sanitization procedures. In addition, property management
companies also incurred increasing labor costs primarily attributable to the overtime
compensation paid to property management staff during the extended Lunar New Year
holidays. The COVID-19 outbreak had also posed challenges to property management services
due to the insufficient protective supplies and difficulties in implementing infection prevention
and control measures among a group of properties in proximity. As a result, there was also
disruption to sales and marketing activities such as new business development and promotion
of value-added services.
Despite the abovementioned short-term impact on the property management industry in
China. According to China Index Academy, the COVID-19 outbreak has limited impact on the
PRC property management industry in the medium- and long-term because (i) the existing GFA
under management and respective property management fees of the Top 100 Property
Management Companies remained stable during the COVID-19 outbreak; (ii) the property
construction and investment activities have been gradually resumed operation and the property
management projects are expected to be delivered thereafter; and (iii) the PRC Government
implemented various favorable policies such as the tax reliefs and government grant to
property management industries. Moreover, the COVID-19 outbreak has presented
opportunities for property management companies, according to China Index Academy:
• Accelerated adoption of smart management and digitization. Since the COVID-19
outbreak, property management companies have actively employed technologies
such as “Internet +”, cloud platforms, smart access control and smart car park
management systems to improve the efficiency of infection prevention and control.
The increasing demand for technology in property management industry is expected
to accelerate the IT system upgrades as well as the adoption of smart management
and digitization by property management companies.
• Development of new community value-added services. The fact that most property
owners and residents were home-bound during the COVID-19 outbreak has
presented opportunities for property management companies to provide more
community living services. For example, more property owners and residents have
subscribed to the existing value-added services provided by property management
companies such as the last-mile delivery service through their online service
platforms. Property management companies have also started to offer new value-
added services to improve home living experience of property owners and residents,
thereby expanding revenue sources.
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• Enhanced brand value and reputation. Property management companies have
played a critical role in infection prevention and control since the COVID-19
outbreak, and their services have been widely recognized by the public. As a result,
the brand value and reputation of property management companies which delivered
high-quality services during the COVID-19 outbreak have been significantly
enhanced. Such positive impact may cultivate stronger customer loyalty and
facilitate marketing for future property management projects.
• Improved property management standards. As property management companies
become more risk averse after the COVID-19 outbreak, it is expected that many of
them will enhance their risk resistance capabilities by strengthening internal policies
and improving risk management systems.
• Increased government support. PRC government continuously introduces favorable
policies to alleviate the short-term adverse impact resulted from the COVID-19
outbreak. Such policies have not only directly alleviated the cost pressure caused by
the outbreak to property management companies, but may also support the
sustainable development of the property management industry in the long run.
• Favorable momentum in capital market. During the COVID-19 outbreak and the
resulting downturn in the global stock market in March 2020, property management
companies have proved their countercyclical and risk resistance capabilities through
outperforming stock prices. This has driven investment momentum in the property
management industry and is expected to continue to enable property management
companies to access the capital market in the near future.
DIRECTORS’ CONFIRMATION
The Directors confirm that, after due enquiry, there is no material adverse change in the
market information since the issue date of the above-mentioned sources which may qualify,
contradict with or adversely impact the information contained in this section.
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Our business operations are subject to extensive supervision and regulation by the
People’s Republic of China (the “PRC”) Government. This section sets out a summary of the
material laws, regulations and policies to which we are subject. Unless otherwise stated, the
laws, regulations and policies mentioned in this section apply nationwide.
LEGAL SUPERVISION OVER FOREIGN INVESTMENT
According to the Provisions on Guiding the Orientation of Foreign Investment (
), which was promulgated by the State Council on February 11, 2002 and
came into effect on April 1, 2002, foreign investment projects are divided into four categories,
namely “encouraged”, “permitted”, “restricted” and “prohibited” categories. Foreign
investment projects of the encouraged, restricted and prohibited categories are listed in the
Catalogue of Industries for Guiding Foreign Investment ( ). Foreign
investment projects that are not of the encouraged, restricted and prohibited categories belong
to the permitted foreign investment projects which are not listed in the Catalogue of Industries
for Guiding Foreign Investment.
On March 15, 2019, the National People’s Congress (the “NPC”) approved the Foreign
Investment Law of the PRC ( ) (the “Foreign Investment
Law”), which came into effect on January 1, 2020 and replaced the Sino-Foreign Equity Joint
Venture Enterprise Law of the PRC ( ), the Sino-
Foreign Cooperative Joint Venture Enterprise Law of the PRC (
) and the Wholly Foreign-Invested Enterprise Law of the PRC (
), and became the legal foundation for foreign investment in the PRC.
The Foreign Investment Law sets out the basic regulatory framework for foreign
investments and proposes to implement a system of pre-entry national treatment with a
negative list for foreign investments, pursuant to which (i) foreign natural persons, enterprises
or other organizations (collectively, the “foreign investors”) shall not invest in any sector
forbidden by the negative list for access of foreign investment, (ii) for any sector restricted by
the negative list, foreign investors shall conform to the investment conditions provided in the
negative list, and (iii) sectors not included in the negative list shall be managed under the
principle of treating domestic investments and foreign investments equally. The Foreign
Investment Law also sets forth necessary mechanisms to facilitate, protect and manage foreign
investments and proposes to establish a foreign investment information report system in which
foreign investors or foreign-funded enterprises shall submit the investment information to
competent departments of commerce through the enterprise registration system and the
enterprise credit information publicity system.
The Regulation for Implementing the Foreign Investment Law of the PRC (
), which was promulgated by the State Council on December 26,
2019 and came into effect on January 1, 2020, provides implementing measures and detailed
rules to ensure the effective implementation of the Foreign Investment Law. The Measures for
the Reporting of Foreign Investment Information ( ), which was
promulgated by the Ministry of Commerce (the “MOFCOM”) and State Administration for
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Market Regulation (the “SAMR”) on December 30, 2019 and came into effect on January 1,
2020, sets out the details of the foreign investment information report system. According to the
Provisions Regarding Mergers and Acquisitions of Domestic Enterprises by Foreign Investors
( ), which was promulgated by MOFCOM on August
8, 2006 and became effective on September 8, 2006, and was later amended on June 22, 2009,
which provided that the scenarios qualify as an acquisition of a domestic enterprise by a
foreign investor.
The Catalogue of Industries for Encouraged Foreign Investment (2020 Edition) (
(2020 ) ) (the “Catalogue”) was promulgated by the National
Development and Reform Commission (the “NDRC”) and MOFCOM on December 27, 2020
and came into effect on January 27, 2021. Catalogue of Industries for Encouraged Foreign
Investment (2019 Revision) ( (2019 ) ) released on June 30,
2019 was repealed simultaneously.
According to the Special Administrative Measures (Negative List) for the Access of
Foreign Investment (Edition 2021) ( ( )(2021 ) )
and Special Administrative Measures (Negative List) for the Access of Foreign Investment in
Pilot Free Trade Zones (Edition 2021) ( (
)(2021 ) ), both promulgated by the NDRC and the MOFCOM on December 27, 2021
and taking effect on January 1, 2022, the property management service does not fall into such
categories which foreign investment is restricted or prohibited.
LEGAL SUPERVISION OVER PROPERTY MANAGEMENT SERVICES
On December 25, 2020, ten departments including the Ministry of Housing and
Urban-Rural Development (the “MOHURD”) jointly issued the Notice on Strengthening and
Improving the Residential Property Management (
, the “Notice 10”), which emphasized the areas including (i) improving the governance
structure of the owners’ committee; (ii) improving and strengthening the property management;
(iii) regulating the use and management of maintenance funds; (iv) reinforcing supervision and
management of property management services, including establishing a property service
information disclosure system and a property service enterprise credit management system, and
improving the property management bidding system and withdrawal system.
On July 13, 2021, the MOHURD and other seven departments jointly promulgated the
Notice on the Continuous Rectification and Regulation of the Real Estate Market Order (
, the “Notice 55”), which mainly focuses on
addressing and correcting outstanding issues that exist in areas such as real property
development, sales and purchase of realty service, house leasing and property management
services. Such outstanding issues include: (i) constructions violating laws and regulations,
constructions disobeying the drawing design documents and late delivery of real property in
violation of the housing sales contract in the process of real property development, etc.; (ii)
releasing illegal and fraudulent advertisements and false information of housing resources,
hoarding housing resources in the sales and purchase of real property, etc.; (iii) illegally
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carrying out business operation and submission of incomplete leasing information as required
in house leasing, etc.; (iv) failure to provide services in compliance with the contents and
standards specified in the property management service contract; failure to publish the
information related to fees of property service; overcharge of fees in excess of the provisions
in the contract or the published charging items; carrying out business activities with properties
commonly-held by owners without their consent, embezzling or misappropriating the operating
income common to the owner; refusal of withdrawal from property service projects without due
reasons when the property service contract has been legally cancelled or terminated, etc. Real
property development corporations, brokers, leasing companies and property management
service providers which have engaged in illegal activities shall be warned, suspended to
conduct business operations and revoked business licenses and certificates, and such
companies shall be made public; if their activities are suspected to be criminal, the case shall
be referred to the public security and judicial departments for investigation and punishment
according to the laws. After the promulgation of the notice abovementioned, the relevant
governmental authorities of multiple provincial administrative units nationwide (such as
Jiangsu, Hunan, Yunnan, Hebei and Fujian) have made detailed plan on the basis of principles
established in the notice to urge the implementation and improvement of relative rules.
Qualification of Property Management Enterprises
According to the Regulations on Property Management ( ) promulgated
by the State Council on June 8, 2003, taking effect on September 1, 2003 and amended on
August 26, 2007, February 6, 2016 and March 19, 2018, a qualification system for companies
engaging in property management activities has been adopted.
In accordance with the Measures for the Administration on Qualifications of Property
Management Enterprises ( ) (formerly known as
), which was promulgated by the Ministry of Construction (has been
abolished) on March 17, 2004, came into effect on May 1, 2004, was amended on November
26, 2007 and May 4, 2015 and was abolished by the MOHURD on March 8, 2018, property
management enterprises shall be classified into Level 1, Level 2 and Level 3 by qualifications
based on relevant specific conditions.
On November 19, 2015, the General Office of the State Council promulgated the Guiding
Opinions of the General Office of the State Council on Accelerating the Development of the
Personal Service Industry to Promote the Upgrading of Consumption Structure (
), which sets out the general
requirements, the main tasks and the policy measures to accelerate the development of personal
services and upgrade consumption structures. Such main tasks focus on the development of the
living services that are closely related to the people’s livelihood with vast demand potential and
strong driving forces, among others, to promote the standardisation developments of the real
estate intermediary, house leasing, property management, moving and cleaning, household
vehicles maintenance and other personal services.
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In accordance with the Decision of the State Council on Canceling the Third Batch of
Administrative Licencing Items Designated by the Central Government for Implementation by
Local Governments ( )
promulgated by the State Council on January 12, 2017 and taking effect on the same day, the
examination and approval of Level 2 and Level 3 qualifications of property management
enterprises were cancelled.
According to the Decision of the State Council on Canceling a Group of Administrative
Licencing Items ( ), which was promulgated by
the State Council on September 22, 2017 and came into effect on the same day, the examination
and approval of Level 1 qualification of property management enterprises were cancelled.
In accordance with the Notice of the General Office of the MOHURD on Effectively
Implementing the Work of Canceling the Qualification Accreditation for Property Management
Enterprises (
), which was promulgated on December 15, 2017 by the MOHURD and became effective
on the same day, the application, change, renewal or re-application of the qualifications of
property management enterprises shall no longer be accepted, and the qualifications obtained
already shall not be a requirement in any way for property management enterprises to
undertake new property management projects.
On March 19, 2018, the State Council promulgated the Decision of the State Council to
Amend and Repeal Certain Administrative Regulations (
), according to which the Regulations on Property Management (
) was amended. The Regulations on Property Management (2018 Revision) (
) (2018 ) has removed the qualification accreditation of the property management
enterprises.
Establishment of Owners’ Assembly and Owners’ Association
According to the Civil Code of the PRC ( ) (the “Civil Code”)
which was promulgated by the NPC on May 28, 2020 and came into effect on January 1, 2021,
the owners may establish the owners’ assembly and elect the members of the owners’
association; the specific conditions of and procedures for the establishment of the owners’
assembly and the owners’ association shall be in compliance with laws and regulations. The
relevant departments under the local people’s governments and the residents’ committees shall
provide guidance to and assistance in the establishment of the owners’ assembly and the
election of the members of the owners’ association.
Under the Regulation on Property Management (2018 Revision) ( )
(2018 ), the owners in a same property management area shall, under the guidance of the
administrative department of real estate of the people’s government of the district or county
where the property is located, or under the guidance of sub-district office or township people’s
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government, form the owners’ assembly and elect the owners’ association. However, where
there is only one owner, or where there are few owners and they all agree not to establish an
owners’ assembly, the owner(s) shall (jointly) perform the duties of the owners’ assembly and
the owners’ association.
Under the Notice on Publication of Guidance Rules on the Owners’ Assembly and the
Owners’ association ( < > ), (1) one
owners’ assembly shall be established in one property management area; where there is only
one owner, or where there are few owners and they all agree not to establish an owners’
assembly, the owner(s) shall (jointly) burden the duty of owners’ assembly and owners’
association; (2) in a property management area, where the area of exclusive section delivered
exceeds 50% of the total area of the building, the construction entity should submit the relevant
documents necessary for the first session of the owners’ assembly meeting, as required by the
administrative department of real estate of the people’s government of the district or county
where the property is located, or sub-district office or township people’ government; (3) if the
requirements of forming owners’ assembly have been satisfied, within 60 days after the written
application of forming owners’ assembly submitted by the owners, the administrative
department of real estate of the people’s government of the district or county where the
property is located, or sub-district office or township people’ government shall be responsible
for organizing and guiding the establishment of a preparatory group to organize and convene
the first session of the owners’ assembly meeting.
With respect to the properties for which relevant property management service
agreements entered into by the Group during the Track Record Period, the provincial
administrative authorities such as Beijing, Jiangsu, Zhejiang, Shanghai, Hunan and Shandong
in which such major properties are located have promulgated the detailed requirements
concerning the establishment of the owners’ assembly and the owners’ association.
Appointment of Property Management Enterprises
According to the Regulations on Property Management (2018 Revision) (
) (2018 ) and the Interim Measures for Bid-Inviting and Bidding Management of
Preliminary Property Management ( ) promulgated
by the Ministry of Construction (has been abolished) on June 26, 2003 and taking effect on
September 1, 2003, the developers of residential buildings and non-residential buildings in the
same property management area shall engage property management enterprises by inviting bid.
In case where there are less than three bidders or for small-scale properties, the developers can
hire property management enterprises by signing an agreement with the approval of the real
estate administrative department of the local government of the place where the properties are
located.
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According to the Civil Code, the preliminary property management service contract
concluded by a developer and a property management service provider pursuant to law and the
property management service contract concluded by the property owners’ committee and the
property management service provider selected by the property owners’ congress pursuant to
law shall be legally binding on the property owners.
According to the Civil Code, selecting or dismissing a property management service
provider or any other manager shall be voted on by two-thirds or more of all the property
owners who own two-thirds or more of the total GFA of the exclusive area, and shall be subject
to the consent of over a half of the owners participating in the voting who own more than half
of the total GFA of the exclusive area owned by all the owners participating in the voting.
Where, prior to the expiration of the service term stipulated in the preliminary property
management service contract entered into between a developer and a property management
service provider according to the law, the property management service contract entered into
by the property owners’ committee or property owners and a new property management service
provider becomes effective, the preliminary property management service contract shall be
terminated. Upon expiration of the term of property management services, where the property
owners have not decided on renewal of employment or engagement of a new property
management service provider and the property management service provider continues to
provide property management services, the original property management service contract
shall continue to be valid, but the term of service shall be non-fixed.
Fees Charged by Property Management Service Provider
According to the Administrative Measures for Property Service Charges (
) (the “Administrative Measures”), which was jointly promulgated by the
NDRC and the Ministry of Construction on November 13, 2003 and came into effect on
January 1, 2004, the fees charged for property management service can be either subject to the
government guidance price or market-based price depending on the basis of the nature and
features of relevant properties. If the fees charged are subject to the government guidance
price, the specific pricing principles shall be determined by the competent price administration
departments and property administration departments of the people’s governments of each
province, autonomous region and municipality directly under the central government of the
PRC. In accordance with the Administrative Measures, except for the circumstance where the
government guidance price shall be implemented, the market-based price applies to the
property management fees. The standard of such fees is determined by the property
management enterprise and the developer or property owners through negotiation. Dependent
on the agreement between the property owners and property management enterprises, the fees
for the property management services can be charged either on a lump sum basis or a
commission basis. The lump sum basis refers to the charging mode requiring property owners
to undertake the fixed property management expenses to property management companies who
shall enjoy or assume the surplus or deficit. The commission basis refers that property
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management companies may collect its service fee in the proportion or amount as agreed from
the property management income in advance, the rest of which shall be exclusively used on the
items as stipulated in the property management contract, and property owners shall enjoy or
assume the surplus or deficit.
According to the Regulation on Property Management Service Charges with Clear Price
Tag ( ), which was jointly promulgated by the NDRC and the
Ministry of Construction (has been abolished) on July 19, 2004 and came into effect on
October 1, 2004, property management enterprises shall clearly mark the price, as well as state
service items and standards and relevant information on services (including the property
management services as stipulated in the property management service agreement as well as
other services requested by property owners) provided to the owners. If the charging standard
changes, property management enterprises shall adjust all relevant information one month
before implementing the new standard and indicate the date of implementing the new standard.
Property management enterprises shall neither use any false or misleading price items or mark
prices in a false or misleading manner to commit price fraud, nor charge any fees not clearly
specified, other than those expressly marked.
According to the Measures on Supervision and Examination over Pricing Cost of Property
Management Services (Trial) ( ( ) ) which was jointly
promulgated by the NDRC and the Ministry of Construction (has been abolished) on September
10, 2007 and came into effect on October 1, 2007, the pricing costs of property management
services should be the social average costs of community property services as verified by the
competent price administration department of the people’s government. With the assistance of
competent real estate administrative department, competent pricing department is responsible
to organize the implementation of the property management pricing costs supervision and
examination work. Property management service pricing costs shall include staff costs,
expenses for daily operation and maintenance on public facilities and equipment, green
conservation costs, sanitation fees, order maintenance costs, public facilities and equipment as
well as public liability insurance costs, office expenses, shared administration fees, fixed assets
depreciation and other fees approved by property owners.
At present, no uniform standard for the government guidance price of fees for property
management services has been established at the national level. In accordance with the Notice
of the NDRC on the Opinions for Relaxing Price Controls of Certain Services (
), which was promulgated by NDRC on
December 17, 2014 and became effective on the same day, the competent price authorities of
all provinces, autonomous regions and municipalities directly under the central government of
the PRC shall complete the relevant procedures without any efforts spared to decontrol the
prices of non-government-supported houses and parking services within the residential areas
which have possessed competitive conditions. The provincial price authorities shall, jointly
with the housing and urban-rural development administrative authorities, decide to implement
government guidance prices for property management fees for government-supported houses,
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houses under housing reform, old residence communities and preliminary property
management service in light of the actual situation. The benchmark and floating range of these
government guidance prices vary from region to region.
According to the Notice on Strengthening and Improving the Administration of
Residential Property ( ) (jointly promulgated by
MOHURD and other nine departments on December 25, 2020 and came into effect on the same
day), the service price for the residential property shall be mainly formed through market
competition and agreed upon by the property owners and the property service company in the
property service contract, and can be dynamically adjusted according to factors such as service
standard and price indices. The billing method of charging on a commission basis is promoted.
The urban housing and urban-rural development departments shall publish a property services
list and clarify the content and standards of property services. The property industry
association shall monitor and regularly publish property service cost information and pricing
rules for property owners and property service companies to refer to when they negotiate
property service price. The price adjustment method of property services is suggested to be
agreed though contracts by the property owners and the property service company. If the
government guidance price is implemented, the price department, the housing and urban-rural
construction departments with pricing authority shall formulate and announce the benchmark
price and fluctuation range, and establish a dynamic adjustment mechanism.
Property Management Service Outsourcing
In accordance with the Civil Code and the Regulations on Property Management (2018
Revision), a property management service provider may outsource some specific services
within the property management area to a specialized service enterprise, but it shall not
outsource all the property management services within such area to third parties or outsource
to third parties separately upon splitting up all the property management services.
Parking Service
According to the Guidance on the Planning, Construction and Management of Urban
Parking Facilities ( ) jointly promulgated by
the MOHURD, the NDRC and the Ministry of Public Security of the PRC and came into effect
on 19 May 2010, a licensed management system shall be adopted with market access and exit
standards and open, fair and equitable selection of professional urban parking service
enterprises.
Pursuant to Guidance on Further Improving Charging Policies for Motor Vehicle Parking
Service ( ) jointly promulgated by
NDRC, MOHURD and Ministry of Transport on 15 December 2015 and came into effect on
the same day, the fees charged in parking service shall be determined mainly by the market,
and the scope of government guidance prices in parking services shall be gradually reduced.
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According to the Notice of NDRC on the Opinions for Relaxing Price Controls of Certain
Services ( ) promulgated by NDRC on 17 December
2014 and came into effect on the same day, price control on parking services in residence
communities was cancelled.
Fire Management Service
Pursuant to the Fire Protection Law of the PRC ( ), which was
promulgated by the Standing Committee of the National People’s Congress (the “SCNPC”) on
April 29, 1998, and was amended on October 28, 2008, April 23, 2019 and April 29, 2021,
property management enterprises of residential districts shall carry out maintenance and
administration of common firefighting facilities within the area under their management, and
provide fire safety prevention services.
Security and Guarding Service
According to the Regulation on the Administration of Security and Guarding Services
( ), which was promulgated by the State Council on 13 October 2009 and
became effective on 1 January 2010, and was amended on November 29, 2020, the guarding,
patrolling, order maintenance and other services in a property management area conducted by
the personnel who are recruited by a property service provider shall, within 30 days after the
start of providing security and guarding services, file with the public security organ of the
people’s government of the local districted city.
Real Estate Brokerage Business
On July 5, 1994, the SCNPC promulgated the Urban Real Estate Administration Law of
the PRC ( ) (the “Urban Real Estate Administration
Law”), which came into effect on January 1, 1995 and was respectively amended on August
30, 2007, August 27, 2009 and August 26, 2019. According to the Urban Real Estate
Administration Law, real estate intermediate service agencies include real estate consultants,
real estate evaluation agencies, real estate brokerage agencies, etc. Real estate intermediate
agencies shall meet the following conditions: (i) have their own names and organizations; (ii)
have fixed business sites; (iii) have the necessary assets and funds; (iv) have sufficient number
of professionals; and (v) other conditions specified by laws and administrative regulations.
According to the Administrative Measures for Real Estate Brokerage (
), which was promulgated by the MOHURD, NDRC and Ministry of Human Resources
and Social Security (the “MOHRSS”) on January 20, 2011, came into effect on April 1, 2011
and was amended on March 1, 2016, real estate brokerage refers to the acts of providing
intermediary and agency services to and collecting commissions from clients by real estate
brokerage institutions and real estate brokers for the purpose of promoting real estate
transactions. Sufficient real estate agents are required to establish real estate brokerage
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agencies and their branches. Real estate brokerage agencies and their branches shall file with
the competent housing and urban-rural development (real estate) authority within 30 days from
the date of obtaining their business licenses.
Catering Service
In accordance with the Food Safety Law of the PRC ( )
(issued by the SCNPC on February 28, 2009, came into effect on June 1, 2009, and amended
on April 24, 2015, December 29, 2018 and April 29, 2021) and the Administrative Measures
for Food Operation Licensing ( ) (issued by the China Food and
Drug Administration, taking effect on 1 October 2015 and amended on 7 November 2017), food
sales and catering business in the PRC are subject to obtaining the food operation license in
accordance with the laws. The principle of one license for one place shall apply to the licensing
for food operation, that is, a food business operator shall obtain a food operation license for
each operation site at which it carries out the food business. Food business operator failing to
obtain a food operation license may be subject to: (i) confiscation of illegal gains, food
illegally produced for sale and tools, facilities and raw materials used for illegal production;
and (ii) fines ranged from RMB50,000 to RMB100,000 if the value of food illegally produced
is less than RMB10,000 or fines equal to 10 to 20 times of the value of food if such value is
equal to or more than RMB10,000.
Community Value-Added Service
Notice 10 provides guidance on improving and strengthening the property management,
including: (1) strengthening the development of smart property management service capacity:
Property management service enterprises shall be encouraged to apply technologies such as
Internet of Things, cloud computing, big data, block chain and artificial intelligence, build
smart property management service platforms, and improve the level of smart property
management services. It is required to collect data on housing, facilities and equipment,
owners’ association and property management service enterprises, share urban management
data, collect data on shopping, housekeeping, caring for the elderly and other life service data,
and ensure that such data is not divulged or abused. It is also advocated to achieve data sharing
and application with the relevant departments according to laws and regulations; (2) enhancing
the intelligent management level of facilities and equipment: Property management service
enterprises shall be encouraged to rely on the smart property management service platform as
the support, and achieve real-time data collection by laying sensors in important facilities and
equipment such as elevators, fire control, water supply and drainage, etc; and (3) promoting the
integrated development of online and offline services: Qualified property management service
enterprises shall be encouraged to extend to the fields of caring for the elderly, nursery,
housekeeping, culture, health, housing brokerage, and express delivery, and explore the model
of “property service + living service”, so as to meet the diversified and multi-level living needs
of residents. Property management service enterprises shall be guided to provide customized
products and personalized services through the smart property management service platform.
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Under the Law on the Protection of Rights and Interests of Consumers of the PRC (
) which was promulgated by the SCNPC on October 25,
2013 and became effective on March 15, 2014, business operators engaging in provision of
goods or services to consumers shall protect the legitimate rights and interests of consumers,
shall not set unfair and unreasonable trading conditions and compel transactions by using
standard terms or technical means, and shall label prices clearly and provide true and complete
information of services and products without misleading or fraudulent advertisements.
LEGAL SUPERVISION OVER THE INTERNET INFORMATION SERVICES
Internet Information Services
According to the Telecommunications Regulations of the PRC (
) issued by the State Council on September 25, 2000 and amended on July 29, 2014 and
February 6, 2016, respectively, value-added telecommunications services are defined as
telecommunications and information services provided through public network infrastructures
and are subject to licenses prior to commencement of operations, and according to the Catalog
of Telecommunications Business (2015 Edition) ( (2015 ) ) attached
to the Telecommunications Regulations of the PRC, which was last amended by the Ministry
of Industry and Information Technology of the PRC (the “MIIT”) on June 6, 2019, value-added
telecommunications services are divided into two categories. Category I value-added
telecommunications services include internet data center services, content delivery network
services, domestic internet protocol virtual private network services and internet access
services. Category II value-added telecommunications services include online data processing
and transaction processing services, domestic multiparty communication services, store-and-
forward-type services, call center services, information services and code and regulation
conversion services. Online data processing and transaction processing services refer to the
services of online data processing and transaction/affair processing provided for users through
public communication networks or the Internet, by utilizing various kinds of data and
affair/transaction processing application platforms that are connected to public communication
networks or the Internet. Information services refer to the information services provided for
users via the public communication network or the internet and by the information collection,
development, processing and construction of information platforms.
According to the Administrative Measures on Internet Information Services (
), which was promulgated by the State Council on September 25, 2000,
became effective on the same day and was amended on January 8, 2011, internet information
service refers to the provision of information through internet to web users, and includes two
categories: commercial and non-commercial. Commercial internet information service refers to
the service activities of compensated provision to online subscribers through the internet of
information or website production. Non-commercial internet service refers to the provision free
of charge of public, commonly shared information through the internet to web users. An entity
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engaged in providing commercial internet information service shall apply for a license for
value-added telecommunication services of internet information services. As for the operation
of non-commercial internet information services, a record-filing is required. Internet
information service providers shall provide services within the scope of their licenses or
filings. Non-commercial internet information service providers shall not provide services with
charge of payment. In case an internet information service provider changes its services,
website address, etc., it shall apply to submit such changes within 30 days in advance at the
relevant government department.
Where an entity provides commercial Internet information services without a license or
provides services beyond the scope of the license, provincial telecommunication administrative
department shall order it to make correction within a prescribed time limit. Where there are
illegal gains, such gains shall be confiscated; and a fine more than three times but less than five
times of such gains shall be imposed. Where there is no illegal gain or the gain is less than
RMB50,000, a fine of RMB100,000 to RMB1 million shall be imposed. Where the
circumstance is serious, the website shall be ordered to shut down. Where an entity provides
non-commercial Internet information services without a filing, provincial telecommunication
administrative department shall order it to make corrections within a prescribed time limit and
to shut down the website if it refused to make corrections.
According to the Provisions on the Administration of Mobile Internet Applications
Information Services ( ), which was promulgated
by the CAC on June 28, 2016 and came into effect on August 1, 2016, entities providing
information services through mobile internet applications shall obtain relevant qualifications
according to law. Mobile internet application providers shall not use mobile internet
application programs to carry out activities prohibited by laws and regulations, such as
endangering national security, disturbing public orders, and infringing other’s legal rights and
interests, or use mobile internet applications to produce, copy, publish and spread illegal
information prohibited by laws and regulations. The CAC shall be responsible for the
supervision and administration and law enforcement with regard to the nationwide mobile
internet applications information contents. The local cyberspace administrations shall be
responsible for the supervision and administration and law enforcement in terms of the mobile
internet applications information contents within their respective jurisdiction.
Chuangmao Technology, a limited liability company incorporated in the PRC, completed
the filing on November 6, 2020 for its non-commercial internet services and obtained the
Value-added Telecommunication Business Operation License, which was issued by MIIT on
January 7, 2021 and updated on December 10, 2021 in relation to its online data processing and
transaction processing services.
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Information Security
According to the Cybersecurity Law of the PRC ( ),
which was promulgated by the SCNPC on November 7, 2016 and came into effect on June 1,
2017, network operators shall comply with laws and regulations and fulfill their obligations to
ensure the security of the network when conducting business and providing services. Those
who provide services through networks shall take technical measures and other necessary
measures in accordance with laws, regulations and compulsory national requirements to
safeguard the safe and stable operation of the networks, respond to network security incidents
effectively, prevent illegal and criminal activities committed on the network, and maintain the
integrity, confidentiality, and availability of network data. In addition, the network operators
shall neither collect the personal information irrelevant to the services provided by them nor
collect or use the personal information in violation of the provisions of any law or
administrative regulation or the agreement between both parties.
On January 4, 2022, the CAC and other twelve PRC regulatory authorities jointly revised
and promulgated the Measures which came into effect on February 15, 2022. The Measures for
Cybersecurity Review( ) which took effect on June 1, 2020 was
abolished at the same time. The Measures requires that if a CIIO anticipates that its
procurement of network products and services affect or may affect national security after the
network products and services being put into use, it shall apply for cybersecurity review to the
Cybersecurity Review Office. In addition, Network Platform Operators possessing personal
information of more than 1 million users that seek for listing in a foreign country are obliged
to apply for a cybersecurity review by the Cybersecurity Review Office.
On November 14, 2021, the CAC published a discussion draft of Regulations on the
Administration of Cyber Data Security (Draft for Comments) ( (
) ) (the “Draft Regulations”), which regulates the specific requirements in respect of
the data processing activities conducted by data processors through internet in the view of
personal data protection, important data safety, data cross-broader safety management and
obligations of internet platform operators. For example, in one of the following situations, data
processors shall delete or anonymise personal information within fifteen business days: (i) the
purpose of processing personal information has been achieved or the purpose of processing is
no longer needed; (ii) the storage term agreed with the users or specified in the personal
information processing rules has expired; (iii) the service has been terminated or the account
has been cancelled by the individual; and (iv) unnecessary personal information or personal
information which was collected inevitably due to the use of automatic data collection
technology without the consent of the individual. Any failure to comply with such requirements
may subject data processors to, among others, suspension of services, fines, confiscation of
illegal earnings, revoking relevant business permits or business licenses and penalties.
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The Draft Regulations also requires that data processors conducting the following
activities shall apply for cybersecurity review: (i) merger, reorganization or division of Internet
platform operators that have acquired a large number of data resources related to national
security, economic development or public interests affects or may affect national security; (ii)
overseas listings of data processors processing over one million persons’ personal information;
(iii) listings in Hong Kong which affects or may affect national security; or (iv) other data
processing activities that affect or may affect national security. There have been no
clarifications from the authorities as of the Latest Practicable Date as to the standards for
determining such activities that “affects or may affect national security”. If the data processing
activities of a Hong Kong listed company or a company that is in the process of applying for
listing in Hong Kong are deemed as “affects or may affect national security” and such company
has failed to conduct cybersecurity review according to the relevant laws and regulations, such
company will be requested to take rectification actions, subject to disciplinary warning, and/or
imposed an administrative penalty ranging from RMB50,000 to RMB500,000 for a single
violation incident. Furthermore, if such violation causes material impact or such company
refuses to rectify the violation, such company may be subject to more severe penalties, such
as revocation of relevant business licenses and permits. Since the Draft Regulations has not
been adopted yet, the final content of the Draft Regulations (especially its operative
provisions) and its anticipated adoption or effective date are subject to further changes with
substantial uncertainty.
Privacy Protection
According to the Civil Code, the personal information of a natural person shall be
protected by the law. Any organization or individual shall legally obtain and ensure the security
of the personal information of others when it’s necessary to obtain such personal information,
and shall not illegally collect, use, process or transmit the personal information, or illegally
buy or sell, provide or make the personal information of others public. Processing personal
information shall be subject to the principles of legality, rightfulness and necessity, with no
excessive processing. An information processor shall take technical measures and other
necessary measures to ensure the security of the personal information collected and stored and
to prevent the information from being divulged, tampered with or lost.
The Data Security Law of the PRC ( ) which was
promulgated by the SCNPC on June 10, 2021 and came into effect on September 1, 2021
specifies that the scope of the data almost includes all information records generated from
every aspect of production, operation and management during the process of digital
transformation of government affairs and enterprises, and requires that data shall be collected
legally and properly and shall not be acquired by theft or other illegal means. An entity
conducting data processing activities shall establish a sound data security management system
throughout the whole process, organize data security education and training and take technical
measures and other necessary measures to ensure the security of the information. In addition,
data processing activities carried out through the Internet or any other information network
shall be conducted on the basis of the graded protection system for cyber security. Risk
monitoring shall be strengthened when data processing activities are conducted, and remedial
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measures shall be taken immediately upon discovery of any data security defect or bug. In case
of data security incidents, disposal measures shall be taken immediately, users shall be timely
notified in accordance with the relevant provisions and reports shall be made to the relevant
competent authorities.
On August 20, 2021, the Personal Information Protection Law ( ) was
passed by the SCNPC and took effect on November 1, 2021. The Personal Information
Protection Law requires, among others, that the processing of personal information should have
a clear and reasonable purpose, and should be limited to the minimum scope necessary to
achieve the processing purpose, adopt a method that has the least impact on personal rights and
interests, and shall not process personal information that is not related to the processing
purpose.
On December 28, 2012, the SCNPC promulgated the Decision on Strengthening
Information Protection on Networks ( ) to enhance the
protection of information security and privacy on the Internet. Accordingly, the state protects
the electronic information that can be used to identify a citizen and involves a citizen’s privacy.
No organization or individual may steal or otherwise illegally acquire a citizen’s personal
electronic information, or sell or illegally provide a citizen’s personal electronic information
to others.
On July 16, 2013, the MIIT promulgated the Provisions on Protection of Personal
Information of Telecommunication and the Internet Users (
), which became effective on September 1, 2013, to regulate the collection and use of
personal information of users in the provision of telecommunication service and the Internet
information service. Such provisions regulate the collection, use, disclosure and security of the
personal information of users including user’s name, birth date, identity number, address,
phone number, account number and pass code, etc, which is collected by the
telecommunication business operators and the Internet service providers and can reveal the
identity of the users solely or in combination with other information. To be more detailed, the
providers shall: (i) not collect the personal information without the consent of users; (ii) not
use users’ personal information for any purpose other than providing services; (iii) strictly keep
the personal information in confidentiality; and (iv) take a series of protective measures to
prevent users’ personal information from being divulged, tampered with or lost.
According to the Several Provisions on Regulating the Market Order of the Internet
Information Services ( ), which promulgated by the
MIIT on December 29, 2011, and came into effect on 15 March 2012, without the consent of
users, the Internet information service providers shall not collect information which is relevant
to users and can serve to identify users solely or in combination with other information (the
“personal information of users”), shall clearly notify users about the means, content and
purpose of collecting and processing their personal information with collecting information
limited to the minimum scope of providing services, and shall not provide personal information
of users to others, unless otherwise provided by laws and administrative regulations.
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On May 8, 2017, the Supreme People’s Court and the Supreme People’s Procuratorate
released the Interpretations of the Supreme People’s Court and the Supreme People’s
Procuratorate on Several Issues Concerning the Application of Law in the Handling of
Criminal Cases Involving Infringement of Citizens’ Personal Information (
) (the
“Interpretations”), effective from June 1, 2017. The Interpretations clarify several concepts
regarding the crime of “infringement of citizens’ personal information” stipulated by Article
253A of the Criminal Law of the PRC ( ), including “citizens’
personal information”, “provision of citizens’ personal information” and “illegally obtaining
any citizen’s personal information by other methods.” In addition, the Interpretations specify
the standards for determining “serious circumstances” and “particularly serious circumstances”
of this crime.
According to the Provisions of the Supreme People’s Court on Several Issues concerning
the Application of Law in the Trial of Civil Cases Relating to the Use of Facial Recognition
Technologies to Process Personal Information (
) which was promulgated on July 27,
2021 and became effective on August 1, 2021, property management service providers shall
bear tort liability where using facial recognition technologies infringes the personality rights
and interests of a natural person. Where a property management service provider uses facial
recognition as the only means of authentication for owners or property users to enter or exit
from the property service area, and an owner or property user who disagrees on such means
may require it to provide other reasonable means of authentication. In the event that an
information processor enters into a contract containing standard terms with a natural person,
which requires the natural person to grant it unlimited, irrevocable rights or rights to delegate
at will to process facial information, such standard terms will be invalid.
LEGAL SUPERVISIONS OVER LABOR PROTECTION IN THE PRC
The Labor Contract Law
According to Labor Law of the PRC ( ), which was
promulgated by the SCNPC on July 5, 1994, came into effect on January 1, 1995 and was
amended on August 27, 2009 and December 29, 2018, employers shall develop and improve
their rules and regulations in accordance with the law to ensure that workers enjoy their labor
rights and perform their labor obligations. Employers shall develop and improve the system of
labor safety and sanitation, strictly implement the national protocols and procedures on labor
safety, guard against labor safety accidents and reduce occupational hazards. Labor safety and
sanitation facilities shall meet the relevant national standards. Employers must provide workers
with the necessary labor protection equipment that meets the safety and hygiene conditions
stipulated under national regulations by the State and conduct regular health checks for
workers who engage in operations with occupational hazards. Laborers engaging in special
operations must have received specialized training and obtained the pertinent qualifications.
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According to Labor Contract Law of the PRC ( ), which
was promulgated by the SCNPC on June 29, 2007, came into effect on January 1, 2008, and
was amended on December 28, 2012, and the Implementation Regulations on Labor Contract
Law of the PRC ( ), which was promulgated and
became effective on September 18, 2008 by the State Council, employers and employees shall
enter into written labor contracts to establish their employment relationship. The labor
contracts shall set forth the terms, duties, remunerations, disciplinary rules of the employment
and conditions to terminate the labor contracts. With respect to a circumstance where a labor
relationship has already been established but no formal contract has been made, a written labor
contracts shall be entered into within one month from the date when the employee begins to
work. Meanwhile, it is stipulated that labor contracts must be concluded in written forms, upon
reaching an agreement after due negotiation, an employer and an employee may enter into a
fixed-term labor contract, a non-fixed-term labor contract or a labor contract that concludes
upon the completion of certain work assignments. After reaching an agreement upon due
negotiation with employees or by fulfilling other circumstances in line with legal conditions,
an employer may legally terminate a labor contract and dismiss its employees.
Social Insurance and Housing Fund
According to Social Insurance Law of the PRC ( ), which
was promulgated by the SCNPC on October 28, 2010, came into effect since July 1, 2011, and
was amended on December 29, 2018, and other relevant PRC laws and regulations such as the
Interim Regulations on the Collection and Payment of Social Insurance Premiums (
), Regulations on Work-Related Injury Insurance ( ),
Regulations on Unemployment Insurance ( ) and Trial Measures on
Employee Maternity Insurance of Enterprises ( ), the employer
shall register with the social insurance authorities and contribute to social insurance plans
covering basic pensions insurance, basic medical insurance, maternity insurance, work injury
insurance and unemployment insurance. Basic pension, medical and unemployment insurance
contributions shall be paid by both employers and employees, while work injury insurance and
maternity insurance contributions shall be paid only by employers, and employers who fail to
promptly contribute social security premiums in full amount shall be ordered by the social
security premium collection agency to make or supplement contributions within a stipulated
period, and shall be subject to a late payment fine computed from the due date at the rate of
0.05% per day; where payment is not made within the stipulated period, the relevant
administrative authorities shall impose a fine ranging from one to three times the amount of the
amount in arrears.
According to the Reform Plan of the State Tax and Local Tax Collection Administration
System ( ), which was promulgated by the General Office of
the Communist Party of China and the General Office of the State Council of the PRC on July
20, 2018, from January 1, 2019, all the social insurance premiums, including the premiums of
the basic pension insurance, unemployment insurance, maternity insurance, work injury
insurance and basic medical insurance, will be collected by the tax authorities. According to
the Notice by the General Office of the State Administration of Taxation on Conducing the
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Relevant Work Concerning the Administration of Collection of Social Insurance Premiums in
a Steady, Orderly, and Effective Manner (
), which was promulgated on September 13, 2018, and the Urgent
Notice of the General Office of the Ministry of Human Resources and Social Security on
Implementing the Spirit of the Executive Meeting of the State Council in Stabilizing the
Collection of Social Insurance Premiums (
), which was promulgated on September
21, 2018, all the local authorities responsible for the collection of social insurance premiums
are strictly forbidden to conduct self-collection of historical unpaid social insurance
contributions from enterprises. In addition, the Notice of the State Administration of Taxation
on Implementing Measures on Further Support and Serve the Development of Private Economy
( ), which was
promulgated on November16, 2018, repeats that tax authorities at all levels shall not organize
self-collection of arrears of taxpayers including private enterprises in the previous years.
According to Regulations on the Administration of Housing Provident Fund (
), which was promulgated by the State Council on April 3, 1999, and became
effective on the same day, and was amended on March 24, 2002 and March 24, 2019,
employers shall undertake registration at the competent administrative center of housing fund
and then, upon the verification by such administrative center of housing fund, go to a
commissioned bank to go through the formalities of opening housing provident fund accounts
on behalf of its employees. The employer shall timely pay up and deposit housing provident
fund contributions in full amount and late or insufficient payments shall be prohibited. The
employer shall process housing provident fund payment and deposit registrations with the
housing provident fund administration center. With respect to companies who fail to process
housing provident fund registrations or open housing provident fund accounts for their
employees, such companies shall be ordered by the housing provident fund administration
center to complete such procedures within a prescribed time limit; where failing to do so by
the expiration of the time limit, a fine of not less than RMB10,000 nor more than RMB50,000
shall be imposed. When an employer fails to pay up housing provident fund contributions in
full amount as due, the housing provident fund administration center shall order it to pay up
within a prescribed time limit; where the payment and deposit has not been made after the
expiration of the time limit, an application may be made to a people’s court for compulsory
enforcement.
Labor Dispatch
According to the Interim Provisions on Labor Dispatch ( )
promulgated by the MOHRSS on January 24, 2014, and came into effect on March 1, 2014,
employers may only employ dispatched workers in temporary, auxiliary or substitutable
positions, and shall strictly control the number of dispatched workers which shall not exceed
10% of the total number of the employees.
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LEGAL SUPERVISIONS OVER INTELLECTUAL PROPERTY
Trademark
Trademarks are protected by the Trademark Law of the PRC (
) (the “Trademark Law”) promulgated by the SCNPC on August 23, 1982, taking effect
on March 1, 1983 and respectively amended on February 22, 1993, October 27, 2001, August
30, 2013 and April 23, 2019, and the Regulation for the Implementation of Trademark Law of
the PRC ( ), which was promulgated by the State Council
on August 3, 2002, amended on April 29, 2014, and went into effect on May 1, 2014. The
trademark office under the SAMR handles trademark registration and grants registered
trademarks for a validity period of 10 years. Trademarks may be renewable every ten years
where a registered trademark needs to be used after the expiration of its validity period.
Trademark registrants may license, authorize others to use their registered trademark by
signing up a trademark license contract. For trademarks, the Trademark Law adopts the
principle of “prior application” with respect to trademark registration. Where a trademark
under registration application is identical with or similar to another trademark that has, in
respect of the same or similar commodities or services, been registered or, after preliminary
examination and approval, this application for such trademark registration may be rejected.
Anyone applying for trademark registration shall not prejudice the existing right first obtained
by anyone else, or forestall others by improper means in registering a trademark which others
have already begun to use and enjoyed certain degree of influence.
Patent
According to the Patent Law of the PRC ( ), which was
promulgated by the SCNPC on March 12, 1984, came into effect on April 1, 1985, and was
amended on September 4, 1992, August 25, 2000, December 27, 2008 and October 17, 2020,
and came into effect on June 1, 2021, the State Intellectual Property Office is responsible for
managing patent work of the whole nation. The patent management departments of the people’s
governments of each province, autonomous region and municipality directly under the central
government of the PRC are responsible for the patent management in their respective
administrative regions. Chinese patent system adopts the principle of “prior application”, i.e.
where two or more applicants file applications for patent for the identical invention or creation
respectively, the patent right shall be granted to the applicant whose application was filed first.
If one wishes to file application for patent for invention or utility models, the following three
standards must be met: novelty, creativity and practicability. The validity period of a patent for
invention is 20 years, while the validity period of utility models and design is 10 years. Others
may use the patent after obtaining the permit or proper authorization of the patent holder,
otherwise such behavior will constitute an infringing act of the patent right.
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Copyright
The Copyright Law of the PRC ( ), which was promulgated
by the SCNPC on September 7, 1990, came into effect on June 1, 1991 and was respectively
amended on October 27, 2001, February 26, 2010 and November 11, 2020, and came into effect
on June 1, 2021, specifies that Chinese citizens, legal persons or other organizations whose
works including literature, art, natural sciences, social sciences, engineering technologies and
computer software created in writing or oral or other forms have been published or not, shall
enjoy the copyright in such works. Copyright holders can enjoy multiple rights, including the
right of publication, the right of authorship and the right of reproduction.
The Measures for the Registration of Computer Software Copyright (
), which was promulgated by the National Copyright Administration on February
20, 2002, and came into effect on the same day, regulates the registration of software copyright,
the exclusive licensing contract and transfer contracts of software copyright. The National
Copyright Administration is mainly responsible for the registration and management of
national software copyright and recognizes the China Copyright Protection Center as the
software registration organization. The China Copyright Protection Center will grant
certificates of registration to computer software copyright applicants in compliance with the
regulations of the Measures for the Registration of Computer Software Copyright and the
Regulations on Protection of Computers Software ( ) which was
promulgated by the State Council on December 20, 2001, came into effect on January 1, 2002
and was amended on January 8, 2011 and January 30, 2013.
Domain Name
According to the Administrative Measures for Internet Domain Names (
), which was promulgated by the MIIT on August 24, 2017 and came into effect on
November 1, 2017, the MIIT is responsible for managing internet network domain names of
PRC. The principle of “first to-file” is adopted for domain name registration services. The
applicant of domain name registration shall provide the agency of domain name registration
with the true, accurate and complete information about the domain name holder’s identity for
the registration purpose and sign the registration agreements. Upon the completion of the
registration process, the applicant will become the holder of the relevant domain name.
LEGAL SUPERVISIONS OVER TAXATION IN THE PRC
Income Tax
According to the Enterprise Income Tax Law of the PRC (
) (the “EIT Law”), which was promulgated by the NPC on March 16, 2007 and came into
effect on January 1, 2008 and was amended on February 24, 2017 and December 29, 2018, and
the Regulation on the Implementation of the EIT Law of the PRC (
) (the “Implementing Regulations of the EIT Law”) which was issued by
the State Council on December 6, 2007, came into effect on January 1, 2008, and was amended
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on April 23, 2019, the tax rate of 25% will be applied to the income related to all PRC
enterprises, foreign-invested enterprises and foreign enterprises which have established
production and operation facilities in the PRC. These enterprises are classified into as either
resident enterprises or non-resident enterprises. Enterprises which are established in
accordance with the law of the foreign country or region, but whose actual administration
institutions (referring to the institutions conducting substantive and all-around management
and control over the enterprises production, operation, personnel, accounting matters, finance,
etc.) are in PRC, are deemed as resident enterprise. Thus, the tax rate of 25% applies to their
income originating from both inside and outside PRC.
According to the EIT Law and the Implementing Regulations of the EIT Law, for
dividends payable to investors that are non-resident enterprises (who do not have institutions
or places of business in the PRC, or that have institutions and places of business in PRC but
to whom the relevant income tax is not effectively connected), 10% of the PRC withholding
tax shall be paid, unless there are any applicable tax treaties are reached between the
jurisdictions of non-resident enterprises and the PRC which may reduce or provide exemption
to the relevant tax. Similarly, any gain derived from the transfer of shares by such investor, if
such gain is regarded as income derived from sources within the PRC, shall be subject to 10%
PRC income tax rate or a lower tax treaty rate (if applicable).
The PRC and the government of Hong Kong entered into the Arrangement between the
Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of
Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (
) (the “Arrangement”)
on August 21, 2006 and implemented the Arrangement since December 8, 2006. If the
beneficiary of the dividends is a Hong Kong resident enterprise, which directly holds no less
than 25% equity interests in a PRC company, the tax levied shall be 5% of the distributed
dividends. The 10% withholding tax rate applies to dividends paid by a PRC company to a
Hong Kong resident if such Hong Kong resident holds less than 25% of the equity interests in
the PRC company.
In accordance with the Measures for Administration of Non-Resident Taxpayers’
Enjoyment of Treaty Benefits ( ) which was
promulgated by the State Administration of Taxation (the “SAT”) on October 14, 2019, and
came into effect on January 1, 2020, if non-resident taxpayers consider they are eligible for
treatments under the tax treaties through self-assessment, they may, at the time of filing tax
returns or making withholding tax filings through withholding agents, enjoy the treatments
under the tax treaties, and shall concurrently collect and retain the relevant documents for
inspection according to relevant regulations, and accept tax authorities’ post-filing
administration.
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Value-added Tax
According to the Interim Regulations on Value-Added Tax of the PRC (
), which was promulgated on December 13, 1993 by the State Council,
came into effect on January 1, 1994 and was respectively amended on November 10, 2008 and
February 6, 2016 and November 19, 2017, and the Detailed Rules for the Implementation of
the Provisional Regulations of the PRC on Value-added Tax (
), which was promulgated by the Ministry of Finance (the “MOF”) on December
25, 1993, became effective on the same day and was amended on December 15, 2008 and
October 28, 2011 (collectively, the “VAT Law”), taxpayers who engaged in the sale of goods,
the provision of processing, repairing and replacement services, leasing service of tangible
movable property or import goods within the territory of the PRC shall pay value-added tax.
Except those specified listed in the VAT law, tax rate for selling services or intangible assets
is 6%.
Furthermore, in accordance with the Notice on Fully Launch of the Pilot Scheme for the
Conversion of Business Tax to Value-Added Tax (
), promulgated by the MOF and the SAT on March 23, 2016 and taking effect on May 1,
2016, the state started to fully implement the pilot program from business tax to value-added
tax on May 1, 2016. All taxpayers of business tax in construction industry, real estate industry,
financial industry and living service industry have been included in the scope of the pilot and
should pay value-added tax instead of business tax.
City Maintenance and Construction Tax and Educational Surcharges
According to the Notice on Unifying the System of Urban Maintenance and Construction
Tax and Education Surcharge Paid by Domestic and Foreign-invested Enterprises and
Individuals ( ),
which was promulgated by the State Council on October 18, 2010 and came into effect on
December 1, 2010, since December 1, 2010, the Interim Regulation on Urban Maintenance and
Construction Tax of the PRC ( ) which was
promulgated in 1985 and the Interim Provisions on the Collection of Educational Surcharges
( ) which was promulgated in 1986 and other rules and
regulations promulgated by the State Council and other competent departments in charge of
relevant financial and tax authorities shall apply to foreign-invested enterprises, foreign
enterprises and foreign individuals.
According to the Interim Regulation on Urban Maintenance and Construction Tax of the
PRC ( ), which was promulgated by the State
Council on February 8, 1985, retroactive to January 1, 1985 and was amended on January 8,
2011, entities and individuals who pay consumption tax, value-added tax and business tax shall
pay city maintenance and construction tax. The payment of city maintenance and construction
tax is based on the actual amount of consumption tax, value-added tax and business tax paid
by the entities and individuals and shall be paid at the same time along with the above taxes.
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If the location of the taxpayer is in city downtown area, the tax rate shall be 7%; if the location
of the taxpayer is in a county or town, the tax rate shall be 5%; the tax rate shall be 1% for
taxpayer located out of city downtown area, country or town.
According to the Interim Provisions on the Collection of Educational Surcharges (
), which was promulgated by the State Council on April 28, 1986,
came into effect on July 1, 1986 and was respectively amended on June 7, 1990, August 20,
2005 and January 8, 2011, the tax rate of education surcharges shall be 3% of the actual amount
of consumption tax, value-added tax and business tax paid by the entities and individuals and
paid at the same time along with the above taxes.
LEGAL SUPERVISIONS OVER FOREIGN EXCHANGE
According to the PRC Foreign Currency Administration Rules (
) promulgated by the State Council on January 29, 1996, taking effect on April 1,
1996 and amended on January 14, 1997 and August 5, 2008, the RMB is generally freely
convertible for current account items, including the distribution of dividends, trade and service
related foreign exchange transactions, but not for capital account items, such as direct
investment, loan, repatriation of investment and investment in securities outside the PRC,
unless the prior approval of the State Administration of Foreign Exchange (the “SAFE”) is
obtained.
According to the Notice of the State Administration of Foreign Exchange on Reforming
and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts
( ) (the “Notice”) which
was promulgated by the SAFE on June 9, 2016 and came into effect on the same day, the
settlement of foreign exchange receipts under the capital account (including but not limited to
foreign exchange capital, external debts and funds recovered from overseas listing, etc.) may
convert from foreign currency into RMB on self-discretionary basis. The RMB funds obtained
by a domestic entity from its discretionary settlement of foreign exchange receipts under the
capital account shall be included in the account pending for foreign exchange settlement and
payment. The Notice reiterates the principle that RMB converted from foreign currency capital
may not directly or indirectly used for the purpose beyond the business scope of the domestic
entity and investments in securities with the exception of banks’ principal-secured products.
The ratio of the discretionary exchange rate of foreign exchange receipts under domestic
capital account is tentatively set at 100%. The SAFE may adjust the above ratio in due time
according to the balance of payment status.
In accordance with the Notice by the State Administration of Foreign Exchange on
Facilitating Promoting Cross-border Trade and Investment (
) which was promulgated by the SAFE on October 23, 2019, and
became effective on the same day, foreign-invested enterprises engaged in non-investment
business are permitted to settle foreign exchange capital in RMB and make domestic equity
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investments with such RMB funds according to law under the condition that the current Special
Administrative Measures (Negative List) for Foreign Investment Access are not violated and
the relevant domestic investment projects are true and compliant.
LEGAL SUPERVISIONS OVER PROPERTY DEVELOPERS
Borrowing Criteria for Property Developers and Management of Individual Housing
Credit
On August 20, 2020, the MOHURD and the People’s Bank of China (the “PBOC”)
convened a meeting, which points out that, in order to further implement the real estate
long-term mechanism, implement the real estate financial prudential management system, and
to enhance the marketization, regularization and transparency of financing for real estate
companies, the MOHURD and the PBOC formed certain rules on capital monitoring and
financing management for key real estate enterprises based on extensive consultation with
other relevant authorities, but such rules were not officially made public.
On December 28, 2020, the PBOC and the CBIRC jointly promulgated the Joint Notice
to establish a concentration management system for real estate loans of financial institutions
in the banking industry, which requires the ratio of the balance of real estate loans of a financial
institution in the banking industry (excluding overseas branches) to the balance of all types of
Renminbi-denominated loans of the institution (the “ratio of real estate loans”) and the ratio
of the balance of personal housing loans to the balance of all types of Renminbi-denominated
loans of the institution (the “ratio of personal housing loans”) shall not exceed the upper limit
of the ratio of real estate loans or the upper limit of the ratio of personal housing loans
determined by the PBOC and the CBIRC, and the development banks and policy banks shall
implement this requirements mutatis mutandis. Financial institutions in the banking industry
whose concentration of real estate loans exceeds the management requirements shall have an
adjustment plan to progressively attain the management requirements within the business
adjustment transitional period.
Measures on Stabilizing Housing Prices and Facilitating a Stable and Healthy
Development in the Real Estate Market
On May 19, 2018, MOHURD issued the Notice on Further Improving the Management
and Control of the Real Estate Market (
), requiring that all regions shall achieve the targets of stabilizing housing prices,
controlling rents, reducing leverage, preventing risks, adjusting structure, and guaranteeing
expectations, supporting rigid housing demands, and resolutely curbing property speculation.
The proportion of ordinary commodity housing at medium and low prices and medium and
small-sized in the supply of newly-built commodity housing shall be pragmatically raised. The
land supply method for commodity housing shall be improved, a linkage mechanism between
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housing and land prices shall be established, and land prices pushing up housing prices shall
be prevented. In key cities, the proportion of land for residential use shall be enhanced and it
is suggested that the proportion of residential land to the urban construction land shall be no
less than 25%.
On March 12, 2021, the NPC issued the Outline of the 14th Five-Year Plan (2021-2025)
for National Economic and Social Development and Vision 2035 of the PRC (
2035 ) which took effective on
the same day, requiring to adhere to the principle that housing is for living rather than for
speculation, and accelerate the establishment of a housing system with diverse suppliers,
multiple channels of support, and combined renting and purchase, ensure access to housing and
balanced job and housing provisions for all people, implement a host of measures based on
local conditions, consolidate the main responsibilities of urban governments, and stabilize land
prices, housing prices and expectations.
The Notice 55 requires that all regions increase the efforts to rectify the order of the real
estate market. The focus of rectification includes problems in the following four areas: (i) real
estate development; (ii) sales of property; (iii) lease of property; (iv) property services. All
regions shall take measures of warning, conducting interview, suspension of business and
rectification, revocation of business licenses and qualification certificates and others in
accordance with the law against the real estate development enterprises, intermediaries,
property leasing enterprises, property service enterprises, financial institutions, network media
and practitioners in the administration region which are in violation of the law, and expose
them publicly; those which are suspected of crime shall be transferred to the public security or
judicial departments in accordance with the law for investigation and punishment.
Policies on Centralized Land Transfer
Since February 2021, the competent government departments of several provinces and
municipalities across the country have successively issued the relevant requirements for the
implementation of the system of synchronized transfer through “two concentrations” for
residential land, specifically:
On February 23, 2021, the Tianjin Municipal Bureau of Planning and Natural Resources
promulgated the Circular on Properly Handling the Centralized Transfer of Residential Land
in 2021 ( 2021 , applicable to Tianjin),
which requires that residential land in 2021 shall be transferred in a synchronized and public
manner through “two concentrations”: the first is to release the transfer announcement in a
centralized manner, which shall be no more than three times in the whole year in principle; the
second is to organize the transfer activities in a centralized manner.
On February 24, 2021, the Qingdao Municipal Bureau of Natural Resources and Urban
Planning promulgated the Resolutely Implementing Relevant Requirements from Higher
Authorities and Arranging for the Supply of Residential Land in 2021 (
2021 , applicable to Qingdao) which requires to strictly
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implement the synchronized public transfer of residential land through “two concentrations”,
that is, to issue transfer announcements in a centralized manner and organize transfer activities
in a centralized manner. Announcements on the bidding, auction and listing of residential land
will be issued in a centralized and unified manner in three batches throughout the year, and
transfer activities will be carried out through bidding, auction and listing in order to guide
rational market competition.
Recent Changes in Real Estate Tax Reform
In 2011, upon the approval of the State Council, Shanghai and Chongqing carried out the
pilot reform of real estate tax on individual residential houses. The real estate tax in Shanghai
and Chongqing has been levied for ten years, but its scope and tax rate are very limited. On
October 23, 2021, the 31st Session of the SCNPC adopted the Real Estate Tax Reform Policy,
authorizing the State Council to carry out a pilot program of real estate tax reform in certain
areas. The Real Estate Tax Reform Policy clarifies that the taxation objects of real estate tax
are various types of real estate for residential use and non-residential use in urban areas, and
that the holders of land use rights and owners of houses are taxpayers of the real estate tax. The
Real Estate Tax Reform Policy authorizes the State Council to formulate specific measures for
the real estate tax pilot program and determine the list of cities for the pilot program and file
the record with the SCNPC. The Real Estate Tax Reform Policy also authorizes the people’s
governments of pilot areas to formulate specific implementing rules. According to the Real
Estate Tax Reform Policy, the period for the real estate tax pilot program shall be five years
from the date when the measures for the pilot program are officially issued by the State
Council. As of the Latest Practicable Date, the Real Estate Tax Reform Policy had not yet
specified the pilot cities or regions, tax base or rate or other details of the proposed real estate
tax, and the specific measures and implementing rules for the pilot program have not been
promulgated yet.
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HISTORY AND DEVELOPMENT
Overview
Our history can be traced back to 1993 when Sinochem Hotel was established as a
subsidiary of Sinochem Group to provide property management services in Beijing, the PRC
for properties developed by the predecessor of China Jinmao, our Controlling Shareholder, and
its subsidiaries.
Our Group has maintained a close and cooperative relationship with Jinmao Group over
the years. Leveraging our long-term and stable relationship with Jinmao Group and benefiting
from Jinmao Group’s rapid expansion, we have successfully provided various property
management services to projects developed by Jinmao Group and its joint ventures and
associates and further extended our services to projects developed by Independent Third
Parties. Over our years of operation, apart from our property management services, we also
offer a variety of value-added services, including community value-added services and
value-added services to non-property owners.
As of September 30, 2021, our contracted GFA reached 45.7 million sq.m., covering 47
cities in 22 provinces, autonomous regions and municipalities in the PRC, with a geographic
focus on first-tier and second-tier cities in the PRC. As of the same date, the total GFA under
our management was 23.2 million sq.m. across 35 cities in 20 provinces, autonomous regions
and municipalities in the PRC, encompassing 96 residential projects and 41 non-residential
projects.
The quality of our services has been well recognized, evidenced by various awards and
rankings detailed below.
Key business development milestones
The following is a summary of the key milestones and achievements in the business
development of our Group:
Year Event
1993 Sinochem Hotel was established to provide property management
services for Sinochem Tower, an office building in Beijing, the PRC
developed by the predecessor of Jinmao Group
1999 We started to provide property management services for Shanghai Jin
Mao Tower, an office and commercial complex in Shanghai, the PRC
developed by the predecessor of Jinmao Group, through Jinmao Shanghai
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
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Year Event
2007 Jinmao PM was established in the PRC and took over the property
management business from Sinochem Hotel with respect to Sinochem
Tower and started to provide property management services for Beijing
Chemsunny World Trade Centre, an office building in Beijing, the PRC
developed by Jinmao Group
2011 We diversified the types of properties under our management and started
to provide property management services for residential properties
developed by Jinmao Group
We were first named as one of the Top 10 Property Management
Companies in China in terms of service quality (
Top 10), according to China Index Academy
2013 We were first named as one of the Top 100 Property Management
Companies in China ( ), according to China Index
Academy
2015 We expanded our business coverage to other cities in the PRC, including
Changsha, Qingdao, Nanjing and Ningbo
2016 We pushed forward our national layout by setting up five regional centers
in Beijing, Shanghai, Guangzhou, Changsha and Chongqing
We were first included in the list of Blue-Chip Property Companies in
China ( ) by The Economic Observer ( )
2018 Our customer satisfaction rate reached 92%, ranking 2nd among the 81
industry-leading property management services enterprises, according to
a survey conducted by FG Consulting, an independent professional
consultancy
2019 We launched the “Home” ( ) APP, thereby building a close-loop smart
life ecosystem and integrating online and offline services to serve
property owners and residents
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
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Year Event
2020 The GFA under our management exceeded 15 million sq.m.
We started to manage residential properties developed by independent
third-party property developers
We were named as one of the Top 100 Leading High Quality Property
Management Service Enterprises in China (
), an Outstanding Enterprise in Office Building Management in
China ( ) and a Leading Upscale Property
Management Service Enterprise in China ( ),
according to China Index Academy
2021 We started to provide city operation services to Independent Third Parties
We were ranked 17th among the Top 100 Property Management
Companies in China ( ) by overall strength, and
were recognized as a Leading Enterprise in Property Technology
Empowerment in China ( ) and a Leading
Enterprise in Smart City Services in China ( ),
according to China Index Academy. We were ranked first in the Top 10
High-End Property Service Force Enterprises in China (
TOP10 ), according to CRIC Research
CORPORATE DEVELOPMENT OF OUR GROUP
Our Company
Our Company was incorporated in Hong Kong under the Companies Ordinance on
September 14, 2020 as a company with limited liability and a wholly-owned subsidiary of
China Jinmao, and became the holding company and listing vehicle of our Group upon
completion of the Reorganization. See “— Reorganization” below for details.
Our Subsidiaries
We carry out our business through various subsidiaries in the PRC. Our principal
operating subsidiaries which contributed a substantial amount of our Group’s revenue and
profit during the Track Record Period are Jinmao PM and Jinmao Shanghai. Details of their
respective major corporate development including major shareholding changes are set forth
below.
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
– 187 –
Jinmao PM
Jinmao PM was established in the PRC on January 16, 2007 with an initial registered
capital of RMB5,000,000, and commenced its business upon establishment. It is principally
engaged in the provision of property management services, community value-added services
and value-added services to non-property owners. Upon its establishment, Jinmao PM was
owned as to 60% by Sino-Ocean Land Limited ( , an Independent Third
Party, at the time known as COSCO Real Estate Development Company Limited (
)) (“Sino-Ocean”), 25% by China Jinmao (at the time known as Franshion
Properties (China) Limited ( ( ) )) and 15% by Beijing Chemsunny
Property Co., Ltd. ( )(“Beijing Chemsunny”), a wholly-owned
subsidiary of China Jinmao.
On September 21, 2007, China Jinmao acquired 60% equity interest in Jinmao PM from
Sino-Ocean at a consideration of RMB3,200,000, which was determined with reference to the
then registered capital of Jinmao PM paid up by Sino-Ocean and the profit after tax of Jinmao
PM for the six months ended June 30, 2007, and was fully settled in cash on November 20,
2007.
As part of the Reorganization, China Jinmao transferred 85% of the equity interest in
Jinmao PM to our Company in the form of a capital injection and Beijing Chemsunny
transferred the remaining 15% equity interest in Jinmao PM to our Company on May 25, 2021.
Upon completion of such capital injection and transfer, Jinmao PM became a wholly-owned
subsidiary of our Company. See “— Reorganization” for details.
Jinmao Shanghai
Jinmao Shanghai was established in the PRC on September 18, 1995 with an initial
registered capital of US$200,000, and commenced its business in 1999. It is principally
engaged in the provision of property management services. Upon its establishment, Jinmao
Shanghai was owned as to 60% by China Jin Mao Group Co., Ltd. ( ( ) )
(at the time known as China Shanghai Foreign Trade Center Co., Ltd. (
)) (“China Jin Mao Group Co”), a wholly-owned subsidiary of China Jinmao,
and 40% by Savills (Hong Kong) Limited ( ( ) ) (at the time known
as First Pacific Davies Property Management Limited ( )),
an Independent Third Party.
Subsequent to a series of equity transfers and an increase in registered capital, Jinmao
Shanghai became wholly owned by China Jin Mao Group Co on January 31, 2011, with a
registered capital of RMB5,000,000. On March 16, 2021, the registered capital of Jinmao
Shanghai was increased to RMB6,630,000.
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
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As part of the Reorganization, China Jin Mao Group Co transferred the entire equity
interest in Jinmao Shanghai to Jinmao PM on April 26, 2021, following which Jinmao Shanghai
became an indirect wholly-owned subsidiary of our Company. See “— Reorganization” for
details.
Other Subsidiaries
In addition to Jinmao PM and Jinmao Shanghai, the following table sets forth the detailed
information of our other subsidiaries upon completion of the Reorganization and as of the
Latest Practicable Date:
No. Name of subsidiary
Place and date of
establishment Registered capital
Equity holding of
our Group
Principal business
activities
1. Nanjing Ninggao April 23, 2004,
the PRC
RMB5,000,000 100% by
Jinmao PM
Property management
2. Chuangmao
Technology
February 14, 2020,
the PRC
RMB10,000,000 100% by
Jinmao PM
Value-added services
and technology
development
3. Yuelin Hangzhou July 29, 2020,
the PRC
RMB1,000,000 100% by
Chuangmao
Technology
Value-added services
4. Jiashan Jiamao February 9, 2021,
the PRC
RMB5,000,000 49% by
Jinmao PM
(1)
Property management
and city operation
services
5. Huimao Building March 5, 2021,
the PRC
RMB20,000,000 100% by
Jinmao PM
Smart community
management
6. Maotong PM March 8, 2021,
the PRC
RMB2,000,000 100% by
Jinmao PM
Property management
7. Zhoushan Dongda
Jinmao
July 19, 2021,
the PRC
RMB5,000,000 49% by Jinmao
Shanghai
(2)
Property management
and city operation
services
8. Zhonglan Xinmao August 19, 2021,
the PRC
RMB10,000,000 51% by Jinmao
Shanghai
(3)
Property management
and city operation
services
9. Zijin Xinmao September 30, 2021,
the PRC
RMB1,000,000 51% by Jinmao
PM
(4)
Property management
10. Guangdong Tumao December 6, 2021,
the PRC
RMB5,000,000 70% by Jinmao
PM
(5)
Property management
11. Nanjing Xinmao December 13, 2021,
the PRC
RMB5,000,000 90% by Jinmao
PM
(6)
Property management
and city operation
services
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
– 189 –
Notes:
1. Jiashan Jiamao is directly held as to 49% by Jinmao PM and 51% by Jiashan Economic Development Zone
Property Management Co., Ltd. ( ), an Independent Third Party. Based on
the articles of association of Jiashan Jiamao, save for certain reserved matters which require affirmative votes
of shareholders holding at least two-thirds of the voting rights, all decisions regarding the day-to-day operation
and management of Jiashan Jiamao shall be resolved by its board of directors whose decisions would require
a simple majority of votes. Jinmao PM, having a 49% shareholding in Jiashan Jiamao, effectively has a veto
power over the reserved matters at the shareholders level. Furthermore, based on the articles of association of
Jiashan Jiamao, Jinmao PM has the right to appoint two out of the three directors of Jiashan Jiamao, and
therefore also has the right to exercise control at the board level. On such basis, Jiashan Jiamao is accounted
for as a non-wholly-owned subsidiary of Jinmao PM.
2. Zhoushan Dongda Jinmao is directly held as to 49% by Jinmao Shanghai and 51% by Zhejiang Zhoushan
Dongda Assets Operation and Management Co., Ltd. ( ), an Independent
Third Party. Based on the articles of association of Zhoushan Dongda Jinmao, save for certain reserved matters
which require affirmative votes of shareholders holding at least two-thirds of the voting rights, all decisions
regarding the day-to-day operation and management of Zhoushan Dongda Jinmao shall be resolved by its board
of directors whose decisions would require a simple majority of votes. Jinmao Shanghai, having a 49%
shareholding in Zhoushan Dongda Jinmao, effectively has a veto power over the reserved matters at the
shareholders level. Furthermore, based on the articles of association of Zhoushan Dongda Jinmao, Jinmao
Shanghai has the right to appoint two out of the three directors of Zhoushan Dongda Jinmao, and therefore also
has the right to exercise control at the board level. On such basis, Zhoushan Dongda Jinmao is accounted for
as a non-wholly-owned subsidiary of Jinmao Shanghai.
3. Zhonglan Xinmao is directly held as to 51% by Jinmao Shanghai and 49% by Zhejiang Hualong Industrial
Group Co., Ltd. ( ), a wholly-owned subsidiary of Sinochem Lantian.
4. Zijin Xinmao is directly held as to 51% by Jinmao PM and 49% by Beijing Zhongguancun Science City
Construction Holding Co., Ltd. ( ), an Independent Third Party.
5. Guangdong Tumao is directly held as to 70% by Jinmao PM and 30% by Ningbo Tutu Commercial
Management Co., Ltd. ( ), an Independent Third Party.
6. Nanjing Xinmao is directly held as to 90% by Jinmao PM and 10% by Nanjing Dongbubaoju Investment and
Development Co., Ltd. ( ), an Independent Third Party.
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
– 190 –
REORGANIZATION
The following diagram illustrates the corporate and shareholding structure of our Group
immediately before the Reorganization:
50%
100%
50.61%14.11%35.28%
Jinmao Shanghai
(PRC)
100%
Nanjing International Mall
Construction Company
Limited
(PRC)
China Jin Mao
Group Co
(PRC)
85%
62%
Jinmao Investment
Management (Tianjin)
Co., Ltd.
(PRC)
100% 15%
99.8%
Jinmao Commercial
Investment Management
(Shanghai) Company Limited
(PRC)
100%
100%
100%
100%
50%
Jinmao Assets Management
Limited Partnership
(Cayman Islands)
China Jinmao Commerce
Holdings Limited
(Cayman Islands)
Sinmax Investment
Limited
(HK)
Jinmao (China) Hotel
Investments and
Management Limited
(Hong Kong)
Nanjing Ninggao
(PRC)
Nanjing International
(PRC)
Chuangmao
Technology
(1)
(PRC)
Jinmao PM
(PRC)
Commercial
Company
(PRC)
Beijing
Chemsunny
(PRC)
100%85%
100%100%
China Jinmao
(Hong Kong)
95.78%
Ping An Life Insurance
Company of China, Ltd.
(PRC)
Other shareholders of
China Jinmao
Sinochem Hong Kong
(Hong Kong)
Yuelin Hangzhou
(PRC)
100%
Jinmao Huichuang
(PRC)
Note:
1. The remaining 15% equity interest in Chuangmao Technology was held by Beijing Chuangmao (as
defined below under the paragraphs headed “5. Acquisition of Chuangmao Technology”), a limited
partnership established by founders and key employees of Chuangmao Technology. Zhang Shukuan (
), a director of Chuangmao Technology, is interested in 85% of the limited partnership interest of
Beijing Chuangmao, and the remaining 15% interests in Beijing Chuangmao are held by Independent
Third Parties.
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
– 191 –
In preparation for the Listing, the following steps were implemented to establish our
Group:
1. Incorporation of our Company and capital injection by China Jinmao
On September 14, 2020, our Company was incorporated in Hong Kong under the
Companies Ordinance as a company with limited liability and a wholly-owned subsidiary of
China Jinmao. As of the date of incorporation, one fully-paid Share was issued to China Jinmao
at HK$1.
On January 26, 2022, China Jinmao made a capital injection of HK$125,000,000 to our
Company, and our share capital was increased by the same amount without allotment and
issuance of any new Shares.
2. Acquisition of Jinmao PM
On April 13, 2021, our Company entered into an equity transfer agreement with China
Jinmao, pursuant to which our Company agreed to acquire 85% of the equity interest in Jinmao
PM from China Jinmao, which was settled by way of allotment and issuance of one Share,
credit as fully paid, to China Jinmao on the same day. As a result, the share capital of our
Company was increased by an amount of HK$10,966,719.8, which was equal to 85% of the net
assets value of Jinmao PM as assessed on November 30, 2020.
On April 12, 2021, our Company entered into an equity transfer agreement with Beijing
Chemsunny, pursuant to which our Company agreed to acquire 15% of the equity interest in
Jinmao PM from Beijing Chemsunny at a consideration of RMB1,629,585, which was equal to
15% of the net assets value of Jinmao PM as assessed on November 30, 2020. Such
consideration will be fully settled in cash before the completion of the Spin-off. The records
and filings reflecting such equity transfer were approved by the relevant PRC authority on May
25, 2021.
Upon completion of such capital injection and transfer, Jinmao PM became a wholly-
owned subsidiary of our Company.
3. Acquisition of Nanjing Ninggao
On April 19, 2021, Jinmao PM entered into an equity transfer agreement with Nanjing
International Group Company Limited ( )(“Nanjing
International”), the sole direct shareholder of Nanjing Ninggao prior to the Reorganization
and an indirect non-wholly-owned subsidiary of China Jinmao, pursuant to which Jinmao PM
agreed to acquire the entire equity interest in Nanjing Ninggao from Nanjing International at
nil consideration, which was determined after taking into consideration the net liabilities of
Nanjing Ninggao as assessed on November 30, 2020. The records and filings reflecting such
equity transfer were approved by the relevant PRC authority on April 25, 2021. Upon
completion of such transfer, Nanjing Ninggao became a direct wholly-owned subsidiary of
Jinmao PM.
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
– 192 –
4. Acquisition of Jinmao Shanghai
On April 22, 2021, Jinmao PM entered into an equity transfer agreement with China Jin
Mao Group Co, pursuant to which Jinmao PM agreed to acquire the entire equity interest in
Jinmao Shanghai from China Jin Mao Group Co at a consideration of RMB7,889,787.06, which
was determined with reference to the book net assets value of Jinmao Shanghai as of November
30, 2020. Such consideration was fully settled in cash on May 7, 2021, and the records and
filings reflecting such equity transfer were approved by the relevant PRC authority on April 26,
2021. Upon completion of such transfer, Jinmao Shanghai became a direct wholly-owned
subsidiary of Jinmao PM.
5. Acquisition of Chuangmao Technology
On April 30, 2021, Jinmao PM entered into an equity transfer agreement with Jinmao
Huichuang Enterprise Management (Tianjin) Partnership (Limited Partnership) (
( ) ( )) (“Jinmao Huichuang”), an indirect non-wholly-owned
subsidiary of China Jinmao, pursuant to which Jinmao PM agreed to acquire 85% of the equity
interest in Chuangmao Technology from Jinmao Huichuang at a consideration of
RMB10,169,230, which was equal to 85% of the net assets value of Jinmao Huichuang as
assessed on December 31, 2020. Such consideration was fully settled in cash on May 17, 2021,
and the records and filings reflecting such equity transfer were approved by the relevant PRC
authority on April 30, 2021.
On April 28, 2021, Jinmao PM entered into an equity transfer agreement with Beijing
Chuangmao Future Information Service Center (Limited Partnership) (
( )) (“Beijing Chuangmao”), a limited partnership established by founders and
key employees of Chuangmao Technology, pursuant to which Jinmao PM agreed to acquire
15% of the equity interest in Chuangmao Technology from Beijing Chuangmao at a
consideration of RMB1,794,570, which was equal to 15% of the net assets value of Chuangmao
Technology as assessed on December 31, 2020. Such consideration was fully settled in cash on
April 28, 2021, and the records and filings reflecting such equity transfer were approved by the
relevant PRC authority on April 30, 2021.
Upon completion of such transfers, Chuangmao Technology became a direct wholly-
owned subsidiary of Jinmao PM.
6. Acquisition of commercial property management business from Commercial
Company
Jinmao Commercial Real Estate (Shanghai) Company Limited ( ( )
)(“Commercial Company”), a wholly-owned subsidiary of China Jinmao, is engaged
in the business of leasing of commercial spaces in the Changsha Jinmao Mall of Splendor (
), the Nanjing Jinmao Place ( ) and the Qingdao Jinmao Harbour
Shopping Mall ( , excluding Block D1). As part of the leasing arrangement
between Commercial Company and its tenants, prior to the Reorganization, the branch
companies of Commercial Company also provided property management services with respect
to such commercial properties (the “Commercial Property Management Business”).
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
– 193 –
As Commercial Company is mainly engaged in the business of leasing of commercial
spaces, an equity transfer of Commercial Company to our Group would not be in line with our
business focus as a property management service provider. As such, instead of an equity
transfer, on March 25, 2021, Jinmao PM entered into a reorganization framework agreement
with Commercial Company (the “Reorganization Framework Agreement”) to acquire the
Commercial Property Management Business (including without limitation all relevant
personnel, contracts with suppliers, equipment and other resources) from Commercial
Company at nil consideration. On March 8, 2021, Maotong PM was established in the PRC as
a direct wholly-owned subsidiary of Jinmao PM to undertake the Commercial Property
Management Business. Maotong PM will discharge the obligations of Commercial Company
and its branch companies in respect of the Commercial Property Management Business under
the terms of the Reorganization Framework Agreement.
Our PRC Legal Advisors have confirmed that all requisite government approvals under
the PRC laws and regulations in relation to the equity and business transfers as described above
have been obtained and all necessary filings and registrations with the governmental authorities
in relation to such equity and business transfers have been effected.
For details on the reasons underlying the exclusion from our Group of the property
management business with respect to Zhuhai Every Garden Project ( )
which will continue to be provided by the Zhuhai Branch of Sinochem Hotel upon Listing,
please refer to the section headed “Relationship with China Jinmao — Delineation of Business
— Business delineation between our Group and Jinmao Group — (a) Property management
services with respect to the Zhuhai Project” of this prospectus.
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
– 194 –
CORPORATE STRUCTURE OF OUR GROUP AFTER THE REORGANIZATION
The following diagram sets out the corporate and shareholding structure of our Group
immediately after completion of the Reorganization but before completion of the Bonus Issue,
the Distribution and the Global Offering:
Sinoche m Hong Kong
(Hong Kong)
Other shareholders
of China Jinmao
Ping An Life Insurance
Company of China, Ltd.
(PRC)
Jinmao PM
(PRC)
The Company
(Hong Kong)
China Jinmao
(Hong Kong)
Jinmao Shanghai
(PRC)
Yuelin Hangzhou
(PRC)
Zhoushan
Dongda Jinmao
(3)
(PRC)
Jiashan Jiamao
(2)
(PRC)
Huimao
Building
(1)
(PRC)
Nanjing Ni nggao
(PRC)
Chuangmao
Technology
(PRC)
Maotong PM
(PRC)
35.28%
49%
51%
100%
100%
50.61%14.11%
100%
100% 100%
100%
49%
100%
100%
Zijin Xinmao
(5)
(PRC)
51%
Guangdong Tumao
(6)
(PRC)
70%
Nanjing Xinmao
(7)
(PRC)
90%
Zhonglan Xinmao
(4)
(PRC)
Notes:
1. The incorporation of Huimao Building is not part of the Reorganization.
2. The remaining 51% equity interest in Jiashan Jiamao is held by Jiashan Economic Development Zone
Property Management Co., Ltd. ( ), an Independent Third Party. The
incorporation of Jiashan Jiamao is not part of the Reorganization.
3. The remaining 51% equity interest in Zhoushan Dongda Jinmao is held by Zhejiang Zhoushan Dongda
Assets Operation and Management Co., Ltd. ( ), an Independent
Third Party. The incorporation of Zhoushan Dongda Jinmao is not part of the Reorganization.
4. The remaining 49% equity interest in Zhonglan Xinmao is held by Zhejiang Hualong Industrial Group
Co., Ltd. ( ), a wholly-owned subsidiary of Sinochem Lantian. The
incorporation of Zhonglan Xinmao is not part of the Reorganization.
5. The remaining 49% equity interest in Zijin Xinmao is held by Beijing Zhongguancun Science City
Construction Holding Co., Ltd. ( ), an Independent Third Party. The
incorporation of Zijin Xinmao is not part of the Reorganization.
6. The remaining 30% equity interest in Guangdong Tumao is held by Ningbo Tutu Commercial
Management Co., Ltd. ( ), an Independent Third Party. The incorporation of
Guangdong Tumao is not part of the Reorganization.
7. The remaining 10% equity interest in Nanjing Xinmao is held by Nanjing Dongbubaoju Investment and
Development Co., Ltd. ( ), an Independent Third Party. The
incorporation of Nanjing Xinmao is not part of the Reorganization.
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
– 195 –
BONUS ISSUE
Pursuant to the resolutions of our sole Shareholder passed on February 18, 2022, subject
to the Global Offering becoming unconditional in all respects, our Directors were authorized
to allot and issue 799,999,998 Shares at nil consideration under the Bonus Issue prior to
completion of the Global Offering to China Jinmao, being the only holder of Shares whose
name appears on the register of members of our Company on the date of passing such
resolution, of which 191,680,031 Shares (subject to the Distribution Adjustment) shall be
allotted and issued, at the direction of China Jinmao, to the Qualifying Jinmao Shareholders in
proportion to their shareholdings in China Jinmao pursuant to the Distribution. The Shares to
be issued and allotted pursuant to the Bonus Issue shall carry the same rights in all respects
with the existing issued Shares.
THE SPIN-OFF AND DISTRIBUTION
Pursuant to the Listing Rules and in accordance with the corporate structure and
ownership of our Company, the Listing of our Company will constitute a Spin-off from China
Jinmao, which will be effected by way of the Distribution and the Global Offering. For details,
see “The Spin-off and Distribution”.
CORPORATE STRUCTURE OF OUR GROUP IMMEDIATELY AFTER THE GLOBAL
OFFERING
The following diagram illustrates the corporate and shareholding structure of our Group
immediately following completion of the Bonus Issue, the Distribution and the Global Offering
(without taking into account the Distribution Adjustment and assuming the Offer Size
Adjustment Option and the Over-allotment Option are not exercised):
49%
100%
Jinmao Shanghai
(PRC)
Zhoushan Dongda
Jinmao
(2)
(PRC)
49%
Jiashan Jiamao
(1)
(PRC)
51%
Zijin Xinmao
(4)
(PRC)
100%
Huimao Building
(PRC)
100%
Nanjing Ninggao
(PRC)
100%
100%
Yuelin Hangzhou
(PRC)
Chuangmao
Technology
(PRC)
100%
Maotong PM
(PRC)
51%
Zhonglan Xinmao
(3)
(PRC)
Guangdong
Tumao
(5)
(PRC)
70%
Nanjing Xinmao
(6)
(PRC)
90%
67.49%
35.28% 50.61%14.11%
100%
Sinochem Hong Kong
(Hong Kong)
Other shareholders
of China Jinmao
Ping An Life Insurance
Company of China, Ltd.
(PRC)
Jinmao PM
(PRC)
The Company
(Hong Kong)
China Jinmao
(Hong Kong)
Other Public Shareholders
11.25%
Mr. Jiang Nan
0.01%
(7)
7.50%
(7)
Other Qualifying
Jinmao
Shareholders
(8)
13.75%
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
– 196 –
Notes:
1. The remaining 51% equity interest in Jiashan Jiamao is held by Jiashan Economic Development Zone
Property Management Co., Ltd. ( ), an Independent Third Party.
2. The remaining 51% equity interest in Zhoushan Dongda Jinmao is held by Zhejiang Zhoushan Dongda
Assets Operation and Management Co., Ltd. ( ), an Independent
Third Party.
3. The remaining 49% equity interest in Zhonglan Xinmao is held by Zhejiang Hualong Industrial Group
Co., Ltd. ( ), a wholly-owned subsidiary of Sinochem Lantian.
4. The remaining 49% equity interest in Zijin Xinmao is held by Beijing Zhongguancun Science City
Construction Holding Co., Ltd. ( ), an Independent Third Party.
5. The remaining 30% equity interest in Guangdong Tumao is held by Ningbo Tutu Commercial
Management Co., Ltd. ( ), an Independent Third Party.
6. The remaining 10% equity interest in Nanjing Xinmao is held by Nanjing Dongbubaoju Investment and
Development Co., Ltd. ( ), an Independent Third Party.
7. These Shares represent the Shares received by Sinochem Hong Kong and Mr. Jiang Nan as Qualifying
Jinmao Shareholders under the Distribution.
8. The Shares held by these Shareholders will be counted towards the public float for the purpose of Rule
8.08 of the Listing Rules.
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
– 197 –
OVERVIEW
We are a fast-growing upscale property management and city operation service provider
in China. According to China Index Academy, the average property management fee for
properties under our management was significantly higher than the industry average of the Top
100 Property Management Companies in 2018, 2019 and 2020. According to China Index
Academy, we are an industry-leading company in terms of multiple indicators in the three
dimensions of scope of service, service standards and service fees. China Jinmao, our
Controlling Shareholder, is a top tier property developer in China. We provide a full range of
high-quality property management and value-added services to one of the fastest-growing
portfolios of high-end residential properties, according to China Index Academy. We also
manage and operate a diversified and growing portfolio of commercial properties primarily
comprising office buildings and shopping malls, as well as public properties such as schools,
government facilities and other public spaces. As of September 30, 2021, the total GFA under
our property management services was approximately 23.2 million sq.m.
Capitalizing on our leading brand reputation, extensive resources and experience, and
comprehensive technological capabilities, together with our business partners, we are
committed to developing a lifestyle service platform that is centered around living and working
activities of property users. Through our platform, we seek to synergize different pillars of our
services to deliver an integrated and elevated living experience, improve property users’
quality of life and vitalize property management for owners.
We are engaged in three business lines, namely (i) property management services, (ii)
value-added services to non-property owners, and (iii) community value-added services. We
also provide city operation services, the scope of which spans across our three business lines.
We were established over 25 years ago to focus on the provision of property management
services in China. In addition to property management services, we offer value-added services
to non-property owners (such as sales assistance, consultancy and other value-added services).
We also offer a variety of community value-added services, which are provided mainly to the
owners and residents of the properties we manage.
Our contracted GFA reached 45.7 million sq.m. as of September 30, 2021, covering 47
cities in 22 provinces, autonomous regions and municipalities in China, 67.8% of which are in
first-tier and second-tier cities in China. Our contracted GFA covers core cities of key
economic zones, including Yangtze River Delta, Beijing-Tianjin-Hebei Region, Pearl River
Delta, Midwest Region, and Chengdu Chongqing Economic Zone. As of the Latest Practicable
Date, our property management portfolio covered residential properties and a wide range of
non-residential properties, including commercial properties (such as office buildings and
shopping malls) and public and other properties (such as schools, government facilities and
other public spaces). Our total GFA under management as of September 30, 2021 was 23.2
million sq.m. across 35 cities in 20 provinces, autonomous regions and municipalities in China,
encompassing 96 residential projects and 41 non-residential projects. As of September 30,
2021, our GFA under management for residential properties and non-residential properties was
approximately 19.7 million sq.m., and 3.5 million sq.m., representing 85.0% and 15.0% of our
total GFA under management, respectively.
BUSINESS
– 198 –
We experienced rapid growth during the Track Record Period. Our revenue increased
from RMB574.5 million in 2018 to RMB788.3 million in 2019 and further to RMB944.2
million in 2020, representing a CAGR of 28.2% from 2018 to 2020. Our revenue in the nine
months ended September 30, 2020 and 2021 was RMB665.3 million and RMB1,048.7 million,
respectively. Meanwhile, our profit for the year increased from RMB17.5 million in 2018 to
RMB22.6 million in 2019 and further to RMB77.1 million in 2020, representing a CAGR of
110.0% from 2018 to 2020. Our profit for the nine months ended September 30, 2020 and 2021
was RMB53.3 million and RMB109.4 million, respectively.
COMPETITIVE STRENGTHS
We are a fast-growing upscale property management and city operation service provider
in China. According to China Index Academy, we are an upscale property management
company in terms of multiple indicators in the three dimensions of scope of service, service
standards and service fees. Our contracted GFA increased from 21.9 million sq.m. as of
December 31, 2018 to 40.5 million sq.m. as of December 31, 2020, representing a CAGR of
36.0%, which was higher than the industry-average CAGR of 18.9% for the same period. Our
total GFA under management grew from 10.2 million sq.m. as of December 31, 2018 to 17.7
million sq.m. as of December 31, 2020, representing a CAGR of 31.7%, which was higher than
the industry-average CAGR of 14.6% for the same period. Our competitive strengths include
comprehensive service offerings with a strong focus on core cities, full support from our
Controlling Shareholder, China Jinmao, premium services and high-end positioning,
outstanding city operation service capabilities, advanced technology and digitalization and
highly experienced management team. These competitive strengths are the foundation from
which we seek to expand market share, improve business performance and develop into one of
the most competitive upscale comprehensive property management and city operation service
providers in China.
We are a leading and well-recognized comprehensive property management service
provider in China with a strong focus on core cities
Our nationwide coverage with a focus on core cities
Over the years, we have established a nationwide business in China, with a strong focus
on high-end properties in core cities. As of December 31, 2020, we had 17.7 million sq.m. of
GFA under management, 84.2% of which was located in first-tier and second-tier cities, in
contrast with the industry average of 63.8%, according to China Index Academy. Moreover, as
of September 30, 2021, our contracted GFA in first-tier and second-tier cities was 31.0 million
sq.m., accounting for 67.8% of our total contracted GFA, with a total of 166 contracted projects
in these locations. Our strong presence in higher-tier cities provides us with first-mover
advantage in many of these markets which we believe are poised for growth. We are able to
explore more opportunities to expand our value-added services to cater to the rapidly
increasing consumption power and increasingly complex consumption habits of citizens in
higher-tier cities, thereby generating more revenue and achieving higher margins.
BUSINESS
– 199 –
Our diverse property profile and comprehensive service offerings
We provide a full spectrum of property management services to a broad range of
properties. We provide premium services to one of the fastest-growing portfolios of high-end
residential properties in China. Our diversified property management portfolio also extends to
an increasing variety of commercial properties such as office buildings and shopping malls,
industrial parks such as Shangyu and Taicang industrial parks, and public properties such as
central government facilities, international schools and other public spaces. Our all-inclusive
property profile maximizes synergies across different property types under our management,
and enhances the vitality of our multi-dimensional service offerings, thus creating value for our
customers and improving their satisfaction and loyalty.
For instance, we manage a large portfolio of office buildings including skyscrapers. As
of September 30, 2021, the total GFA of the office buildings under our management amounted
to 1.7 million sq.m. We maintain a sophisticated operation and management system and
industry-leading safety management standards customized for skyscrapers. We have been
actively involved by various industrial organizations in formulating industry standards for
commercial office property management services and are a member of China Property
Management Institute ( ). Behind these achievements is our relentless
commitment for over a decade to offer best-in-class property management and operational
services to high-end skyscrapers, including the 421-meter Shanghai Jinmao Tower, one of the
ten tallest skyscrapers in the world at the time of completion, the 313-meter Lanzhou
Asia-Europe International Building, the tallest skyscraper in China’s northwestern region, and
the 250-meter Meixi Lake Twin Towers in Changsha. Our expertise in office building and
skyscraper management is further demonstrated by our 13 consulting projects from
Independent Third Parties, mainly for office buildings and hotels, with a total area of 2.0
million square meters.
Driven by our premium service quality, we have received industry-wide recognitions. We
received the title of “Beijing Model Management Project (Building) — Five-star” (“
( )— ”) from Beijing Municipal Commission of Housing and Rural and
Urban Construction in 2010, the National Three-Star Green Architecture Label Certification
( ) from Ministry of Housing and Rural and Urban
Construction of the PRC in 2014, the “Five-Star Quality Management System Certificate” from
Shanghai Institute of Quality Inspection and Technical Research (SQI) (
) in 2017, the title of “AAA Integrity Commitment Enterprise in Shanghai’s Property
Management Industry” from the Shanghai Property Management Association in February 2020,
and the “Five-Star Service Certification” from the Shanghai Quality and Technology
Certification Center in August 2020. We were named among “Shanghai Most Beautiful
Property Service Enterprises” from the Shanghai Property Management Industry Association in
September 2020, and we were named “Outstanding Specialized Property Management Service
Enterprise” in the area of office building management by China Index Academy in 2020.
Moreover, Kaichen World Trade Tower was the first office building in mainland China that was
awarded LEED-EB Platinum certification in 2013. We were also one of the first property
management companies in China to pass the “Commercial Office Building Rating Standard”
(“ ”) and obtained a Five-Star Certification by China Real Estate
Association in 2014.
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Excellent management capability has enabled us to command a high premium in property
management fees. In 2020, the average property management fee for office buildings under our
management amounted to RMB27.3 per sq.m., which was higher than the average for the Top
100 Property Management Companies of RMB6.93 per sq.m., according to China Index
Academy. In addition to conventional property management services, we strive to become the
trusted partner and one-stop solution provider to both our landlord customers and the tenants
in the office buildings under our management, many of whom are Fortune 500 companies. We
have developed one-stop integrated commercial property management and operational
solutions under our “Yue Business Services ( )” brand, which consist of shared
reception services, shared administrative services, shared accounting services, shared cleaning
services, customized conference services and more. Our one-stop integrated commercial
property management and operational services have received wide customer demands. For
example, as of September 30, 2021, 12 of our 17 tenants in Kaichen World Trade Tower
(Central Tower) had purchased such services.
Our diverse property profile has increased demands for our value-added services, thereby
enriching our service offerings, expanding our sources of income and improving profitability.
This has enhanced the resilience of our business and enabled us to manage our growth through
economic cycles.
Leveraging the support from our Controlling Shareholder, China Jinmao, we have
achieved a strong project pipeline and will continue to capitalize on highly visible and
sustainable growth opportunities
We benefit from our long-standing business cooperation with our Controlling
Shareholder, China Jinmao, which is a leading and fast-growing property developer in China
with a brand value of RMB42.1 billion in 2021, according to World Brand Lab. As of
December 31, 2020, Jinmao Group held land reserves of 95.1 million sq.m., representing a
CAGR of 21.7% from 2018, according to China Index Academy. The contracted sales of
Jinmao Group reached RMB231.1 billion in 2020, ranking 14th among the Top 100 Property
Companies in China, and representing a CAGR of 34.4% from 2018, which was significantly
higher than the industry-average CAGR of 14.2%, according to China Index Academy. The
average selling price of the properties developed by Jinmao Group was RMB20,468 per sq.m.
in 2020, which was significantly higher than the industry average of RMB15,755 per sq.m.,
according to China Index Academy. Jinmao Group has ranked first on the Top List of the
Typical Real Estate Products Brand Index issued by Yihan Zhiku for eight consecutive
quarters.
Our long-term and stable cooperation with Jinmao Group has driven our continuous
growth since our inception and we believe it will pave the way for our long-term growth.
During the Track Record Period, we provided property management services to most of the
properties developed by Jinmao Group and its joint ventures and associates. We also provided
a wide variety of community value-added services for properties developed by Jinmao Group
and its joint ventures and associates. Moreover, we provide various value-added services to
Jinmao Group and such cooperation with Jinmao Group has helped us gain in-depth
understanding of Jinmao Group’s environmental and sustainability initiatives and relevant
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technological knowhow, which further empowers us to offer environmentally-friendly property
management services for smart energy and construction technology projects promoted by
Jinmao Group. Leveraging our privileged position as the only property management service
provider within Jinmao Group, we believe we will continue to benefit from Jinmao Group’s
land reserves and project pipeline to continue to grow our GFA under management and business
scale after the completion of the Spin-off.
Besides the support from Jinmao Group, we have further solidified our market position
and business expansion through our relationship with China Jinmao’s controlling shareholder,
Sinochem Group, a Fortune 500 company. Sinochem Group is a world-leading chemical and
petroleum engineering enterprise under the supervision of the SASAC. In March 2021, the PRC
government granted approval for the business combination of Sinochem Group and China
National Chemical Corporation Limited ( )(⬙ChemChina⬙), which is
expected to create a globally competitive powerhouse in the global chemical industry engaging
in eight business lines, namely life science, materials science, basic chemicals, environmental
science, rubber and tire, machinery and equipment, city operation, and industrial finance. We
expect our relationship with Sinochem Group to help drive highly visible and sustainable
growth opportunities. As Jinmao Group is the platform enterprise of Sinochem Group in the
development of real estate business and we are the only property management company within
Jinmao Group, we are well positioned to capitalize on the pipeline of Sinochem Group and
future opportunities to be derived from its potential business combination with ChemChina.
For example, we recently partnered with Sinochem Lantian, a fluorine chemical engineering
arm of Sinochem Group, to establish a joint venture which specializes in property management
services for the high-quality industrial parks and office buildings held by Sinochem Group,
including the core research and production base, Shangyu industrial park, and the core fluorine
chemical engineering base, Taicang industrial park.
We are a leader in the high-end property management services market and provide
premium property management services
Our high-end and premium services
We focus on providing premium services to our customers and have established a strong
brand image. This is partly attributable to the fact that most of the properties under our
management are high-end properties. The average selling prices of the properties under our
management were generally higher than the industry average during the Track Record Period,
according to China Index Academy. Capitalizing on the strong brand image and reputation of
“Jinmao”, we have positioned ourselves as a quality living services provider and have
established a proprietary MOCO high-quality services system. For instance, we provide
specialized one-stop property care services, including real estate brokerage, examination,
repair and maintenance services, which cover the full life cycle of properties under our
management; we organize residents to participate in various outdoor activities to appreciate the
sceneries of different seasons; in addition to property management capability, our butlers
typically possess special skills in order to provide personalized services to our residents, such
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as pet care, clutter-cleaning, parenting, cooking, photographing, painting and music; we
promote friendly culture in our diversified communities by connecting our property owners
through a variety of social events and environmental protection activities.
In 2021, we were recognized as an upscale property management company by China
Index Academy in terms of multiple indicators in the three dimensions of scope of service,
service standards and service fees. In recognition of our high-end and premium services, we
were awarded “China’s Top 100 Leading High Quality Property Management Service
Enterprise” (“ ”) in 2020 and 2021 and “China’s Leading
Specialized Property Management Service Enterprise — MOCO Service System” (“
—MOCO ”) in 2021. We ranked first among the top 10 companies
on CRIC Research’s short list of “China’s Property Service Force High-End Service Brand”
(“ ”) in 2021. We were honored as “China Service Property
Industry Leading Group” (“ ”) at the 2020 China Golden Key 25th
Anniversary Brand Service Conference. Further,we obtained the First-class Property
Management Enterprise Certification (“ ”) in 2013, and have held
ISO9001:2015 Quality Management System Certification, ISO14001:2015 Environment
Management System Certification and ISO45001:2018 Occupational Health and Safety
Management System Certification for ten consecutive years.
We have and will continue to benefit from our premium property management services
and brand recognition, evidenced by our high property management fees, high customer
satisfaction, significant potential for value-added services and increased opportunities offered
by third parties:
High property management fees
• The average property management fee for properties under our management was
approximately RMB6.2, RMB5.9 and RMB5.4 per sq.m. as of December 31, 2018,
2019 and 2020, which was significantly higher than the industry average of the Top
100 Property Management Companies, being RMB4.2, RMB3.9 and RMB3.8 per
sq.m. as of the same dates, according to China Index Academy.
• Our average property management fee charged for residential properties was
approximately RMB3.6, RMB3.7 and RMB3.6 per sq.m. as of December 31, 2018,
2019 and 2020, respectively, which was above the industry average of RMB2.3,
RMB2.1 and RMB2.1 per sq.m. as of the same dates, according to China Index
Academy.
• Our average property management fee charged for non-residential properties was
approximately RMB20.7, RMB20.0 and RMB19.7 per sq.m. as of December 31,
2018, 2019 and 2020, which was significantly higher than the industry average of
RMB5.9, RMB5.2 and RMB5.0 per sq.m. as of the same dates, according to China
Index Academy.
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High customer satisfaction, client retention and collection rates
Our premium quality service enables us to maintain high customer satisfaction, client
retention and collection rates. According to a survey conducted by FG Consulting, our
customer satisfaction rate remained at approximately 90% throughout 2018, 2019 and 2020.
Other than two projects that did not match with our profitability criteria which we terminated
on a voluntary basis in 2019 and the nine months ended September 30, 2021, we had renewed
all of our property management contracts during the Track Record Period. Our collection rate
of property management fees was 98.5%, 96.8% and 94.1% for the years ended December 31,
2018, 2019 and 2020, respectively.
Significant potential for value-added services
High levels of customer trust and satisfaction rate have empowered us to expand our
community value-added services. Residents of mid- to high- end properties in first-tier and
second-tier cities generally have higher disposable income, thereby driving demand for
community value-added services and creating opportunities for us to expand and diversify our
service portfolio.
We started to expand our community value-added services and offer services such as real
estate brokerage services, platform services for interior decoration and new retail services from
the second quarter of 2020. Since then, our revenue from community value-added services has
increased by 73.9% to RMB98.8 million in the nine months ended September 30, 2021 from
RMB56.8 million in the same period in 2020. We have a dedicated team focused on improving
the overall business development and management capabilities for our community value-added
products and solutions, while our professional customer research team focuses on studying
customers’ needs and continuously expanding our diversified service portfolio. We expect our
diversified service offerings to lay a solid foundation for highly visible and sustainable
business growth as well as our profit growth.
Opportunities from third-party properties
Leveraging our strong brand recognition and years of experience, we expect to expand our
business to third-party projects in the areas surrounding our existing projects. We believe that
our leading brand and premium services will enhance our overall competitiveness and help us
acquire more management contracts from Independent Third Parties in a cost-effective manner,
thereby achieving a competitive edge in high-tier cities which we believe are poised for
growth. Since 2020, we have been actively expanding our business into properties developed
by Independent Third Parties. As of September 30, 2021, we had entered into 40 management
contracts for properties developed by Independent Third Parties, and our contracted GFA and
GFA under management for properties developed by Independent Third Parties were 4.4
million sq.m. and 3.1 million sq.m., respectively.
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As a pioneer in city operation service sector in China, we are well positioned to rapidly
scale up and further diversify our city operation property portfolio and service offerings
City operation services refer to the integration, optimization, transformation and
distribution of urban resources by governments and enterprises and the delivery of value-added
public services to citizens, which underpin the seamless operation of modern urban areas.
China Jinmao, as a leading city operator in China, has taken a coordinated and synergistic
approach to city operation, combining economic interest and long-term social benefit, to better
serve the interests of citizens and regional development.
Leveraging its advantages as a state-owned enterprise, Jinmao Group continues to scale
its city operation and has established itself as a developer of city operation projects through
joint ventures with local governments and business partners. As of July 31, 2021, Jinmao
Group had successfully contracted for 30 city operation projects nationwide. These projects
span new urban zones, city complexes and charismatic towns, covering a wide array of
property types, including hotels, commercial properties, office buildings, schools, health care
centers, theaters and smart energy stations, with various construction forms, including urban
skyscrapers, complex underground spaces, and integrated urban corridors.
To better align Jinmao Group’s city operation strategy with our own, and leveraging our
solid property management and customer service capabilities, we step beyond traditional
property management services to provide specialized, standardized and digital city operation
solutions for customers from all walks of life. Our well-rounded capabilities and deep-rooted
connection with Jinmao Group have enabled us to continuously capitalize on Jinmao Group’s
strong project pipeline in the city operation sector. As of the Latest Practicable Date, we had
entered into preliminary property management contracts for 22 city operation projects of
Jinmao Group, representing a diverse portfolio of office building complexes, new towns,
cultural towns and smart cities in Shanghai, Changsha, Lijiang, Qingdao, Nanjing, Sanya,
Wenzhou, Tianjin and more, among which 12 projects were in operation.
City operation has high barriers to entry in terms of technology and experience due to the
scope and complexity of services involved. As the upscale property management arm of Jinmao
Group, and benefiting from our extensive experience in multi-format and premium-grade city
operation services, we believe we are well positioned to capitalize on future market
opportunities from Independent Third Parties in the city operation service sector by expanding
our management scale and diversifying our city operation portfolio and service offerings. We
typically seek to enter into strategic cooperation agreements with government authorities and
state-owned enterprises, optimize the allocation of social resources, and have built a
multi-dimensional management mechanism for city operation services. For example:
• In February 2021, we established a joint venture with Jiashan Economic
Development Zone Property Management Co., Ltd. (
) to provide city operation services for Jiashan’s 60 sq.km. economic
development zone encompassing municipal gardens, parks, roads, river course and
underground pipes and provide greening, security, cleaning, repair and maintenance
services. By integrating the property management concept into the comprehensive
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management of urban areas, we provide city operation services including
maintenance and operation of urban equipment and facilities, property management
of public properties, industrial parks, residential properties and commercial
properties, property management preliminary consulting and human resources
services. We strive to establish management service benchmarks in different areas
of the Jiashan development zone and improve the overall service quality.
• In May 2021, we signed a cooperation agreement with Zhoushan government to
provide city operation services for Zhoushan’s 12 sq.km. economic development
zone. We strive to transform the traditional decentralized approach to urban
management to a centralized approach to improve efficiency, offering one-stop
management services for the urban environment, public architectures, city squares
and industrial communities in the Zhoushan economic development zone.
We are also in negotiations with other local governments for providing similar city
operation services. In recognition of our long-established excellence in city operation services,
we were awarded “China’s Leading Smart City Services Enterprise” (“
”) in 2021 by China Index Academy.
Our advanced technology and digitalization have enabled us to deliver smart property
management
We employ advanced technologies to create smart communities, improve living
experience and optimize resource allocation, thereby improving customer satisfaction and
achieving operational leverage. Our independent digital research and development team
consists of 30 personnel, with an average of nine years of experience. Through technology
innovations, we have established a comprehensive smart property service system and
formulated service standards for smart community, smart office building and smart city. Our
smart community service consists of three key pillars: smart community, smart operation, and
smart life.
Smart community
We employ technologies such as IoT, AI, big data analytics and cloud computing to
establish a smart community encompassing various application scenarios including security,
cleaning, parking, billing and more, providing our residents a secure, convenient and
comfortable living environment. For example, we deploy facial recognition or QR code
technology to enable an automatic lift call and intelligent management system, improving
residents’ ride experience. We use AI technology to provide location tracking to improve
security management. Our IBA IoT technology allows for 24-hour monitoring of major
equipment and facilities in our communities, enabling efficient operations, early detection of
critical conditions and timely maintenance. Furthermore, our smart parking lots have greatly
improved traffic flow for vehicles of property owners and visitors.
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Smart operation
At the core of our smart community service is our digitalization of property management,
which has significantly enhanced our operational efficiency and space utility and improved our
ability to respond to residents’ demands. For example, we began to operate a centralized
parking management platform and provide unattended parking services in 2021, which reduced
our parking attendant headcount by over 50% and is expected to reduce cost of revenues by
approximately RMB6 million per year. The application of IBA IoT technology has also
improved efficiency in equipment and facility management in one of our projects in Beijing by
reducing the number of staff for this task by approximately 20% from September 30, 2020 to
September 30, 2021. Moreover, our employees use “Jin Xiaomao” ( ) APP, an online
platform for our internal resources management, to access their task checklists in real time,
which has greatly improved their work efficiency. Jinmao OA is a platform which enables our
employees to perform smart office work such as document review, order approval, email
sending and receiving and internal communications through mobile phone. We developed
Client Relationship Management (“CRM”) System to help collect basic information relating to
our properties, car park spaces and residents. Our customers can make repair and maintenance
requests and settle the bills through the CRM System. We have developed a financial operating
system to streamline the process of expense reimbursement, receipt certification and account
auditing. Our big data analytics technology has enabled us to perform multi-dimensional
analysis of operational data, including user behaviors and customer complaints, and provide
data support for front-line operations, which enhanced our digital operation management
capacity.
Smart life
We operate our proprietary online customer portal, “Home” ( ) APP, as an aftermarket
service platform to build a closed-loop smart life ecosystem for property owners and residents
and improve their digital living experience in a vibrant and interactive community. The
“Home” APP connects with intelligent IoT devices in apartments and features the seamless
integration of online and offline services to serve property owners and residents. Through this
platform, we analyze online data in order to introduce offline services that address the needs
of our property owners and residents more precisely. Meanwhile, our offline services create
opportunities to direct user traffic to our online platform, enabling our online platform to
introduce our new service offerings to our customers more effectively. In addition, property
owners and residents can also use the “Home” ( ) APP to pay utilities, send repair requests,
view visitors, reserve parking space and participate in a variety of community activities at ease.
Our users have increasingly subscribed for the paid services we offer on our “Home” ( )
APP. We also provide smart delivery services which include a digital file of the property at the
time of offline delivery. The digital file includes information relating to the structure of each
room and parameters of facilities, enabling us to obtain information and prepare for repair and
maintenance work when residents make a request on the “Home” ( ) APP. Such information
also helps our cleaning staff to preview the structure of the property and plan the best route for
cleaning services. It also digitalizes the size of the interior environment and matches it with
suitable furniture and home appliances, which greatly enhanced efficiency in our platform
services for interior decoration.
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Our continuous technology and service innovations have enabled us to incubate a variety
of community value-added services led by our newly established subsidiary, Chuangmao
Technology ( ), including new retail services and last-mile delivery services through
our online to offline model. Since inception, Chuangmao Technology has obtained 15 software
copyrights. We were awarded “Leading Special Property Management Service Enterprise in
China — High-end Butler Smart Services” in 2020. Moreover, we have adopted energy-saving
operations guidelines to support our sustainable growth, aiming to reduce energy consumption
of our managed properties by a specified percentage each year. Through upgrading water
spraying equipment, optimizing illumination systems and improving water and energy saving
technologies, the overall energy costs of our managed properties decreased by 9.2% in 2020.
We have an experienced, visionary and pragmatic management team and a
comprehensive talent development system
Our experienced management team and employees are crucial to our success. Our senior
management team has extensive experience in the property management and related industries,
with an average of 14 years of experience. Moreover, our senior management possesses
in-depth knowledge of the industry and shares the strategic vision of our Company. Mr. Xie
Wei, our Executive Director and chief executive officer, has more than 20 years of experience
in property development and management. He has been responsible for the operations and
executive responsibilities of Jinmao Group since 2015 and has accumulated extensive
experience in the customer relations and property management departments of Jinmao Group.
He is also in charge of formulating strategic development plans and overseeing the overall
operations of our Company.
We regularly host comprehensive internal staff training programs to improve and enhance
their technical and service skills, as well as to provide them with the knowledge of industry
quality standards and work place safety standards which are tailored to the needs of different
positions, from entry-level staff to senior management, with different skill requirements and
career aspirations. We also have competitive compensation plans and incentive schemes to
attract external talents as well as retaining employees and management for our business
expansion.
We have adopted market-oriented talent retention mechanisms, including a multi-
dimensional, comprehensive talent development system which caters to employees of different
positions and at different stages of development, to foster their continuous growth and enable
them to address the evolving needs of our rapidly developing business. We have established
“Dianjin Program” ( ) and “Zhujin Program” ( ), which aim to select, and
nurture excellent, high-caliber candidates with a strong sense of identity to become our future
key management. We believe that our effective human resource system will enable us to retain
competent employees who are essential to our ability to provide quality and diversified
services, enhance our market position and achieve sustainable growth.
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BUSINESS STRATEGIES
We will continue to focus on selecting major cities for our further growth and
development. We will strive to develop and enhance our systemic capability of providing
premium services and to enhance our branding in the industry. Moving towards lean
management and technology empowerment, we aim to further expand our community
value-added services and promote our city operation services. We strive to become one of the
most competitive upscale comprehensive property management and city operation service
providers in China.
Further expand and diversify our portfolio under management through various channels,
achieving economies of scale
We will continue to leverage the abundant land and project reserves held by Jinmao
Group. We plan to actively secure projects to be developed by Jinmao Group in the future to
scale rapidly. Leveraging our premium services and brand, we also seek to obtain more
engagements from Independent Third Party property developers. We have established
professional market development teams at both our headquarters and regional subsidiaries and
plan to further refine the organizational structure of our business development team to
encourage cooperation and improve the skills and professionalism of business development
team members, which we believe will improve our tender success rate for future property
management service agreements.
China’s fragmented property management industry is in the early stages of consolidation.
As such, we plan to explore strategic investment and acquisition opportunities with companies
engaging in property management and/or community operations, and we currently intend to
allocate a portion of the net proceeds of the Global Offering to the execution of this plan. We
believe there is a pool of suitable target companies not affiliated with other property developers
for this purpose, as well as a number of property management companies affiliated with
relatively small property developers that represent additional potential opportunities for
investments or acquisitions. We also intend to allocate a portion of the proceeds of the Global
Offering to investments in and acquisitions of companies that provide community value-added
services which are complementary to ours. As of the Latest Practicable Date, we had not
identified or committed to any acquisition targets for our use of net proceeds from the Global
Offering. For further information on the types of strategic investment and acquisition
opportunities that we plan to explore in the areas of property management, city operation
and/or community operations, see “Future Plans and Use of Proceeds.” We believe that such
investments and acquisitions will enrich our service offerings and enable us to offer services
that cover a greater portion of the value chain.
We plan to diversify the types of properties under our management and to expand our
business scale by obtaining more engagements from non-residential properties, including
commercial properties, government and public facilities, educational institutions, airport
lounges, elderly-care facilities, hospitals, museums and industrial parks.
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Leveraging our status as a state-owned enterprise, we seek to further expand our city
operation services by deepening our cooperation with local governments and large companies
in space management, public resources operation and comprehensive services with multiple
use case scenarios including greening and cleaning, infrastructure and facility maintenance,
social governance, public space operation, urban ecology management, social and livelihood
services, auxiliary public services and urban planning. We plan to establish long-term
relationships with them by entering into strategic cooperation agreements and setting up more
joint ventures with them. We also plan to expand our local community management services
by implementing a mediation mechanism in connection with dispute resolutions for residents.
Continue to focus on select major cities with high growth potential, optimize our premium
services and further improve our brand recognition and influence
We intend to continue to grow our presence in major cities with relatively high population
density and per-capita income. We plan to continue focusing on quality residential
communities in select major cities and to increase the number of managed projects to capitalize
on our geographic focus and economies of scale.
We have also established a strong brand and reputation among our customers, and will
continue to adhere to our service philosophy and seek to further enhance our comprehensive
system capabilities, including the “Home ( )” APP service system, quality control
standardization system, and employee training, assessment and incentives system. By offering
premium services to create a pleasant and comfortable living experience, we intend to reinforce
and increase our brand influence and customer satisfaction. We believe this will enhance
customer loyalty, attract new customers and allow us to increase market share and explore
additional value-added services. Moreover, we strive to pursue additional project opportunities
for commercial properties and public properties. We intend to cooperate with more local
government investment vehicles that are usually not equipped with property management
experience. We expect these efforts to help us further expand our business scale in those areas
as an upscale comprehensive property management and city operation service provider, and
further enhance our overall strengths, market position, brand recognition and influence in the
property management industry.
Further develop a wide variety of distinguished new value-added services to diversify our
sources of income and to increase our customer loyalty
Value-added services are an increasingly important aspect of property management
services for modern communities. In particular, the high-end communities in our select major
cities show strong demand for diversified and distinguished new value-added services. We
intend to continue enhancing our service diversity and value creation capability by deepening
and broadening our value-added services provided to property owners and residents as well as
property developers in order to satisfy the diversifying needs of customers and to build a
personalized community ecosphere. We plan to introduce services that satisfy both daily living
needs, as well as customized needs for parent-child bonding, healthcare, education, recreation
and real estate brokerage services, thereby creating an ecosystem comprising individuals,
families and communities.
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Leveraging our professional property management team and our various service
platforms, we plan to make life more convenient for property owners and residents and enhance
their well-being by further developing community value-added services. In order to optimize
the living experience and satisfaction of property owners and residents, we intend to diversify
our revenue stream of community value-added services by expanding our real estate brokerage
services and car park space sales agency services as well as community space operation
services such as the management of advertising spaces and common facilities. We seek to
increase the number of service points in the residential communities under our management
and organize a series of marketing activities to attract more property owners and residents so
as to expand the coverage of our real estate brokerage services. Moreover, we will continue to
enhance our existing community living services such as interior decoration, new retail and
housekeeping and cleaning services as well as expanding the coverage of our community living
services based on the feedback from property owners and residents.
For property developers, we intend to provide full-lifecycle value-added services to
non-property owners addressing their needs from preliminary consultancy for property
development to post-delivery management. Leveraging our extensive customer base and our
know-how and experience in smart management, we intend to strengthen our pre-delivery
services and consultancy services provided to the non-property owners and further expand our
business scale. In particular, we seek to customize and expand our consultancy services to
include consultation on project planning, design and management, construction management
and marketing management. In addition, we plan to improve our pre-delivery services by
strengthening our cleaning, security inspection, maintenance and concierge reception provided
at the property sales site, so as to attract more collaboration with third-party property
developers. We believe the provision of such value-added services to property developers will
help us obtain additional property management engagements.
Continue to enhance our technological capabilities, thereby increasing service quality and
operational efficiency
Property management is a labor-intensive industry. In light of the rapid expansion of our
scale, we not only have to develop sophisticated capability in managing our high-quality
services system, but also have to continue to control costs and improve operational efficiency.
Meanwhile, continuous investment in smart technology will remain crucial for the property
management industry. We therefore intend to continue to enhance our standardized
management system and adhere to the approach of lean management. We seek to ensure
effective implementation of high-quality business standards and satisfactory user experience
among customers, and to effectively identify inefficient operations, minimize wastage and
control costs reasonably. We plan to upgrade the features and functionalities of our data middle
office, and to strengthen our data analytics and application capabilities. We plan to introduce
features that allow us to predict collection rates, expected costs and customer satisfaction rates
in connection with new mandates, which will offer meaningful support and insight to our
decision-making processes.
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We expect to enhance our capabilities in city operation services. We intend to foster our
investment and team building in city operation sector, with a focus on the application of IoT
and AI technologies in different use case scenarios. We aim to develop a centralized smart city
management platform that embraces urban cleaning, energy management, landscape
maintenance, facility maintenance and government services. We also plan to further invest in
smart facilities and research and development in management platforms in our existing city
operation projects to build a leading brand of smart city operations.
We also intend to increase the use of technology to enhance user experience and
satisfaction, effectively reduce the amount of manual work which is subject to greater
deviations in service quality, enhance operational efficiency and results, and strengthen on-site
quality control. We also plan to leverage big data to analyze customer preferences and offer
more targeted services.
Continue to improve our talent training and incentive mechanisms to support sustainable
and rapid growth of our business
We intend to maintain effective talent training and incentive mechanisms to identify,
select and cultivate employees across our organization. Through systematic training and
development mechanisms, we plan to nurture teams of competent employees at various levels.
We intend to formulate and continually adjust targeted performance assessment and promotion
mechanisms, based on the development stage and the specific nature of the business, with a
view to promoting positive competition internally. We will continue to stimulate employee
creativity and value by performance evaluation and assessment system to achieve our
performance sharing culture. For key employees, we may provide them with long-term
incentive opportunities through our share option scheme to ensure the stability of talents. We
will enhance the introduction of professional talents through recruitment and referral to
maintain high-quality talent reserves for our business development, in particular, our
value-added services. We will continue to build our human resources management system to
create a good corporate culture and working atmosphere.
AWARDS AND RECOGNITIONS
During the Track Record Period and up to the Latest Practicable Date, we had received
numerous awards and recognitions for the quality of our services. Representative awards and
recognitions are set forth below:
We were recognized as “Leading Technology Empowered Property Management
Enterprise in China” (“ ”) and “Leading Smart City Service
Provider in China” (“ ”) in 2021. We ranked the 1st among the top
10 companies on CRIC Research’s short list of “China’s Property Service Force High-End
Service Brand” (“ ”) in 2021. We were awarded “Leading
Upscale Property Management Service Enterprise in China” (“ ”) in
2020 and “Leading Specialized Operation Brand Enterprise in China” (“
”) in 2020. Our brand, which is built on high-quality services, was valued
BUSINESS
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at RMB2.5 billion by China Index Academy as of December 31, 2020. According to China
Index Academy, we ranked 17th among “2021 Top 100 Property Management Companies in
China” (“2021 ”) by overall strength.
BUSINESS MODEL
Our business includes the following three business lines:
• Property management services. We provide a range of property management
services to property owners and residents, as well as property developers, including,
among others, security, cleaning, greening, gardening and repair and maintenance
services for the operation of common area facilities. Our property management
portfolio covers residential properties, in particular, high-end ones, and a wide range
of non-residential properties, including (i) commercial properties, such as office
buildings and shopping malls, and (ii) public and other properties, such as schools,
government facilities and other public spaces. During the Track Record Period, we
charged substantially all of our property management fees on a lump sum basis, with
the remaining portion charged on a commission basis.
• Value-added services to non-property owners. We provide value-added services to
non-property owners, including (i) sales assistance services to property developers
to assist with their sales and marketing activities at property sales venues and
display units, and (ii) consultancy and other value-added services such as pre-
delivery and consultancy services, mainly to property developers.
• Community value-added services. We provide community value-added services
mainly to property owners and residents of our managed properties to address their
daily lifestyle needs, which mainly consist of: (i) platform services for interior
decoration, (ii) community living services such as housekeeping, new retail and
catering services, (iii) community space operation services such as elevator
advertising services and car park space management services, and (iv) real estate
brokerage services.
Additionally, we provide city operation services, the service scope of which spans across
our three business lines. We provide city operation services in different forms. For example,
we establish joint ventures with local governments to provide city operation services. In
February 2021, we established a joint venture with Jiashan government to provide city
operation services for Jiashan’s 60 sq.km. economic development zone encompassing
municipal gardens, parks, roads, river course and underground pipes and provide greening,
security, cleaning, repair and maintenance services thereof. In addition, in May 2021, we
entered into a cooperation agreement with Zhoushan government to provide city operation
services for Zhoushan’s 12 sq.km. economic development zone. We are also in negotiations
with other local governments for providing similar city operation services.
BUSINESS
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The following table sets out the breakdown of our revenue by business line for the periods
indicated:
For the year ended December 31,
For the nine months ended
September 30,
2018 2019 2020 2020 2021
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
Revenue
Property management
services 335,117 58.3 462,277 58.6 567,481 60.1 409,498 61.6 578,238 55.2
— Residential
properties 164,568 28.6 201,501 25.6 276,914 29.3 199,400 30.0 335,210 32.0
— Non-residential
properties 170,549 29.7 260,776 33.0 290,567 30.8 210,098 31.6 243,028 23.2
Value-added services to
non-property owners 178,613 31.1 250,838 31.8 294,401 31.2 198,982 29.9 371,624 35.4
Community value-added
services
(1)
60,773 10.6 75,208 9.6 82,328 8.7 56,842 8.5 98,823 9.4
Total revenue 574,503 100.0 788,323 100.0 944,210 100.0 665,322 100.0 1,048,685 100.0
Note:
(1) Includes gross rental income from investment properties operating leases.
BUSINESS
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The following table sets out the breakdown of our revenue by source of projects for the
periods indicated:
For the year ended December 31, Nine months ended September 30,
2018 2019 2020 2020 2021
Revenue Revenue Revenue Revenue Revenue
Amount % Amount % Amount % Amount % Amount %
(RMB in thousands, except percentages)
Property management
services 335,117 58.3 462,277 58.6 567,481 60.1 409,498 61.6 578,238 55.2
— Properties developed by
Jinmao Group and
Sinochem Group (and
their respective joint
ventures and associates) 308,277 53.6 431,282 54.7 524,854 55.6 380,716 57.3 534,714 51.0
— Properties developed by
Independent Third Parties 26,840 4.7 30,995 3.9 42,627 4.5 28,782 4.3 43,524 4.2
Value-added services to
non-property owners 178,613 31.1 250,838 31.8 294,401 31.2 198,982 29.9 371,624 35.4
— Properties developed by
Jinmao Group and
Sinochem Group (and
their respective joint
ventures and associates) 176,539 30.7 247,956 31.4 284,019 30.1 192,601 28.9 360,499 34.4
— Properties developed by
Independent Third Parties 2,074 0.4 2,882 0.4 10,382 1.1 6,381 1.0 11,125 1.0
Community value-added
services 60,773 10.6 75,208 9.6 82,328 8.7 56,842 8.5 98,823 9.4
— Properties developed by
Jinmao Group and
Sinochem Group (and
their respective joint
ventures and associates) 59,921 10.5 74,547 9.5 81,604 8.6 56,702 8.5 97,347 9.3
— Properties developed by
Independent Third Parties 852 0.1 661 0.1 724 0.1 140 0.0 1,476 0.1
Total 574,503 100.0 788,323 100.0 944,210 100.0 665,322 100.0 1,048,685 100.0
BUSINESS
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The following table sets out the breakdown of gross profit and gross profit margin by
source of projects for the periods indicated:
For the year ended December 31, Nine months ended September 30,
2018 2019 2020 2020 2021
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
Property management
services 37,105 11.1 54,868 11.9 100,978 17.8 77,831 19.0 101,163 17.5
— Properties developed by
Jinmao Group and
Sinochem Group (and
their respective joint
ventures and associates) 38,548 12.5 54,557 12.6 97,375 18.6 75,386 19.8 97,410 18.2
— Properties developed by
Independent Third Parties -1,443 -5.4 311 1.0 3,603 8.5 2,445 8.5 3,753 8.6
Value-added services to
non-property owners 48,373 27.1 68,558 27.3 101,170 34.4 64,231 32.3 171,157 46.1
— Properties developed by
Jinmao Group and
Sinochem Group (and
their respective joint
ventures and associates) 47,149 26.7 67,115 27.1 97,266 34.2 61,852 32.1 169,429 47.0
— Properties developed by
Independent Third Parties 1,224 59.0 1,443 50.1 3,904 37.6 2,379 37.3 1,728 15.5
Community value-added
services 29,556 48.6 28,097 37.4 32,641 39.6 21,739 38.2 38,575 39.0
— Properties developed by
Jinmao Group and
Sinochem Group (and
their respective joint
ventures and associates) 29,650 49.5 28,043 37.6 32,551 39.9 21,661 38.2 38,177 39.2
— Properties developed by
Independent Third Parties -94
(1)
-11.0 54 8.2 90 12.4 78 55.7 398 27.0
Total 115,034 20.0 151,523 19.2 234,789 24.9 163,801 24.6 310,895 29.6
Note:
(1) This is attributable to our one-off and non-recurring cleaning services provided to a government facility and
not representative of our revenue model for community value-added services.
BUSINESS
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The following table sets out the breakdowns of our Group’s (i) contracted GFA, (ii)
undelivered GFA, and (iii) number of properties for contracted GFA by source of projects as
of the dates indicated:
As of December 31,
As of
September 30,
2018 2019 2020 2021
Contracted GFA (’000
sq.m.) 21,861.2 30,788.4 40,525.5 45,730.2
— Properties developed by
Jinmao Group and
Sinochem Group (and their
respective joint ventures
and associates) 20,823.2 29,950.5 37,835.9 41,379.0
— Properties developed by
Independent Third Parties 1,038.0 837.9 2,689.6 4,351.2
Undelivered GFA (’000
sq.m.) 11,638.1 18,127.8 22,874.0 22,489.4
— Properties developed by
Jinmao Group and
Sinochem Group (and their
respective joint ventures
and associates) 11,638.1 18,026.9 22,343.1 21,260.3
— Properties developed by
Independent Third Parties – 100.9 530.9 1,229.1
Number of properties for
contracted GFA 107 148 190 228
— Properties developed by
Jinmao Group and
Sinochem Group (and their
respective joint ventures
and associates) 99 137 164 188
— Properties developed by
Independent Third Parties 8 11 26 40
BUSINESS
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The following table sets out the breakdown of our revenue by type of properties for the
periods indicated:
For the year ended December 31, Nine months ended September 30,
2018 2019 2020 2020 2021
Revenue Revenue Revenue Revenue Revenue
Amount % Amount % Amount % Amount % Amount %
(RMB in thousands, except percentages)
Property management
services 335,117 58.3 462,277 58.6 567,481 60.1 409,498 61.6 578,238 55.2
— Residential properties 164,568 28.6 201,501 25.6 276,914 29.3 199,400 30.0 335,210 32.0
— Non-residential properties 170,549 29.7 260,776 33.0 290,567 30.8 210,098 31.6 243,028 23.2
Value-added services to
non-property owners 178,613 31.1 250,838 31.8 294,401 31.2 198,982 29.9 371,624 35.4
— Residential properties 167,972 29.2 236,522 30.0 280,418 29.7 187,567 28.2 352,463 33.6
— Non-residential properties 10,641 1.9 14,316 1.8 13,983 1.5 11,415 1.7 19,161 1.8
Community value-added
services 60,773 10.6 75,208 9.6 82,328 8.7 56,842 8.5 98,823 9.4
— Residential properties 28,813 5.0 31,861 4.0 40,342 4.3 30,957 4.7 62,785 6.0
— Non-residential properties 31,960 5.6 43,347 5.6 41,986 4.4 25,885 3.8 36,038 3.4
Total 574,503 100.0 788,323 100.0 944,210 100.0 665,322 100.0 1,048,685 100.0
The following table sets out the breakdown of gross profit and gross profit margin by type
of properties for the periods indicated:
For the year ended December 31, Nine months ended September 30,
2018 2019 2020 2020 2021
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
(%) (%) (%) (%) (%)
(RMB in thousands, except percentages)
Property management
services 37,105 11.1 54,868 11.9 100,978 17.8 77,831 19.0 101,163 17.5
— Residential properties 2,712 1.6 5,301 2.6 36,788 13.3 33,729 16.9 54,159 16.2
— Non-residential properties 34,393 20.2 49,567 19.0 64,190 22.1 44,102 21.0 47,004 19.3
Value-added services to non-
property owners 48,373 27.1 68,558 27.3 101,170 34.4 64,231 32.3 171,157 46.1
— Residential properties 44,758 26.6 63,136 26.7 93,647 33.4 57,656 30.7 159,366 45.2
— Non-residential properties 3,615 34.0 5,422 37.9 7,523 53.8 6,575 57.6 11,791 61.5
Community value-added
services 29,556 48.6 28,097 37.4 32,641 39.6 21,739 38.2 38,575 39.0
— Residential properties 12,031 41.8 3,581 11.2 14,524 36.0 12,155 39.3 24,819 39.5
— Non-residential properties 17,525 54.8 24,516 56.6 18,117 43.2 9,584 37.0 13,756 38.2
Total 115,034 20.0 151,523 19.2 234,789 24.9 163,801 24.6 310,895 29.6
BUSINESS
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The following table sets out the breakdowns of our Group’s (i) contracted GFA, (ii)
undelivered GFA, and (iii) number of properties for contracted GFA by type of properties as
of the dates indicated:
As of December 31,
As of
September 30,
2018 2019 2020 2021
Contracted GFA (’000
sq.m.) 21,861.2 30,788.4 40,525.5 45,730.2
— Residential properties 19,461.8 27,559.4 36,444.9 41,355.4
— Non-residential properties 2,399.4 3,229.0 4,080.6 4,374.8
Undelivered GFA (’000
sq.m.) 11,638.1 18,127.8 22,874.0 22,489.4
— Residential properties 11,591.8 17,129.5 21,989.1 21,592.1
— Non-residential properties 46.3 998.3 884.9 897.3
Number of properties for
contracted GFA 107 148 190 228
— Residential properties 85 118 152 182
— Non-residential properties 22 30 38 46
The following table sets out the breakdown of our revenue by types of ultimate paying
customers for the periods indicated:
For the year ended December 31, Nine months ended September 30,
2018 2019 2020 2020 2021
Revenue Revenue Revenue Revenue Revenue
Amount % Amount % Amount % Amount % Amount %
(RMB in thousands, except percentages)
Property management
services 335,117 58.3 462,277 58.6 567,481 60.1 409,498 61.6 578,238 55.2
— Jinmao Group and
Sinochem Group (and
their respective joint
ventures and associates) 95,020 16.5 90,509 11.5 102,611 10.9 78,009 11.7 105,609 10.1
— Independent Third Parties 240,097 41.8 371,768 47.1 464,870 49.2 331,489 49.9 472,629 45.1
Value-added services to
non-property owners 178,613 31.1 250,838 31.8 294,401 31.2 198,982 29.9 371,624 35.4
— Jinmao Group and
Sinochem Group (and
their respective joint
ventures and associates) 164,457 28.6 232,210 29.5 279,610 29.6 190,796 28.7 353,669 33.7
— Independent Third Parties 14,156 2.5 18,628 2.3 14,791 1.6 8,186 1.2 17,955 1.7
Community value-added
services 60,773 10.6 75,208 9.6 82,328 8.7 56,842 8.5 98,823 9.4
— Jinmao Group and
Sinochem Group (and
their respective joint
ventures and associates) 20,540 3.6 28,546 3.6 28,568 3.0 19,661 3.0 24,527 2.3
— Independent Third Parties 40,233 7.0 46,662 6.0 53,760 5.7 37,181 5.5 74,296 7.1
Total 574,503 100.0 788,323 100.0 944,210 100.0 665,322 100.0 1,048,685 100.0
BUSINESS
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The following table sets out the number of projects that were successfully awarded to us
through tenders and the number of projects that were successfully renewed for the periods
indicated:
For the year ended December 31,
For nine months
ended September 30,
2018 2019 2020 2021
Number of
successful
tenders
Number of
successful
project
renewals
Number of
successful
tenders
Number of
successful
project
renewals
Number of
successful
tenders
Number of
successful
project
renewals
Number of
successful
tenders
Number of
successful
project
renewals
To Jinmao Group and Sinochem
Group (and their respective joint
ventures and associates) 41 13 34 9 25 6 16 6
To Independent Third Party
developers 39281211108
Total 44 22 36 17 37 17 26 14
The following table sets out the details of our tender success rates and project renewal
rates for property management service engagements for the periods indicated:
For the year ended December 31,
For nine months
ended September 30,
2018 2019 2020 2021
Tender
success
rate
Project
renewal
rate
Tender
success
rate
Project
renewal
rate
Tender
success
rate
Project
renewal
rate
Tender
success
rate
Project
renewal
rate
To Jinmao Group and
Sinochem Group (and
their respective joint
ventures and associates) 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
To Independent Third
Party developers 100.0 100.0 50.0 88.9 44.4 100.0 58.8 88.9
Total 100.0 100.0 94.7 94.4 71.2 100.0 78.8 93.3
BUSINESS
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Our tender success rates for property management service engagements from Independent
Third Party developers decreased from 2018 to 2020 mainly because we started to actively
expand our business into properties developed by Independent Third Parties from 2020, which
resulted in a significant increase in the number of bids submitted by us for Independent Third
Party projects and a decrease in successful tenders as a percentage of the total number of bids
submitted in 2020.
Our project renewal rate for property management service engagements from Independent
Third Party developers fluctuated during the Track Record Period because we terminated two
property management service contracts which did not match with our profitability and other
relevant criteria on a voluntary basis. Typically, with respect to projects developed by
Independent Third Party developers, we aim to achieve a profit margin before income tax of
no less than 4% for projects charged on a lump sum basis or a commission of no less than 8%
of the total costs for projects charged on a commission basis. In addition, we also take into
account the nature and background of the Independent Third Parties, strategic relationship,
future cooperation opportunities and potential for turnaround in profitability when we
determine whether to terminate the relevant projects.
PROPERTY MANAGEMENT SERVICES
We were established over 25 years ago to focus on the provision of property management
services in China. As of September 30, 2021, our contracted GFA was 45.7 million sq.m., and
we managed 228 properties in total, including 182 residential properties and 46 non-residential
properties, with an aggregate GFA under management of 23.2 million sq.m. For the years ended
December 31, 2018, 2019 and 2020 and the nine months ended September 30, 2020 and 2021,
revenue generated from property management services amounted to RMB335.1 million,
RMB462.3 million, RMB567.5 million, RMB409.5 million and RMB578.2 million,
respectively, representing 58.3%, 58.6%, 60.1%, 61.6% and 55.2% of our total revenue during
the same periods, respectively.
The following table sets out the breakdowns of our Group’s (i) contracted GFA, (ii) GFA
under management, (iii) number of properties for contracted GFA, and (iv) number of
properties for GFA under management as of the dates indicated:
As of December 31,
As of
September 30,
2018 2019 2020 2021
Contracted GFA (’000 sq.m.) 21,861.2 30,788.4 40,525.5 45,730.2
GFA under management
(’000 sq.m.) 10,223.1 12,660.6 17,651.5 23,240.8
Number of properties for
contracted GFA 107 148 190 228
Number of properties for
GFA under management 51 66 97 137
BUSINESS
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General Scope of Property Management Services
The property management services we provide can be grouped into the following
categories. In order to deliver an elevated home experience, we provide personalized home
services to residents. Our dedicated team of butlers is at residents’ service and offers a full
spectrum of services including doorstep delivery, laundry management and home concierge:
• Security services. We seek to ensure that the properties we manage are safe and in
good order, and we endeavor to enhance the quality of our security services through
equipment upgrades and smart management. The security services that we provide
primarily consist of preserving general order, patrolling, electronic access control,
video surveillance, car park security, visitor management, fire safety management
and emergency response. We staff our security services with both our own
employees and third-party sub-contractors.
• Cleaning, greening and gardening services. We provide general cleaning, garbage
collection, pest control, greening and gardening services to the common areas of the
properties we manage, mostly through sub-contractors. Such common areas may
include, among others, staircases, railings, hallways, basements and gardens.
• Repair and maintenance services. The scope of our property repair and
maintenance services typically includes (i) common area equipment and facilities,
such as elevators, air conditioning and lighting systems, (ii) fire and safety facilities,
(iii) utility facilities, such as power supply and distribution, water supply and
drainage systems, and (iv) security facilities, such as surveillance equipment and
entrance gate control. During the Track Record Period, we outsourced to sub-
contractors a substantial portion of the specialized repair and maintenance services
in relation to elevators and fire protection facilities.
BUSINESS
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Geographic Coverage
The following table sets out the breakdowns of our (i) GFA under management, and (ii)
number of properties under management by geographic region, as of the dates indicated. As of
December 31, 2020, we had 17.7 million sq.m. of GFA under management, 84.2% of which was
located in first-tier and second-tier cities, in contrast with the industry average of 63.8%,
according to China Index Academy.
As of December 31, As of September 30,
2018 2019 2020 2021
GFA under
management
Number of
properties
under
management
GFA under
management
Number of
properties
under
management
GFA under
management
Number of
properties
under
management
GFA under
management
Number of
properties
under
management
(’000
sq.m.) (%)
(’000
sq.m.) (%)
(’000
sq.m.) (%)
(’000
sq.m.) (%)
Eastern region
(1)
3,034.4 29.7 22 4,304.1 34.0 28 8,048.2 45.6 45 12,690.3 54.6 76
Northern region
(2)
2,649.8 25.9 16 2,640.8 20.9 20 3,109.4 17.6 25 3,362.0 14.5 27
Central region
(3)
2,013.5 19.7 7 2,581.1 20.4 9 2,834.1 16.0 12 3,130.3 13.5 13
Southern region
(4)
1,131.8 11.1 2 1,735.4 13.7 4 1,971.8 11.2 6 2,022.1 8.7 8
Southwestern
region
(5)
1,393.6 13.6 4 1,399.2 11.0 5 1,587.1 9.0 8 1,776.6 7.6 11
Northwestern
region
(6)
– – – – – – 100.9 0.6 1 259.5 1.1 2
Total 10,223.1 100.0 51 12,660.6 100.0 66 17,651.5 100.0 97 23,240.8 100.0 137
Notes:
(1) “Eastern region” refers to Shanghai, Zhejiang province, Jiangsu province, Jiangxi province, Shandong
province, Fujian province and Anhui province;
(2) “Northern region” refers to Beijing, Tianjin, Shanxi province, Hebei province and the central area of Inner
Mongolia (Hohhot, Baotou and Ulanqab);
(3) “Central region” refers to Hubei province, Hunan province and Henan province;
(4) “Southern region” refers to Guangxi Zhuang autonomous region, Guangdong province and Hainan province;
(5) “Southwestern region” refers to Chongqing, Sichuan province, Yunnan province, Guizhou province and Tibet;
(6) “Northwestern region” refers to Gansu province, Ningxia Hui autonomous region, Shaanxi province, Xinjiang
Uygur autonomous region and the western area of Inner Mongolia autonomous region (Alxa League, Bayannur,
Wuhai and Ordos).
BUSINESS
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Types of Properties under Management
We manage a diverse portfolio of properties covering residential properties, in particular,
high-end ones, and non-residential properties, including (i) commercial properties, such as
office buildings, skyscrapers and shopping malls, and (ii) public and other properties, such as
schools, government facilities and other public spaces. The following tables set out the
breakdowns of our (i) revenue from property management services by property type, (ii) GFA
under management, and (iii) number of properties under management by property type, for the
periods or as of the dates indicated:
For the year ended December 31,
For the nine months ended
September 30,
2018 2019 2020 2020 2021
Revenue Revenue Revenue Revenue Revenue
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
Residential properties 164,568 49.1 201,501 43.6 276,914 48.8 199,400 48.7 335,210 58.0
Non-residential properties 170,549 50.9 260,776 56.4 290,567 51.2 210,098 51.3 243,028 42.0
Total 335,117 100.0 462,277 100.0 567,481 100.0 409,498 100.0 578,238 100.0
As of December 31, As of September 30,
2018 2019 2020 2021
GFA under
management
Number of
properties
under
management
GFA under
management
Number of
properties
under
management
GFA under
management
Number of
properties
under
management
GFA under
management
Number of
properties
under
management
(’000
sq.m.) (%)
(’000
sq.m.) (%)
(’000
sq.m.) (%)
(’000
sq.m.) (%)
Residential properties 7,870.0 77.0 29 10,429.8 82.4 40 14,455.7 81.9 62 19,763.3 85.0 96
Non-residential
properties 2,353.1 23.0 22 2,230.8 17.6 26 3,195.8 18.1 35 3,477.5 15.0 41
Total 10,223.1 100.0 51 12,660.6 100.0 66 17,651.5 100.0 97 23,240.8 100.0 137
BUSINESS
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Sources of Projects
During the Track Record Period, the properties under our management were principally
developed by Jinmao Group and Sinochem Group and their joint ventures and associates while
the rest were developed or owned by other independent-third-party property developers. For
details about our relationship with China Jinmao and Sinochem Group, see “Relationship with
China Jinmao”. For information concerning the business delineation between Jinmao Group
and us, see “Relationship with China Jinmao — Delineation of Business”.
The following tables set out the breakdowns of our (i) revenue from property management
services by source of projects, (ii) GFA under management and number of properties under
management by source of projects for the periods or as of the dates indicated:
For the year ended December 31,
For the nine months ended
September 30,
2018 2019 2020 2020 2021
Revenue Revenue Revenue Revenue Revenue
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
Properties developed by
Jinmao Group and
Sinochem Group (and
their respective joint
ventures and
associates)
(1)
308,277 92.0 431,282 93.3 524,854 92.5 380,716 93.0 534,714 92.5
Projects developed by
Independent Third
Parties
(2)
26,840 8.0 30,995 6.7 42,627 7.5 28,782 7.0 43,524 7.5
Total 335,117 100.0 462,277 100.0 567,481 100.0 409,498 100.0 578,238 100.0
Notes:
(1) “Properties developed by Jinmao Group and Sinochem Group (and their respective joint ventures and
associates)” refers to properties solely developed by Jinmao Group or Sinochem Group or jointly developed
by Jinmao Group or Sinochem Group and other parties.
(2) “Properties developed by Independent Third Parties” refers to properties that were not developed by Jinmao
Group or Sinochem Group, either solely or jointly with other parties.
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As of December 31, As of September 30,
2018 2019 2020 2021
GFA under
management
Number of
properties
under
management
GFA under
management
Number of
properties
under
management
GFA under
management
Number of
properties
under
management
GFA under
management
Number of
properties
under
management
(’000
sq.m.) (%)
(’000
sq.m.) (%)
(’000
sq.m.) (%)
(’000
sq.m.) (%)
Properties developed
by Jinmao Group
and Sinochem
Group (and their
respective joint
ventures and
associates)
(1)
9,185.1 89.8 43 11,923.7 94.2 56 15,492.8 87.8 76 20,118.7 86.6 105
Properties developed
by Independent
Third Parties
(2)
1,038.0 10.2 8 736.9 5.8 10 2,158.7 12.2 21 3,122.1 13.4 32
Total 10,223.1 100.0 51 12,660.6 100.0 66 17,651.5 100.0 97 23,240.8 100.0 137
Notes:
(1) “Properties developed by Jinmao Group and Sinochem Group (and their respective joint ventures and
associates)” refers to properties solely developed by Jinmao Group or Sinochem Group or jointly developed
by Jinmao Group or Sinochem Group and other parties.
(2) “Properties developed by Independent Third Parties” refers to projects not developed by Jinmao Group or
Sinochem Group, either solely or jointly with other parties.
Based on information available to us, as of December 31, 2018, 2019 and 2020 and June
30, 2021, we managed approximately 91.0%, 93.0%, 89.0% and 89.0% of the total GFA of the
properties developed by Jinmao Group and its joint ventures and associates. To the best of our
knowledge, as the properties developed by Sinochem Group and its joint ventures and
associates are mainly for self-use purposes, Sinochem Group does not maintain GFA data for
such properties, and therefore our managed GFA as a percentage of the total GFA of the
properties developed by Sinochem Group and its joint ventures and associates is not available.
Starting from 2020, we proactively reinforced our efforts to seek property management
engagements for projects developed by property developers that are Independent Third Parties,
in order to benefit more from economies of scale, gain additional revenue sources, diversify
our property management portfolio, and reduce reliance on our Controlling Shareholder,
Jinmao Group. As of September 30, 2021, our contracted GFA from properties developed by
Independent Third Parties was 4.4 million sq.m.
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We typically obtain or renew our projects for property management services through
tender bidding process or commercial negotiation. The following table sets forth a breakdown
of our projects for property management services by types of project sourcing process as of the
dates indicated.
As of December 31,
As of
September 30,
2018 2019 2020 2021
Tender and bidding 26 38 64 94
Commercial negotiation 25 28 33 43
Total 51 66 97 137
Revenue Model of Property Management Services
During the Track Record Period, we charged a substantial portion of our property
management fees on a lump sum basis, with the remaining portion charged on a commission
basis. Our property management revenue generated from services charged on a lump sum basis
accounted for 96.8%, 98.7%, 98.5% and 98.7% of our total revenue from property management
services for the years ended December 31, 2018, 2019 and 2020 and the nine months ended
September 30, 2021, respectively.
We take into account a number of factors in determining whether to charge property
management fees on a lump sum basis or a commission basis, including the nature and
requirements of property owners, the local regulations and market conditions and the
preliminary property management service contract. At other times property owners or
management associations may specify their preferred payment methods and we would consider
whether to accommodate such request taking into account the specific circumstances. We
conduct assessments of our prospective customers by evaluating key factors such as the
estimated costs of managing the property, historical property management fee collection rate,
projected profitability, fee rates charged by competitors.
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The following diagram illustrates the contractual relationships under our management
service contracts for residential projects and the distinction between the revenue collection
models thereof:
Tender process and preliminary property
management service contract
(1)
Provide property management services
Property developers Our Group
Property owners’
association
Property owners
Property owners engage us through
the property owners’ general meeting
and we provide property management
services to property owners
(2)
Sell
properties
Pay property management fees
Lump sum basis: all property management fees
are recognized as our revenue and expenses are
borne by our Group
Commission basis: a pre-determined percentage
of, or a xed amount out of, the property
management fees is recognized as our revenue
and the remainder belongs to property owners
and used as working capital to cover the
expenses for managing the properties which are
borne by property owners
Establish property owners’ association through
property owners’ general meeting
Differences
(3)
Similarities
(3)
Property
management
service contract
(2)
Notes:
(1) The property developer can enter into a preliminary property management service contract with us and such
contract is legally binding on the property owners.
(2) The property owners can select to engage us through the property owners’ general meeting. Once we are
selected, the property owners’ general meeting can authorize the property owners’ association to enter into a
property management service contract with us on behalf of the property owners and such contract is legally
binding on all the property owners. We provide property management services to property owners post
property delivery but before the property owners’ general meeting.
(3) These lines are to show the differences and similarities between the lump sum basis and the commission basis.
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The differences between lump sum basis and commission basis are explained in more
details below:
Property management fees charged on a lump sum basis
On a lump sum basis, we generally charge a pre-determined property management fee
based on GFA under management with varying payment terms which represents “all-inclusive”
fees for all of the property management services we provide in accordance with the property
management service contract we entered into. We are entitled to retain as our revenue the full
amount of property management fees receivable from customers such as property owners,
property developers and residents, as the case maybe. According to China Index Academy, the
lump sum basis revenue model is the dominant method of collecting property management fees
in China, especially in relation to residential properties.
On a lump sum basis, we bear the costs of managing properties, and recognize such costs
as our cost of sales. These costs generally include expenses associated with our staff directly
providing property management services, as well as our sub-contracting costs for third-party
services. As a result, reducing the costs incurred in the provision of management services to
a property on a lump sum basis has a direct impact on our profitability. Prior to negotiating and
entering into our property management service contracts, we seek to form as accurate-as-
possible an estimate of our cost of sales. If the amount of property management fees we are
entitled to collect during the term of a contract is not sufficient to cover all the expenses
incurred, we are not entitled to request customers to pay us the shortfall. As of December 31,
2018, 2019 and 2020 and September 30, 2021, we had 8, 11, 14 and 15 property management
projects managed on a lump sum basis for which we incurred losses during the Track Record
Period and such projects had an aggregate GFA under management of 1.7 million sq.m., 2.3
million sq.m., 3.0 million sq.m. and 3.0 million sq.m. as of December 31, 2018, 2019 and 2020
and September 30, 2021, respectively. Based on our accounting records, the loss-making
projects had incurred losses amounting to RMB8.6 million, RMB12.4 million, RMB11.9
million and RMB10.5 million for the years ended December 31, 2018, 2019 and 2020 and the
nine months ended September 30, 2021, respectively, and property management service
revenue from such projects accounted for 2.6%, 2.6%, 2.1% and 1.8% of our total revenue for
the respective periods.
Losses incurred for these projects were due to various reasons that affected the
profitability level of the relevant projects.
• We were unable to adjust the property management fee rates for four, five, five and
five projects in 2018, 2019 and 2020 and the nine months ended September 30,
2021, respectively, to keep up with the increased costs, which was primarily
attributable to the price controls imposed by local government authorities over
residential property management fees. The total GFA under management for these
projects was 1.2 million sq.m., 1.3 million sq.m., 1.3 million sq.m. and 1.3 million
sq.m., as of December 31, 2018, 2019, 2020 and September 30, 2021. Based on our
accounting records, the total revenue we recorded from these projects accounted for
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0.9%, 1.0%, 0.5%, 0.8% and 0.7% of the total revenue in 2018, 2019 and 2020 and
nine months ended September 30, 2020 and 2021. We incurred net losses of RMB2.9
million, RMB4.6 million, RMB2.9 million, RMB3.2 million and RMB3.8 million
for these projects in the same periods.
• We had increased cost of sales for four, six, nine and ten projects in 2018, 2019 and
2020 and the nine months ended September 30, 2021, respectively, which was
primarily due to (i) lack of economies of scale in smaller projects, (ii) high costs
related to the hot water supply system and (iii) high upfront invariable costs incurred
for projects that are not completely delivered, which are expected to generate more
revenue in the future. The total GFA under management for these projects was 0.7
million sq.m., 1.1 million sq.m., 1.7 million sq.m. and 1.7 million sq.m., as of
December 31, 2018, 2019 and 2020 and September 30, 2021. Based on our
accounting records, the total revenue we recorded from these projects accounted for
1.7%, 1.6%, 1.6%, 1.7% and 1.2% of the total revenue in 2018, 2019 and 2020 and
nine months ended September 30, 2020 and 2021. We incurred net losses of RMB5.7
million, RMB7.8 million, RMB9.0 million, RMB6.8 million and RMB6.8 million
for these projects in the same periods.
We continue to manage these projects and we believe that we would gradually improve
their profitability and reduce losses in the future by diversifying our community value-added
service offerings to create new revenue streams, and implementing various cost-saving
measures. In particular, with respect to cost-saving measures, we have enhanced cost control
and management at a granular level by implementing digitalization initiatives and further
standardizing service processes to reduce labor costs. We are analyzing the correlations
between cost of revenues and customer satisfaction rate to improve resource allocation and
maintain efficiency in our operations. We continue to evaluate the effectiveness of our cost
control measures on a regular basis. In addition, with respect to projects that are not subject
to government price control, we will negotiate with customers to increase property
management fees. Our Directors are of the view that with a combination of the cost-saving and
revenue generation through fee-increment measures we will be effective in reducing losses of
our loss-making projects. For example, two of our projects to which we charged a package
price incurred less loss during the nine months ended September 30, 2021 compared to the
same period of 2020. We currently aim to turn around the loss-making projects in 2024 with
our combination of the cost-saving and revenue generating measures. For details, see “—
Property Management Fees — Pricing of Property Management Fees.”
For more details, see “Risk Factors — Risks relating to Our Business and Industry — We
may be subject to losses and our profit margins may decrease if we fail to control costs or raise
the property management fee in performing our property management services on a lump sum
basis”. To maintain the profitability of our managed properties, we have undertaken various
cost-saving measures. For details, see “— Standardization and Smart Management”. Our
management believes that lump sum basis will continue to be the predominant revenue
collection model in the near future.
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Property management fees charged on a commission basis
During the Track Record Period, we derived property management services revenue from
a limited number of property management projects on a commission basis, representing 3.2%,
1.3%, 1.5% and 1.3% of our revenue from property management services for the years ended
December 31, 2018, 2019 and 2020 and the nine months ended September 30, 2021,
respectively. On a commission basis, we charged a pre-determined property management
commission fee at a fixed percentage, which typically ranged from 6% to 10% of, or a fixed
amount out of, the property management fees during the Track Record Period while the
remainder of such property management fees are used as working capital to cover the expenses
we incur for managing such properties.
When we are contracted to manage communities on a commission basis, we essentially
act as an agent of our customers. On a commission basis, we are not entitled to any excess of
the property management fees paid by property owners, residents or property developers (after
deducting the fees receivable by us as the property manager) over the costs and expenses
associated with the provision of services to the property. Therefore, we do not recognize any
direct cost under property management service contracts charged on a commission basis in
general. Such costs are borne by our customers, such as property owners, property developers
and residents, as the case maybe. As at the end of a reporting period, if the working capital of
a management office accumulated in our treasury is insufficient to cover the expenses incurred
by the management office in arranging for property management services, we would recognize
the shortfall as other receivables subject to impairment. For more information, see “Risk
Factors — Risks Relating to Our Business and Industry — We may fail to recover payments
on behalf of property owners of the properties managed on a commission basis”.
The following table sets out the breakdown of our revenue generated from property
management by project stage according to the management account for the periods indicated:
For the year ended December 31, Nine months ended September 30,
2018 2019 2020 2020 2021
Revenue Revenue Revenue Revenue Revenue
Amount % Amount % Amount % Amount % Amount %
(RMB in thousands, except percentages)
Property management
services
— Preliminary stage 286,327 85.4% 409,824 88.7% 507,638 89.5% 372,312 90.9% 531,442 91.9%
— property owners’
association stage 48,790 14.6% 52,453 11.3% 59,843 10.5% 37,186 9.1% 46,796 8.1%
Total 335,117 100% 462,277 100% 567,481 100% 409,498 100% 578,238 100%
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The following table sets out the breakdowns of our Group’s (i) number of projects and (ii)
GFA under management by project stage as of the dates indicated:
As of December 31
As of
September 30
2018 2019 2020 2021
Number of projects 51 66 97 137
— Preliminary stage 44 59 87 125
— Property owners’
association stage 7 7 10 12
GFA under management
(’000 sq.m.) 10,223.1 12,660.6 17,651.5 23,240.8
— Preliminary stage 9,929.0 12,366.5 16821.1 21,959.1
— Property owners’
association stage 294.1 294.1 830.4 1,281.7
Property Management Fees
Pricing of Property Management Fees
We generally price our property management services based on a number of factors,
including (i) the types and geographic locations of the properties, (ii) the scope and
requirements of the services to be provided, (iii) the expected costs, (iv) reasonable target
profit margins, (v) years of operating history of the projects and profiles of the property owners
and residents, (vi) the local government’s guidance price or limit on property management fees
(where applicable), and (vii) competition from peer companies (including the pricing of
property management services provided to comparable properties). In addition, we consider the
potential cost savings and optimized allocation of resources we can achieve through
standardization and smart management, which allow us to propose property management fees
acceptable to customers.
We regularly evaluate our financial information to assess whether we are collecting
sufficient property management fees to sustain our profit margins. We may propose to raise our
property management fee rates during renewal negotiations for our property management
service contracts or otherwise as approved by a requisite number of property owners under
applicable PRC laws and regulations.
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In the PRC, property management fees charged for certain properties, such as residential
communities, are regulated and supervised by the relevant PRC authorities. The relevant price
administration department and construction administration department of the State Council are
jointly responsible for the supervision over and administration of fees charged in relation to
property management services for preliminary property management service contracts and such
fees may need to follow PRC government guidance prices in different regions in China. Among
the services we provided, the property management services for residential projects in certain
cities are subject to government price control. During the Track Record Period, the maximum
guidance price for property management services in certain cities where we provided services
ranged from RMB1.4 per sq.m. per month to RMB4.0 per sq.m. per month. For further
information, see “Regulations — Legal Supervision over Property Management Service —
Fees Charged by Property Management Service Provider”. As of December 31, 2018, 2019 and
2020 and September 30, 2021, the number of projects that were subject to government
guidance price was 7, 10, 15 and 30, respectively, with an aggregate GFA under management
of 2.9 million sq.m., 4.0 million sq.m., 5.5 million sq.m. and 7.9 million sq.m., respectively,
contributing to aggregate revenue of RMB52.9 million, RMB66.2 million, RMB81.5 million,
RMB50.3 million and RMB105.8 million in 2018, 2019 and 2020 and the nine months ended
September 30, 2020 and 2021, respectively, which accounted for 15.8%, 14.1%, 14.3%, 12.3%
and 18.3% of our revenue from property management service during the same periods,
according to the management account, respectively. All of these projects are residential
properties located in cities such as Hefei, Ningbo, Nanjing and Qingdao. According to China
Index Academy, the property management fee charged by us during the Track Record Period
was in line with the market trends with reference to the location, quality and other
characteristics of the properties under our management. During the Track Record Period and
up to the Latest Practicable Date, based on the advice from our PRC Legal Advisers, our
Directors confirm that the property management fees charged by us complied with the relevant
PRC laws and regulations in all material aspects in relation to such government price controls.
Our ability to increase property management fees for a project is generally subject to
negotiations upon contract renewal and a number of factors such as pricing of comparable
projects and market conditions. There can be no guarantee that we will be able to increase
property management fees for any of the aforementioned properties as estimated.
For certain of the properties we manage, including non-residential properties such as
schools, government facilities and other public spaces, we charge a package price of property
management fees on a per project basis without reference to any GFA. Such package price is
determined by taking into account factors such as the nature and scope of the specific property
management services to be provided, our cost expected to be incurred, reasonable target profit
margins and competition from peer companies (including pricing of property management
services provided to comparable properties). We took the same set of factors into consideration
when determining the package price for projects developed by Sinochem Group and its
associates and joint ventures and Independent Third Parties. During the Track Record Period,
we charged 4, 5, 11 and 19 projects a package price of property management fees as of
December 31, 2018, 2019 and 2020 and September 30, 2021. All of these projects were
developed by Independent Third Parties other than Shanghai Jinmao School which we began
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to manage in 2021. During the Track Record Period, the package price we charged ranged from
approximately RMB30,000 per month to RMB650,000 per month per project for projects
developed by Independent Third Parties. The package price of Shanghai Jinmao School project
was higher than that of projects developed by Independent Third Parties primarily due to the
higher costs that were expected to incur in connection with the Shanghai Jinmao School project
at the price negotiation stage. The following table sets forth the revenue, gross profit and gross
profit margin of the package price projects during the Track Record Period.
According to the management account, we incurred gross losses of RMB3.6 million,
RMB3.0 million, RMB2.1 million and RMB1.7 million in 2018, 2019, 2020 and the nine
months ended September 30, 2021, respectively, for these projects. In 2018, 2019, 2020 and the
nine months ended September 30, 2021, one, one, one and two projects to which we charged
a package price incurred losses of RMB4.9 million, RMB4.1 million, RMB3.8 million,
RMB2.5 million, respectively. We incurred losses for such projects primarily because of our
strategic decision to source certain projects which require higher costs and our pricing
strategies to charge a package price to these projects in order to build business relationships
with these customers.
The following table sets forth (i) the number of projects to which we charged a package
price, (ii) the number of projects to which we charged a package price and incurred losses, and
(iii) losses incurred by such loss-making projects during the Track Record Period.
For the year ended December 31,
For the nine
months ended
September 30,
2018 2019 2020 2021
The number of projects to
which we charged a
package price 4 5 11 19
The number of projects to
which we charged a
package price and
incurred losses 1112
Losses incurred by such
loss-making projects
(RMB million) 4.9 4.1 3.8 2.5
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We believe that we will be able to gradually improve the profitability of these projects.
As commonly encountered in expansion to new businesses, the initial higher upfront costs are
likely to be mitigated over time as we continue to streamline the management of such package
projects more efficiently and build a successful track record which will enable us to charge a
better price for such package projects. Specifically, we are gradually improving the
profitability of projects to which we charge a package price by implementing various
digitalization and standardization measures to enhance our cost structure. For details of these
measures, see “— Property Management Services — Revenue Model of Property Management
Services — Property management fees charged on a lump sum basis.” As a result of these
efforts, we have improved the profitability of projects to which we charge a package price. For
example, we managed to improved the profitability of a project where we provide services to
a strategic government customer. Such project incurred less losses during the nine months
ended September 30, 2021 compared to the same period of 2020.
For the year ended/
As of December 31,
For the nine months/
As of September 30,
2018 2019 2020 2020 2021
Revenue (RMB’000) 16,407 11,753 17,549 12,256 20,910
Gross profit
(RMB’000) (3,570) (2,994) (2,078) (1,745) 2,100
Gross profit margin
(%) (21.8)% (25.5)% (11.8)% (14.2)% 10.0%
Our overall average property management fee was approximately RMB6.2, RMB5.9,
RMB5.4 and RMB4.9 per sq.m. per month as of December 31, 2018, 2019 and 2020 and
September 30, 2021, respectively. The property management fees we charged during the Track
Record Period were determined in accordance with normal commercial terms.
Our average property management fee charged for residential properties was
approximately RMB3.6, RMB3.7 and RMB3.6 per sq.m. per month as of December 31, 2018,
2019 and 2020, respectively, which is above the industry-average property management fees
charged for residential properties of RMB2.3, RMB2.1 and RMB2.1 per sq.m. per month as of
December 31, 2018, 2019 and 2020, respectively, according to China Index Academy. Our
average property management fee charged for residential properties was approximately
RMB3.5 sq.m. per month as of September 30, 2021.
Our average property management fee charged for non-residential properties was
approximately RMB20.7, RMB20.0, RMB19.7 and RMB19.7 per sq.m. per month as of
December 31, 2018, 2019 and 2020 and September 30, 2021, respectively.
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Under our property management service contracts, we can negotiate with property owners
to raise the property management fees upon contract renewal or through obtaining approval
from the requisite number of property owners under applicable PRC laws and regulations. In
practice, as it takes time to communicate with the property owners and to go through the
necessary procedures to obtain their requisite approval, we would evaluate the situation on a
case-by-case basis and generally would propose to adjust the property management fees when
we consider it necessary in conducting our business and in accordance with our internal
policies and procedures. Our business department for the management of residential properties
would be in charge of a fee raise evaluation, together with our finance department and the
relevant regional offices, and determine to proceed with a fee raise process after considering
factors including without limitation: (i) the guidance prices or limits set by the local
authorities, if applicable, and local policies regarding property management fee adjustment, (ii)
the fee level of comparable neighboring projects in the local market, and (iii) the operating
status of our projects and whether our fee level corresponds with our scope of services (taking
into account any modifications required by owners as applicable). Despite our efforts to adjust
our property management fees, there is no assurance that we would succeed in achieving such
fee increases when needed. For further details, see “Risk Factors — Risks relating to Our
Business and Industry — We may be subject to losses and our profit margins may decrease if
we fail to control costs or raise the property management fee in performing our property
management services on a lump sum basis”.
We also settle property management fees with property developers. Property developers
provide vouchers to property owners for promotional purposes, and property owners will use
the vouchers to purchase our property management services. We will then present the vouchers
to, and settle property management fees with, property developers directly. For property
management services settled through vouchers, our revenue recognition method is the same as
property management services settled through other measures. For property management
services, we bill a fixed amount for services provided on a monthly basis and recognize as
revenue the amount which we have a right to invoice and that corresponds directly with the
value of performance completed. For details, see “Financial Information — Critical
Accounting Policies and Estimates — Revenue Recognition”.
Taking into account the property management fees charged to our customers and the time
and procedures it takes to adjust such fees from time to time, we continuously monitor our
costs to maintain profitability or cut loss to the extent possible. In this regard, we have
undertaken various internal measures to reduce cost and maintain profitability for our property
management services. For instance, to reduce our operational costs, we have outsourced certain
labor intensive services such as cleaning and security to third-party sub-contractors whose
service standards meet our requirements. Moreover, we also focus on implementing
standardization and smart management measures to reduce our reliance on manual labor and
enhance our operational efficiency. For details, see “— Standardization and Smart
Management”. Furthermore, to reduce labor costs, we have implemented an internal policy
providing instructions on, among other things, negotiation with suppliers, establishing of price
ceilings in bid invitations, enhancing supplier evaluation and enforcing the strategic
centralized purchase plan.
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The following table sets out the average property management fee charged by our Group
and the Top 100 Property Management Companies by type of properties as of December 31,
2018, 2019 and 2020:
As of December 31,
2018 2019 2020
(RMB per square meter per month)
Overall average property management fees
Top 100 Property Management Companies 4.2 3.9 3.8
Our Group 6.2 5.9 5.4
Average property management fees for
residential properties
Top 100 Property Management Companies 2.3 2.1 2.1
Our Group 3.6 3.7 3.6
Average property management fees for
non-residential properties
Top 100 Property Management Companies 5.9 5.2 5.0
Our Group 20.7 20.0 19.7
Notes:
(i) Source: China Index Academy
(ii) According to China Index Academy, the non-residential properties of the Top 100 Property Management
Companies in China in 2018, 2019 and 2020 comprise commercial properties, office buildings,
industrial parks, public properties, schools and hospitals.
Average property management fee charged by our Group for each type of properties is
higher than that charged by the Top 100 Property Management Companies mainly because (i)
65.2% of the properties developed by Jinmao Group or its joint ventures and associates were
delivered post 2018, and we typically charge higher property management fees for newly
delivered properties; (ii) according to China Index Academy, 84.2% of our GFA under
management as of December 31, 2020 was located in first-tier and second-tier cities, compared
to the industry average of 63.8% as of the same date; (iii) as of December 31, 2020, the
majority of properties under our management were developed by Jinmao Group and its joint
ventures and associates, which primarily consisted of high-end residential properties,
commercial properties and office buildings with premium quality above industry average,
according to China Index Academy; and (iv) there is a wide range of property management fees
for different types of non-residential properties and for non-residential properties located in
different cities, and therefore different composition of non-residential properties leads to
significant difference between our average property management fees for non-residential
properties and that for the Top 100 Property Management Companies.
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For example, as of December 31, 2020, approximately 83.1% of the non-residential
properties under our management (excluding properties to which we charged a package price
which does not form a significant part of our management of non-residential properties) were
commercial properties and office buildings which typically contribute to higher gross profit
margin, whereas on average only approximately 42.2% of the non-residential properties
managed by the Top 100 Property Management Companies were commercial properties and
office buildings, according to China Index Academy. Further, unlike other Top 100 Property
Management Companies, all of the non-residential properties under our management
(excluding properties to which we charged a package price) were located in first-tier and
second-tier cities, which typically charge higher average property management fees for
non-residential properties, according to China Index Academy. According to China Index
Academy, the average property management fees charged by us for residential and non-
residential properties, respectively, in first-tier and second-tier cities are in line with those
charged by our industry peers for residential and non-residential properties with similar
attributes. For example, our average property management fee for high-end residential
properties in Beijing ranged from RMB4.2 to RMB13.0 as of December 31, 2020, compared
to the average property management fee of RMB4.5 to RMB9.5 charged by another Top 100
Property Management Company for residential properties with similar attributes. The slightly
higher end of our fee range was mainly attributable to a new high-end villa property delivered
post 2018. Excluding the impact of this new villa property, our average property management
fee for high-end residential properties in Beijing would have ranged from RMB4.2 to RMB11.8
as of December 31, 2020.
The following table sets out the average property management fee charged to each type
of property developed by Jinmao Group, Sinochem Group and their respective joint ventures
and associates and Independent Third Party developers as of the dates indicated:
As of December 31,
As of
September 30,
2018 2019 2020 2021
Residential properties 3.6 3.7 3.6 3.5
— Jinmao Group and
Sinochem Group (and their
respective joint ventures
and associates) 3.6 3.7 3.7 3.5
— Independent Third Party
property developers – – 2.6 3.4
Non-residential properties 20.7 20.0 19.7 19.7
— Jinmao Group and
Sinochem Group (and their
respective joint ventures
and associates) 20.9 20.1 20.5 20.5
— Independent Third Party
property developers 18.7 18.9 14.1 14.1
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The average property management fee for properties developed by Independent Third
Party developers are relatively lower compared to those developed by Jinmao Group, Sinochem
Group and their respective joint ventures and associates. This is primarily because (i) the
residential properties developed by Jinmao Group and its joint ventures and associates
comprise more high-end properties compared to residential properties developed by
Independent Third Parties; (ii) the non-residential property portfolio developed by Jinmao
Group and its joint ventures and associates comprised more high-end commercial properties
and office buildings. In particular, Shanghai Jinmao Tower, one of the landmark high-end
office buildings in China, was the key driver of the high average monthly property management
fee of the non-residential properties of Jinmao Group and its joint ventures and associates
during the Track Record Period. Excluding the impact of Shanghai Jinmao Tower, the average
monthly property management fee of the non-residential properties developed by Jinmao
Group and its joint ventures and associates would have been RMB15.6 per sq.m. during the
Track Record Period. In contrast, the non-residential property portfolio developed by
Independent Third Parties included a spacious office building in a second-tier city in China’s
northwestern region. Its relatively low property management fee contributed to the lower
average monthly property management fee of the non-residential properties of Independent
Third Parties. Excluding the impact of this office building, the average monthly property
management fee of the non-residential properties developed by Independent Third Parties
would have been RMB16.3 per sq.m. during the Track Record Period; and (iii) we made a
strategic decision to adjust pricing based on project quality and profitability requirement in
order to build scale at our early stage of expansion into properties developed by Independent
Third Party property developers. The average property management fees charged by us for
high-end residential and non-residential properties, respectively, in first-tier and second-tier
cities which were developed by Jinmao Group, Sinochem Group and their respective joint
ventures and associates are in line with those charged by us for properties with similar
attributes developed by Independent Third Parties. For example, our average property
management fees for two high-end residential properties in Shanghai developed by Jinmao
Group were RMB5.8 and RMB6.3, respectively, in 2020, compared to the average property
management fee of RMB5.6 charged by us for a residential property with similar attributes
developed by an Independent Third Party and delivered in 2021.
Collection of Property Management Fees
When properties to be managed by us become deliverable in accordance with the property
management service contracts or otherwise agreed in writing with the customers, we would
begin to charge property management fees from customers, such as property owners, residents
and property developers. For residential properties, we charge property management fees
directly from residents. For office buildings, shopping malls and public facilities, we charge
property management fees from property owners and lessees. We generally charge property
management fees on a semi-annual or annual basis and while we accept advance payments, we
typically do not grant credit terms to customers for the property management fees we charge.
For further details on our trade receivables, see “Financial Information — Description of
Selected Consolidated Statement of Financial Position — Trade Receivables”.
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During the Track Record Period, we charged property management fees from property
developers, primarily Jinmao Group (and its joint ventures and associates), for completed but
unsold property units as well as sold and completed property units prior to the delivery date
as agreed between property developers and property purchasers (the “vacant properties”).
Unless required by the applicable local PRC authorities, we generally do not offer a discount
to the property developers for the property management fees charged for such property units.
We primarily accept payments for property management fees through offline payment methods
such as cash, credit card, third party payment platforms, bank transfers, check, commercial
draft, which are linked to our online service platform, “Home ( )” mobile application. We
also accept payments for property management fees through prepayment rewards activities. We
reward customers who choose to make prepayments for property management fees with gifts
such as cooking oil, rice and other groceries. We will not recognize revenue for services
provided to such customers until the requirements for revenue recognition are met. For details
about our revenue recognition methods, see “Financial Information — Critical Accounting
Policies and Estimates — Revenue Recognition”.
According to the Administrative Measures for Non-commercial Institutions Payment
Service ( ), online payment service providers who provide
fund transfer services as an intermediary between payees and payers are required to obtain
payment licenses. During the Track Record Period and up to the Latest Practicable date, (i) we
use third party online payment service provider on our online service platform and such online
payment service provider has obtained the requisite payment licenses; and (ii) we did not
develop and do not have our own electronic payment tools for the provision of fund transfer
services on our online service platform. Base on the above, our PRC Legal Advisers are of the
view that no licenses for us are required for our collection of fees on our online service
platform through third party online payment service providers.
We have undertaken various measures to enhance the timeliness of the collection of
property management fees. When property management fees become overdue, we will send
overdue payment notices to customers by phone, messages, through our online service platform
or delivery in person or to the mailboxes of the property owners and residents and follow up
by frequent payment reminders. Our butlers will collect overdue payments from residents from
door to door. We may also offer incentive rewards to encourage residents and property owners
to pay property management fees in advance on a timely basis. In the event of significant
payment delays after repeatedly failed collection attempts, we may initiate legal proceedings
to collect the property management fees.
Our collection rate of property management fees was 98.5%, 96.8% and 94.1% for the
years ended December 31, 2018, 2019 and 2020, respectively. Our collection rate is in line with
industry norm, according to China Index Academy. Our Directors believe that, benefiting from
the satisfactory services provided to customers coupled with our continual fee collection
efforts, we had maintained a reasonable property management fee collection level during the
Track Record Period.
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Property Management Service Contracts
The following table sets out the breakdowns of the number of our property management
service contracts by source of project and project stage, respectively, as of the dates indicated:
As of December 31,
As of
September 30,
2018 2019 2020 2021
Properties developed by
Jinmao Group and
Sinochem Group (and their
respective joint ventures
and associates)
Residential properties
— preliminary property
management service
contracts 99 140 175 193
— property management
service contracts with
property owners’
associations 6 6 6 6
Non-residential properties
— property management
service contracts of
non-residential properties 18 25 26 28
Sub-total 123 171 207 227
Properties developed by
Independent Third Parties
Residential properties
— preliminary property
management service
contracts 0 0 5 12
— property management
service contracts with
property owners’
associations 0 0 3 5
Non-residential properties
— property management
service contracts of
non-residential properties 8 11 18 23
Sub-total 8 11 26 40
Total 131 182 233 267
The key terms of our property management service agreements with Jinmao Group,
Sinochem Group and their respective joint ventures and associates are similar to those with
Independent Third Party property developers, whereas fee rates may vary depending on project
location, property type and scope of work, etc. According to China Index Academy, our
property management service agreements with Jinmao Group, Sinochem Group and their
respective joint ventures and associates are in line with industry norm.
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Property management service contracts for residential communities
For the provision of our property management services of residential communities, we
enter into (i) preliminary property management service contracts with property developers at
the construction or pre-sale stage of property development projects, or (ii) property
management service contracts with property owners’ associations (on behalf of the property
owners) after formation thereof.
The diagram below illustrates our relationships with various contracting parties under our
property management service contracts for residential communities:
Property management
service contract
Service delivery
through our
employees or
sub-contractors
Preliminary property
management service contrac
t
Property owners’ association is authorized to
act on behalf of the property owners
Property
management fees
Our Group
Property owners’
association
(2)
Property developer
(1)
Property owners
Binding contracts
Binding contracts were entered into between the parties
with respect to the managed property as a whole
Notes:
(1) Property developer enters into the preliminary property management service contract with us. Such contracts
are legally binding on future property owners in accordance with PRC laws.
(2) Property owners’ association enters into property management service contract with us on behalf of property
owners and such contracts are legally binding on all property owners in accordance with PRC laws.
Property developers typically engage property management service providers through a
tender and bidding process or in other manners as allowed under applicable PRC laws and
regulations. Property developers would contract directly with property management service
providers before newly developed properties are sold to property owners. The tender and
bidding process to select a property management company for a property development project
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would generally be initiated by a property developer after it has obtained the state-owned land
use certificates, construction land use permits, planning permits for construction engineering
and construction permits for that project. Property developers, within a prescribed period upon
the confirmation of the winning bidder for property management services, are required to file
such bidding results with the relevant local PRC authorities where the property project is
located and such filing, as required by the local PRC authorities, generally has to be made prior
to the approval of property pre-sale permits for the property developers by the local PRC
authorities.
Upon engagement by the property developers, property management companies will
generally need to make registration of the preliminary property management service contracts
(together with the proposed property management fees) with the local PRC authorities. The
aforementioned process for obtaining property management services engagements applies to
projects developed by Jinmao Group and Sinochem Group (and their respective joint ventures
and associates) and independent third party property developers alike.
Under PRC laws, although neither the property owners’ associations nor property owners
are parties to the preliminary property management service contracts, these contracts are
nonetheless legally binding on the future property owners as the property sale and purchase
agreements that property owners enter into with property developers shall incorporate the
content of the preliminary property management service contracts. Accordingly, property
owners are obligated to pay property management fees directly to us under these contracts.
After delivery of the projects by property developers to the property owners, property
owners may form and operate property owners’ associations to manage the projects. According
to Article 10 of the Regulations on Property Management (2018 Revision) (
), property owners of a same property shall have a property owners’ meeting and elect a
property owners’ association. The PRC Civil Code, which became effective on January 1, 2021,
stipulates that property owners can establish property owners’ meeting and elect property’s
association in accordance with procedures stipulated by laws and regulations.
According to the PRC Civil Code, a preliminary property management service agreement
entered into between a property developer and a property management service company in
accordance with the PRC laws and regulations is legally binding on the relevant property
owners. According to the Regulations on Property Management (2018 revision), a sales
contract concluded by a property developer and a property buyer shall include the content
stipulated in the relevant preliminary property management service agreement. Therefore, as
advised by our PRC Legal Advisors, the preliminary residential property management service
agreements entered into with property developers in compliance with the aforementioned
regulations are legally binding on the relevant future property owners as the property sale and
purchase agreements that property owners enter into with property developers shall include the
content of the preliminary property management service contracts. Once our preliminary
property management service agreements have expired, we may negotiate with the newly-
formed property owners’ associations on terms of new property management service
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agreements. Property owners’ associations are independent from us. In order to secure and
continue to secure property management service agreements, we strive to consistently provide
quality services at competitive prices.
At times, the fixed terms of preliminary property management service contracts may have
expired before the relevant property owners’ general meetings of such properties are convened,
or before the relevant property owners’ associations are formed to renew our property
management service contracts or to select a replacement property management service
provider, or at other times, we may be in the negotiation process with the property owners’
association for the renewal of our engagement. Under such circumstances, so long as we
continue to provide property management services to the relevant properties, we are entitled to
receive the property management fees for the continued services we provide despite the expired
contract terms of the preliminary property management service contracts or the pending
renewal of our property management contracts.
Under PRC laws, property owners’ associations represent the interests of property owners
in matters concerning property management. Decisions of the property owners’ association are
binding on all property owners. Contracts between property owners’ associations and property
management service providers are valid and legally binding on all property owners concerned,
irrespective of whether or not the property owners are individual parties to such contracts.
Thus, we have legal claim rights against all property owners for outstanding property
management fees.
For residential properties under our management which have established property
owners’ associations, it typically took an average of approximately two to three years for them
to form property owners’ associations. As of December 31, 2018, 2019 and 2020 and
September 30, 2021, 5.7%, 4.1%, 3.2% and 2.8% of the preliminary property management
services contracts of residential properties had turned into property management service
contracts with property owners’ associations, respectively. Except for the foregoing, property
owners of the residential properties under our management have not yet established property
owners’ associations. Establishment of property owners’ association is rare for residential
properties primarily due to (i) lack of incentives for property owners to establish the
associations, and (ii) obstacles to allocate costs incurred during the process among property
owners. There are also few property owners’ associations for non-residential properties
primarily because such properties are normally owned by one owner. According to China Index
Academy, only less than 10% of the local communities in China have established property
owners’ associations for residential and non-residential properties. According to China Index
Academy, for residential properties delivered post 2018 in first-tier and second-tier cities in
China which have established property owners’ associations, it typically took an average of
approximately three to five years for them to form such property owners’ associations.
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The key terms and arrangements of our preliminary property management service
contracts entered into with property developers for residential communities typically include
the following:
• Scope of services. We provide standard property management services including
security, cleaning, greening, gardening, repair and maintenance of the operation of
common area facilities. We may also be responsible for providing other auxiliary
property management services such as services in relation to the usage of car park
spaces.
• Performance standards. The contract sets out the quality standards required for
providing the property management services, as well as the requirement for regular
examination and maintenance of equipment and facilities in the common areas.
• Property developer’s obligations. The property developer is primarily responsible
for, among other things, (i) ensuring that its property purchasers understand and
commit to their obligations under the preliminary property management service
contract, (ii) providing a readily available office space for us to use as our on-site
property management office, (iii) ensuring the quality of the common area
equipment and facilities delivered to a property and assuming warranty
responsibility within the warranty period as required under PRC laws, (iv) providing
us with blueprints, other construction design documents and completion inspection
and warranty documents, and (v) providing other support necessary for carrying out
our contractual obligations and reviewing plans and budgets that we may draw up
in relation to our services.
• Property management fees. The contract sets out the property management fee to
be collected which generally begin to accrue when the purchased property becomes
deliverable as agreed under the property management service contracts. The
property developer is generally responsible for paying the property management
fees for completed but unsold property units as well as sold and completed property
units prior to the delivery date as agreed between the property developer and
property purchaser.
• Sub-contracting. We are allowed to outsource individual components of the
property management services to specialized third-party sub-contractors. For
example, we may choose to outsource services such as security, cleaning, greening,
gardening and repair and maintenance services for elevators and fire protection
systems to third-party sub-contractors and only conduct the overall coordination and
planning ourselves for these outsourced services. We may need to post notices in the
communities to inform the property owners and residents of the third-party
sub-contractors we engage and we remain responsible for the services they provide
under the terms of our property management contracts. For arrangements with our
third-party sub-contractors, see “— Our Suppliers — Sub-contracting”.
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• Term of service. Our preliminary property management service contracts generally
have a fixed term which is no more than three years, or do not have a fix term and
can be terminated when the property owners’ association is formed and select
another property management service provider and a replacement property
management service contract entered into by the property owners’ association takes
effect.
The key terms and arrangements of our property management service contracts entered
into with property owners’ associations for residential communities typically include the
following:
• Scope of services. We provide standard property management services including
security, cleaning, greening, gardening, repair and maintenance of the operation of
common area facilities. We may also be responsible for providing other auxiliary
property management services such as services in relation to the usage of car park
spaces.
• Performance standards. The contract sets out the quality standards required for
providing the property management services, as well as the requirement for regular
examination and maintenance of equipment and facilities in the common areas.
• Property owners’ association’s obligations. The property owners’ association is
primarily responsible for, among other things, (i) procuring that the property owners
and residents understand and commit to their obligations under the property
management service contract, (ii) daily communication with the property
management service provider on behalf of the property owners and residents, (iii)
providing a readily available office space for us to use as our on-site property
management office, and (iv) providing other support necessary for carrying out our
contractual obligations and reviewing plans and budgets that we may draw up in
relation to our services.
• Property management fees. The contract sets out the property management fee
rates to be collected which generally begin to accrue upon delivery of the purchased
property as agreed under the property management service contracts. We may also
impose late fees on overdue property management fees and have the right to initiate
legal proceedings against customers to collect the fees.
• Sub-contracting. We are allowed to outsource individual components of the
property management services to specialized third-party sub-contractors and only
conduct the overall coordination and planning ourselves for these outsourced
services and we remain responsible for the services they provide under the terms of
our property management contracts. For arrangements with our third-party sub-
contractors, see “— Our Suppliers — Sub-contracting”.
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• Term of service. Property owners’ associations are generally authorized by the
property owners to enter into property management service contracts with us on
behalf of the property owners which typically have fixed terms of no more than three
years.
Property management service contracts for non-residential properties
We enter into property management service contracts with customers, such as property
owners, property owners’ associations or property developers, for the management of
non-residential properties, including (i) commercial properties, such as office buildings,
skyscrapers and shopping malls, and (ii) public and other properties, such as schools,
government facilities and other public spaces. In practice, it is not common in the PRC for
owners of non-residential properties to form property owners’ association. The following
summarizes the general terms of our property management service contracts for non-residential
properties:
• Scope of services. We provide standard property management services including
security, cleaning, greening, gardening, repair and maintenance of the operation of
common area facilities. We may also provide other auxiliary property management
services, such as conference services for office buildings. We have also developed
and offer customized operation and management system and industry-leading safety
management standards for skyscrapers.
• Performance standards. The contract sets out the quality standards required for
providing the property management services, as well as the requirement for regular
examination and maintenance of equipment and facilities of the managed properties.
• Customers’ obligations. The customers of our property management service
contracts for non-residential properties are primarily responsible for, among other
things, (i) payment, or procuring lessees to make payment, of property management
fees in the agreed manner, (ii) providing a readily available office space for us to
use, (iii) ensuring the quality of the common area equipment and facilities; and (iv)
providing other support necessary for carrying out our contractual obligations and
reviewing plans and budgets that we may draw up in relation to our services.
• Property management fees. The contract sets out the property management fees
generally payable on a quarterly, semi-annual or annual basis. Apart from some of
the non-residential properties for which we charge the property management fees
based on the revenue-bearing GFA, we may also charge a package price of property
management fees without reference to revenue-bearing GFA, in particular, for
non-residential properties such as schools and government facilities. We may also
impose late fees on overdue property management fees and have the right to initiate
legal proceedings against the customers to collect the fees.
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• Sub-contracting. We are allowed to outsource individual components of the
property management services, such as cleaning services, to third-party sub-
contractors and only conduct the overall coordination and planning ourselves for
these outsourced services. We remain responsible for the services they provide under
the terms of our property management contracts.
• Term of service. Our property management service contracts for non-residential
properties generally have a fixed contract term of one to three years, or as the case
may be, can be terminated when the property owners general meeting selects another
property management service provider.
Expiration schedule of property management service contracts
The following table sets out the expiration schedule of our preliminary property
management service contracts for residential properties as of September 30, 2021:
Preliminary property management service contracts
for residential properties
Contracted GFA Number of contracts
(’000 sq.m.) (%) (%)
Property management service contracts
without fixed term
(1)
25,048.7 62.5 138 67.3
Property management service contracts
under which we provided services
beyond contract expiration
(2)
4,385.4 10.9 19 9.3
Property management service contracts
with fixed terms expiring in
— Year ending December 31, 2021 261.5 0.6 3 1.5
— Year ending December 31, 2022 679.0 1.7 4 1.9
— Year ending December 31, 2023 and
beyond 9,730.3 24.3 41 20.0
Sub-total 10,670.8 26.6 48 23.4
Total 40,104.9 100.0 205 100.0
Notes:
(1) A property management service contract without fixed term primarily refers to a preliminary property
management service contract entered into with the property developer which does not have a fixed term
and can be terminated when the property owners’ association is formed and the property owners select
the property service provider with a replacement property management service contract entered into by
the property owners’ association.
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(2) We continued to provide services under these property management service contracts despite their
expired contract terms as of September 30, 2021. This was mainly because the relevant property owners’
general meetings of such properties are yet to be convened or the property owners’ associations are yet
to be formed to renew our property management service contracts or to select a replacing property
management service provider, or that we are still in the negotiation process with the property owners’
associations for the renewal of our engagement.
During the Track Record Period, none of our preliminary property management service
contracts entered into with developers was terminated by developers or by property owners
through the property owners’ general meeting.
The following table sets out the expiration schedule of our property management service
contracts for residential properties entered into with property owners’ associations as of
September 30, 2021:
Property management service contracts for residential
properties entered into with property owner ’s
associations
Contracted GFA Number of contracts
(’000 sq.m.) (%) (%)
Property management service contracts
without fixed term ————
Property management service contracts
under which we provided services
beyond contract expiration 103.3 8.3 4 36.4
Property management service contracts
with fixed terms expiring in
— Year ending December 31, 2021 106.2 8.5 1 9.1
— Year ending December 31, 2022 182.0 14.5 1 9.1
— Year ending December 31, 2023 and
beyond 858.9 68.7 5 45.4
Sub-total 1,147.1 91.7 7 63.6
Total 1,250.4 100.0 11 100.0
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The following table sets out the expiration schedule of our property management service
contracts for non-residential properties as of September 30, 2021:
Property management service contracts for
non-residential properties
Contracted GFA Number of contracts
(’000 sq.m.) (%) (%)
Property management service contracts
without fixed term 1,172.3 26.8 10 19.6
Property management service contracts
under which we provided services
beyond contract expiration 189.0 4.3 3 5.9
Property management service contracts
with fixed terms expiring in
— Year ending December 31, 2021 1,255.0 28.7 10 19.6
— Year ending December 31, 2022 574.4 13.1 12 23.5
— Year ending December 31, 2023 and
beyond 1,184.1 27.1 16 31.4
Sub-total 3,013.5 68.9 38 74.5
Total 4,374.8 100.0 51 100.0
During the Track Record Period, we terminated two property management service
contracts which did not match with our profitability criteria on a voluntary basis. As of
September 30, 2021, all of the property management service contracts without fixed contract
terms as of September 30, 2021 were still operating without being terminated or otherwise
renewed.
Under PRC laws, the property owners’ general meeting of a residential community has the
right to change property management companies pursuant to certain procedures. We believe
property owners will continue to engage our Group as the property management service
provider after the delivery of residential properties developed by Jinmao Group, Sinochem
Group and their respective joint ventures and associates due to our high-end, premium and
personalized services as well as our smart property management. For instance, we were
honored as “China’s Leading Specialized Property Management Service Enterprise – MOCO
Service System” (“ —MOCO ”), “Leading Technology
Empowered Property Management Enterprise in China” (“ ”) and
“Leading Smart City Service Provider in China” (“ ”) in 2021. Our
property management service contracts for non-residential properties are also subject to
renewal or can be terminated pursuant to the relevant contract clauses. In the event of
termination or non-renewal of property management service contracts, we may be adversely
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affected. See “Risk Factors — Risks relating to Our Business and Industry — Termination or
non-renewal of our property management service contracts for a significant number of
properties could have a material adverse effect on our business, financial position and results
of operations”.
Growth of Our Property Management Project Portfolio
We have been expanding our property management services business in the past primarily
through obtaining new service engagements from property developers.
Under the Regulations on Property Management (2018 Revision) ( )
(2018 ) and the Interim Measures for Bid-Inviting and Bidding Management of
Preliminary Property Management ( ), property
developers are typically required to select property management service providers and enter
into preliminary property management service contracts for residential properties and
non-residential properties in the same property management area through a tender and bidding
process. In circumstances where there are less than three bidders or the size of the managed
property is small, property developers are permitted under PRC laws to select property
management service providers by entering into agreements, subject to approval by the
competent PRC authorities. For details, see “Regulations — Legal Supervision over the
Property Management Service”.
A typical tender and bidding process for the aforementioned engagement of a property
management service provider primarily involves the following stages:
• Invitation. The property developer may publish an announcement to invite potential
bidders or issue private invitations to at least three qualified bidders setting out the
specifications and requirements for the tendered property management project.
Tender invitation related documents and governmental approvals in relation to the
property project are required to be submitted and filed in advance with the
competent local real estate administration department in the PRC.
• Tender submission. Bidders submit tender documents to the property developer
which generally contain proposed pricing, proposal and plan for property
management and other information as specified by the tender invitation. Bidders
may be required to provide pre-qualification documents for vetting before the formal
tender documents are submitted.
• Evaluation. The property developer will establish a tender evaluation committee to
review and rank the submitted tenders. The tender evaluation process and the
composition of the tender evaluation committee must comply with the requirements
of relevant PRC laws and regulations. The tender evaluation committee generally
takes into account factors such as credentials, service quality, availability of capital
and proposed fee levels when it evaluates the proposals.
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• Selection. Based on its evaluation, the tender evaluation committee recommends no
more than three bidders as qualified candidates with ranking to the property
developer. The property developer will generally confirm the top one bidder as the
winner and proceed to arrange for necessary notification.
• Award and contract signing. The property developer must file the result of the
tender with the relevant local authorities within 15 days upon confirmation of the
award. The property management contract so awarded to the winner is expected to
be signed within 30 days upon issuing the notification of the award.
A public tender process may also be required under PRC laws and regulations for PRC
government, public institutions and bodies with public fiscal funds to engage property
management service providers for properties, such as government buildings and public service
facilities.
The number of property management service contracts awarded to us by Jinmao Group,
Sinochem Group and their respective joint ventures and associates through tender process
accounted for 78.0%, 80.1%, 82.6% and 83.7% of the total number of property management
contracts awarded to us by Jinmao Group, Sinochem Group and their respective joint ventures
and associates as of December 31, 2018, 2019 and 2020 and September 30, 2021.
As of the Latest Practicable Date, we were not aware of any administrative penalties or
any notice of potential administrative penalties from the relevant competent authorities on us
in relation to any required tender and bidding process for our preliminary property management
service contracts.
VALUE-ADDED SERVICES TO NON-PROPERTY OWNERS
Leveraging our front-line property management expertise, we maintain close relationship
with customers through provision of property management services and value-added services
and manage useful data that covers the full life cycle of properties under our management. We
have developed in-depth knowledge of customer preferences and accumulated extensive
experience in property planning and design and facility maintenance. We offer value-added
services to satisfy the varied needs of non-property owners. For instance, we provide
value-added services to property developers to address their incidental needs arising
throughout various stages of property development and management. Our services cover
aspects such as planning and design, construction, selling and marketing, project delivery, and
repair and maintenance.
For the years ended December 31, 2018, 2019 and 2020 and the nine months ended
September 30, 2020 and 2021, our revenue from value-added services to non-property owners
amounted to RMB178.6 million, RMB250.8 million, RMB294.4 million, RMB199.0 million
and RMB371.6 million, respectively, accounting for 31.1%, 31.8%, 31.2%, 29.9% and 35.4%
of our total revenue for the respective periods. We typically give a credit term of 90 days to
180 days to customers of our value-added services to non-property owners.
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The following table sets out the breakdown of our revenue from value-added services to
non-property owners by service type for the periods indicated:
For the year ended December 31,
For the nine months ended
September 30,
2018 2019 2020 2020 2021
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
Sales assistance services 139,425 78.1 204,392 81.5 228,446 77.6 166,566 83.7 174,911 47.1
Consultancy and other
value-added services to
non-property owners 39,188 21.9 46,446 18.5 65,955 22.4 32,416 16.3 196,713 52.9
Total 178,613 100.0 250,838 100.0 294,401 100.0 198,982 100.0 371,624 100.0
During the Track Record Period, we obtained contracts for value-added services to
non-property owners primarily through direct appointments by property developers as a natural
extension of our property management services.
Value-added services to non-property owners attributable to properties developed by
Jinmao Group, Sinochem Group and their respective joint ventures and associates accounted
for 98.8%, 98.9%, 96.5% and 97.2% of our total revenue generated from value-added services
to non-property owners in 2018, 2019, 2020 and the nine months ended September 30, 2021,
respectively.
Sales Assistance Services
We provided value-added services to non-property owners mainly through the provision
of sales assistance services to property developers to assist with their sales and marketing
activities at property sales venues and display units so as to create premium customer
experience appealing to potential property purchasers. As of September 30, 2021, we offer
sales assistance services to 105 projects, covering 50 cities in 19 provinces, autonomous
regions and municipalities in China. During the Track Record Period, sales assistance services
contributed to over 45% of the revenue generated from our value-added services to
non-property owners.
We deploy on-site staff at the property sales venues and display units to provide sales
assistance services generally. These include operating the visitor reception, and management,
cleaning, greening, gardening, security inspection, maintenance and operation of facilities,
presentation of display apartments, marketing and other customer related services for potential
property purchasers. Under our sales assistance service contracts, we are obligated to follow
the service standards specified by our customers, while our customers are obligated to provide
us with the facilities and equipment necessary to provide our services. We provide our sales
assistance services through our own employees and sub-contractors. We have implemented
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quality standards for our sales assistance services and regularly assess the quality of such
services. We provide sales assistance services to Jinmao Group (and its joint ventures and
associates) as well as to independent-third-party property developers. Our high-quality sales
assistance services are well recognized among Independent-third-party property developers
who have engaged us to assist in high-end projects such as Beijing Zijinshuyuan (
) and Chang’an Mao Fu ( ) in first-tier and second-tier cities.
Our sales assistance service contracts generally have a term of no more than one year and
can be renewed by our customers depending on sales conditions. We typically charge a fixed
rate commission for the provision of sales assistance services for the contract term which is
payable by customers on a monthly or quarterly basis. Such fee is determined on a cost plus
basis by taking into consideration factors such as the nature and scope of the services, the
headcount and positions of the staff we deploy and the size, location and positioning of the
properties involved.
Consultancy and Other Value-added Services to Non-property Owners
We provide consultancy and other value-added services to non-property owners to assist
in site selection, brand positioning, preliminary planning and design, construction, delivery,
and repair and maintenance through the life cycle of projects during the Track Record Period.
Our services cover the following stages of property development projects:
• Planning and design. We help property developers improve design and
performance of projects from the perspective of end users. Leveraging on our
first-hand experience gained from property management, property developers design
and tailor their projects to residents’ needs.
• Construction. We provide on-site consultancy and conduct inspections from time to
time. We follow up on quality issues that are discovered in these inspections from
the perspective of property management. We also provide consultancy services with
respect to selection of construction materials, adjustment to the parameters of
facilities and other ancillary requirements.
• Pre-delivery. We conduct evaluation of properties, including common areas,
facilities and landscapes, prior to delivery to make sure the properties meet the
quality standard and functional requirements as agreed between property developers
and residents. We also help property developers prepare for the delivery of
properties, such as procuring facilities and equipment.
• Post-delivery. We provide post-delivery services to property developers, mainly
comprising repair and maintenance services during the post-delivery warranty
periods which typically last two years from the delivery of such properties.
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In addition, we provide sales agency services to property developers, sourcing potential
purchasers and providing assistance in entering into sales contracts with buyers, with respect
to newly developed properties and car park spaces developed by such developers. With respect
to sales agency services for newly developed properties, we charge commissions calculated at
a fixed percentage of the sales price of the relevant properties. With respect to sales agency
services for car park spaces, we plan to charge either (i) a commission calculated at a fixed
percentage of the sales price of the relevant car park spaces or a fixed amount on top of the
sales price of the relevant car park spaces, or (ii) the difference between the actual sales price
paid by the purchaser and the pre-determined minimum sales price, determined between us and
the property developer on a case-by-case basis.
In addition to Jinmao Group, we also provide consultancy services to office buildings and
skyscrapers developed by Independent Third Parties such as Jiangsu Guangdian City (
) and Wuhan Guohua Financial Center ( ). We generally charge a fixed
fee rate per sq.m. of GFA for the consultancy services and other value-added services provided
to non-property owners calculated based on the unit price and areas of each project. We also
take into account the nature and scope of the specific project and the services provided. The
fees are determined on a case by case basis.
COMMUNITY VALUE-ADDED SERVICES
As an extension of our property management services business, we provide community
value-added services mainly to property owners and residents of our managed properties to
address their lifestyle and daily needs, enhance customer experience, satisfaction and loyalty,
and to create a more convenient community environment for our customers. These services are
provided primarily through our daily contact and interaction with our customers during the
process of providing traditional property management services, as well as through our online
service platform. During the Track Record Period, we obtained contracts for our community
value-added services primarily through direct appointments by property owners as a natural
extension of our property management services. For the years ended December 31, 2018, 2019
and 2020 and the nine months ended September 30, 2020 and 2021, revenue generated from
our community value-added services amounted to RMB60.8 million, RMB75.2 million,
RMB82.3 million, RMB56.8 million and RMB98.8 million, respectively, accounting for
10.6%, 9.6%, 8.7%, 8.5% and 9.4% of our total revenue for the respective years.
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The following table sets out the breakdown of our revenue from community value-added
services by service type for the periods indicated:
For the year ended December 31,
For the nine months ended
September 30,
2018 2019 2020 2020 2021
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
Community space
operation
services
(1)
45,198 74.4 57,348 76.3 61,101 74.3 43,164 75.9 72,552 73.4
Community living
services 15,108 24.9 17,696 23.5 16,401 19.9 12,187 21.4 17,597 17.8
Platform services for
interior decoration 439 0.7 164 0.2 3,802 4.6 797 1.4 5,594 5.7
Real estate brokerage
services 28 – – – 1,024 1.2 694 1.3 3,080 3.1
Total 60,773 100.0 75,208 100.0 82,328 100.0 56,842 100.0 98,823 100.0
Note:
(1) Includes gross rental income from investment properties operating leases.
Community value-added services attributable to properties developed by Jinmao Group,
Sinochem Group and their respective joint ventures and associates accounted for 98.6%,
99.1%, 99.1%, 98.9% of our total revenue generated from community value-added services in
2018, 2019, 2020 and the nine months ended September 30, 2021, respectively.
Community Space Operation Services
We are devoted to increasing our income from the operation of common area resources
of the properties under our management, including (i) publishing advertisement in the common
area, such as exterior wall, lobby, elevator room, light box and parking lot entry, for which we
charge fees per billboards, (ii) leasing common areas for third-party commercial activities, and
(iii) car park space management services which includes rental, cleaning, security and facilities
management services for owners of car park spaces in the properties under our management,
as well as sub-leasing operations in connection with our leased car park spaces. We also
provide vehicle parking services within the area of properties under our management. We
implement a smart car park management system to record all the entries and exits of vehicles.
We generally charge a monthly or quarterly service fee for our car park management services.
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For community space operation services, we are authorized under the property
management service contracts or under property owners’ consents of a certain scale as required
by the PRC laws to lease out the common areas on behalf of the property owners. The income
generated from such services is shared between us and the property owners generally in a
proportion (i) calculated in accordance with applicable local regulations, (ii) agreed in the
property management service contracts or (iii) otherwise consented to by the property owners.
Real Estate Brokerage Services
We provide sales agency services to customers, as well as real estate brokerage services
to property owners and residents for secondary sales or rental transactions of properties. Upon
the closing of a secondary sale of a property for which we provide brokerage services, we
charge a commission fee equal to a pre-determined percentage of the purchase price, which is
typically borne by both the purchaser and the seller. Similarly, upon the closing of a rental
transaction, we typically charge an agency fee equal to one month’s rent from either the
landlord or the tenant. We explore opportunities to provide brokerage services through our
daily property management operations. Most of our brokerage services target communities
close to the properties under our management.
Platform Services for Interior Decoration
Through our in-house designers based in our headquarters, and through cooperation with
third-party decoration companies, we provide property owners and residents of our managed
properties with interior home design, decoration and turnkey furnishing services to create a
move-in ready residence, for which we act as an agent. We assist the property owners and
residents of our managed properties in identifying suitable third-party decoration companies to
decorate and furnish the property units and purchasing furniture, home appliances and
accessories. We enter into agreements with large interior decoration service providers. We
typically charge to service providers a commission representing a pre-negotiated percentage on
the contract amount such interior decoration service providers charge our property owners and
residents if such contract amount exceeds a pre-negotiated threshold. Most of the contracts
with interior decoration service providers require a minimum amount of brand promotion
service fees to be paid by such providers in advance. For the convenience of our residents,
residents can make orders and payments with respect to interior decorations directly to us
through our “Home” ( ) mobile application. We typically transfer 80% of the amount of the
order payment, extracting our commission fee, to the suppliers and typically will not transfer
the remaining 20% of the amount of the order payment until the suppliers complete the
contracts. As a marketing strategy, we invite potential customers to view our display apartment
on opening days.
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Community Living Services
Leveraging our long-term experience and professional teams for property management
services, we provide a variety of community living services to property owners and residents
of the communities we manage focusing on their daily needs, which mainly include: (i)
housekeeping, cleaning, air purification, and formaldehyde removal services to property units,
and (ii) new retail services through our “Home” ( ) mobile application with third-party
merchants of groceries. For housekeeping, cleaning, air purification, and formaldehyde
removal services to property units and new retail services, we facilitate transactions between
our residents and third-party service providers. We provide the last-mile delivery services for
the products purchased on our mobile application through our butlers under our new retail
services. We also provide catering services to tenants in certain of the office buildings under
our management.
Third-party Merchants for Community Value-added Services
For the provision of community value-added services by third-party merchants, we screen
and select suitable merchants based on a number of factors including, amongst others, price
competitiveness, quality of products or services and responsiveness to demands of customers.
We may select various third-party merchants to provide certain products or services to
communities under our management within the same region, considering, among others, the
nature of the product or service in question and the operating scale and capability of the
merchant to cater to the different needs and preferences of the residents in such communities.
We adopt strict entry threshold and quality control measures to ensure the quality of products
or services provided by third-party merchants. We typically enter into written collaboration
agreements with merchants, setting forth, among other things, the content of the supplied
products or services, terms, fees or commissions we charge, payment method, obligations and
rights of both parties, settlement mechanisms, logistics for deliveries of products or services
and liability for compensation. We may replace a third-party merchant prior to agreed contract
expiry dates in the event of suboptimal performance.
City Operation Services
City operation services refer to the integration, optimization, transformation and
distribution of urban resources by governments and enterprises and the delivery of value-added
public services to citizens, which underpin the seamless operation of modern urban areas.
China Jinmao, as a leading city operator in China, has taken a coordinated and synergistic
approach to city operation, combining economic interest and long-term social benefit, to better
serve the interests of citizens and regional development.
Leveraging its advantages as a state-owned enterprise, Jinmao Group continues to scale
its city operation and has established itself as a developer of city operation projects through
joint ventures with local governments and business partners. As of July 31, 2021, Jinmao
Group had successfully contracted for 30 city operation projects nationwide. These projects
span new urban zones, city complexes and charismatic towns, covering a wide array of
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property types, including hotels, commercial properties, office buildings, schools, health care
centers, theaters and smart energy stations, with various construction forms, including urban
skyscrapers, complex underground spaces, and integrated urban corridors.
To better align Jinmao Group’s city operation strategy with our own, and leveraging our
solid property management and customer service capabilities, we step beyond traditional
property management services to provide specialized, standardized and digital city operation
solutions for customers from all walks of life. Our well-rounded capabilities and deep-rooted
connection with Jinmao Group have enabled us to continuously capitalize on Jinmao Group’s
strong project pipeline in the city operation sector. As of the Latest Practicable Date, we had
entered into preliminary property management contracts for 22 city operation projects of
Jinmao Group, representing a diverse portfolio of office building complexes, new towns,
cultural towns and smart cities in Shanghai, Changsha, Lijiang, Qingdao, Nanjing, Sanya,
Wenzhou, Tianjin and more, among which 12 projects were in operation.
We provide full life-cycle city operation services which cover a wide variety of properties
and use case scenarios in urban areas. Our city operation services cover all types of properties
located in a city or region, including residential and commercial properties, public properties,
industrial parks and villages. Our city operation services encompass the full life-cycle of the
development of an urban development zone, including preliminary services to areas under
construction, daily city operations and municipal maintenance, and renovation of old
residential projects and villages.
We offer the following services in our city operation service portfolio:
• City operation planning. We help local governments to identify pain points in
certain city operation use case scenarios and provide solutions. We assist with
garbage collection and disposal, parking management, street vendor management
and safety production.
• Coordination and implementation. Based on city operation planning, we integrate
available resources and coordinate professional suppliers including ourselves to
provide city operation services and solutions.
• Property management services. We provide property management services in
residential and non-residential properties, such as resettlement estates, industrial
parks and commercial streets. We also provide auxiliary services such as greening
and cleaning and public facility maintenance.
• Value-added services. We also provide value-added services to non-property owners
and community value services in properties under our management in city operation
projects. For details of services we provide, see “Value-Added Services to
Non-property Owners” and “Community Value-Added Services”.
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As we further expand our city operation services, we intend to provide the following
services:
• setting up smart city operation platforms such as intelligent fire station, intelligent
lighting systems and security and control platforms leveraging the AI and IoT
technologies;
• engaging in urban cultural activities and rural vitalization initiatives, such as
providing information related to education, healthcare, cultural activities and
tourism through integrated platforms; and
• expanding the scope of our property management services to engage in village
management services and management of underground pipelines.
We typically enter into cooperation agreements with regional governments to provide city
operation services, such as property management services to residential and non-residential
properties and other municipal management services.
The following table sets forth the number of projects, GFA under management and
average property management fee for our city operation service business during the Track
Record Period. According to China Index Academy, the average property management fee for
our city operation services is in line with industry norm.
For the year ended/
As of December 31,
For the
nine months
ended/As of
September 30,
2018 2019 2020 2021
City operation services
Number of projects 16 17 19 33
Average property management
fee (RMB per sq.m. per
month) 5.1 4.7 4.4 4.0
GFA under management
(’000 sq.m.) 2,790.6 3,323.1 4,232.8 5,874.1
City operation has high barriers to entry in terms of technology and experience due to the
scope and complexity of services involved. As the upscale property management arm of Jinmao
Group, and benefiting from our extensive experience in multi-format and premium-grade city
operation services, we believe we are well positioned to capitalize on future market
opportunities from Independent Third Parties in the city operation service sector by expanding
our management scale and diversifying our city operation portfolio and service offerings. We
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typically seek to enter into strategic cooperation agreements with government authorities and
state-owned enterprises, optimize the allocation of social resources, and have built a
multi-dimensional management mechanism for city operation services. For example:
• In February 2021, we established a joint venture with Jiashan Economic
Development Zone Property Management Co., Ltd. (
) to provide city operation services for Jiashan’s 60 sq.km. economic
development zone encompassing municipal gardens, parks, roads, river course and
underground pipes and provide greening, security, cleaning, repair and maintenance
services. By integrating the property management concept into the comprehensive
management of urban areas, we provide city operation services including
maintenance and operation of urban equipment and facilities, property management
of public properties, industrial parks, residential properties and commercial
properties, property management preliminary consulting and human resources
services. We strive to establish management service benchmarks in different areas
of the Jiashan development zone and improve the overall service quality.
• In May 2021, we signed a cooperation agreement with Zhoushan government to
provide city operation services for Zhoushan’s 12 sq.km. economic development
zone. We strive to transform the traditional decentralized approach to urban
management to a centralized approach to improve efficiency, offering one-stop
management services for the urban environment, public architectures, city squares
and industrial communities in the Zhoushan economic development zone.
We are also in negotiations with other local governments for providing similar city
operation services. In recognition of our long-established excellence in city operation services,
we were awarded “China’s Leading Smart City Services Enterprise” (“
”) in 2021 by China Index Academy.
The launch of city operation services contributes to the growth of our business scale, as
it allows us to gain a foothold in the city operation service sector as a pioneer, according to
China Index Academy. We are committed to building our “Jinmao Property Management
Service” ( ) brand to be an industry-leading city operation service brand in China. We
believe city operation service offerings will allow us to improve our market reputation and
expand our sources of revenues, which in turn will contribute to our sustainable long-term
growth.
Further, we are well positioned to capitalize on the pipeline of Sinochem Group and
future opportunities to be derived from its potential business combination with ChemChina.
For example, we recently partnered with Sinochem Lantian, a fluorine chemical engineering
arm of Sinochem Group, to establish a joint venture which specializes in property management
services for the high-quality industrial parks and office buildings held by Sinochem Group,
including the core research and production base, Shangyu industrial park, and the core fluorine
chemical engineering base, Taicang industrial park.
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STANDARDIZATION AND SMART MANAGEMENT
We have been implementing upgrades of information technology to strengthen our
competitiveness and to reduce operational costs and reliance on manual labor. Our professional
team has been focusing on implementing standardization and smart management to
continuously improve operation procedures, maximize operation efficiency and optimize
customers’ experience for the management of smart communities.
Standardization
We have standardized and optimized our service procedures and strengthened our ability
at headquarters, regional offices and branch offices levels to manage our projects based on a
comprehensive quality management system. With the improvement of our service ability, we
continuously issue and update internal standards to meet the ever changing requirements of
customers. We have formulated a series of internal guidelines and rules laying out detailed
guidance on key standards and procedures for property management and related services,
supervision of service procedures and project evaluation, so as to ensure consistent and
high-quality services covering a wide spectrum of property types and targeting various types
of customers along the value chain of property development and management. We also
established and implemented a set of control and supervision measures to coordinate our
standard operating procedures for property management services to further enhance operation
and management efficiency and improve service quality. We provide systematic training to our
property management staff as well as subcontractors to help them understand and comply with
our service standards and procedures. In addition, we have implemented standards and
procedures to conduct comprehensive evaluation of our projects to identify problems and
improve service quality. We believe such standards and procedures enable us to improve our
management efficiency while ensuring high service quality.
Online Service Platform
We utilize our online service platform, mainly comprising our “Home” ( )) mobile
application, together with WeChat mini program, as the gateway for users to access our
services both online and offline with a view to enhancing customer experience and loyalty, as
well as our brand recognition. Registered users can access our services through our online
service platform, primarily including: (i) reporting repair and housekeeping requests and
arranging for such services, (ii) contacting our property management customer service staff for
assistance and complaints, (iii) paying property management fees, parking fees and utility fees,
reviewing and tracking property management fee statements and receiving payment reminders
from us, (iv) accessing notices about community activities, (v) browsing community
value-added services and products information, and (vi) placing orders for and arranging
deliveries of daily necessity products and goods we sourced from third party suppliers and sold
on such online service platform.
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According to the Administrative Measures on Internet Information Services (
), which were issued by the State Council and became effective on 25 September
2000, as amended on 8 January 2011, the provision of information to web users through the
Internet is classified into commercial and non-commercial Internet information services.
Commercial Internet information services refer to paid services for providing information to or
creating web pages for web users through the Internet. Non-commercial Internet information
services refer to free services for providing public, commonly-shared information to web users
through the Internet. Whether an Internet information service is regarded as commercial or
non-commercial depends on whether the provision of Internet information is free or charged.
We have completed the requisite filings of non-commercial Internet information services for
the “Home” ( ) mobile application, in respect of the relevant services, given that during the
Track Record Period the business conducted by our online service platform was regarded as
non-commercial Internet information services because we used our online service platform as
a tool to facilitate the provision of the relevant services and we did not generate any revenue
directly from such online service platform in the form of paid Internet information services.
Besides, we have obtained the Value-added Telecommunication Business Operation License
( ) for online data processing and transaction processing in respect of
the service for selling daily necessity products and goods we sourced from third party suppliers
on our online service platform. Based on the foregoing, our PRC Legal Advisers are of the view
that we are not required to obtain any licenses, permits or approvals for the operation of our
online service platform other than the filings of non-commercial Internet information services
and the Value-added Telecommunication Business Operation License for online data
processing and transaction processing.
On January 4, 2022, the CAC and other twelve PRC regulatory authorities jointly revised
and promulgated Measures for Cybersecurity Review ( ) the (“Measures”)
which came into effect on February 15, 2022. Pursuant to the Measures, the procurement of
network products and services by critical information infrastructure operators and any data
processing activities by network platform operators that affects or may affect national security
shall be subject to the cybersecurity review. In addition, network platform operators possessing
personal information of more than one million users must apply to the Cybersecurity Review
Office for cybersecurity review when they go public in a foreign country ( ).
According to the Critical Information Infrastructure Security Protection Regulations,
protection work departments are responsible for organizing the identification of CII within
their industries and sectors and notifying operators about the identification results. As of the
date of this Prospectus, we have not received any notification from relevant regulatory
authorities regarding our identification as a CIIO. Therefore, the obligation for CIIO to apply
for cybersecurity review shall not be applicable to us as of the date of this Prospectus. As of
the Latest Practicable Date, we possessed personal information of less than one million users.
However, the Measures provides no further explanation or interpretation for “listing in a
foreign country.” As advised by our PRC legal advisors, Article 13 of the Draft Regulations by
the CAC differentiates between listing in a foreign country and a listing in Hong Kong. The
obligations under the Measures to proactively apply for cybersecurity review by network
platform operators seeking listing in a foreign country shall not be applicable to the proposed
listing in Hong Kong. As advised by our PRC legal advisors, except voluntary filings,
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regulatory authorities may initiate cybersecurity reviews if it is of the opinion that the network
products and services as well as data processing activities affect or may affect national security.
Since there remain uncertainties with respect to the interpretation and applicability of the
criteria for determining the risks that “affect or may affect national security” based on the
factors (v)-(vii) set out in Article 10 of the Measures, we cannot preclude the possibility that
the risk factors may apply to us as network platform operators and we may be subject to
cybersecurity review. In addition, on November 14, 2021, the CAC published a discussion draft
of Regulations on the Administration of Cyber Data Security (Draft for Comments) (
( ) ) (the “Draft Regulations”), which reiterates that a data
processor which processes personal information of more than one million persons and is going
to list in foreign countries should apply for the cybersecurity review but still does not explicitly
clarify whether this requirement will be applicable to the listing in Hong Kong; moreover, the
Draft Regulations also specifically requires that if the listing in Hong Kong by a data
processing operator affects or may affect the national security, the data processor shall apply
for cybersecurity review in accordance with the relevant provisions of the state. As to the risks
that “affect or may affect national security”, Article 10 of the Measures outlines the security
risks which should be taken into consideration when the cybersecurity review assesses the
potential national security risks, which mainly include the following seven factors: (i) the risk
that the use of products and services could bring about the illegal control of, interference with,
or destruction of Critical Information Infrastructure (the “CII”); (ii) the harm to CII business
continuity of product and service supply disruptions; (iii) the security, openness, transparency,
and diversity of sources of products and services, the reliability of supply channels, as well as
the risk of supply disruptions due to political, diplomatic, and trade factors; (iv) product and
service providers’ compliance with Chinese laws, regulations, and department rules; (v) the
risk that core data, important data or large amount of personal information being stolen, leaked,
damaged, illegally used or illegally exported; (vi) the risk of CII, core data, important data, or
large amount of personal information being affected, controlled, or maliciously used by foreign
governments, as well as the risk of network information security, if a company goes public; and
(vii) other factors that could harm CII security, cybersecurity and data security.
Scenarios (i)-(iv) mainly focus on security risks associated with CIIOs purchasing
specific network products and services. As advised by our PRC Legal Advisors, according to
the Critical Information Infrastructure Security Protection Regulations, protection work
departments are responsible for organizing the identification of CII within their industries and
sectors and notifying operators about the identification results. As of the date of this
Prospectus, we have not received any notification from relevant regulatory authorities
regarding its identification as CIIO. Therefore, scenarios (i)-(iv) are not applicable to us as of
the date of this Prospectus.
In terms of scenario (v), during the Track Record Period and up to the date of this
Prospectus, the user data collected by us within the territory of mainland China during our
business operations has been stored within the territory of mainland China. We have not
experienced any material cybersecurity and data privacy incident including without limitation,
data or personal information theft, leakage, damage, tampering, loss and illegal use, or any
claim from any infringement upon any third parties’ right to data privacy. We have taken
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appropriate backup, encryption, access control and other necessary technical and
organizational measures and set up overall cybersecurity and data protection policies to protect
data from unauthorized access, disclosure, theft, tampering, destruction, loss, illegal use, or
other serious incidents and breaches. We are of the view that it is not likely to trigger scenario
(v). We will keep abreast and conform to the legislative and regulatory requirement to prevent
the related risks that may trigger scenario (v).
Scenario (vi) applies to the risks when a company goes public. We are not likely to trigger
scenario (vi) with respect to the proposed Listing in Hong Kong, on the basis that: (i) we have
not been identified as CIIO by relevant regulatory authorities; (ii) the user data collected by us
within the territory of mainland China as part of our business operations has been stored within
the territory of mainland China; and (iii) we have set up appropriate technical and
organizational measures and will continually make great effort to prevent the related risks that
may trigger scenario (vi). However, as advised by our PRC legal adviser, the interpretation and
applicability of “network information security” remains uncertain and subject to further
clarification by the CAC or relevant regulatory authorities, we cannot preclude the possibility
that this scenario may apply.
As to scenario (vii), our PRC Legal Advisors are of the view that the interpretation and
applicability of it may be subject to uncertainty and further elaboration by the CAC or relevant
regulatory authorities. We cannot preclude the possibility that this scenario may apply.
Subject to the above uncertainties, if we need to apply for the cybersecurity review
according to applicable regulations, we will apply for the cybersecurity review in due course.
Due to the lack of further clarifications or detailed rules and regulations, there are
uncertainties on how to determine whether a proposed listing by a company like us in Hong
Kong affects or may affect national security or not, the PRC government authorities may have
wide discretion in the interpretation and enforcement of these measures and regulations. As of
the Latest Practicable Date, the Draft Regulations have not been formally adopted. We will
conduct a review to determine whether we are subject to relevant national security review when
the Draft Regulations take effect. If the Draft Regulations become effective in the current form,
we do not foresee any material impediments for us to comply with the Draft Regulations in all
material respects, on the basis that (i) as of the date of this prospectus, we have not been subject
to any material administrative penalties, mandatory rectifications, or other sanctions by any
competent regulatory authorities in relation to cybersecurity, data and personal information
protection; (ii) as of the date of this Prospectus, there has been no material cybersecurity, data
and personal information protection incidents or infringement upon any third parties, or other
administrative or legal proceedings, pending or, to the best of the knowledge of us, threatened
against or relating to us; (iii) we have taken appropriate and necessary measures, policies and
procedures that include legal controls involved in our cybersecurity, data and personal
information risk management processes, such as documentation requirements, access control,
security, and emergency response mechanism and preventive measures; and (iv) we will closely
monitor the legislative and regulatory development in cybersecurity, data and personal
information protection, and the we will implement, maintain and continually improve our
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compliance practices to comply with regulatory and legal requirements in such respects,
including, among others, the Draft Regulations, if implemented in their current form. Base on
the foregoing and the fact that we have not received any objection to the proposed Listing from
relevant regulatory authorities, nor have we been involved in any investigation, official inquiry,
examination, warning, or similar notice in such respect as of the date of this Prospectus, our
Directors are of the view that the Draft Regulations would not have an adverse and material
impact on our business operations or the proposed Listing, assuming the Draft Regulations are
implemented in the current form.
Deployment of Intelligent Devices for Smart Community Management
As part of our smart community establishment and operation, we are dedicated to
deploying intelligent devices as well as Internet of Things ( ) equipment to reduce labor
costs, improving property management efficiency and creating better and safer living
environments for property owners and residents. Our smart community service consists of three
key pillars: smart community, smart operation, and smart life.
Smart Community
For instance, we equip our car park entrances and exits with automatic license plate
detection and recognition systems which identify and allow entry of vehicles that have their
license plate details stored in our system. Our community and building entry-exit system is
upgraded with face recognition systems, contactless entrance system and QR code scanners.
Property owners and residents who have stored facial images in our system can enter the
community and apartment building without stopping at the gate. We install cameras above main
roads, public activity areas and elevators in communities, where smart sensors and cameras
operate to enable real-time operating data monitoring and automatic inspection for significant
equipment and facilities. We deploy a centralized system for the smart management of
equipment and facilities in our managed communities, which enables us to collect equipment
operating information, detect errors and abnormalities of our equipment and facilities in a
timely manner and promptly dispatch our staff to deal with the issues. For the seven smart
community application scenarios in Beijing Asian Olympics Jinmao Yue ( )
project, we have further established unattended car parking systems, automatic road lamps, and
the application scenario for objects thrown from the higher floors of the building. We plan to
continue expanding the use of smart devices in properties under our management.
We have established a subsidiary specializing in smart mansion management which is
focused on the design, installation, construction, renovation and maintenance services of
intelligent security equipment and light current systems. We employ technologies such as IoT
and IBA to establish a smart community encompassing various application scenarios including
security, cleaning, parking, bill payment and more, providing our residents a secured,
convenient and comfortable living environment.
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Smart Operation
We began to operate a centralized parking management platform and provide unattended
parking services in 2021, which has reduced our parking attendant headcount by over 50% and
is expected to reduce cost of revenues by approximately RMB6 million per year. The
application of IBA IoT technology has also improved efficiency in equipment and facility
management in our communities by reducing the frequency of manual inspections.
Our employees can utilize comprehensive systems to improve work efficiency. For
example, Jinmao OA is a platform which enables our employees to perform smart office work
such as document review, order approval, email sending and receiving and internal
communications through mobile phone. We developed Client Relationship Management
(“CRM”) System to assist collection of basic information relating to our properties, car park
spaces and residents. Our customers can make repair and maintenance requests and settle the
bills through the CRM System. We developed a financial operating system to streamline the
process of expense reimbursement, receipt certification and account auditing.
Our “Jinxiaomao” ( ) system was implemented to enable our employees to carry out
smart management conveniently and effectively. Our on-site staff have online access to status
information of properties under management, equipment or facilities within their scope of duty,
their working tasks and new orders to be dealt with through “Jinxiaomao” ( ) system.
Our systems can effectively reduce labor costs and optimize maintenance and management of
our utility facilities and equipment. We believe these measures effectively help further improve
our operational efficiency and ensure the delivery of consistent and high-quality services.
As a comprehensive enterprise with business operations covering various geographic
locations, we take full advantage of information technologies to integrate resources and realize
efficient and smart management and create better living environment for property owners and
residents. For example, staff in our headquarter can learn about key operating indicators such
as national fee collection rates and progress of different projects to better coordinate with
front-line employees. We have deployed and are continuously upgrading our systems which
aims to support not only the efficient operations of our on-site staff but also the remote
management and coordination of our project managers, regional offices and the headquarters.
Smart Life
We operate our proprietary online customer portal, “Home” ( ) mobile application, as
an aftermarket service platform to build a close-loop smart life ecosystem for property owners
and residents and improve their digital living experience in a vibrant and interactive
community. The “Home” mobile application connects with intelligent IoT devices in
apartments and features the seamless integration of online and offline services to serve
property owners and residents. Through this platform, we analyze online data in order to
introduce offline services that address the needs of our property owners and residents more
precisely. Meanwhile, our offline services create opportunities to direct user traffic to our
online platform, enabling our online platform to introduce our new service offerings to our
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customers more effectively. In addition, property owners and residents can also use “Home”
( ) mobile application to pay utilities, send repair requests, view visitors, reserve parking
space and participate in a variety of community activities at ease.
We also provide smart delivery services which include a digital file of the property at the
time of the offline delivery. The digital file includes information relating to the structure of
each room and parameters of facilities, enabling us to obtain information and prepare for repair
and maintenance work when residents make a request on the “Home” ( ) APP. Such
information also helps our cleaning staff to preview the structure of the property and plan the
best route for providing cleaning services. It also digitalizes the size of the interior
environment and matches it with suitable furniture and home appliances, which greatly
enhanced efficiency in our platform services for interior decoration.
Privacy and Data Security Protection
To effectively provide our services and manage our customers, we may request basic user
data such as name, gender, ID information and mobile number and some optional personal data
which can be collected only upon users’ authorization such as real-time location. For example,
users need to provide name, gender, birthday, phone number and home address in order to
register an account through our “Home” ( ) APP. We obtain users’ consent to collect and
use their personal information by requesting them to read and click to confirm the acceptance
of the service agreement and privacy policy of our “Home” ( ) APP when they log into the
mobile application.
We will not share, transfer or publicly disclose user data (including data collected from
“Home” ( ) APP) without prior consent or authorization from the users with or to other
entities. We keep user data for no longer than what is necessary for providing our services to
them, unless otherwise permitted by relevant laws and regulations or authorized by customers.
For example, as long as our customers have set up accounts with us on our “Home” ( ) APP
and continue to permit us to access their user data and enjoy the services we provide, we will
be able to retain their data in our information technology system. Our customers have the rights
to close their accounts and we would immediately remove all the personal information and data
saved once the accounts were closed. We inspect our employees’ access to customer data
collected through our “Home” ( ) APP periodically. Only data necessary to provide relevant
services are permitted to be disclosed to the relevant employees and such employees are
required to follow detailed procedures to safeguard customer data.
We have adopted following internal control measures to protect data stored in the internal
information system and network from different types of threats, interference and destruction,
and ensure the availability, confidentiality and reliability of the data:
• We have established an anti-Trojan virus system consisting of anti-Trojan software,
firewall anti-virus interception, intrusion prevention system, and host auditing
system to keep servers from unstable operation, and protect the data from
modification, destruction or loss;
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• We conduct server-side patch management to ensure IT security, which includes
purchasing patches, downloading, testing and installing patches by server
administrators, and prioritizing patch installation according to risk levels and value
levels;
• We formulate different control strategies for system access with different risk levels
and restrict access to important systems. We classify our staff based on their
positions and responsibilities and grant them different access rights and adopt
password control and other technical means to IT system so that only necessary staff
could access certain confidential information. We grant the minimum level of access
to employees only to the extent necessary to provide services. We approve
application to access information in accordance with our internal rules of access
control. Staff need to apply for a designated account when working remotely and can
only access limited systems;
• We record all the data and information processing activities and monitor account
permissions, networks, servers and emails of important systems. Our data operation
and maintenance personnel regularly check our system logs to further improve
information security of our systems;
• We choose the most suitable database to store information collected in the ordinary
course of our business. We encrypt and back up essential information such as
identity number, phone number and login credentials and desensitize certain data to
safeguard data privacy;
• We grade and classify emergencies and information security events in accordance
with the internal security standards and report to different levels of management to
ensure timely action to minimize damages; and
• We have established internal rules such as rules governing the security of
information systems and rules governing our data processing activities, which
provide the obligations and responsibilities of employees in specified positions.
Our PRC Legal Advisers have reviewed our information security policies, service
agreement and privacy policies for our “Home” ( ) APP and other internal control measures
in relation to the data privacy and are of the view that we are compliant with the applicable data
privacy laws and regulations in all material aspects regarding the collection, use and disclosure
of information or protection of personal data in the PRC up to the Latest Practicable Date. The
public information search results demonstrated that we had not been subject to any
administrative penalties related to data privacy protection matters as of the Latest Practicable
Date, which was confirmed by our Directors.
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OUR CUSTOMERS
We have a large, growing and loyal customer base primarily consisting of (i) property
owners and residents for our property management and community value-added services, (ii)
property developers for our value-added services to non-property owners and property
management service, and (iii) other customers such as advertising companies for our
community value-added services. We typically do not grant a credit term to individual
customers for our property management services and other customers for our community
value-added services. We typically grant a credit term of 90 days to 180 days to property
developers.
Major Customers
China Jinmao is the Controlling Shareholder of our Company for the purpose of the
Listing Rules. Sinochem Group is an indirect controlling shareholder of China Jinmao and
consolidated the accounts of China Jinmao and its subsidiaries during the Track Record Period.
When calculating our five largest customers for the Track Record Period, we aggregated
revenue contribution from customers under common control and their subsidiaries, joint
ventures and associates. As a result, our single largest customer during the Track Record Period
was Sinochem Group and its subsidiaries, joint ventures and associates, which include China
Jinmao and its subsidiaries (excluding our Group), joint ventures and associates. We provided
property management services and value-added services to non-property owners to Sinochem
Group during the Track Record Period. For further details, see “Connected Transactions” and
Note 29 of the Accountants’ Report in Appendix I to this prospectus. For the years ended
December 31, 2018, 2019 and 2020 and the nine months ended September 30, 2021, revenue
from our single largest customer in each year/period for the Track Record Period amounted to
RMB280.0 million, RMB351.3 million, RMB410.8 million and RMB483.8 million,
representing 48.7%, 44.6%, 43.5% and 46.1% of our total revenue, respectively. For the same
periods, revenue from our five largest customers in each year/period for the Track Record
Period, in aggregate amounted to RMB336.6 million, RMB405.6 million, RMB461.8 million
and RMB528.4 million, representing 58.5%, 51.5%, 48.8% and 50.4% of our total revenue,
respectively. All of our five largest customers for the Track Record Period were Independent
Third Parties except for Sinochem Group and its subsidiaries, joint ventures and associates. We
have established ongoing business relationships and co-operations with our five largest
customers for the Track Record Period for more than seven years on average. We generally
grant Sinochem Group and its subsidiaries, joint ventures and associates credit terms ranging
from 90 days to 180 days. We generally grant our five largest customers other than Sinochem
Group and its subsidiaries, joint ventures and associates credit terms of no more than 90 days.
The following tables set out certain details of our five largest customers for the Track Record
Period. Due to our confidentiality obligations under the agreements with our customers, we set
forth below the business nature, instead of specific identities, of our five largest customers
during the Track Record Period.
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For the nine months ended September 30, 2021
Rank Customer Business nature Listing status
Length of
business
relationship
with us
Services
provided
by us Revenue
Percentage
of total
revenue
(RMB’000) (%)
1. Sinochem Group and its
subsidiaries, joint
ventures and associates
Large-scale
conglomerate under
the supervision of
the SASAC covering
a range of sectors
including energy,
chemical,
agriculture, real
estate and finance
Not listed 14 years Property
management
services,
value- added
services to
non-property
owners
483,805 46.1
2. Customer A Policy bank which
implements
economic policies of
the government and
provides policy
financial support so
as to promote the
export of Chinese
products and
services
Not listed 14 years Property
management
services
27,446 2.7
3. Customer G State-owned enterprise
which provides city
operation services
Not listed 1 year Property
management
services
6,485 0.6
4. Customer B Government agency
which administrates
commerce matters
Not listed 3 years Property
management
services
6,228 0.6
5. Customer C Bank, one of the
leading banks in the
PRC which offers
comprehensive
commercial banking
services with net
profit exceeding
RMB216.4 billion in
2020
Listed on the
Main Board
of the Stock
Exchange
and the
Shanghai
Stock
Exchange
14 years Property
management
services
4,420 0.4
528,384 50.4
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For the year ended December 31, 2020
Rank Customer Business nature Listing status
Length of
business
relationship
with us
Services
provided
by us Revenue
Percentage
of total
revenue
(RMB’000) (%)
1. Sinochem Group and its
subsidiaries, joint
ventures and associates
Large-scale
conglomerate under
the supervision of
the SASAC covering
a range of sectors
including energy,
chemical,
agriculture, real
estate and finance
Not listed 14 years Property
management
services,
value- added
services to
non-property
owners
410,789 43.5
2. Customer A Policy bank which
implements
economic policies of
the government and
provides policy
financial support so
as to promote the
export of Chinese
products and
services
Not listed 14 years Property
management
services
33,260 3.5
3. Customer B Government agency
which administrates
commerce matters
Not listed 3 years Property
management
services
7,968 0.8
4. Customer C Bank, one of the
leading banks in the
PRC which offers
comprehensive
commercial banking
services with net
profit exceeding
RMB216.4 billion in
2020
Listed on the
Main Board
of the Stock
Exchange
and the
Shanghai
Stock
Exchange
14 years Property
management
services
5,553 0.6
5. Customer E Government agency
which administrates
matters within one
of the provincial
development zones
Not listed 6 years Property
management
services
4,194 0.4
461,764 48.8
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For the year ended December 31, 2019
Rank Customer Business nature Listing status
Length of
business
relationship
with us
Services
provided
by us Revenue
Percentage
of total
revenue
(RMB’000) (%)
1. Sinochem Group and its
subsidiaries, joint
ventures and associates
Large-scale
conglomerate under
the supervision of
the SASAC covering
a range of sectors
including energy,
chemical,
agriculture, real
estate and finance
Not listed 14 years Property
management
services,
value- added
services to
non-property
owners
351,265 44.6
2. Customer A Policy bank which
implements
economic policies of
the government and
provides policy
financial support so
as to promote the
export of Chinese
products and
services
Not listed 14 years Property
management
services
36,311 4.6
3. Customer B Government agency
which administrates
commerce matters
Not listed 3 years Property
management
services
7,619 1.0
4. Customer C Bank, one of the
leading banks in the
PRC which offers
commercial banking
services with net
profit exceeding
RMB216.4 billion in
2020
Listed on the
Main Board
of the Stock
Exchange
and the
Shanghai
Stock
Exchange
14 years Property
management
services
5,572 0.7
5. Customer F Public school which is
located in Beijing
Not listed 11 years Property
management
services
4,796 0.6
405,563 51.5
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For the year ended December 31, 2018
Rank Customer Business nature Listing status
Length of
business
relationship
with us
Services
provided by
us Revenue
Percentage
of total
revenue
(RMB’000) (%)
1. Sinochem Group and its
subsidiaries, joint
ventures and associates
Large-scale
conglomerate under
the supervision of
the SASAC,
covering a range of
sectors including
energy, chemical,
agriculture, real
estate and finance
Not listed 14 years Property
management
services,
value- added
services to
non-property
owners
280,017 48.7
2. Customer A Policy bank which
implements
economic policies of
the government and
provides policy
financial support so
as to promote the
export of Chinese
products and
services
Not listed 14 years Property
management
services
34,247 6.0
3. Customer F Public school which is
located in Beijing
Not listed 11 years Property
management
services
9,275 1.6
4. Customer B Government agency
which administrates
commerce matters
Not listed 3 years Property
management
services
7,603 1.3
5. Customer C Bank, one of the
leading banks in the
PRC which offers
commercial banking
services with net
profit exceeding
RMB216.4 billion in
2020
Listed on the
Main Board
of the Stock
Exchange
and the
Shanghai
Stock
Exchange
14 years Property
management
services
5,455 0.9
336,597 58.5
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As of the Latest Practicable Date, we were not aware of any information or arrangements
which would lead to cessation or termination of our relationships with any of our five largest
customers for the Track Record Period. As of the Latest Practicable Date, save as otherwise
disclosed in this prospectus, none of our Directors, their close associates or any Shareholders
which, to the knowledge of our Directors, owns more than 5% of the number of issued shares
of our Company, had any interest in any of our five largest customers (other than Sinochem
Group) during the Track Record Period.
Starting from 2020, we proactively reinforced our efforts to seek property management
engagements for projects developed by property developers that are Independent Third Parties,
in order to benefit more from economies of scale, gain additional revenue sources, diversify
our property management portfolio, and reduce reliance on our single largest customer,
Sinochem Group and its subsidiaries, joint ventures and associates. As of September 30, 2021,
our contracted GFA from properties developed by Independent Third Parties was 4.4 million
sq.m.
Customer Relationship Management
According to a survey conducted by FG Consulting, our customer satisfaction rate was
maintained at approximately 90% throughout 2018, 2019 and 2020. When conducting the
survey, FG Consulting interviewed 6,430, 8,908 and 18,911 tenants or property owners of
residential properties under our management in 2018, 2019 and 2020, respectively. FG
Consulting also interviewed 1,469, 1,469 and 1,469 tenants or customers of the non-residential
properties under our management in 2018, 2019 and 2020, respectively. During the interviews,
interviewees are asked to assess our services from a scale of one to five. Our customer
relationship management aims to build and maintain sustainable customer relationships by
focusing on delivering superior customer value and satisfaction, which we believe are critical
to the long-term success of our businesses. We aim to build long-term relationships with our
customers. We regularly conduct surveys of the satisfaction level among the property owners
and residents of our managed properties to proactively identify issues through telephone
inquiries. We prepare annual and quarterly property management work reports, which are
accessible to all property owners of the communities we manage. We have developed multiple
customer communication channels to better access and address customers’ needs and requests
and to maximize customer experience and loyalty, including our information service platform
and toll-free customer service hotline serving property owners and residents on a 24-hour
basis.
Feedback and Complaint Management
During the ordinary course of our business operations, we receive feedback, suggestions
and complaints from property owners and residents from time to time regarding our services.
We encourage property owners or residents to reach out to our property management staff
face-to-face or through telephone. For complaints received, our property management team is
generally required to respond within 24 hours for business complaints and one business day for
network complaints. Depending on the nature and seriousness of the complaint, the responsible
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staff will attend the concerned property to resolve the issue when necessary. Pursuant to our
internal control policies, all complaints are recorded in the CRM System and the handling
progress is reviewed and monitored by our project management team regularly. These
procedures help ensure that all complaints are handled and resolved in a timely manner in order
to uphold the quality of our service.
MARKET DEVELOPMENT
Our management is responsible for, amongst others, planning and developing our overall
market expansion plan, marketing strategies and coordinating our market development
activities to acquire new customers for us to maintain and strengthen relationships with
existing customers, as well as to explore and develop further business opportunities. Our
headquarters manage our overall market development strategies, while our regional
subsidiaries and branches oversee the implementation of our market development activities
within their respective regions. We have implemented market development systems, business
operational guidelines and employee incentive measures to support our market development
efforts in relation to obtaining property management and value-added service engagements, as
well as seeking opportunities for acquisition and investment in suitable companies along the
value chain of our industry.
For the years ended December 31, 2018, 2019 and 2020 and the nine months ended
September 30, 2021, revenue generated from our property management services attributable to
projects developed by Jinmao Group and Sinochem Group and their joint ventures and
associates accounted for approximately 92.0%, 93.3%, 92.5% and 92.5% of our total revenue
generated from property management services, respectively. As of December 31, 2018, 2019
and 2020 and September 30, 2021, our GFA under management from projects developed by
Jinmao Group and Sinochem Group and their joint ventures and associates amounted to
approximately 9.2 million sq.m., 11.9 million sq.m., 15.5 million sq.m. and 20.1 million sq.m.,
respectively, representing approximately 89.8%, 94.2%, 87.8% and 86.6% of our total GFA
under management, respectively. We maintain a long-term cooperative relationship with
Jinmao Group and expect the management of properties developed by Jinmao Group will
continue to be our stable source of revenue in the foreseeable future.
Since 2020, we have been actively exploring potential business opportunities to obtain
and manage projects from other sources. As a result, the total GFA under our management for
projects developed by independent third-party property developers increased substantially
from approximately 0.7 million sq.m. as of December 31, 2019 to approximately 2.2 million
sq.m. as of December 31, 2020, and our revenue from property management services
attributable to projects developed by independent third-party property developers also
increased from approximately RMB31.0 million for the year ended December 31, 2019 to
approximately RMB42.6 million for the year ended December 31, 2020. As of September 30,
2021, we managed a total of 32 projects developed by independent third-party property
developers with an aggregate GFA under management of approximately 3.1 million sq.m.,
representing approximately 13.4% of our total GFA under management as of the same date. We
have also made remarkable achievements in our extension of value-added services to
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Independent Third Parties. We have successfully acquired seven engagements in 2020 with a
total contract amount of approximately RMB20.6 million and secured 11 engagements during
the nine months ended September 30, 2021 with a total contract amount of approximately
RMB23.3 million for the provision of value-added services to non-property owners who are
Independent Third Parties.
Since 2021, we have also been actively pursuing cooperation opportunities and exploring
acquisitions of quality targets with considerable business scale, diversified property
management portfolio and regional competitive strength. In this regard, we have adopted a
series of measures to proactively seek new project engagements and acquisition opportunities.
We have established a system to promote business development at the group, regional platform
and project levels, which includes the formulation of a comprehensive performance appraisal
system, particularly a systematic and attractive commission fee incentive system, in
preparation for rapid business development. We collect information from multiple channels and
sources to extensively explore potential target projects, while strictly overseeing the risks and
requirements for returns for the projects at the same time. In particular, we has set up a
functional department which is responsible for exploring potential new projects through
establishing contacts with property developers, property owners’ associations or property
owners by site visits or setting up meetings with them through industry referrals and
introduction from other customers.
Leveraging our status as a state owned enterprise, we seek to establish strategic alliance
with other state owned enterprises which need property management services for their
properties and other private enterprises. Leveraging our relationship with Sinochem Group, we
seek to provide services to their properties including their industrial parks and surrounding
properties, as well as the chemistry museum. As a state-owned enterprise, we are in a strong
position to seek to cooperate with various local governments to provide broader city operation
services. We endeavor to further enhance our market development capability and explore
opportunities for suitable acquisition targets by leveraging our quality services, customer
loyalty, operational capabilities of a diversified types of properties and service offerings, as
well as professional employees and incentive systems. Moreover, we utilize our various
customer communication channels, such as our service hotline and mobile application, to seek
feedback and suggestions from customers which help us have a better understanding of
customer needs and explore more opportunities to provide a wider range of community
value-added services. We also organize community events utilizing outdoor open spaces in our
managed communities to increase our engagement level with the property owners and residents
and expand our access to consumer activities of the residents at the same time. We continually
seek business cooperation opportunities from third-party merchants to enhance the width and
depth of our community value-added services.
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OUR SUPPLIERS
During the Track Record Period, our suppliers primarily were (i) sub-contractors
providing cleaning, greening, maintenance, security and housekeeping services, and (ii)
suppliers of products, equipment and materials.
During the Track Record Period and up to the Latest Practicable Date, save as otherwise
disclosed in this prospectus, all of our suppliers were Independent Third Parties and we did not
experience any material delay, supply shortages or disruptions in our operations relating to our
suppliers, or any material product claims arising from and/or attributable to our suppliers.
We generally do not enter into long-term contracts with our suppliers. Our suppliers grant
us credit terms generally ranging from 30 to 90 days, and payment to our suppliers is typically
made by bank transfers.
Selection of Suppliers
To ensure the consistency of the overall quality of services provided to our customers, we
have maintained a list of qualified suppliers, the selection of which is primarily based on their
product or service quality, necessary industry and regulatory licenses and professional
qualifications, past performance and customer feedback, as well as price competitiveness. Our
list of qualified suppliers is subject to periodic review in order to ensure consistently
high-quality services provided to our customers.
We typically engage our suppliers through competitive biddings, which is administered
by internal committees comprising members of the relevant business department and our
procurement department, as well as finance personnel. We first select a number of competent
suppliers (generally more than three) from the list of qualified suppliers and invited them to
submit a fee quote and other bidding documents. The internal committees then assess the
submitted bids and consider a number of factors, such as the bidders’ price competitiveness,
product or service quality, professional qualifications, industry reputation and financial
strength, in selecting the bid awardee. We may also procure materials in relatively small
amounts through the requests for fee quotes from and commercial negotiation with shortlisted
vendors. When there are fewer than three bidders, we engage our suppliers through price
comparison. Our negotiation team will be responsible for the negotiation with suppliers that
satisfy the qualification or technology requirements. For certain business, our procurement
department will select designated brands or designated suppliers who are then required to
provide certificates with respect to their qualifications.
Once a selected supplier commences to provide products or services, we will periodically
monitor and evaluate its performance in accordance with the supplier contracts we entered into.
Evaluations generally focus on the suppliers’ product or service quality, cooperation with our
staff, results of problem rectification and handling of customer complaints. In the event of
repeated sub-standard performance or other failures, the suppliers may be terminated and
removed from our list of qualified suppliers.
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Sub-contracting
To utilize our own workforce more efficiently, we delegate certain services to qualified
sub-contractors, mainly (i) labor-intensive services such as cleaning, greening and security
services, and (ii) specialized services such as repair and maintenance of elevator and fire
systems. For the years ended December 31, 2018, 2019 and 2020 and the nine months ended
September 30, 2020 and 2021, our sub-contracting costs (representing security, maintenance,
cleaning and greening cost) amounted to RMB128.8 million, RMB189.3 million, RMB226.0
million, RMB154.2 million and RMB220.4 million, accounting for 28.0%, 29.7%, 31.9%,
30.8% and 29.9% of our total cost of sales, respectively. All of our sub-contractors for the
Track Record Period were located in China.
We believe such sub-contracting arrangements allow us to leverage the human resources
and technical expertise of the sub-contractors, reduce our operational costs, improve service
quality, contribute more resources to our core businesses and enhance the overall profitability
of our operations. To ensure that the sub-contractors meet our requirements and standards of
services, we implement a score-base system to monitor and evaluate their performance from
time to time. We aim to create and maintain a quality-oriented, effective and comprehensive
system for sub-contractor management. Based on our experience in the property management
industry in the PRC, we believe that there are readily available alternative sub-contractors that
could replace any of our existing sub-contractors if necessary. Therefore, we do not consider
our business operations to be reliant on the services provided by any of our sub-contractors.
Key terms of sub-contracting contracts
We enter into sub-contracting contracts with sub-contractors on normal commercial
terms. The key terms of our typical sub-contracting contracts are as follows:
• Term of service. Our sub-contracting contracts typically have a term of one to two
years and may be renewed upon mutual consent.
• Our responsibilities. We are typically responsible for providing on-site
sub-contractors with necessary working spaces, facilities and utilities.
• Obligations of sub-contractors. The sub-contractors are responsible for providing
services in accordance with the scope and standards prescribed in the subcontracting
contracts and in compliance with all applicable laws and regulations. In the event of
sub-standard performance, the sub-contractors are required to take necessary
rectification measures within the period required by us. Sub-contractors are also
required to manage their staff who provide the contracted services and there is no
employment relationship between us and the staff of our sub-contractors.
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• Risk allocation. The sub-contractors are responsible for indemnifying us for any
damages to property or personal injury caused by the fault or gross negligence of the
sub-contractors in the course of providing the sub-contracting services. We typically
require sub-contractors to indemnify us for any damages they cause to our customers
which have been paid by us. Sub-contractors are also required to pay all social
insurance and housing provident fund contributions for their staff in accordance
with the applicable PRC laws and be held liable in the event of any non-compliance
with the applicable PRC laws or industry standards.
• Sub-contracting fees. Sub-contracting fees are typically payable monthly or
quarterly and are generally determined with reference to the labor costs,
procurement costs of raw materials and other miscellaneous costs incurred by the
sub-contractors. We may conduct evaluations with respect to the quality of services
provided by our sub-contractors and adjust the sub-contracting fees based on the
results of the evaluations.
• No assignment. Sub-contractors are not allowed to assign or sub-contract their
obligations under the sub-contracting contracts to any other party except with our
prior consent.
• Termination and renewal. We have the right to claim damages or unilaterally
terminate the sub-contracting agreements if the sub-contractors fail to adhere to
their obligations, or fail to take necessary rectification measures within the period
required by us in the event of suboptimal performance. Sub-contracting agreements
are generally renewed in writing 30 days prior to expiry.
Major Suppliers
During the Track Record Period, most of our five largest suppliers were sub-contractors
providing cleaning, product purchasing and security services. For the years ended December
31, 2018, 2019 and 2020 and the nine months ended September 30, 2021, purchase from our
single largest supplier in each year/period for the Track Record Period amounted to RMB22.4
million, RMB52.9 million, RMB63.0 million and RMB125.1 million, representing 10.7%,
16.7%, 15.6% and 23.9% of our total purchase amount, respectively. For the years ended
December 31, 2018, 2019 and 2020 and the nine months ended September 30, 2021, purchase
from our five largest suppliers in each year/period for the Track Record Period, amounted to
in aggregate RMB76.3 million, RMB121.8 million, RMB148.5 million and RMB193.9 million,
representing 36.4%, 38.4%, 36.9% and 37.1% of our total purchase amount, respectively. We
have maintained business relationship with our five largest suppliers for the Track Record
Period for approximately five years on average. We typically enter into supplier contracts with
our five largest suppliers during the Track Record Period and such contracts generally have a
term of two years. Our five largest suppliers generally do not grant us any credit terms.
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The following tables set out certain details of our five largest suppliers for the Track
Record Period. Due to our confidentiality obligations under the agreements with our suppliers,
we set forth below the business nature, instead of specific identities, of our five largest
suppliers during the Track Record Period.
For the nine months ended September 30, 2021
Rank Supplier Business nature
Length of
business
relationship
with us
Services provided
by the supplier
Purchase
amount
Contribution
to total
purchase
(RMB’000) (%)
1. Supplier A Human resources
agency company
8 years Human resources
services
125,132 24.0
2. Supplier F Electricity provider 14 years Electricity services 23,249 4.4
3. Supplier B Property service
provider
6 years Cleaning services 18,200 3.5
4. Supplier C Security services
provider
5 years Security services 14,606 2.8
5. Supplier D Environment
management
company
4 years Cleaning services 12,698 2.4
193,885 37.1
For the year ended December 31, 2020
Rank Supplier Business nature
Length of
business
relationship
with us
Services provided
by the supplier
Purchase
amount
Contribution
to total
purchase
(RMB’000) (%)
1. Supplier A Human resources
agency company
8 years Human resources
services
62,950 15.6
2. Supplier B Property service
provider
6 years Cleaning services 32,985 8.2
3. Supplier F Electricity provider 14 years Electricity services 26,844 6.7
4. Supplier C Security services
provider
5 years Security services 13,907 3.5
5. Supplier G Security services
provider
4 years Security services 11,819 2.9
148,505 36.9
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For the year ended December 31, 2019
Rank Supplier Business nature
Length of
business
relationship
with us
Services provided
by the supplier
Purchase
amount
Contribution
to total
purchase
(RMB’000) (%)
1. Supplier A Human resources
agency company
8 years Human resources
services
52,935 16.7
2. Supplier B Property service
provider
6 years Cleaning services 30,543 9.6
3. Supplier F Electricity provider 14 years Electricity services 16,922 5.3
4. Supplier C Security services
provider
5 years Security services 11,710 3.7
5. Supplier H Security services
provider
4 years Security services 9,725 3.1
121,835 38.4
For the year ended December 31, 2018
Rank Supplier Business nature
Length of
business
relationship
with us
Services provided
by the supplier
Purchase
amount
Contribution
to total
purchase
(RMB’000) (%)
1. Supplier B Property service
provider
6 years Cleaning services 22,435 10.7
2. Supplier A Human resources
agency company
8 years Human resources
services
19,367 9.2
3. Supplier F Electricity provider 14 years Electricity services 15,676 7.5
4. Supplier I Management
consultancy
agency company
4 years Maintenance and
operation services
9,772 4.7
5. Supplier D Environment
management
company
4 years Cleaning services 9,004 4.3
76,254 36.4
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We did not encounter any acute supply shortages or material delay during the course of
business relating to our suppliers, or any material claims attributable to our suppliers. As of the
Latest Practicable Date, save as otherwise disclosed in this prospectus, we were not aware of
any information or arrangements which would lead to cessation or termination of our
relationships with any of our five largest suppliers for the Track Record Period. As of the
Latest Practicable Date, save as otherwise disclosed in this prospectus, none of our Directors,
their close associates or any Shareholders which, to the knowledge of our Directors, owns more
than 5% of the number of issued shares of our Company, had any interest in any of our five
largest suppliers for the Track Record Period.
COMPETITION
The property management industry in the PRC is highly competitive and fragmented with
a large number of market participants. The industry is becoming more competitive as many
property service providers become publicly listed companies which, amongst others, enable
them to access greater source of capital to compete. As an upscale property management and
city operation service provider with a diversified property management portfolio, we primarily
compete against both national and regional property management companies in the PRC. For
value-added services, we also compete against other property management companies as well
as relevant industry participants providing similar services. For instance, our community
value-added services to property owners and residents may compete with vendors and new
retail business that provide similar products and services. We believe that the principal
competitive factors include, among others, operation scale, service quality and price, customer
base, technical capabilities, brand recognition and financial resources. For more details about
the industry and markets that we operate in, see “Industry Overview”.
QUALITY CONTROL
We regard service quality as the cornerstone of our operation and development, and we
believe that quality control is critical to the sustainable growth of our business. We have
established a comprehensive quality control system and a dedicated quality control team, who
primarily focuses on, among other things, compliance with standardized service procedures,
participating in supplier selection, and monitoring the service quality of our employees and
suppliers.
Quality Control of Property Management Services
We have obtained ISO9001:2015 Quality Management System Certification which is
valid through March 30, 2024. In addition to service quality, we also attach importance to
environmental protection, employees’ health and safety, information security and asset
maintenance and appreciation and have obtained certification of ISO14001:2015 Environment
Management System, ISO45001:2018 Occupational Health and Safety Management System
and ISO9001:2015 Quality Management System for the set-up of a comprehensive quality
management system to provide quality control guidance for our daily operations, while
minimizing our operational costs and disruption to the operation that can result from poor
service or inconsistent adherence to service quality.
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We value and seek to realize dynamic quality control management covering various
aspects of our business operations throughout the provision of our services by our staff at
different levels. We have set up a strict quality control and automatic inspection system at both
project and headquarters levels through the application of IBA IoT technology. We evaluate the
performance of property management services taking into account both internal and customers’
evaluations. Each project is self-inspected regularly and the inspection results are used to
evaluate the performance of relevant staff. Moreover, the headquarters also evaluates the
service quality through the information reflected by the CRM System, including but not limited
to service data, customer complaints and feedback.
Due to the nature of our business, we receive customer suggestions, appraisals and
complaints from time to time during the ordinary course of our business. We record, analyze
and evaluate such customer feedback by creating logs on our internal systems and we track the
progress in addressing the underlying customer concerns and problems. We also engage
third-party consulting firm(s) to conduct customer satisfaction surveys (including “mystery
customer” surveys) on a regular basis. We enjoy a relatively high customer satisfaction rate.
According to a survey conducted by FG Consulting, our customer satisfaction rate for property
management services was maintained at approximately 90% throughout 2018, 2019 and 2020.
These performance evaluations further ensure that the services provided by us meet the needs
and requirements of our customers. During the Track Record Period and up to the Latest
Practicable Date, we did not receive any complaints that may have a material adverse impact
on our operations or business reputation from our customers.
Quality Control of Sub-contractors and Other Third-party Vendors
In respect of quality control over outsourced services, we typically include in contracts
with sub-contractors detailed quality standards for the services to be provided. We regularly
monitor and evaluate the performance of the sub-contractors and may require the sub-
contractors to take necessary rectification measures when their services do not meet the agreed
standards. We make assessment based on our own on-site examination and the suppliers’
self-examination. We may also hire third party consultant to conduct surveys among property
owners and residents regarding the quality of services provided by our sub-contractors and to
make suggestions for improvement. To the extent as agreed, we may have the contractual right
to adjust the sub-contracting fees and to terminate the sub-contracting contracts depending on
the outcomes of our evaluation. If sub-contractors repeatedly or seriously fall short of our
standards or our customers’ expectations, or fail performance reviews conducted by us, they
will be excluded from our selected list of qualified sub-contractors.
We implement various measures and policies to ensure the quality of the products and
services offered by other third-party vendors, such as screening potential vendors by examining
their qualifications and conducting on-site inspection of their business premises, before
entering into cooperation agreements with them. We also conduct annual assessment on our
vendors in respect of transaction volume, service quality and after-sales services. We also have
the right to replace a third-party vendor in the event of suboptimal performance.
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Our Cash Management Policy
We have a bank account and cash management system to manage our cash inflows and
outflows, applicable to all of our subsidiaries and branch offices in their ordinary course of
business. Generally, we encourage our subsidiaries and branch offices to settle their
transactions through bank transfers to lower the risks relating to managing cash. Our
employees are expressly forbidden from removing and/or using our cash for private or other
purposes not in line with our ordinary course of business.
Cash flow transactions Cash handling policies and internal control
measures
Cash inflow in relation to payments
of property management fees,
deposits, rent or service fees from
our customers
We typically have designated customer service
personnel specifically responsible for cash
collection who verify that the cash collected is
the correct amount prior to issuing receipts.
Payment made to suppliers, service
providers and subcontractors of our
subsidiaries and branches
Payments by our subsidiaries and branches to
their suppliers, service providers and
subcontractors shall be pre-approved by the
responsible senior supervising personnel. Once
approved, such payments shall be made directly
from the bank accounts of our subsidiaries and
branches.
Cash inventories and deposits Our subsidiaries and branch offices typically
keep cash on an as-needed basis for our ongoing
projects and the budget is subject to pre-
approval. We typically require that excess
amounts be deposited into the bank accounts of
our subsidiaries and branch offices within the
day they are received.
Cash transfers to our centralized
bank account or the bank accounts
of our subsidiaries and branch
offices
We receive cash through methods such as
WeChat Pay, Alipay, credit or debit card
payments and bank transfers. Our employees
are typically required to timely file all proofs of
payment.
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Opening of and managing bank
accounts of our subsidiaries and
branch offices
Our subsidiaries and branch offices must adhere
to our internal policies and procedures in
relation to the opening of bank accounts. They
are typically required to complete an
application form before opening any bank
accounts. Our subsidiaries and branch offices
are typically required to reconcile and check
bank balances on a monthly basis.
EMPLOYEES
We endeavor to hire the best available employees in the market by offering competitive
wages and benefits, systematic training opportunities and internal upward mobility. We have
established a series of policies and measures to acquire talent suitable for our business
development.
As of September 30, 2021, we had a total of 4,770 employees with whom we had entered
into labor contracts. All of our employees are located in China. The following table sets out the
breakdown of our employees by function as of September 30, 2021:
Number of
Employees
On-site services 2,507
Engineering and quality control 1,170
Value-added management 132
Human resources, administration, finance, operations, risk
management and other personnel 920
Marketing 41
Total 4,770
We recruit high-quality talents from multiple channels and we provide our employees
with ongoing training and career development opportunities. We enter into individual
employment contracts with our full-time employees. Our employees are paid a fixed salary and
may be granted other allowances, based on their positions. In addition, discretionary bonuses
may also be awarded to our employees based on their annual performance reviews and/or other
contributions to our business development to incentivize our employees.
We regularly host comprehensive internal staff training programs for our staff to improve
and enhance their technical and service skills, as well as to provide them with the knowledge
of industry quality standards and work place safety standards. We provide orientation training
to new hires, introducing them to our corporate culture, coaching them on our teamwork model,
and teaching them our service standards and procedures. We have established the “Dianjin
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Program” ( ), and Zhujin Program” ( ), which aims to select, and nurture
excellent, high-calibre candidates with a strong sense of identity to become our future key
management. We also assign experienced managers to serve as mentors to newly-hired
employees, who provide tailored coaching and guidance. We provide training courses and
regular seminars on various aspects of our business operations, such as quality control and
customer relationship management, to our employees.
Some of our employees form labor unions, and we have maintained good working
relationships with our employees. During the Track Record Period and up to the Latest
Practicable Date, our employees did not negotiate their terms of employment through any labor
union or by way of collective bargaining agreements nor did we experience any material labor
disputes or shortages that may have a material adverse effect on our business, financial position
and results of operations.
Social Insurance and Housing Provident Fund Contributions
Pursuant to applicable PRC laws and regulations, employers are required to make
contributions to, and employees are required to participate in, a number of social insurance
funds, including pension fund, medical insurance, work-related injury insurance,
unemployment insurance and maternity insurance, and the housing provident fund. For details,
see “Regulations — Legal Supervisions over Labor Protection in the PRC”.
In 2018 and the nine months ended September 30, 2021, we did not make full
contributions to the social insurance and housing provident funds for certain employees,
mainly because we are not required to make such contributions to certain employees such as
interns and employees who are rehired after retirement or we engaged third-party human
resources agencies to pay social insurance premium and housing provident funds for some of
our employees.
As advised by our PRC Legal Advisers, the relevant PRC authorities may demand that we
pay the outstanding social insurance contributions within a stipulated deadline and we may be
liable to a late payment fee equal to 0.05% of the outstanding amount for each day of delay;
if we fail to make such payments, we may be liable to a fine of one to three times the amount
of the outstanding contributions. Our PRC Legal Advisers have also advised us that, under the
relevant PRC laws and regulations, we may be ordered to pay the outstanding housing
provident fund contributions within a prescribed time period, and if we fail to make such
payments, application may be made to a people’s court in the PRC for compulsory
enforcement. Furthermore, if we fail to complete the registration of housing provident fund
within a prescribed period, we would be subject to an administrative penalty of RMB10,000 to
RMB50,000 for each of our entities not complying with such regulations. Based on the unpaid
amount of our social insurance contribution of RMB0.8 million in 2018 and the nine months
ended September 30, 2021, the potential maximum fine which may be imposed on us if we fail
to make required payment within the prescribed period as required by the government equals
to three times of the outstanding amount of our social insurance contribution. In respect of the
unpaid amount of our housing provident fund contribution of RMB0.1 million in 2018 and the
nine months ended September 30, 2021, we may be ordered to make full payment on the unpaid
amount within the time period stipulated by relevant authorities.
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During the Track Record Period and up to the Latest Practicable Date, (i) we had not
received any notification from relevant government authorities requiring us to pay shortfalls or
the penalties with respect to social insurance or housing provident funds; (ii) we had not been
subject to any administrative penalties, nor were we aware of any material employee
complaints nor involved in any material disputes with our employees with respect to social
insurance or housing provident funds; (iii) a majority of our PRC subsidiaries have obtained
written confirmations from competent local government authorities which confirmed that no
penalties had been imposed on us with respect to social insurance or housing provident funds
during the Track Record Period; (iv) we will make full contributions or pay any shortfall within
a prescribed time period if demanded by the relevant government authorities and (v) we made
provisions for social insurance and housing provident fund contributions of RMB0.5 million
and RMB0.4 million in 2018 and the nine months ended September 30, 2021, respectively. We
have implemented relevant internal controls to ensure that we make full contributions in
relation to the social insurance and housing provident funds, including reviewing the
calculation result of social insurance and housing provident funds for all eligible employees
and actively communicate with local human resources, social security bureau and housing fund
management center on a regular basis, to ensure we acquire the most updated information about
the relevant laws and regulations.
In light of the above, our Directors are of the view that our failure to register for and/or
make full contributions to the social insurance and housing provident funds for our employees
would not have a material adverse effect on our business operations and financial condition.
For further details, see “Risk Factors — Risks relating to Our Business and Industry — Failure
to pay the social insurance premium and housing provident funds for and on behalf of our
employees in accordance with the relevant PRC laws and regulations may have an adverse
impact on our financial conditions and results of operation”.
Remedial Measures
We expect to make full contribution for the unpaid amount of our social insurance and
housing provident fund contributions by November 2022. We have implemented the following
internal control measures to monitor the internal work flow and compliance procedures for
contributions to social insurance and housing provident funds.
• regularly communicating with relevant government agencies to ensure that our
calculation and payment methods are in compliance with relevant laws and
regulations;
• regularly consulting with outside counsel to understand whether we are at risk of
non-compliance with the relevant laws and regulations;
• keeping regular records of our contribution amounts for review by our Board; and
• conducting internal training for our Directors, members of senior management and
certain employees on the relevant laws and regulations.
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RESEARCH AND DEVELOPMENT
We have a product/service research and development center responsible for developing
various design aspects, focusing on market highlights and pain points of market players in
project management, and promotion of innovative solutions in terms of functional refinement,
cost-effectiveness, technology update and policy-oriented upgrade of our products and
services. Our research and development results can be applied to our management projects with
a view to improve the quality, streamline the process and reduce the cost of services. Our
independent digital research and development team consists of 30 personnel, with an average
of nine years of experience. Most of the research and development personnel in our product
research and development center have college degrees.
INTELLECTUAL PROPERTY RIGHTS
Our intellectual property is a key component of our brand and is an integral part of our
business. As of the Latest Practicable Date, we had registered 46 trademarks, 7 patents, 19
software copyrights, 1 copyright and 2 domain names in the PRC.
We have been licensed by Jinmao Group to use several of its trademarks for our operation
pursuant to which we were entitled to use such trademarks on a non-transferable and
royalty-free basis. For further details, see “Connected Transactions”.
As of the Latest Practicable Date, we were not aware of any material infringement (i) by
us of any intellectual property rights owned by third parties, or (ii) by any third parties of any
intellectual property rights owned by us. For further details of our intellectual property rights,
see “Risk Factors — Risks relating to Our Business and Industry — Our failure to protect our
intellectual property rights could have a negative impact on our business and competitive
position”, “Risk Factors — Risks relating to Our Business and Industry — Third parties may
assert or claim that we have infringed their intellectual property rights, which may disrupt and
affect our business”, “Appendix V — Statutory and General Information”.
INSURANCE
We maintain certain insurance coverage, primarily public liability insurance to cover
liabilities for damages suffered by third parties arising out of our business operations, employer
liability insurance, commercial health insurance, property insurance for our business related
facilities and vehicle insurance. We require our sub-contractors to purchase accident insurance
for their employees who provide services to our Group, and in accordance with our contracts
with sub-contractors, the sub-contractors are responsible for all workplace injuries to their
employees, except for the injuries directly attributable to us. We believe our insurance
coverage is in line with industry practice for similar property management companies in the
PRC. However, our insurance coverage may not adequately protect us against certain operating
risks and other hazards, which may result in adverse effects on our business. For more details,
see “Risk Factors — Risks relating to Our Business and Industry — Our insurance may not
sufficiently cover, or may not cover at all, losses and liabilities we may encounter”.
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IMPACT OF THE OUTBREAK OF COVID-19 ON OUR BUSINESS
According to the China Index Academy, the COVID-19 outbreak, including the recent
emergence of the Omicron virus variant, has only had short-term impact on property
development industry and property management industry and is expected to have limited
impact on these industries in the medium- and long-term. The Omicron virus variant is
significantly more infectious than its predecessors. However, according to China Index
Academy, based on past experience gained from the previous rounds of Covid-19 outbreak, the
PRC government has improved infection control measures, vaccines and drugs to contain the
spread of the Omicron virus variant timely and effectively. Based on the forgoing, China Index
Academy is of the view that, although the Omicron virus variant may create uncertainties for
the macro-economic environment in China and the real estate industry in the short run, it is
expected to have limited impact on the real estate industry and property management industry
in the medium- and long-term.
Since the outbreak of COVID-19, the PRC government has introduced a series of
measures in order to prevent and control the pneumonia epidemic, including but not limited to
lock-down measures, travel restrictions, restrictions on enterprises from resuming work,
management and control over commencement schedules of construction in new and existing
construction sites and mandatory quarantine requirements on infected individual and anyone
deemed potentially infected.
Due to PRC governments’ measures to contain the spread of the virus such as restrictions
on mobility and travel and cancellation of public activities, our operations have, to a certain
extent, been impacted by delays in business activities and commercial transactions as well as
general uncertainties surrounding the duration of the governments’ extended business and
travel restrictions. Moreover, we took a series of measures in response to the outbreak to
protect our employees, including, among others, temporary closure of our offices, remote
working arrangements for our employees, and travel restrictions or suspension.
Impact on Our Business Operation
In relation to the provision of our services in general, our Directors confirm that (i) prior
arrangement had been made in ensuring sufficient workforce available for our business
operations during and after the outbreak of the disease and that our frontline staff did not
experience material disruption in carrying out their responsibilities for the provision of our
services; and (ii) our major suppliers are sub-contractors which provide services such as
cleaning, maintenance and security services, and the workers assigned by our sub-contractors
to our managed properties did not experience material disruption in performing their duties for
the sub-contracting services following the outbreak of the disease. Our Directors also confirm
that since the outbreak of COVID-19 and up to the Latest Practicable Date, our Group had not
encountered and is not expected to experience any shortage in labor or disruption to the supply
of sub-contracting services or materials as a result of the outbreak of COVID-19, including the
recent emergence of the Omicron virus variant.
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As for our property management services relating to residential communities, the negative
impact of COVID-19, including the recent emergence of the Omicron virus variant, is expected
to be minimal. There has been an increasing demand for high-end property management
services. We believe that the outbreak of the disease had created an opportunity for us to
establish stronger bonds with the property owners and residents increasing their recognition,
trust and satisfaction of our brand and services, as we not only provide daily living-related
services but also extensive preventive measures that safeguarded the community and health and
well-being of our property owners and residents during the outbreak.
For our property management services relating to non-residential properties, certain
property owners and tenants of the relevant business premises, such as office buildings and
shopping malls, had to temporarily suspend their operations during the outbreak. As of the
Latest Practicable Date, these non-residential properties had resumed operations. After these
non-residential properties resumed operations, the demand for high-quality property
management gradually increased. As of the Latest Practicable Date, the recent emergence of
omicron virus variant has had no material adverse impact on our property management services
for non-residential properties.
For our value-added services to non-property owners, due to the delay in construction,
sales and marketing activities and delivery of some of the property development projects by our
customers caused by temporary lock-down in response to the COVID-19 outbreak in the nine
months ended September 30, 2020, we had experienced a relatively slower growth in revenue
from our value-added services to non-property owners. However, as the COVID-19 outbreak
has been brought under control in China and economic activities have gradually resumed, our
revenue from value-added services to non-property owners increased in the nine months ended
September 30, 2021 as compared to the same period of 2020. As of the Latest Practicable Date,
the recent emergence of omicron virus variant has had no material adverse impact on our
value-added services to non-property owners. If the recent emergence of omicron virus variant
cannot be effectively contained in the PRC, it may cause a slowdown in property development
activities, which may adversely affect our value-added services to non-property owners such
as preliminary planning and design and pre-delivery services.
For our community value-added services, we had experienced a slow-down in business
for our platform services for interior decoration as a result of the outbreak. However, we also
saw a considerable increase in the demand of our community living services, in particular, with
respect to purchase and delivery assistance for daily necessities, e-commerce services and
community activities, which presents us significant opportunities to expand our related service
offerings. As of the Latest Practicable Date, the recent emergence of omicron virus variant has
had no material adverse impact on our community value-added services. If the recent
emergence of omicron virus variant cannot be effectively contained in the PRC, it may have
a mixed impact on our community value-added services. For instance, if local governments
issue lockdown orders again, the lockdowns may adversely affect our real estate brokerage
services and platform services for interior decoration, while causing property owners or tenants
to subscribe for more community space operation services and community living services as
they spend more time at home.
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During the nine months ended September 30, 2020, we incurred lower selling and
marketing expenses since we have been focusing on implementing and enhancing hygiene and
precautionary measures across the properties under our management and canceled most of the
community events and activities as affected by the outbreak of COVID-19.
As part of our contingency plan due to the outbreak of COVID-19, including the recent
emergence of the Omicron virus variant, our Directors confirm that there are sufficient control
measures in place. For more details, see “— Impact of the Outbreak of COVID-19 on our
Business — Contingency Plan and Control Measures” below. Due to the abovementioned
reasons, our Directors confirm that our Group is able to fulfill the obligations under all existing
property management service contracts and other business contracts, and therefore the
COVID-19 pandemic, including the recent emergence of the Omicron virus variant, has not
given rise to financial damage to our Group in any material aspect or adversely impacted our
long-term relationship with our customers and business partners.
Impact on Our Pipeline Projects
Our Directors confirm that, as of the Latest Practicable Date, Jinmao Group, our largest
customer for the Track Record Period, did not expect the construction schedule and delivery
date of the pipeline properties developed by them to be delayed by a large extent as a result
of the outbreak of COVID-19, including the recent emergence of the Omicron virus variant,
since such pipeline projects had gradually resumed work to steadily catching up on the original
development schedule. In light of this, our Directors do not expect the pipeline projects to be
materially affected in connection with either of our property management services or our
value-added services to non-property owners.
Contingency Plan and Control Measures
In view of the outbreak of COVID-19, we have adopted on January 28, 2020 a
contingency plan for pandemic outbreak whereby our employees and sub-contractors shall take
a series of practicable steps in the properties under our management to maintain a hygienic
environment for all personnel who may be present including property owners, residents,
visitors and our employees and sub-contractors.
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Our Directors confirm that in light of the severity of COVID-19, we had, in accordance
with the contingency plan, taken the following control measures to prevent the transmission of
or further exposure to the disease within our managed properties:
• mandatory infrared contactless temperature screening at entry of managed properties
on a 24-hour basis and similar body temperature measurements for all our staffs and
workers of our sub-contractors each time they enter or leave the working premises;
scanning of health QR code at entry of managed properties; intensified and regular
disinfection of common areas at least twice a day, covering key areas in a
community such as lobby, gate entry, service reception, handrail, door handle,
garbage bin, passage way, elevator, basement, sports and leisure facilities and
children’s playground; provision of disposable face masks, gloves and applicable
protective uniforms to employees and requiring relevant employees to wear
preventive clothing and accessories distributed to them every day; setting up hand
sanitizing stations at key service touch points, placing collection bins especially for
used facial masks and gloves and engaging designated personnel for the disinfection
and disposal of used disease prevention materials; conducting targeted cleaning,
disinfection, and maintenance checks of ventilation and air purifying equipment and
facilities at communities; strict quarantine for suspected cases among our residents
or our residents otherwise subject to compulsory quarantine at designated locations
imposed by the PRC government; designated staff within the community will go to
the residence concerned every day for body temperature measurements and will
deliver necessities to the residence directly when requested; setting up emergency
response team for each community and conducting daily inspection and report on
implementation of the contingency plan and control measures.
All our employees and workers of our sub-contractors are required to familiarize
themselves with requirements of our contingency plan for pandemic outbreak and ensure that
the control measures are properly implemented.
Impact on Our Financial Condition
The ongoing outbreak of COVID-19 has inevitably increased our costs in managing
properties and providing other related services. For instance, in 2020 and the nine months
ended September 30, 2021, according to the management account, we had to incur an
additional expense of RMB6.9 million and RMB1.5 million, respectively, for the disinfection
of managed properties and the purchase of personal protective equipment and sanitizing
materials. On the other hand, according to the management account, we had received
government grants of RMB1.3 million and RMB0.06 million in 2020 and the nine months
ended in September 30, 2021, respectively, which were mainly comprised of government
subsidies for creating jobs to support local economies and for supporting projects affected by
COVID-19 outbreak to ease our financial burden in light of the outbreak of COVID-19 and we
had also became entitled to certain social insurance contribution exemptions in 2020, which
alleviated our increased operating costs following the outbreak.
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In addition, in response to the impact of the Omicron virus variant, the PRC government
has actively deployed scientific prevention and control measures. Except for a few indigenous
cases in a few provinces, the vast majority of the cases in mainland China were imported from
abroad. As all of our business operations are conducted in mainland China, based on the limited
information about the Omicron virus variant that is currently available to us, we currently do
not expect any material delay in the delivery of properties, or any material delay or difficulty
in collecting property management fees, or any material decrease in demand for our property
management services, value-added services to non-property owners and community value-
added services.
In light of the above, our Directors confirm that the outbreak of COVID-19, including the
recent emergence of the Omicron virus variant, has not had a material adverse impact on our
continuing business operation and sustainability based on the following reasons: (i) the
property management industry is an industry involving essential community services and our
employees and workers of our sub-contractors did not experience material disruption in
performing their job duty during the outbreak of the disease; (ii) we are able to fulfill our
obligations under all existing property management service contracts and other business
contracts; (iii) the delivery date of the pipeline properties developed by Jinmao Group was not,
or expected to be, materially delayed; and (iv) our Group has sufficient cash and cash
equivalents to maintain our operation.
SOCIAL HEALTH, SAFETY AND ENVIRONMENTAL MATTERS
We are subject to PRC laws and regulations in relation to labor, safety and environment
protection matters. In addition, we have established occupational safety and sanitation systems,
implemented the ISO45001:2018 Occupational Health and Safety Management System, and
provided employees with workplace safety trainings on a regular basis to increase their
awareness of work safety issues. We also conduct tests on waste water, waste gas or noise in
our work places to ensure compliance with applicable environmental protection and employee
work safety requirements.
Our Directors confirm that during the Track Record Period and up to the Latest
Practicable Date, we had implemented necessary internal policies and procedures for
compliance with PRC laws in relation to workplace safety and we did not have any incidents
which had materially and adversely affected our operations.
We consider the protection of the environment to be important and have implemented
measures in the operation of our businesses to ensure our compliance with all applicable
requirements. Given the nature of our operations, we do not believe we are subject to material
environmental liability risk or compliance costs.
Our Directors believe that establishing and implementing sound environmental, social
and governance (“ESG”) principles and practices will provide long-term returns to our
stakeholders. To ensure the effectiveness of our ESG measures, our Directors will be
responsible for overseeing the formulation and reporting of our ESG strategies and determining
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the ESG-related risks. We provide employees with training sessions in relation to workplace
safety on a regular basis. We have worked intensely to promote health, safety and
environmental aspects of our operations: (i) to promote the reduction in emissions, solid wastes
and consumption of water, paper, energy and other supplies; (ii) to organize regular training
programs to all employees on environmental protection; (iii) to prioritize environment-friendly
suppliers in the decision-making process for procurement; (iv) to maintain first-aid kits and
fire-fighting equipment and facilities regularly; (v) to provide comfortable office furniture and
air cleaner and to regularly sanitize the premises, water dispensers and air-conditioners for a
good working and living environment; (vi) to follow the corporate policy on equal
opportunities and to hiring, evaluate and promote based on merits; (vii) to provide paid leaves,
insurances and allowances for employees and to organize parties and other activities to
promote work-life balance and cordial working environment; and (viii) to provide adequate
training and supervision for new employees and training programs for employees’ career
advancement.
Since our inception, we have been dedicated to serving the communities where we
operate, and have implemented the following measures to fulfill our social responsibilities.
• Combat of the COVID-19 pandemic. Since the outbreak of the COVID-19 pandemic,
we have been on the frontline of preventing the spread of the pandemic, with our
employees working around the clock in property projects under our management
across China to safeguard the health and safety of property owners, residents and
visitors. We closely verify the identities and monitor the health status of every
person entering properties under our management, and offered comprehensive
community living services to residents under quarantine, such as delivery of food,
water and medicine. We had incurred additional costs of approximately RMB5
million in 2020 for purchasing protective materials, such as face masks, ethanol
hand wash, disinfectants, and infrared thermometers.
• Employee benefits. We truly appreciate the services of our employees, and care
about their wellbeing. To that end, we offer employee benefits such as housing
allowances, meal allowances, vacation packages, group sports, cultural and social
events, and holiday and birthday gifts.
Our Directors confirmed that we were not subject to significant health, work safety, social
or environmental risks with respect to our business operations during the Track Record Period
and up to the Latest Practicable Date. We had not been subject to any material fines or
administrative penalties due to non-compliance with or any violation of health, work safety,
social or environmental laws and regulations in the PRC during the Track Record Period and
up to the Latest Practicable Date.
As advised by our PRC Legal Advisers, based on their due diligence search, during the
Track Record Period and up to the Latest Practicable Date, we had not been subject to any
material fines or administrative penalties due to non-compliance with or any violation of
health, work safety, social or environmental laws and regulations in the PRC that would have
materially and adversely affected our financial and business operation and the Listing.
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PROPERTIES
As of the Latest Practicable Date, we leased 199 properties in the PRC with an aggregate
GFA of approximately 25,334.0 sq.m. primarily as dormitories and office premises. As of the
Latest Practicable Date, we had not registered the lease agreements for 195 out of our 199 of
our aforementioned leased properties with the local housing administration authorities as
required under PRC laws. Our PRC Legal Advisers have advised us that although the
non-registration of such lease agreements would not affect the validity of such agreements
under PRC laws and regulations, we might be ordered to rectify this non-filing by competent
authorities and if we fail to rectify within a prescribed period, an administrative penalty of
RMB1,000 to RMB10,000 for each non-filed case may be imposed on us as a result of such
non-filing. As of the Latest Practicable Date, we had not received any notice from any
regulatory authority with respect to potential administrative penalties as a result of our failure
to file the lease agreements described above. Our PRC Legal Advisors have advised us that any
failure to file the lease agreements would not affect the validity of the lease agreements. Our
Directors are of the view that such non-filing would not have a material impact on our business
operations. For further details, see “Risk Factors — Risks relating to Our Business and
Industry — Our leased property interests may be defective and our right to lease the properties
affected by such defects may be challenged, which could cause significant disruption to our
business”.
For a total of 62 of our 199 leased properties, the lessors could not provide relevant title
certificates or proof of property rights. As advised by our PRC Legal Advisers, if third parties
are able to prove that they have valid titles to or valid leasehold interests in these properties
and refuse acknowledge our lease of such properties, we may not be able to enforce the lease
agreements in relation to these properties. In the event that we are required to relocate from any
of these leased properties as a result of the foregoing, given the nature of our operation, we do
not believe that any relocation would result in material disruptions to our business. Moreover,
replacement premises for the leased properties without title certificates and proofs of property
rights, which we are using primarily as employee dormitories and office premises, are readily
available. Although we may incur additional relocation costs, our Directors are of the view that
this would not have any material impact on our business, financial position and results of
operation.
According to section 6(1) of the Companies (Exemption of Companies and Prospectuses
from Compliance with Provisions) Notice (Chapter 32L of the Laws of Hong Kong), this
prospectus is exempted from compliance with the requirements of section 38(1) of the
Companies (Winding Up and Miscellaneous Provisions) Ordinance in relation to paragraph
34(2) of the Third Schedule to the Companies (Winding Up and Miscellaneous Provisions)
Ordinance which requires a valuation report with respect to all of our Group’s interests in land
or buildings, for the reason that, as of September 30, 2021, none of the properties interests has
a carrying amount of 15% or more of our total assets. Pursuant to Chapter 5 of the Listing
Rules, this prospectus is not required to include valuations of our properties.
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INTERNAL CONTROL AND RISK MANAGEMENT
We have implemented various risk management policies and measures to identify, assess
and manage risks arising from our operations. Details on risk categories identified by our
management, internal and external reporting mechanism, remedial measures and contingency
management have been codified in our policies. For details of the major risks identified by our
management, see “Risk Factors — Risks Relating to Our Business and Industry”. In addition,
we face various financial risks, including credit and liquidity risks that arise during our
ordinary course of business. See “Financial Information — Quantitative and Qualitative
Disclosures About Financial Risks” for a discussion of these financial risks.
Prior to the Listing, we have adopted internal policies and procedures set by Jinmao
Group, our Controlling Shareholder and a company listed on the Stock Exchange, on various
compliance matters, including the Stock Exchange’s requirements on corporate governance and
environmental, social and governance matters. We, as a subsidiary of Jinmao Group, have
cultivated a compliance culture and will adopt similar policies and procedures as a separate
listed company effective upon the Listing. During the process of preparing for the Listing, we
also engaged an internal control consultant to perform certain agreed-upon procedures in
connection with the internal control of our Company and major operating subsidiaries. As of
the Latest Practicable Date, no material issues in relation to the internal controls of our Group
were uncovered after such review.
To monitor the ongoing implementation of our risk management policies and corporate
governance measures after the Listing, we have adopted or will adopt, among other things, the
following risk management and internal control measures:
• Our risk control department is responsible for supervising the compliance with our
internal control and risk management policies and will timely conduct routine
inspections and report for any non-compliance to ensure our compliance with
relevant laws and regulations;
• the establishment of an audit committee responsible for overseeing our financial
records, internal control procedures and risk management systems. Our audit
committee consists of three members: Chen Jieping, Sincere Wong and Qiao
Xiaojie. See “Directors and Senior Management — Directors” and “Directors and
Senior Management — Board Committees” for the qualifications and experience of
these committee members as well as a detailed description of the responsibility of
our audit committee;
• the appointment of Ms. Ho Wing Tsz Wendy as our company secretary to ensure the
compliance of our operation with relevant laws and regulations. For the biographical
details, see “Directors and Senior Management — Company Secretary”;
• the appointment of First Shanghai Capital Limited as our compliance adviser upon
the Listing to advise us on compliance with the Listing Rules;
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• the engagement of external legal advisers to advise us on compliance with the
Listing Rules and to ensure our compliance with relevant regulatory requirements
and applicable laws, where necessary; and
• the implementation of internal policies and procedures formulated to monitor the
ongoing continuing connected transactions and to ensure that they do not exceed the
relevant annual caps.
In order to comply with applicable anti-corruption and anti-bribery laws and regulations
of the PRC and Hong Kong, we have formulated and implemented an anti-corruption and
anti-bribery regime. Key anti-corruption and anti-bribery measures include the following:
• authorizing a committee consisting our management team to assume responsibility
for daily execution of our anti-corruption and anti-fraud measures, including
handling complaints, ensuring protection for the whistleblower and conducting
internal investigations;
• providing anti-corruption compliance training periodically to our senior
management and employees to enhance their knowledge and compliance with
applicable laws and regulations, and including relevant policies and express
prohibitions against non-compliance in staff handbooks;
• undertaking rectification measures with respect to any identified corrupt or
fraudulent activities, evaluating the identified corrupt or fraudulent activities and
proposing and establishing preventative measures to avoid future non-compliance;
and
• setting rules and policies in relation to anti-bribery and anti-corruption requirements
during the tender processes, such as rejecting a tender offer due to the tenderer’s
fraudulent conducts or attempted bribery and entering into honest cooperation
agreements with our business partners to require honest conducts during the tender
processes.
Our Directors are of the view that such controls and measures are sufficient and effective
to avoid the occurrence of corruption, bribery, or other improper conduct of our employees.
During the Track Record Period and up to the Latest Practicable Date, we were not subject to
any government investigation or litigation with respect to claims or allegations of monetary
and non-monetary bribery activities. Our Directors are of the view that we are compliant with
the applicable anti-corruption and anti-bribery laws and regulations of the PRC in all material
aspects during the Track Record Period and up to the Latest Practicable Date.
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LEGAL PROCEEDINGS AND COMPLIANCE
As advised by our PRC Legal Advisers, as of the Latest Practicable Date, we had obtained
all material permits, licenses, registrations and filings necessary to conduct our business
operations during the Track Record Period from the relevant government authorities, all of
which are valid and in force, and we had been in compliance in all material respects with the
applicable PRC laws and regulations. We are required to renew such permits, licenses,
registrations and filings from time to time. We currently do not expect our material permits,
licenses, registrations and filings to expire or be subject to renewal in the near future. Our
Directors confirmed that they do not foresee material obstacles for renewing the relevant
permits, licenses, registrations and filings for carrying out our business operations when
renewals are required.
As advised by our PRC Legal Advisers, we had not been subject to significant fines or
legal or administrative actions involving non-compliance with any PRC laws or regulations
relating to our business during the Track Record Period and up to the Latest Practicable Date.
Our Directors also confirmed that, during the Track Record Period and up to the Latest
Practicable Date, we had not experienced any non-compliance incidents that had or would
reasonably be expected to have a material adverse financial or operational impact on our
business.
From time to time we may be involved in legal proceedings or disputes in the ordinary
course of business, such as contract disputes with our customers. As of the Latest Practicable
Date, there were no litigation or arbitration proceedings or administrative proceedings pending
or threatened against us or any of our Directors which would have a material adverse effect on
our financial position or results of operations.
NON-COMPLIANCES
Failure to File Certain Brokerage Licenses
According to the Administrative Measures for Real Estate Brokerage (
), real estate brokerage agencies and their branches shall file with the competent housing
and urban-rural development (real estate) authority within 30 days from the date of obtaining
their business licenses. For details, see “Regulations – Legal Supervision Over Property
Management Services – Real Estate Brokerage Business.”
During the Track Record Period, branches of Jinmao PM in Chongqing, Shanghai and
Dongguan of were engaged by certain property developers to sell car parking spaces without
filing their brokerage license to the competent authorities in accordance with the relevant local
regulations. Yuelin Hangzhou and its branches in Guangzhou and Chongqing engaged in
selling and leasing of second-hand properties (including car parking spaces) in Sanya, Beijing,
Wuhan, Qingdao, Hangzhou, Suzhou, Wenzhou, Guangzhou and Chongqing without filing
brokerage license to the competent authorities in accordance with the relevant local
regulations.
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In the event of violation of the regulations requiring filing of brokerage license, the
competent governmental authorities would order the violating entity to rectify such violations,
make records in the entity’s credit files, and/or impose a fine of RMB1,000 to RMB30,000 on
each of the entities not complying with such regulations.
We have rectified such non-compliance by ceasing to conduct brokerage service through
branches of Jinmao PM in Chongqing, Shanghai and Dongguan and Yuelin Hangzhou and its
branches in Guangzhou and Chongqing since April 2021. As of the Latest Practicable Date, we
had not received any notice of rectification or administrative penalties in respect of the
non-filing of the brokerage license. The revenue generated from real estate brokerage services
conducted through branches of Jinmao PM in Chongqing, Shanghai and Dongguan and Yuelin
Hanzhou and its branches in Guangzhou and Chongqing accounted for less than 1.0% of our
total revenue during the Track Record Period. Based on the above, our Directors are of the view
that such non-compliance incidents will not have a material adverse impact on our business,
financial condition or results of operations.
Failure to Make Filings for Certain Public Parking Space Management Services
According to the Measures for the Construction and Management of Parking Lots in
Nanjing ( ), companies which operate public parking space
shall make market and tax registration, and file with the competent urban development
authority within 15 days from the date of obtaining their business licenses. According to the
Interim Measures for the Administration of Parking Lots in Changsha (
), the constructing parties or operators of public parking space shall file with the
traffic administrative department of the police within 15 days from the completion and
acceptance.
During the Track Record Period, our Changsha branch and Nanjing Ninggao were
engaged to provide public parking space management services without make filings to the
competent authorities in accordance with the relevant local regulations.
In the event of violation of the regulations requiring filings for the public parking space
management services, the competent authorities would order our Changsha branch to make
rectification within a prescribed time and impose a fine of RMB1,000 on it. Nanjing Ninggao
is subject to the risk of such non-compliance incidents being recorded in its credit files.
We plan to rectify such non-compliance by making required filings for our Changsha
branch and Nanjing Ninggao by the end of 2022. As of the Latest Practicable Date, we had not
received any notice of rectification or administrative penalties in respect of the non-filings. The
revenue generated from public parking space management services conducted through our
Changsha branch and Nanjing Ninggao accounted for less than 2.0% of our total revenue
during the Track Record Period. Based on the above, our Directors are of the view that such
non-compliance incidents will not have a material adverse impact on our business, financial
condition or results of operations.
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Failure to Meet Governmental Pricing Standard When Charging Electricity Fees to End
Users
In August and September 2021, the relevant local governmental authorities deemed
Jinmao PM in violation of the Pricing Law of the PRC ( ) by failing
to charge end users electricity fees according to governmental pricing standard for certain
projects under its management from May 2018 to April 2021, and therefore ordered Jinmao PM
to rectify such non-compliance and imposed a total fine of RMB3.05 million on Jinmao PM.
By the end of September 2021, Jinmao PM had rectified such non-compliance, including,
among others, refunding and compensating for the additional electricity fees collected and
strictly implementing the governmental pricing mechanism in the collection of electricity fees,
and had paid the fine in full.
We have established internal procedures to prevent non-compliance in our pricing
activities, including (i) requiring all business units to keep a record of their pricing activities
and to ensure the pricing and service charges are in compliance with applicable laws and
regulations; (ii) formulating internal policies to standardize the charges for services we provide
and monitoring the implementation of such policies; and (iii) providing regular training to our
employees on compliance with pricing laws and regulations. In addition, we plan to strengthen
our internal control with respect to pricing activities by adopting the additional policies and
procedures, including: (i) requiring each pricing activity to be approved through internal
systems; (ii) review and improve internal policies from time to time to make sure they stay in
line with the most updated laws, regulations and industry standards; and (iii) requiring internal
reporting of any pricing incident, penalties and the remedial measures to our senior
management team.
RECENT REGULATORY DEVELOPMENT
Recent Changes in Property Management Industry Regulations
The PRC government recently promulgated a series of regulatory notices to regulate the
real estate market as well as property management industry, aiming to promote the stable and
healthy development of the property management industry.
Notice 10 and Notice 55
These regulatory notices include the Notice 10 and the Notice 55 issued by the MOHURD
and other competent departments. These notices are aimed to rectify existing problems in the
real estate market, standardize the regulations currently in effect in order to improve the market
order, and regulate the areas of real estate development, property sale and purchase, housing
leasing and property management services.
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The Notice 10 clarifies the price forming mechanism for property management services
as well as imposing requirements on the areas of integrating grassroots in the social governance
system; improving governance structure of property owners’ associations; promoting property
management service quality; promoting and developing living services; regulating the use and
management of repair fund and reinforcing supervision and management of property
management services. According to China Index Academy, the Notice 10 provides a clear path
for the development of residential property management as well as releases a positive signal
in terms of marketization of property management fees, promotion of the integration of online
and offline services, and encouraging property management services providers to explore
“property services + living services” model. China Index Academy further advise us that the
implementation of Notice 10 is expected to have a positive impact on the property management
service industry in the aspects of, among others, management scale, quality of services,
development of smart property management, professionalization of management personnel,
marketization of prices, value-added services exploration, and standardization of management.
The Notice 55 states that it will strive to improve the real estate market order in three
years, including the areas of real estate development, housing sales, housing leasing, and
property services. For property management services companies, the key problems set forth in
the notice which require standardization measures include (i) failure to provide services in
accordance with contractual terms, (ii) failure to disclose information regarding standards for
the property service fee items, the common area’s operation and income and maintenance funds
related information, (iii) collection of fees beyond service contracts, (iv) unauthorized use of
common area to carry out business activities, and (v) refusal to exit the property services
project without a proper reason upon rescission or termination of the property services contract
pursuant to the law. According to China Index Academy, the Notice 55 represents the
continuous efforts of the PRC government to regulate the property management services
market and the requirements imposed therein are not new to the property management service
providers in the PRC, but rather a reiteration of the existing laws and regulations. Nevertheless,
the Notice 55 is not expected to have negative impact on the property management companies
that offer high quality services, constantly operate in compliance with laws and regulations,
and have relevant internal control policies in place to ensure the compliance.
Although the competent authorities have not promulgated any new requirements under the
Notice 10 and the Notice 55, we conducted self-inspection and had not been aware of any
material violation of the Notice 10 and the Notice 55 as of the Latest Practicable Date. As
advised by our PRC Legal Advisors, during the Track Record Period and up to the Latest
Practicable Date, (i) our PRC subsidiaries and branches had no material pending litigation or
proceeding relating to the performance of property management service contracts and (ii) our
PRC subsidiaries and branches were not subject to any material fines or administrative
penalties due to non-compliance with or violation of the Notice 10 and/or the Notice 55.
To ensure continuous compliance with the requirements set out in the Notice 10 and the
Notice 55, we have already formulated and implemented, and optimized the relevant internal
policies and system in accordance with the Notice 10 and the Notice 55, which primarily
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include (i) providing on-the-job training and lectures to our employees regarding the
requirements of Notice 10 and Notice 55 to facilitate bottom-up compliance thereto in our daily
operations; (ii) designating legal staff to closely monitor and oversee our compliance status
with the requirements of Notice 10 and Notice 55, and report non-compliance matters on a
timely basis; (iii) designating legal risk management center to monitor regulatory
developments relating to our business; and (vi) consulting with external counsels for
professional advice.
Based on the foregoing, and taking into account the above advice from our PRC Legal
Advisers, our Directors are of the view, and the Joint Sponsors concur, on the basis of the
foregoing and the view of the Joint Sponsors’ PRC Legal Advisers, that we did not violate the
Notice 10 and Notice 55 in any material aspect.
With respect to the Notice 10, to the best of our Directors’ information, knowledge and
belief, although we may incur additional costs in communicating with property management
committees, based on our past experience in managing projects with established property
owners’ associations, we will continue to maintain a cooperative relationship with the property
owners’ association and the newly established property management committee in the relevant
projects under management. We therefore do not expect the Notice 10 to have a material
adverse impact on our business operation or financial results.
With respect to Jinmao Group, to the best of our Directors’ knowledge after consultation
with Jinmao Group, since the promulgation of the Notice 55 and up to the Latest Practicable
Date, Jinmao Group had not experienced any material delay in property development and
construction, which would result in adverse material impact on the overall operations or
financial position of Jinmao Group. With respect to our Group, our Directors are of the view
that the Notice 55 is unlikely to have a material adverse impact on our Group’s business
operation and financial performance on the basis that (i) we expect that we would still be able
to generate stable revenues and cash flows from our existing GFA under management; (ii) we
have been rapidly expanding our cooperation with Independent Third Party property
developers to reduce the reliance on Jinmao Group, thereby reducing risks from the potential
delay in delivery of properties from Jinmao Group to us; and (iii) we have been expanding our
service portfolio, such as expanding our city operation services, under which most of our
clients are non-property developers.
The Proposed Regulations on the “Three Red Line”
In August 2020, the MOHURD and the PBOC proposed restrictive rules that limit the
growth of real estate companies’ interest-bearing debt and financing activities in a symposium
jointly held by the agencies. The rules lay out three red line standards on debt-to-asset ratio,
net gearing ratio and cash to short-term debt ratio applicable to property developers. For
details, see “Industry Overview – Industry Growth Drivers – Proposed Regulations on “Three
Red Line” Standards”.
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According to China Index Academy, the proposed regulations on the “Three Red Line”
are primarily for the purpose of restraining the overly aggressive expansion of certain heavily
indebted property developers, enhancing the marketization, regulation and transparency of
financing of property developers. The proposed regulations on the “Three Red Line” standards
are expected to speed up real estate companies’ deleveraging process and promote the healthy
development of the PRC real estate industry. The short-term investment along with the
short-term financings in the real estate industry are expected to decrease. In the long run, the
land auction market will become more stable and the cost of long-term financings are expected
to decrease.
The Three Red Line standards require that (i) the debt-to-asset ratio (excluding receipts
in advance) shall not exceed 70%, (ii) the net gearing ratio shall not exceed 100%, and (iii) the
cash to short-term debt ratio shall not be lower than 1.0. Based on the interim results of China
Jinmao for the six months ended June 30, 2021, as of June 30, 2021, China Jinmao’s
debt-to-asset ratio (excluding receipts in advance), net gearing ratio and cash to short-term debt
ratio were 69%, 52% and 1.26, respectively, each having met the relevant standard set by the
“Three Red Line” regulations. Based on the foregoing, and after due inquiry with China
Jinmao, we believe that the “Three Red Line” regulations do not have a material adverse
impact on China Jinmao’s usual course of business and planned operations.
According to China Index Academy, certain property developers are no longer able to
achieve rapid and large-scale expansion through use of financial leverages, which may slow
down the growth of the real estate market and have an adverse impact on the property
management industry. The proposed regulations are expected to have less negative impact on
real estate companies which have advantages in capital sufficiency, such as large property
developers and state-owned companies and therefore likely to have less negative impact on the
business and financial performance of the property management service providers affiliated to
such real estate companies, since many of their projects are sourced from related parties.
Property management industry will become attractive due to its light asset mode and property
management companies need to enhance their abilities to source projects from independent
third parties to diversify its revenue source, provide more comprehensive service offerings and
achieve economies of scale.
Based on the foregoing, our Directors are of the view, and the Joint Sponsors concur, that
the proposed regulations on the “Three Red Line” would be less likely to have a material
adverse impact on our business and financial performance.
The Real Estate Tax Reform
On October 23, 2021, the Standing Committee of NPC passed a resolution to authorize
the State Council to carry out pilot projects for the Real Estate Tax Reform in certain regions.
According to the Real Estate Tax Reform Policy, real estate tax is proposed to be imposed on
land users and property owners of various types of properties, such as residential or
non-residential properties, except for rural homestead and buildings. Furthermore, the Real
Estate Tax Reform Policy authorizes the State Council to formulate specific measures for the
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real estate tax pilot program, determine the list of cities for the pilot program, file records with
the Standing Committee of NPC and authorize the local governments of pilot cities or regions
to formulate specific implementing rules. However, as of the Latest Practicable Date, the Real
Estate Tax Reform Policy had not yet specified the pilot cities or regions, tax base or rate or
other details of the proposed real estate tax, and the specific measures and implementing rules
for the pilot program have not been promulgated yet. The Real Estate Tax Reform Policy is
another step taken by the PRC government as its long-term effort to curb overheated real estate
market and speculation activities, with a view to promote a healthy and stable real estate
market.
According to China Index Academy, the levy of real estate tax is expected to impact the
property market of the specified pilot regions, the extent of which hinges on the dependence
on property development of this region, and the current market condition and development of
the real estate market. In general, the levy of real estate tax on various types of properties is
expected to reduce the reliance on new property development and alleviate sharp increase in
property prices in the pilot regions. In terms of land supply, according to China Index
Academy, the levy of real estate tax will, to certain extent, have the effect of replacing the
premium for land use right and widening the source of tax revenue, which would benefit the
finance of the local governments by reducing their reliance on land use right transfer as
primary revenue source and promote a reasonable demand and supply of land. The increase in
cost for holding properties is expected to reshape the preference of property buyers, which
would in turn cause property developers to adjust their supply of properties based on real
market demand. The levy of real estate tax on various types of properties is expected to
increase the supply of second hand properties and promote the liquidity of the real estate
property market, in light of which, the demand and supply misalignment in certain large cities
will be relieved and property prices will stabilized.
According to China Index Academy, the Real Estate Tax Reform Policy may affect the
availability of newly constructed projects for the property management market; however, the
Real Estate Tax Reform Policy is not expected to have a material adverse impact on projects
under management or change the landscape for property demand and supply in the long run and
are viewed as being conducive to the development of a healthy and stable real estate market
and thereby promoting a healthy, orderly and quality property management market.
As of the date of this prospectus, based on the review of publicly available sources, our
PRC Legal Advisors are unaware of any official announcement from the PRC government in
relation to details of the Real Estate Tax Reform Policy such as the specified pilot regions, tax
base or rate and any other implementation details of the proposed real estate tax. Based on
information from public media, it is speculated that the Real Estate Tax Reform may be
launched in certain first- and second-tier cities with relatively vibrant real estate markets.
Based on information available in the public domain, amongst the cities where our current
projects are located, we expect that Shanghai, Shenzhen, Guangzhou, Nanjing, Hangzhou,
Ningbo, Wuhan, Chengdu, Xiamen and Chongqing may fall into the ambit of the regions where
the Real Estate Tax Reform may take place. As of September 30, 2021, we had 85 contracted
projects in these cities, representing 35.1% of our total contracted GFA. As of September 30,
2021, we had 54 projects under management in these cities, representing 38.5% of our total
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GFA under management as of September 30, 2021. Revenue generated from our property
management services provided to these projects for the nine months ended September 30, 2021
accounted for 35.8% of our total revenue generated from property management services during
the same period.
With respect to properties under our management in these cities, as the Real Estate Tax
Reform will primarily have short-term impact on property sales and property transactions and
property owners and tenants are obligated to pay property management fees regardless of the
Real Estate Tax Reform, according to China Index Academy, we expect that the Real Estate Tax
Reform will not have a material adverse impact on projects under our management.
As of September 30, 2021, our contracted but undelivered GFA in these cities accounted
for approximately 15.5% of our total contracted GFA. With respect to contracted projects that
have not been delivered for our management, the Real Estate Tax Reform may have a
short-term impact on the sales progress of these properties, thereby affecting their occupancy
rates in the short term. However, according to China Index Academy, in the long run, the real
estate market is primarily affected by factors such as population, the supply and demand of
land and financial policies instead of the Real Estate Tax Reform. As such, in the long run, the
Real Estate Tax Reform is not expected to have a material adverse impact on our GFA under
management and property management fee income.
In addition, in line with our business strategy, we strive to obtain more mandates in
existing properties developed by Independent Third Parties and capitalize on future market
opportunities in non-residential properties through expanding our city operation services and
deepening our cooperation with strategic partners, thereby mitigating the potential adverse
impact of the Real Estate Tax Reform.
Based on the foregoing, our Directors are of the view, and the Joint Sponsors concur, that
the Real Estate Tax Reform is not expected to have imminent material adverse impact on our
business operations or financial performance. However, we will continue to monitor regulatory
updates in the Real Estate Tax Reform and further assess the impact of the Real Estate Tax
Reform as the implementation details about the Real Estate Tax Reform Policy become
available.
Recent Changes in Regulations on Real Estate Loans and Personal Housing Loans
Recently, the PRC government continued to implement stringent real estate industry
policies, including the “two centralized” land supply policy, and strengthened financial
regulations, which include the Joint Notice promulgated by the PBOC and the CBIRC on
December 28, 2020 to establish a concentration management system for real estate loans of
financial institutions in the banking industry. The Joint Notice requires the ratio of real estate
loans and the ratio of personal housing loans shall not exceed the upper limit of the ratio of
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real estate loans or the upper limit of the ratio of personal housing loans determined by the
PBOC and the CBIRC, and the development banks and policy banks shall implement this
requirements mutatis mutandis. Financial institutions in the banking industry whose
concentration of real estate loans exceeds the management requirements shall have an
adjustment plan to progressively attain the management requirements within the business
adjustment transitional period. The Joint Notice does not raise the interest rates of individual
housing loans, but limits the proportion of individual housing loans of various commercial
banks, which, together with the interest rate adjustment of individual housing loans, are control
measures taken by the PRC government to curb the overheated real estate market and promote
steady and healthy development of the real estate market. According to China Index Academy,
the Joint Notice mainly affects residential properties, and in the short term, in light of the Joint
Notice, some banks and financial institutions may be reluctant to provide financing to personal
housing mortgages, which in turn affects purchasing power of personal housing buyers,
residential property sales and the growth of real estate sector. However, according to China
Index Academy, in the long run, the overall impact of the Joint Notice on the real estate
industry is expected to be neutral and therefore unlikely to have material adverse impact on the
property management industry.
Our property management portfolio includes not only residential properties, but also
non-residential properties. We also offer a wide range of value-added services to non-property
owners and property owners. Therefore, based on the information currently available to us and
to the best of our knowledge after due and careful inquiry, as of the Latest Practicable Date,
the completion and delivery schedule of the properties developed by Jinmao Group was not,
and the property development plan of Jinmao Group in the long run are not expected to be,
materially and adversely affected by the relevant regulations on provision of personal housing
loans to purchasers of new and second-hand properties. Based on the foregoing, our Directors
are of the view that, the property management projects to be awarded by Jinmao Group to our
Group and our operations and financial performance are unlikely to be materially and adversely
affected solely because of the regulations introduced under the Joint Notice. As of the Latest
Practicable Date, nothing has come to the attention of the Joint Sponsors that would cause the
Joint Sponsors to disagree with the Directors’ view above.
On the supply side, according to China Index Academy, the aforementioned recent
regulatory developments are aimed to stabilize the land auction and property market, restrain
the overly aggressive expansion of property developers, improve risk resistance capability of
the real estate financing system, optimize the credit structure of the banking industry and
promote the healthy development of the real estate industry. In the short run, land auction in
certain cities are expected to postpone, which may lead to decreasing volume of land
transactions. In addition, property developers may face difficulties in refinancing and
increasing borrowing costs, and are expected to be more cautious in land acquisitions.
Consequently, the growth of the real estate market in the PRC is expected to slow down and
the property management industry is likely to be adversely affected due to delay in
construction and delivery of new properties as well as decreasing volume of real estate
transactions in the short run.
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Compared to smaller private real estate companies, the aforementioned recent regulatory
developments are likely to have less negative impact on financially sound and large scale
state-owned enterprises which have advantages in capital sufficiency. According to China
Index Academy, as of June 30, 2021, 22 cities subject to the “two centralized” policies have
completed first round of land auction in 2021 and state-owned enterprises accounted for 4 out
of the top 10 buyers in terms of both acquisition value and GFA. Correspondingly, business
operations and financial performance of the property management service providers affiliated
to those financially sound and large scale state-owned enterprises are likely to be subject to less
negative impact caused by the aforementioned recent regulatory developments.
As a large scale state-owned enterprise, Jinmao Group continues to achieve growth and
maintain sound financial ratios in 2021. In December 2021 alone, due to the tightened
regulation on real estate market and the macroeconomic environment, Jinmao Group recorded
a contracted sales amount of RMB21,985 million, representing a year-over-over decrease of
28.6%. However, Jinmao Group recorded an accumulative contracted sales amount of
RMB235,603 million in the twelve months ended December 31, 2021, representing a
year-over-year growth of 2%. As of December 31, 2021, Jinmao Group recorded a subscribed
(but not contracted) property sales amount of RMB6,501.15 million. In addition, none of China
Jinmao’s relevant financial ratios exceeded any of the “Three Red Line” standards as of June
30, 2021, and China Jinmao has been actively expanding a variety of financing channels,
including issuance of domestic medium-term notes, offshore senior notes and subordinated
perpetual securities since 2021.
On the basis of above, the Directors are of the view, and the Joint Sponsors concur, that
taking into account of the views of China Index Academy, the aforementioned recent regulatory
developments, including the Joint Notice, would be less likely to have a material adverse
impact on the land acquisition, liquidity and cash flow management of Jinmao Group, and
therefore less likely to have material adverse impact on the business and financial performance
of our Group.
Recent Changes in Cyber and Data Security Regulations
On November 14, 2021, the CAC published Draft Regulations. According to the Article
2 of the Draft Regulations, it applies to the activities relating to the use of networks to carry
out data processing activities within the territory of the PRC. As advised by our PRC Legal
Advisors, we are of the view that once the Draft Regulations becomes effective in the current
form, it will be applicable to our certain PRC domestic entity and the relevant requirements
shall be complied.
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On January 4, 2022, the CAC and other twelve PRC regulatory authorities jointly revised
and promulgated the Measures, which came into effect on February 15, 2022. The Measures for
Cybersecurity Review ( ) which took effect on June 1, 2020 was
abolished at the same time. According to the Measures, if a CIIO anticipates that its
procurement of network products and services affect or may affect national security after the
network products and services being put into use, it shall apply for cybersecurity review to the
Cybersecurity Review Office. The Measures also requires that network platform operators
possessing personal information of more than 1 million users that seek for listing in a foreign
country are obliged to apply for a cybersecurity review by the Cybersecurity Review Office.
According to the Critical Information Infrastructure Security Protection Regulations,
protection work departments are responsible for organizing the identification of CII within
their industries and sectors and notifying operators about the identification results. As of the
date of this Prospectus, we have not received any notification from relevant regulatory
authorities regarding our identification as a CIIO. Therefore, the obligation for CIIO to
proactively apply for cybersecurity review shall not be applicable to us as of the date of this
Prospectus. As advised by our PRC legal advisors, given the fact that, the number of users that
we process personal information as of the Latest Practical Date was significantly less than “one
million users” threshold, as well as the differentiation made by Article 13 of the Draft
Regulations by the CAC which clarifies that “listing in a foreign country” does not include
“listing in Hong Kong”, the obligations under the Measures to proactively apply for
cybersecurity review by a network platform operator seeking listing in a foreign country shall
not be applicable to the proposed listing in Hong Kong. As advised by our PRC legal advisors,
except the above voluntary filings, regulatory authorities may initiate cybersecurity reviews if
it is of the opinion that the network products and services as well as data processing activities
affect or may affect national security. Since there remain uncertainties with respect to the
interpretation and applicability of the criteria for determining the risks that “affect or may
affect national security” based on the risk factors set out in Article 10 of the Measures, we
cannot preclude the possibility that the risk factors may apply to us as network platform
operators, and we may be subject to cybersecurity review.
For details, see “— Standardization and Smart Management — Online Service Platform”.
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OVERVIEW
Immediately upon completion of the Bonus Issue, the Distribution and the Global
Offering (without taking into account the Distribution Adjustment and any Shares which may
be issued pursuant to the exercise of the Offer Size Adjustment Option and the Over-allotment
Option), China Jinmao will directly control approximately 67.5% of the issued share capital of
our Company. Hence, upon Listing, China Jinmao constitutes our controlling shareholder under
the Listing Rules.
Jinmao Group is a large-scale developer and operator of quality real estate projects in the
PRC. As disclosed in the annual report of China Jinmao for the year ended December 31, 2020,
Jinmao Group had a saleable/leasable GFA of approximately 82.7 million sq.m. which were yet
to be delivered by Jinmao Group as of the publication date of the annual report. Its contracted
sales amounted to approximately RMB231,100 million for the year ended December 31, 2020,
ranking 14th among the Top 100 Property Companies in China according to China Index
Academy. Jinmao Group had a market share of approximately 1.33% in terms of contract sales
according to the data released by the National Bureau of Statistics on the contracted sales of
commodity housing in China for the year ended December 31, 2020. For the year ended
December 31, 2020, Jinmao Group recorded a revenue of approximately RMB60,053.9 million
and a profit attributable to its owners of approximately RMB3,881.0 million. For the six
months ended June 30, 2021, it recorded a revenue of approximately RMB28,455.6 million and
a profit attributable to its owners of approximately RMB4,301.0 million.
China Jinmao is indirectly owned as to approximately 35.3% by Sinochem Group, a
large-scale conglomerate under the supervision of the SASAC. Sinochem Group is listed as one
of the Fortune 500 companies, ranking 109th in 2020. For the year ended December 31, 2020,
Sinochem Group recorded a net profit of approximately RMB15.1 billion. The business of
Sinochem Group covers a range of sectors including energy, chemicals, agriculture, real estate
and finance. Jinmao Group is the platform enterprise of Sinochem Group in the development
of real estate business. To the best knowledge, information and belief of the Directors, there
is no material competition between the businesses of Sinochem Group and our Group.
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DELINEATION OF BUSINESS
Overview
Jinmao Group is primarily engaged in city operations and property development,
commercial leasing and retail operations, as well as hotel operations in the PRC.
The table below sets forth the principal business operations of our Group and Jinmao
Group as at the Latest Practicable Date:
Our Group Jinmao Group
Business
focus
Our Group provides a wide range
of property management and
related value-added services,
forming an integrated service
offering to our customers along
the value chain of property
management. Major scope of
business includes:
(i) Property management
services at community level
such as security, cleaning,
greening, gardening and
repair and maintenance
services for the operation of
common area facilities, as
well as city operation
services at municipal level
in multiple forms
Jinmao Group primarily engages
in city operations and property
development, commercial leasing
and retail operations, as well as
hotel operations:
(i) City operations: involving
city upgrade and land
redevelopment in
collaboration with local
governments
(ii) Property development:
involving the development
of residential and
commercial properties
(iii) Commercial leasing and
retail operations: involving
the leasing of commercial
properties and office
buildings owned by Jinmao
Group
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Our Group Jinmao Group
(ii) Value-added services to
non-property owners,
including sales assistance
services to property
developers to assist with
their sales and marketing
activities at property sales
venues and display units,
consultancy and other
value-added services, such
as pre-delivery and
consultancy services, mainly
to property developers
(iii) Community value-added
services, including platform
services for interior
decoration, community
living services such as
housekeeping, new retail
and catering services,
community space operation
services such as elevator
advertising services and car
park space management
services, and real estate
brokerage services
(iv) Hotel operations
Customers Primarily property owners and
residents, property developers,
and advertising companies
Property buyers, lessees and
hotel guests
Key revenue
source
Fees from property management
services and value-added services
Proceeds from property sales,
rent from tenants and hotel
booking fees
Suppliers The main suppliers include
subcontractors providing
cleaning, greening, maintenance,
security and housekeeping
services, and suppliers of
products, equipment and
materials
The main suppliers include
engineering and construction
companies for the property
development business
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Business delineation between our Group and Jinmao Group
Upon completion of the Spin-off, the businesses of our Group and Jinmao Group will be
clearly delineated. Jinmao Group principally assumes the roles of owner, investor and/or
operator in respect of the properties developed or invested by Jinmao Group with the purpose
of maximizing Jinmao Group’s investment interests and brand value in such self-developed
properties; whereas our Group is principally an asset light service provider without holding any
ownership interest in its managed properties, with its property management services aimed at
keeping the properties under management safe, clean and functional and its other value-added
services aimed at facilitating the sales and marketing activities of property developers and
addressing the lifestyle needs of existing residents.
While our Group and Jinmao Group operate in the same market segments of residential
and commercial properties and are both operating on a national scale, the nature of their
operations complements and does not compete with each other. Whilst there exist limited
overlapping or similar businesses described below, we believe that these will not materially
affect the business delineation between our Group and Jinmao Group.
(a) Property management services with respect to the Zhuhai Project
Upon completion of the Spin-off, Jinmao Group will not engage in the property
management business, save for the Zhuhai Every Garden Project ( ,
the “Zhuhai Project”), a residential development project with a GFA of approximately
137,225 sq.m. All units of the Zhuhai Project have been delivered to the property buyers.
After the dissolution of the first session of the property owners’ association in December
2018, no new session of the property owners’ association has been established for the
Zhuhai Project. The Zhuhai Project is currently under the management of the Zhuhai
Branch (the “Zhuhai Branch”) of Sinochem Hotel, a wholly-owned subsidiary of China
Jinmao, and the existing property management contracts in relation to the Zhuhai Project
will expire if and when the property owners’ association is established and if it selects to
enter into a new property management contract with third party property management
company, which is at the independent prerogative of such property owners’ association.
For the following reasons (primarily beyond control of our Group and Jinmao
Group), the property management services with respect to the Zhuhai Project (the
“Zhuhai Property Management Business”) has not been included in our Group as part
of the Reorganisation:
(i) Not feasible for equity transfer of the Zhuhai Branch — the Zhuhai Property
Management Business cannot be transferred to our Group via an intra-group
equity transfer of the Zhuhai Branch. The Zhuhai Branch is a branch company
who does not have a separate legal personality, and is therefore not transferable
under applicable PRC laws and regulations.
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(ii) Not feasible for equity transfer of Sinochem Hotel — the Zhuhai Branch is a
branch company of Sinochem Hotel. The main asset of Sinochem Hotel is the
Sinochem Tower, an office building in Beijing. Sinochem Hotel is mainly
engaged in the operation and leasing of the Sinochem Tower, but is not
involved in any property management business (except for the Zhuhai Property
Management Business provided by the Zhuhai Branch). An equity transfer of
Sinochem Hotel to our Group is not in line with the asset light business nature
of our Group or its business focus as a property management service provider
without holding any ownership interest in its managed properties.
(iii) Not feasible for subcontracting the business — according to the Civil Code
( ) of the PRC, a property management service provider shall not
subcontract the property management services as a whole to any third party.
Due to such legal restriction, there is practical difficulty for Jinmao Group to
subcontract or transfer the Zhuhai Property Management Business in entirety
to our Group or any third party.
(iv) No control over the change of property management service provider —
according to the Civil Code ( ) of the PRC, for residential
properties, the change of property management service provider shall be
determined by the property owners at a general meeting. A quorum for the
general meeting of the property owners shall consist of the property owners
who hold more than two-thirds of the total GFA of the exclusive area of the
property and who represent more than two-thirds of the total number of
property owners. The general meeting of the property owners can change a
property management service provider with affirmative votes of property
owners who hold more than half of the total GFA of the exclusive area owned
by the property owners participating in the voting and who represent more than
half of the total number of property owners participating in the voting. The
holding of and outcome of any voting at the general meeting of property
owners is independent of Jinmao Group as well as our Group. Neither Jinmao
Group nor our Group has any power to call the general meeting of the property
owners, or procure the holding of the general meeting within any specific
period of time, nor is Jinmao Group or our Group able to exert any control over
the voting results of the general meeting of the property owners.
According to the Zhuhai Administrative Measures on the Tendering and
Bidding for Property Management Services (
) and based on our anonymous consultation with the local real estate
administration department (being the competent authority to advise on such
matters), after the general meeting of the property owners decides to change
the property management service provider, a new property management service
provider shall be selected through a public tender process. If two rounds of
public tender process have been organized and there are less than three bidders
in each round, an alternative method of selection by agreement can be adopted
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in which case a general meeting of the property owners must be held to
approve the method of selection by agreement. Neither Jinmao Group nor our
Group has any influence over the process of change of the property
management service provider, and there is no assurance that either Jinmao
Group or our Group will be selected by the property owners as the new
property management service provider of the Zhuhai Project.
Even if any member of our Group is successfully selected as the new property
management service provider of the Zhuhai Project, a new property
management contract must be signed by the property owners’ association
according to the Regulation on Property Management of the Zhuhai Special
Economic Zone ( ). As there is currently no
property owners’ association in place, a general meeting of the property owners
must be held to approve the establishment of the property owners’ association
or a property management committee acting on behalf of the property owners’
association, which is again beyond the control of Jinmao Group or our Group
as described above.
As such, it is expected that Jinmao Group will continue to manage the Zhuhai
Project according to the terms of the current property management contracts. It is
submitted that the retention of the Zhuhai Property Management Business by Jinmao
Group is essentially a legacy issue that is not anticipated to have materially negative
impact on the business delineation between our Group and Jinmao Group for the
following reasons:
(i) Immateriality — if the Zhuhai Property Management Business had been
undertaken by our Group, the GFA of the Zhuhai Project would have accounted
for only approximately 1.3%, 1.1% and 0.8% of the total GFA under the
management of our Group as at December 31, 2018, 2019 and 2020,
respectively, and the revenue generated therefrom for each of the three years
ended December 31, 2018, 2019 and 2020, being approximately RMB5.11
million, RMB5.34 million and RMB5.88 million, respectively, would have
accounted for only approximately 0.9%, 0.7% and 0.6% of the total revenue of
our Group for the relevant period. As such, the Zhuhai Property Management
Business is insignificant as compared to the overall business of our Group.
(ii) Not the principal business of Jinmao Group — for each of the three years
ended December 31, 2018, 2019 and 2020, the Zhuhai Property Management
Business accounted for only approximately 0.01% of the total revenue of
Jinmao Group for the relevant period. After the Spin-off, Jinmao Group will
continue to focus on the business of city operations and property development,
commercial leasing and retail operations, as well as hotel operations in the
PRC.
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(iii) No involvement in any other project — during the Track Record Period and up
to the Latest Practicable Date, the Zhuhai Branch did not engage in any
property management business except for the Zhuhai Property Management
Business, and Jinmao Group has confirmed to our Group that it has no
intention to expand the property management business of the Zhuhai Branch to
cover any other property after the Spin-off.
(iv) Undertaking from China Jinmao — to protect our Group from potential
competition in the future with respect to our provision of property management
business, China Jinmao has entered into the Deed of Non-Competition in
favour of our Group. In particular, China Jinmao has undertaken to our Group
that if the general meeting of the property owners of the Zhuhai Project decides
to change the property management service provider and establish the property
owners’ association, and a public tender process is launched for the selection
of service provider for the management of the Zhuhai Project, China Jinmao
shall not, and shall procure its close associates not to, participate in the public
tender process, and shall provide and procure its close associates to provide
necessary assistance to our Group for our participation in the process should
our Group choose to do so. For details on the Deed of Non-Competition, please
refer to “— Deed of Non-Competition” in this section.
(b) Sales agency services with respect to newly developed residential properties
Our Group commenced providing sales agency services to Jinmao Group in
November 2020 and intends to also provide such services to other property developers,
by sourcing potential buyers of newly developed residential properties and assisting
property developers in entering into sale and purchase agreements with such buyers. Our
Group has been providing real estate brokerage services to property owners and residents
for secondary sales of properties, and the provision of sales agency services to property
developers is considered as a natural extension of the brokerage services of our Group for
secondary sales.
Following the Spin-off, Jinmao Group will continue to sell its self-developed
properties as a direct vendor. Our Directors do not consider the sales efforts of our Group
and Jinmao Group constitute any competition between the parties for the following
reasons:
(i) Mutually beneficial in nature:
Need for sales agency services from Jinmao Group’s perspective:
• For property developers in the PRC, the ability to quickly and efficiently
recoup and recycle capital is critical to achieve sustainable growth.
Similar to other property developers in the PRC, to the knowledge of our
Group, Jinmao Group has been, during the Track Record Period and up to
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the Latest Practicable Date, engaging third-party agents to sell its newly
developed residential properties as a means to effectively expand its sales
channels to enable it to quickly recover their investments which may be
used to meet their development and financial needs in other projects. It is
common for property developers in the PRC to sell their properties both
as direct vendors and through sales agents at the same time. Whilst the
property developers would need to pay additional agency fee to such sales
agents, this is justified by the ability of the developers to more quickly
monetize their investments and is therefore still commercially attractive
from the property developers’ perspective. The decision on whether to
introduce third party agents to help with sales of projects is determined
by Jinmao Group on a case by case basis ranging from factors such as
initial sales performance, targeted recovery of investment and other
reasons more particularly set out below and is independent from concerns
of our Group who does not benefit from exclusive arrangements. The
engagement of our Group as a sales agent may further expand the sales
channels of Jinmao Group and boost its sales volume and amount.
• To the knowledge of our Group, Jinmao Group has a well-established
sales team who is responsible for the branding, positioning and sales and
marketing of its property developments. It will determine whether to
engage any third-party agents for the sale of a particular project after
taking into account various factors, including the location and difficulty
of sales of the particular project, as well as the sales progress after the
opening for sale of the project. Jinmao Group usually engages third-party
agents to sell its less attractive properties by taking advantage of the
extensive and different customer base of the agents, so as to generate
sales proceeds in a most timely manner.
• Aiming to solicit as many potential buyers as possible, to the knowledge
of our Group, Jinmao Group treats referrals from the sales agents,
including our Group, on similar terms and does not offer preferential
terms to any particular agent. The interests of the shareholders of Jinmao
Group would not be compromised but rather enhanced as a result of the
additional sales avenues from the engagement of our Group. In such
cases, even if Jinmao Group was unable to engage our Group as a sales
agent, it would engage another third party agent to assist with its sales
efforts.
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Motivation to provide sales agency services from our Group’s perspective:
• Our Group has been providing real estate brokerage services to property
owners and residents for secondary sales of properties. Having set up a
department and offline stores for the brokerage services for secondary
sales, our agency services can be easily expanded to newly developed
residential properties, better tap into our existing user data and not
require significant capital investment or resource input.
• Leveraging on our established platform for secondary sales of properties
and our relationship and familiarity with property owners or residents of
the projects under our management, our Group may have first-hand
knowledge of the demand of property owners or residents for home
purchase, and is therefore well positioned to provide the sales agency
services to the property developers, including Jinmao Group.
• The provision of sales agency services by our Group will increase our
commission income and promote the development of our value-added
services business. Our Group is not reliant on favorable terms from
Jinmao Group and has the ability to bring in potential buyers and offer
high quality services to facilitate a transaction between Jinmao Group and
the potential buyer. From our Group’s perspective, the competition in
sales agency services is more likely to be with other third-party sales
agents, rather than with Jinmao Group.
• Our Group will independently evaluate the newly developed residential
property projects, including those developed by Jinmao Group and
independent property developers, and the terms of sales agency contracts
offered before taking on any specific project.
(ii) Clear delineation of the business
• Different business model — Jinmao Group will continue to sell its
self-developed properties as a direct vendor, while our Group will, in
addition to our real estate brokerage services to property owners and
residents for secondary sales of properties, act as an agent to assist
property developers in entering into sale and purchase agreements with
potential buyers in exchange for a commission paid by the property
developers. Jinmao Group has confirmed to our Group that it has no
intention to engage in the business of sales agency services.
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• Different business scopes — our Group will provide real estate brokerage
services for secondary sales of properties and sales agency services with
respect to newly developed residential properties, which are not limited
to the properties developed by Jinmao Group, but will also include those
developed by Independent Third Parties. By contrast, to the knowledge of
our Group, Jinmao Group only sells its self-developed properties as a
direct vendor, as an inherent function of a property developer, and will
not act as agent to sell any properties developed by other property
developers.
• Different purposes — our Group strives to earn commission fees and
serve as many different developers as possible to maximize our
commission income, while the aim of Jinmao Group is to promote the
sales of its self-developed properties and engage suitable agents to
maximize its sales volume and expedite its recovery of sales proceeds.
• Different source of customers — potential buyers that may be referred by
our Group to Jinmao Group are mainly property owners and residents of
residential projects under the management of our Group, whom we
maintain close contact with as a result of our provision of property
management services. The target customers of Jinmao Group in its direct
sales are much broader (potentially wider spectrum of members of the
public).
While we cannot rule out the possibility that potential buyers who are not
property owners or tenants of residential projects under our management
approach us to buy newly developed properties of Jinmao Group, it is
expected that the vast majority of the customers of our Group for the sales
agency services will still be our existing customers who are most likely
to have downloaded the mobile application of our Group or have
otherwise learned from us the information of the new development
projects of Jinmao Group. From Jinmao Group’s perspective, the
engagement of all sales agents, including our Group, is a way to help it
acquire potential customers, rather than a competition with the sales
agents for potential customers. Since our Group commenced providing
sales agency services to Jinmao Group in November 2020 and up to the
Latest Practicable Date, all potential buyers referred by our Group to
Jinmao Group, whether or not leading to a successful transaction, are
property owners or tenants of residential projects under the management
of our Group. The customer base of our Group as a property management
company is not expected to change materially in a foreseeable future.
Given the non-core business nature and immateriality of the sales agency
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services as further described under (iii) below, we consider that the
possibility of overlap in potential customers of the sales agency services
will not affect the delineation of business of our Group from Jinmao
Group.
• Different sale process — to the knowledge of our Group, Jinmao Group
sells its property development projects mainly through its in-house sales
team, but depending on the project conditions and targeted customer
group, may also engage third party agents to help with sales of projects.
The third party agents engaged by Jinmao Group include (i) sales agents
who station a team of sale personnel on-site to market the project and
assist potential buyers, and (ii) sales agents who are not stationed at the
sales venue of the project (the “Off-site Agents”) but are expected to
introduce potential buyers to the sales venue. The sales agency services
provided by our Group do not involve stationing of personnel at the sales
venue of any project. To the knowledge of our Group, Jinmao Group does
not engage any Off-site Sales Agents, such as our Group, at the time of
the opening for sale of any project. If it considers an additional sales
channel may be required, it usually engages Off-site Sales Agents three to
six months after the opening for sale of the project when it has a clear
assessment of the sales conditions of the project. Third party sales agents
are typically engaged to assist with the selling of less attractive
properties.
In the same manner as any other third party Off-site Agents, if our Group
identifies or is approached by a potential buyer who is interested in a new
development project of Jinmao Group, our Group will introduce the
potential buyer to the sales venue of the project where the sales team of
Jinmao Group will receive the potential buyer, show him the display unit,
and provide him with detailed information of the project and the available
units for sale. Our Group will accompany the potential buyer on meetings
with the sales team of Jinmao Group, but it cannot determine the sales
price of any particular unit of the project or the scope of units open for
sale at any particular time, which are at the sole discretion of Jinmao
Group. If the potential buyer decides to buy a unit, the sales team of
Jinmao Group will liaise with the potential buyer directly on the contract
signing and payment arrangements, and our Group will be informed of the
progress of the transaction. Jinmao Group’s own sales team will
participate and handle the sale process regardless of source of customers
(directly obtained or through sales agents, whether third parties or our
Group), including assisting buyers in applying for mortgage loans to
banks with which Jinmao Group has mortgage arrangements, and
completing registrations to obtain ownership certificate and delivering
the same to the property buyer.
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Set out below is a summary of the key differences of the sales agency services
provided by our Group and the direct sales by Jinmao Group:
Sales agency services
provided by our Group
Direct sales of properties
by Jinmao Group
Different
business
model
• Brokerage services for
property owners and
residents and sales
agency services for
property developers.
• Charging commissions
calculated at a fixed
percentage of the
actual purchase price.
• Direct sales of its self-
developed properties as
an inherent function of
a property developer.
• Receiving proceeds
based on the actual
purchase price.
Different
scope
• Intention to provide
sales agency services
to different property
developers and no
exclusive tie into
Jinmao Group.
• No intention to enter
into sales agency
business.
Different
purposes
• Purpose is to earn
commission fees, and
to serve as many
different developers as
possible to maximize
our commission
income.
• Purpose is to promote
sales of its self-
developed properties,
and to engage suitable
agents to maximize its
sales volume and
expedite its recovery
of sales proceeds.
Different
source of
customers
• Property owners and
residents of residential
projects under our
management as our
main source of
customers.
• General public.
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Sales agency services
provided by our Group
Direct sales of properties
by Jinmao Group
Different sale
process
• No engagement until a
later stage, usually
three to six months
after the opening for
sale of a project.
• No discretion on sales
price or scope of units
open for sale and no
involvement in
handling mortgage
loan arrangement or
ownership registration
process.
• Participation in the
whole process of sales
and marketing.
• Handling sale process
regardless of source of
customers (directly
obtained or through
sales agents).
(iii) Immateriality
• From the perspective of our Group — the sales agency business with
respect to newly developed residential properties is an ancillary business
which does not and will not form part of the core business of our Group.
The estimated revenue of our Group from commissions earned from the
sales agency services with respect to newly developed residential
properties of Jinmao Group (i.e. the annual cap for such services as set
out in the section headed “Connected Transactions — Continuing
Connected Transactions Which are Subject to the Reporting, Annual
Review, Announcement, Circular and Independent Shareholders’
Approval Requirements — Property Agency Services Framework
Agreement” in this prospectus) for each of the two years ending
December 31, 2022 and 2023 will account for less than 3% of the total
revenue of our Group for the year ended December 31, 2020. With the
business growth of our Group, it is expected that the percentage of the
estimated revenue from such sales agency services to the total revenue of
our Group for the two years ending December 31, 2022 and 2023 will
decrease substantially.
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• From the perspective of Jinmao Group — for each of the three years
ended December 31, 2020, selling and marking expenses of Jinmao
Group accounted for less than 5% of the revenue of Jinmao Group from
its sale of properties in the city and property development segment. As
the selling and marketing expenses of Jinmao Group include not only the
commissions paid to the Off-site Agents, but also those paid to other
agents and all advertising and marketing expenses, the commission
payment to the Off-site Agents as a percentage to the revenue of Jinmao
Group in the relevant segment would be much lower. The engagement of
our Group as a sales agent is not expected to materially change the
composition of the selling and marking expenses of Jinmao Group or the
percentage of such expenses to the revenue of Jinmao Group. From the
perspective of Jinmao Group, if the size of the sales agency services
provided by our Group with respect to its newly developed residential
properties is to be measured by dividing the estimated commission
payment to our Group in each of the two years ending December 31, 2022
and 2023 by the total revenue of Jinmao Group for the year ended
December 31, 2020 (similar to a size test in a connected transaction
scenario), the percentage ratio would be less than 0.1%.
(c) Sales agency services with respect to unsold car park spaces
Our Group provides sales agency services to Jinmao Group with respect to unsold
car park spaces of the projects under our management, by sourcing potential buyers of
unsold car park spaces and assisting Jinmao Group in entering into sale and purchase
agreements with such buyers. Our Group intends to also provide sales agency services to
other property developers with respect to unsold car park spaces.
Following the Spin-off, Jinmao Group will continue to sell its self-developed car
park spaces as a direct vendor. Our Directors do not consider the sales efforts of our
Group and Jinmao Group constitute any competition between the parties for the following
reasons:
(i) Mutually beneficial in nature — after the property developers, including
Jinmao Group, substantially deliver the properties to property buyers, it is very
common that a number of car park spaces remain unsold. Our Group, as the
property management service provider, is well positioned to provide the sales
agency services to the property developers with respect to the unsold car park
spaces leveraging on our position as the property manager for the development
and also our relationship and familiarity with property owners. The provision
of sales agency services may facilitate the sale of car park spaces developed by
Jinmao Group through an additional sales channel. On the other hand, this will
increase the commission income of our Group and promote the development of
RELATIONSHIP WITH CHINA JINMAO
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our value-added services business. Such arrangement would be mutually
beneficial to both our Group and Jinmao Group and serves as an effective
supplement to the existing sales channel of Jinmao Group.
(ii) Different time of the sales — Jinmao Group, as developer of a project, would
initially be responsible for sales of both properties and car park spaces. Upon
substantial delivery of property units, Jinmao Group would then negotiate with
sales agents, such as our Group, on the scope of services to be engaged with
respect to the remaining unsold car park spaces of each individual project
taking into account the location and difficulty of sales of the particular project.
Once such terms are agreed, our Group will be authorized to sell the specified
unsold car park spaces of the particular project, and property developers,
including Jinmao Group, will no longer sell the same car park spaces. Jinmao
Group has confirmed to our Group that our Group and Jinmao Group will not
sell the same car park spaces at the same time.
(iii) Different business scopes — our Group will provide the sales agency services
with respect to unsold car park spaces, which are not limited to the car park
spaces developed by Jinmao Group, but will also include those developed by
Independent Third Parties. By contrast, to the knowledge of our Group, Jinmao
Group only sells car park spaces in its self-developed projects as a direct
vendor, and will not act as agent to sell any car park spaces in projects
developed by other property developers. Jinmao Group has confirmed to our
Group that it has no intention to engage in the business of sales agency
services.
Based on the foregoing, we believe that (i) there is clear delineation between our
business and the business of Jinmao Group; (ii) there will be no direct or material
competition between our Group and Jinmao Group upon completion of the Spin-off; and
(iii) sufficient arrangements are or will be in place to ensure the clear delineation and
minimal competition between Jinmao Group and our Group.
Rule 8.10 of the Listing Rules
Save as disclosed above, as at the Latest Practicable Date, none of China Jinmao and our
Directors had any interest in any other business which competes or is likely to compete, either
directly or indirectly with our business which would require disclosure under Rule 8.10 of the
Listing Rules.
RELATIONSHIP WITH CHINA JINMAO
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INDEPENDENCE FROM CHINA JINMAO
We believe that we are capable of carrying on our business independently of China
Jinmao and its close associates (other than our Group) after the Listing for the following
reasons:
Administrative independence
Most, if not all of the essential administrative functions of our Group have been during
the Track Record Period, and will be, handled by our own team independently of Jinmao Group
without support from Jinmao Group.
Our Group and Jinmao Group have been sharing certain information technology systems
and financial management software on a clear cost allocation basis. Notwithstanding any
sharing of resources to optimize the administration costs structure of our Group, all essential
functions involving any management decision or discretion will be retained and performed by
our Group independently of Jinmao Group.
In particular, our Group has established our own finance department with a team of
finance staff responsible for financial control, accounting and reporting, group credit, risk
management and internal control. Jinmao Group has no access to the financial data of our
Group and the finance staff of our Group can operate our financial system independently.
Management independence
Our Board comprises two executive Directors, three non-executive Directors and three
independent non-executive Directors. For further details of our Directors, please refer to the
section headed “Directors and Senior Management” in this prospectus. The following table sets
forth details of the role of our Directors in our Group and in Jinmao Group.
Name of Director
Position(s) in our Company
upon Listing
Position(s) in Jinmao
Group upon Listing
Mr. Xie Wei Executive Director and the
chief executive officer
None
(1)
Ms. Zhou Liye Executive Director and the
chief financial officer
None
Mr. Jiang Nan Non-executive Director and
chairman of the Board
Executive director and the
chief financial officer of
China Jinmao
RELATIONSHIP WITH CHINA JINMAO
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Name of Director
Position(s) in our Company
upon Listing
Position(s) in Jinmao
Group upon Listing
Ms. He Yamin Non-executive Director Human resources director
of China Jinmao
Ms. Qiao Xiaojie Non-executive Director Deputy financial controller
of China Jinmao
Dr. Chen Jieping Independent non-executive
director
None
Dr. Han Jian Independent non-executive
Director
None
Mr. Sincere Wong Independent non-executive
Director
None
Note:
1. As at the Latest Practicable Date, Mr. Xie Wei is a vice president of China Jinmao. He will resign from
his position in China Jinmao with effect from the Listing Date.
Our Group does not rely on Jinmao Group in terms of directorship and management, and
that the day-to-day operations and management functions of our Group, upon Listing, can be
managed independently of Jinmao Group, given that:
(i) while Mr. Xie Wei, an executive Director and the chief executive officer of our
Company, is also a vice president of China Jinmao, he will resign from his position
in China Jinmao with effect from the Listing Date and will focus on the affairs of
our Group upon Listing;
(ii) while Mr. Jiang Nan, an executive director and the chief financial officer of China
Jinmao, Ms. He Yamin, the human resource director of China Jinmao, and Ms. Qiao
Xiaojie, a deputy financial controller of China Jinmao, are non-executive Directors
of our Company, they are not and will not be involved in the day-to-day management
of our Group and will only contribute from a non-executive capacity at the board
level;
(iii) as at the Latest Practicable Date, other than Mr. Xie Wei (as disclosed in (i) above),
none of the core management team of our Group with executive functions held any
position in Jinmao Group;
(iv) our Group has and will have a sufficient level of independence of directorship and
management and a team of full-time senior management and employees focused
exclusively on its businesses;
RELATIONSHIP WITH CHINA JINMAO
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(v) our Company has and will have sufficient number of independent non-executive
directors which meets the requirements of the Listing Rules to protect the interests
of our Company and the Shareholders as a whole; and
(vi) each of the Directors is aware of his/her fiduciary duties as a Director, which
require, among other things, that he/she acts for the benefit and in the best interests
of our Company and does not allow any conflict between his/her duties as a Director
and his/her personal interests. In the event of any actual or potential conflict of
interest between our Group and Jinmao Group, the conflicted directors will be
required to abstain from voting on the relevant board resolution and the other
directors will vote and decide on the matter.
Nevertheless, to address potential conflict of interests that may arise in the future, our
Company has adopted certain corporate governance measures. Please refer to “- Corporate
Governance” in this section for details.
Based on the reasons above, our Directors are of the view that our Group is capable of
managing our business independently from China Jinmao and its close associates following the
completion of the Spin-off.
Financial independence
Save as disclosed in the section headed “Financial Information — Related Party
Transactions and Balances”, as at the Latest Practicable Date, (i) our Group does not have
amount of non-trade nature due from and to China Jinmao or its close associates and (ii) our
Group had not provided any guarantee in respect of any loans of China Jinmao or its close
associates, or vice versa.
Further, our Group is able to finance our own operations. Please refer to the section
headed “Financial Information — Liquidity and Capital Resources” for further details.
Accordingly, we believe we are able to maintain financial independence from China
Jinmao and its close associates.
Operational independence
We engage in our business independently from China Jinmao and its close associates,
with the independent right to make operational decisions and implement such decisions, and we
do not have undue reliance on China Jinmao.
RELATIONSHIP WITH CHINA JINMAO
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Selection process for service provider
(a) Independent tendering and bidding/selection process for property management
service provider
(i) Management of residential properties before delivery
Our Group provides property management and related services to the
residential projects of Jinmao Group at the pre-sale and pre-delivery stages.
Historically, our Group has procured initial property management service
engagements from Jinmao Group mainly through standard public tender
process regulated by applicable PRC laws and regulations.
In accordance with the Interim Measures on the Tendering and Bidding for
Initial Property Management Services (
) of the PRC, all initial property management services contracts of
residential buildings and non-residential buildings in the same development
would need to go through a competitive tendering process, which is a common
market practice in the property management sector in the PRC, unless (1) the
residential building in question is considered by the relevant local real estate
administration department as being insignificant and does not warrant a
tendering process; or (2) there are less than three bidders for the services and
the relevant local real estate administration department allows the engagement
of a property management company directly through agreement without going
through a tendering process.
Such public tender is a well-established, competitive and fairly structured
process. Our Group has been able to successfully win tenders on our own merit
of our services and reputation and does not enjoy any preferential treatment in
the selection process for properties developed by Jinmao Group and is not
granted property management contracts simply due to our intra-group
relationship with Jinmao Group. For further details of the tender and bidding
process, please refer to the section headed “Business — Property Management
Services — Growth of Our Property Management Project Portfolio” in this
prospectus.
(ii) Management of residential properties after delivery
After the delivery of residential properties by Jinmao Group to the property
buyers, the property management services are provided by our Group directly
to the property owners, and the property owners have the right to change the
property management service provider.
RELATIONSHIP WITH CHINA JINMAO
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According to the Civil Code ( ) of the PRC, for residential
properties, the engagement or dismissal of property management service
provider shall be determined by the property owners at a general meeting. A
quorum for the general meeting of the property owners shall consist of the
property owners who hold more than two-thirds of the total GFA of the
exclusive area of the property and who represent more than two-thirds of the
total number of property owners. The general meeting of the property owners
can engage or dismiss a property management service provider with
affirmative votes of property owners who hold more than half of the total GFA
of the exclusive area owned by the property owners participating in the voting
and who represent more than half of the total number of property owners
participating in the voting.
The property owners are independent of Jinmao Group and our Group and have
the right to engage or dismiss the property management service provider at
their discretion. Neither Jinmao Group nor our Group has any influence, or can
exert any control, over such process of change of the property management
service provider. Benefitting from the quality of our Group’s property
management services and brand recognition, our Group has a proven track
record of maintaining a high project renewal rate in respect of our property
management business. Other than two projects that did not match with our
profitability criteria which we terminated on a voluntary basis in 2019 and the
nine months ended September 30, 2021, we had renewed all of our property
management contracts during the Track Record Period. This reflects the
property management capabilities of our Group and shows that our Group is
able to operate independently of Jinmao Group.
(iii) Selection process for property management service provider of commercial
properties
While there are no regulatory requirements on the property owners to conduct
tendering and bidding process for the procurement and renewal of property
management services with respect to commercial properties, our Group still
has to go through a selection process in order to obtain the contracts for such
services. For commercial properties developed by Jinmao Group, our Group
will be invited to submit a proposal on the property management services, and
Jinmao Group will review and assess the proposal and determine whether or
not to award the contracts to our Group based on various factors including our
Group’s experience, positioning strategies, pricing standard and brand image.
RELATIONSHIP WITH CHINA JINMAO
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(b) Selection of community value-added service provider
The community value-added services, as an extension of the property management
services, are provided by our Group mainly to the property owners and residents of its
managed properties.
Certain community value-added services, including community space operation
services such as elevator advertising services and car park space management services,
are secured by our Group primarily by leveraging our capacity as the incumbent property
management service provider to the relevant property or community. Once our Group is
engaged as the property management service provider for the relevant projects, whether
or not the projects are developed by Jinmao Group and its joint ventures and associates,
our Group will naturally become the service provider of such community value-added
services. As the property owners have the right to change the property management
service provider at their discretion as described above under the paragraphs headed
“Independent tendering and bidding/selection process for property management service
provider”, our Group has to offer high quality services to build and maintain sustainable
customer relationships, and ensure the continuous engagement as a service provider for
the property management services as well as such community value-added services.
For other community value-added services, such as platform services for interior
decoration, community living services such as housekeeping, new retail and catering
services, and real estate brokerage services, customers select service providers based on
their lifestyle and daily needs, the scope and quality of services provided and the fee rate
charged for providing such services. While the customers of such services may be
residents and owners of properties developed by Jinmao Group and its joint ventures and
associates, the identity of the property developer has no bearing on such customers’
selection of the community value-added service provider. During the Track Record Period
and up to the Latest Practicable Date, none of Jinmao Group and our Group had bundled
any products or services to their respective customers.
(c) Selection of service provider for value-added services to non-property owners
The value-added services to non-property owners are mainly provided to property
developers. During the Track Record Period and up to the Latest Practicable Date, our
Group was awarded contracts for such services at market price after arms’ length
negotiation with property developers, including Jinmao Group. In particular, to the
knowledge of our Group, Jinmao Group is required under its internal policy to obtain
reference quotations and proposals from independent third parties for its selection of
service providers for sales agency services with respect to newly developed properties
and car park spaces, and determine whether to engage our Group or independent service
providers for such services after taking into account various factors including their
experience, customer base, business scale and pricing standards. Our Group’s engagement
by Jinmao Group for all value-added services have been and will continue to be in line
with market standards.
RELATIONSHIP WITH CHINA JINMAO
– 330 –
Mutual complementary relationship
Our Group has a well-established and ongoing business relationship with Jinmao Group
for over 20 years and has provided principally property management services to Jinmao Group.
As confirmed by China Index Academy, such business relationship between our Group and
Jinmao Group is common among property management companies and their parent or related
companies which are property developers.
During the Track Record Period, we were engaged to manage most of the properties
developed by Jinmao Group and its joint ventures and associates. Based on information
available to us, as of December 31, 2018, 2019 and 2020 and June 30, 2021, in terms of the
total GFA, approximately 91.0%, 93.0%, 89.0% and 89.0% of the properties developed by
Jinmao Group and its joint ventures and associates were managed by our Group, respectively.
As of June 30, 2021, a total of 29 projects developed by Jinmao Group and its joint ventures
and associates with an aggregate GFA of approximately 2.2 million sq.m. were not managed
by us, including (i) 14 residential projects with an aggregate GFA of approximately 1.5 million
sq.m. and four office buildings with an aggregate GFA of approximately 52,400 sq.m.. Save for
the Zhuhai Project, a residential project, which is currently under the management of the
Zhuhai Branch of Sinochem Hotel for reasons described under the paragraphs headed
“Property management services with respect to the Zhuhai Project” above, all other residential
projects and office buildings which were not under our management were projects of Jinmao
Group developed through its joint ventures and associates, where Jinmao Group either did not
have a controlling or majority interest or had no intention to be involved in the daily
operations; (ii) one shopping mall located in Lijiang, Yunnan province with a GFA of
approximately 21,900 sq.m., which did not match with our profitability criteria; and (iii) ten
hotels with an aggregate GFA of approximately 611,200 sq.m., all of which were managed by
hotel managers, being globally renowned operators of hotels appointed by Jinmao Group to
manage the day-to-day operations of the hotels. We do not and have no intention to engage in
the business of hotel operation and management. Such projects of Jinmao Group and its joint
ventures and associates which were not under our management accounted for approximately
9.5% of our total GFA under management as of September 30, 2021.
During the Track Record Period, we also provided property management services for one
project developed by a subsidiary of Sinochem Group (not being a member of Jinmao Group
and its joint ventures and associates). The project is an office building located in Shanghai with
a total GFA under management of approximately 32,180 sq.m, which is mainly used by
Sinochem Group and its joint ventures and associates as office premises. As of September 30,
2021, the GFA of this project accounted for approximately 0.1% of our total GFA under
management. To the best of our knowledge, as the properties developed by Sinochem Group
and its joint ventures and associates are mainly for self-use purposes, Sinochem Group does not
maintain GFA data for such properties, and therefore our managed GFA as a percentage of the
total GFA of the properties developed by Sinochem Group and its joint ventures and associates
is not available.
RELATIONSHIP WITH CHINA JINMAO
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Over the years, our Group has developed and strengthened our own expertise and
branding in the property management services sector. The business relationship between our
Group and Jinmao Group has been mutually beneficial and complementary, and our Directors
consider that it is unlikely that the relationship will materially adversely change in the
foreseeable future on the following grounds:
(i) Jinmao Group’s principal businesses of property development and commercial
leasing require property management services and various value-added services in
its business development and daily operations from time to time. To Jinmao Group,
as a leading developer in the PRC, it is critical to ensure the satisfaction of
customers, and it is beneficial for Jinmao Group to appoint a quality property
management service provider that is consistent with its own branding, marketing
positioning and service quality. As disclosed in the annual report of China Jinmao
for the year ended December 31, 2020, Jinmao Group strives to consolidate its
positioning as a city operator and focuses on the “two-wheel and two-wing driven”
strategic update. The “two-wheel” strategy comprises property development and
property holding, whereas the “two-wing” strategy comprises technology and
services. Jinmao Group attaches great importance to the quality of its products and
services and the value of the “Jinmao” brand. Being customer-oriented, Jinmao
Group has integrated customer demands into product design from the perspectives
of “green health and smart technology”, and created a series of high-end and
premium products featuring “Jinmao” brand. The service quality, brand recognition,
historical experience, expertise and customer satisfaction of our Group are well-
recognized in the market and make us a competitive and attractive service provider
for Jinmao Group. In particular, our experience in managing high-end residential
and non-residential properties, our knowledge of the requirements for managing
green buildings, and our capabilities of providing high-end, premium and
personalized services as well as smart property management services will assist us
in fulfilling Jinmao Group’s business needs in a way that will generate synergies and
nurture our mutual growth;
(ii) It is beneficial to our Group to tender and accept property management contracts
from Jinmao Group and to provide value-added services to Jinmao Group. Jinmao
Group has sizeable development nationwide and is able to provide substantial
ongoing business opportunities to our Group to continue scaling up our operations
and gain greater market recognition. It is a common trend that other listed property
management companies receive a large number of new contracts from their affiliated
developers on an ongoing basis;
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(iii) Considering the long-standing business relationship between our Group and Jinmao
Group, and our Group’s knowledge on and familiarity with the specific
characteristics, requirements and considerations of the properties developed by
Jinmao Group, our Group is in a priority position in satisfying Jinmao Group’s
demand. During the Track Record Period, we won all the bids we submitted for the
management of properties developed by Jinmao Group. We believe that this is owed
to our long-standing track record to work with Jinmao Group, our involvement for
properties developed by Jinmao Group at early stage of property development
process and our familiarity with their needs, which enables us to reduce
communication costs and provide services tailored to Jinmao Group’s stringent
requirements. Furthermore, save for two projects that did not match with our
profitability criteria which we terminated on a voluntary basis, we had successfully
renewed all of our property management contracts during the Track Record Period.
Our ability to maintain high project renewal rate with properties under our
management also demonstrates the level of client satisfaction for our high quality
services, which indicates our important contribution to Jinmao Group’s brand image
by continuously delivering quality property management services to property
owners and residents of its developed properties. Even though a large number of
property management service providers are available in the market, our Directors
believe that it might not be in the best interest of Jinmao Group to select and engage
those other property management service providers, considering the amount of time
and relevant experience required for such new service providers to provide services
that are of comparable standard and quality to that of our Group;
(iv) Our Group has also entered into various cooperation agreements with Jinmao Group
for the provision of a wide range of services, including but not limited to sales
assistance services, consultancy services, pre-delivery services, post-delivery
services, etc. It is unlikely that Jinmao Group will terminate these agreements
without cause, as there may be substantial administrative cost in finding other
suppliers in the market to provide such services and may cause disruption to Jinmao
Group’s operation; and
(v) Our Company is expected to remain as a subsidiary of China Jinmao upon
completion of the Spin-off and the Global Offering.
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Efforts to extend services to Independent Third Parties
(i) Strategic direction and focus of our Group
Since 2009, our Group has started to manage properties developed by independent
third-party property developers (the “External Projects”), mainly including schools and
government facilities, and starting from 2012, also including office buildings. Although
the history of our Group’s management of External Projects can be traced back to 2009,
the focus of our Group before 2020 was primarily on improving our service quality and
customer satisfaction, instead of external business expansion.
Given that the business of our Group was originally established out of the necessity
to serve Jinmao Group’s business requirements (which is an important after-sales service
and is common for property management companies spun off from their parent property
developers), it is inevitable that a majority of the revenue and the total GFA under
management of our Group during the Track Record Period was derived from projects
developed by Jinmao Group and its joint ventures and associates. Through years of
services as property management service provider, our Group has successfully established
a high quality image for our services, which helps promote and lay a solid foundation for
our future market expansion.
Since 2020, our Group has been actively exploring potential business opportunities
to manage External Projects and has started to manage residential properties developed
by Independent Third Parties.
Since the beginning of 2021, our Group has also been actively pursuing cooperation
opportunities and exploring acquisitions of quality targets with considerable business
scale, diversified property management portfolio and regional competitive strength.
(ii) Establishment of an organizational and incentive structure for new business
development
Our Group has adopted a series of measures to proactively seek new project
engagements and acquisition opportunities. We have established a system to promote
business development at the group, regional platform and project levels, which includes
the formulation of a comprehensive performance appraisal system, particularly a
systematic and attractive commission fee incentive system, in preparation for the rapid
business development of our Group.
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Our Group collects information from multiple channels and sources to extensively
explore potential target projects, while strictly overseeing the risks and requirements for
returns for the projects at the same time. In particular, in 2020, we established market
development teams to develop business with Independent Third Parties, including an
investment development department at our headquarters and local market development
teams at our regional centers in Beijing, Shanghai, Guangzhou, Changsha, Qingdao,
Nanjing and Chongqing. As of the Latest Practicable Date, our market development teams
at all levels consist of over 70 persons in total. The investment development department
at our headquarters is responsible for managing our overall market development
strategies, and guiding, coordinating, supporting and supervising our local market
development teams at regional centers. The local market development teams are
responsible for implementing and overseeing our market development activities within
their respective regions.
Our market development teams are also responsible for exploring potential
acquisition targets through referrals sourced from internal staff networks and external
marketing events. Once they identify a potential acquisition target, they will work with
our finance department to conduct due diligence investigation, commence business
negotiations with the sellers of the potential target companies and prepare a proposal for
the management to approve.
Property management services
Following the establishment of the market development teams in 2020, we
have been actively exploring potential business opportunities to manage External
Projects. Our local market development teams have established contacts with
property developers, property owners’ associations or property owners by site visits
or setting up meetings with them through industry referrals and introduction from
other customers. During such site visits and meetings, we could typically obtain
important information including but not limited to (i) in respect of newly developed
properties, the positioning of the properties, expected scale of the projects, details
relating to the common area and facilities and regulatory requirements on the pricing
of the property management fees; and (ii) in respect of existing properties, the tenure
of the existing property management service providers, GFA under management,
existing property management fees and whether the property owners are satisfied
with the property management services provided by the existing service providers,
as well as the reasons thereof. We have set up a database to store such information
in order to assess whether to pursue the potential opportunities and/or take follow-up
actions such as setting up further meetings for the purpose of pursuing such potential
opportunities.
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The local market development teams maintain close contact with local
governments, state-owned enterprises and other industry players to explore potential
cooperation opportunities. For example, we have established joint venture
arrangements with local governments to provide city operation services by
integrating the property management service concept into the comprehensive
management of urban areas. Since the launch of the city operation services in 2021
and up to September 30, 2021, our Group has been engaged to manage properties
with a total contracted GFA of approximately 671,600 sq.m. Leveraging our status
as a state-owned enterprise and our experience as a pioneer in the city operation
service sector, we are in a strong position to seek to cooperate with local
governments to provide broader city operation services, and establish strategic
alliance with other state-owned enterprises and private enterprises which need
property management services for their properties. For example, we have entered
into cooperation agreements with two independent third-party property developers
to manage their projects, pursuant to which we expect to acquire a total of six
property management projects with an estimated contracted GFA of approximately
3.6 million sq.m.. Furthermore, the local market development teams also explore
business opportunities through bidding and procurement platforms on which
property developers, property owners’ associations, stated-owned enterprises and
government agencies announce tender opportunities, and actively participating in
the tendering and bidding process and commercial negotiation in their respective
regions. For the nine months ended September 30, 2021, we have acquired or
secured nine External Projects with a total contracted GFA of approximately 1.9
million sq.m.. Our tender success rate also increased from approximately 44.4% for
the year ended 31 December 2020 to approximately 58.8% for the nine months
ended September 30, 2021.
Going forward, we plan to (i) enter into more cooperation arrangements with
regional governments to expand our management scale and diversify our city
operation portfolio and service offerings, (ii) establish strategic alliance with other
independent third-party developers to fully collaborate and utilize their resources in
the field of property management and related services, (iii) leveraging our brand
reputation and track record, continue to secure new contracts by participating in the
tendering and bidding process and commercial negotiation, and (iv) use
approximately 50% of the proceeds from the Global Offering for acquisition and
investment in suitable property management companies, details of which are set out
in “Future Plans and Use of Proceeds – Use of Proceeds”. As a result, it is expected
that we will continue to capture new contracts from Independent Third Parties, and
our GFA under management in respect of properties developed by Independent Third
Parties and revenue generated from services provided to Independent Third Parties
will continue to increase.
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Value-added services to non-property owners
Our above efforts to establish business relationship with independent third-
party property developers can also help us expand our value-added services to
non-property owners. Our market development teams collect information on
potential business opportunities and seek new engagement of value-added services,
such as sales assistance services and consultancy services, by actively participating
in the tendering and bidding process and commercial negotiation organized by
independent third-party property developers. According to China Index Academy, it
is fairly common for the property developers to engage their affiliated property
management companies to provide value-added services. Despite so, we have
successfully acquired seven engagements in 2020 with a total contract amount of
approximately RMB20.6 million and secured 11 engagements for the nine months
ended September 30, 2021 with a total contract amount of approximately RMB23.3
million for the provision of value-added services to non-property owners who are
Independent Third Parties.
During the Track Record Period, a substantial part of our revenue from
value-added services to non-property owners was generated from our services
provided to Jinmao Group and its joint ventures and associates, which was mainly
due to the rapid business growth of Jinmao Group in recent years, generating
significant demand for the sales assistance services, consultancy and pre-delivery
services. Along with the completion and delivery of property development projects
of Jinmao Group and its joint ventures and associates, the revenue contribution from
such value-added services to Jinmao Group and its joint ventures and associates is
expected to decrease gradually, and the completion and delivery of such projects
may further increase our GFA under management, which will in turn help us expand
our customer base for community value-added services.
Meanwhile, we will continue our efforts to identify potential projects through
various channels and reach out to independent third-party developers for individual
projects and cooperation opportunities. We believe that our capability to provide a
wide range of value-added services to non-property owners, as well as our quality
services and our brand recognition, will increase our competitiveness to obtain
contracts from Independent Third Parties. Further, as detailed in “Future Plans and
Use of Proceeds – Use of Proceeds”, we plan to use approximately 50% of the net
proceeds from the Global Offering for acquisition and investment in suitable
property management companies. We believe that our future acquisitions of
third-party property management companies would bring us additional sources of
projects and more market opportunities in respect of value-added services,
especially those with close cooperation or affiliation with independent third-party
property developers that are of relatively small scale, as such developers may not
have sufficient capability and experience to develop its own team of personnel to
provide value-added services.
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Community value-added services
We utilize our various customer communication channels, such as our service
hotline and mobile application, to seek feedback and suggestions from customers
which help us have a better understanding of customer needs and explore more
opportunities to provide a wider range of community value-added services. We also
organize community events utilizing outdoor open spaces in our managed
communities to increase our engagement level with the property owners and
residents and expand our access to consumer activities of the residents at the same
time.
Going forward, we will continue to seek business cooperation opportunities
from third-party merchants to enhance the width and depth of our community
value-added services, thereby increasing the proportion of our total revenue
generated from services provided to Independent Third Parties. Furthermore, we
plan to use (i) approximately 5% of the proceeds from the Global Offering for
acquisition and investment in companies which provide community products and
services complementary to those of ours, and (ii) approximately 13% of the proceeds
from the Global Offering to further develop our community value-added services,
including optimizing our existing businesses such as community living services,
platform services for interior decoration, real estate brokerage services and
community space operation services, and expanding our business outreach to new
services, such as community health management services, details of which are set
out in “Future Plans and Use of Proceeds – Use of Proceeds”.
Along with the anticipated increase of our total GFA under management
attributable to External Projects and given our above efforts to promote our
community value-added services and diversify our service offering, we believe that
the revenue of our community value-added services from independent third-party
customers will increase accordingly.
Based on the above and taking into account factors including our notable
achievements in business development with Independent Third Parties in each
business line as further described below under the paragraphs headed
“Achievements in securing External Projects and contracts for providing value-
added services to Independent Third Parties”, and our competitive strengths, in
particular our quality services and customer satisfaction, our diversified property
management portfolio and comprehensive management capabilities, and our state-
owned background, which laid a solid foundation for our future business
development as further described below under the paragraphs headed “Our Group’s
competitive strengths in securing External Projects and contracts for providing
value-added services to Independent Third Parties in the future”, our Directors are
of the view that our measures to develop business with Independent Third Parties
and reduce our reliance on Jinmao Group and its joint ventures and associates are
feasible and effective.
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(iii) Achievements in securing External Projects and contracts for providing value-added
services to Independent Third Parties
Property management services
For the year ended December 31, 2020, our Group has secured 16 External
Projects covering residential properties, office buildings and commercial
complexes. Due to the increased efforts of our Group in seeking External Projects,
the total GFA of External Projects under our management increased substantially
from approximately 0.7 million sq.m. as at December 31, 2019 to approximately 2.2
million sq.m. as at December 31, 2020, and the total revenue of our Group
attributable to projects developed by Independent Third Parties also increased from
approximately RMB31.0 million for the year ended December 31, 2019 to
approximately RMB42.6 million for the year ended December 31, 2020.
Beyond the traditional scope of expanding property management services for
independent third-party developers, we have established joint venture arrangements
with local governments since 2021 to provide city operation services by integrating
the property management service concept into the comprehensive management of
urban areas. For example, we established Jiashan Jiamao in February 2021 under a
cooperation agreement with Jiashan government to provide comprehensive city
operation solutions for Jiashan’s economic development zone of 60 sq.km., such as
maintenance and operation of urban equipment and facilities, and property
management services covering a wide array of property types within the region
including public properties, industrial parks, residential properties and commercial
properties. We also established Zhoushan Dongda Jinmao in July 2021 under a
cooperation agreement with Zhoushan government to provide city operation services
for Zhoushan’s economic development zone of 12 sq.km., and established Nanjing
Xinmao in December 2021 under a cooperation agreement with Nanjing government
in connection with 17 property management projects with an estimated contracted
GFA of approximately 8.7 million sq.m. within the area of Xinyao New Town of
Nanjing. We are also in negotiation with other local governments for providing
similar city operation services. Our Group and the local governments will enter into
individual agreements to confirm the engagement of services for each of the projects
within the regions. Where any particular engagement requires a public tender
process, our experience in providing comprehensive city operation services in the
regions and our ability to manage individual projects in a cost-effective manner by
utilizing existing resources devoted to the regions, will enable our Group to have
competitive advantages over other service providers in acquiring the projects in the
public tender process. Since the launch of the city operation services in 2021 and up
to September 30, 2021, our Group has been engaged to manage properties with a
total contracted GFA of approximately 671,600 sq.m. within the regions, covering
property types including residential properties, office buildings, hospitals and public
properties. The launch of city operation services will further increase the revenue of
our Group from Independent Third Parties.
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We also seek for strategic cooperation with Independent Third Parties. In
September 2021, we established Zijin Xinmao under a cooperation agreement with
Beijing Zhongguancun Science City Construction Holding Co., Ltd. (
), an independent third-party developer, and entered into a
cooperation agreement with Chongqing Dongtie Property Development Co., Ltd. (
), also an independent third-party developer. Pursuant to
such agreements, we expect to acquire a total of six property management projects
located in Beijing, Nantong, Chengdu and Chongqing with an estimated contracted
GFA of approximately 3.6 million sq.m..
We have also been seeking new engagement by actively participating in the
tendering and bidding process and commercial negotiation organized by
independent third-party developers and property owners’ associations. Leveraging
our strong brand recognition and solid experience, we are able to expand our
business to third-party projects in the surrounding areas of our existing projects. For
the nine months ended September 30, 2021, our Group has acquired or secured nine
External Projects with a total contracted GFA of approximately 1.9 million sq.m.
(without taking into account the projects acquired or secured under the city
operation service arrangements or through our strategic cooperation with
Independent Third Parties).
As of September 30, 2021, we managed a total of 32 projects developed by
independent third-party property developers with an aggregate GFA under
management of approximately 3.1 million sq.m., representing approximately 13.4%
of our total GFA under management as of the same date.
Value-added services to non-property owners
We have made remarkable achievements in our extension of value-added
services to Independent Third Parties.
Despite the industry norm that property developers usually prefer their
affiliated property management companies to provide value-added services to
non-property owners, our Group has successfully acquired seven engagements in
2020 with a total contract amount of approximately RMB20.6 million and secured
11 engagements for the nine months ended September 30, 2021 with a total contract
amount of approximately RMB23.3 million for the provision of value-added
services to non-property owners who are Independent Third Parties. Such new
engagements mainly involve the provision of sales assistance services and
consultancy services to 17 different property developers for their projects in cities
including Tianjin, Suzhou, Shanghai, Jinan, Jiaxing, Beijing, Changsha, Nanjing,
Zhoushan, Wenzhou and Qingdao in the PRC. With such an encouraging
achievement made since 2020 which will serve as good reference to other
RELATIONSHIP WITH CHINA JINMAO
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independent property developers, we are of the view that our Group will be able to
identify and capture more business opportunities for the value-added services from
independent property developers.
Community value-added services
We have also increased our efforts to provide community value-added services
to property owners and residents. We launched the “Home” ( ) mobile
application as the gateway for users to access our services both online and offline
with a view to enhancing customer experience and loyalty, as well as brand
recognition. In addition to the property management services, registered users can
also access a variety of the community value-added services and information
through such online service platform, such as placing orders for and arranging
deliveries of daily necessity products and goods sourced by our Group. It is expected
that the community value-added services will contribute to the future growth of our
Group, and facilitate increase in the proportion of our total revenue generated from
services provided to Independent Third Parties.
(iv) Our Group’s competitive strengths in securing External Projects and contracts for
providing value-added services to Independent Third Parties in the future
With the business scale, brand recognition and nationwide operating platform of our
Group, the comprehensive organizational and incentive structure for new business
development as aforementioned, as well as the vast opportunities in the property
management market, our Group will be well positioned to capture potential opportunities
and further expand our business with Independent Third Parties. In particular:
• Quality services and customer satisfaction — Our Group has been focusing on
improving our service quality and customer satisfaction for years, and has
established an image of high-quality services and a solid reputation, as well as
the core competitiveness for achieving long-term sustainable growth. Among
others, our Group was ranked the 17th among the “Top 100 Property
Management Companies in China” ( ) in 2021 by
overall strength, and was recognized as one of the “Top 100 Leading High
Quality Property Management Service Enterprises in China” (
) in 2020 and a “Leading Upscale Property Management
Service Enterprise in China” ( ) in 2020, according
to China Index Academy.
• Diversified property management portfolio and comprehensive management
capabilities — We have a diversified property management portfolio covering
residential properties and non-residential properties such as office buildings,
shopping malls, schools, etc. In addition, we provide various value-added
services to non-property owners such as sales assistance services and
consultancy services, and community value-added services mainly to property
RELATIONSHIP WITH CHINA JINMAO
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owners and residents. Our Directors believe that such diversified property
management portfolio and comprehensive management capabilities will
support our Group’s external business expansion on all fronts, providing a
balanced structure for long-term growth. Our Directors are further of the view
that the launch of the city operation services by establishing joint ventures with
local governments will increase the revenue of our Group from Independent
Third Parties, and also allows our Group to improve our market reputation and
service capabilities, which in turn will lead to improved and sustainable
long-term growth.
• State-owned background — Our Company is a subsidiary of China Jinmao,
which is indirectly owned as to approximately 35.3% by Sinochem Group, a
large-scale conglomerate under the supervision of the SASAC. The
endorsement of such strong state-owned background has reinforced the value
and credibility of the brand of our Group, which will place our Group in a
better position to compete against our competitors and facilitate our expansion
of business with Independent Third Parties.
• Market trend — It is a developing trend in the PRC property management
service market for service providers to manage properties developed by
independent third-party developers, a trend that is becoming increasingly
common. Our Directors believe that our Group will not have difficulty
expanding its third party developers’ portfolio given that smaller independent
property developers will be in need of property management services from
reputable property management services providers such as our Group. Our
Directors are also confident that our Group will be well positioned to acquire
suitable targets given that there are ample acquisition opportunities in the
fragmented property management market. Independent property management
companies in the PRC with no operational support from their related property
developers are interested to team up with property management companies
with strong support from top property developer such as our Group. The
property management industry has begun to experience a trend of
consolidation.
As such, despite the increase in the amount of revenue from projects developed by
Jinmao Group and its joint ventures and associates during the Track Record Period, it is
expected that the percentage of the relevant revenue contribution to our Group will taper
in growth and decrease in the long run.
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Independence from Jinmao Group
Further to the aforementioned, our Directors consider that our Group is able to operate
independently of Jinmao Group after the Spin-off, given that:
(i) our Group has sufficient capital and a sizeable number of employees necessary to
make all decisions on, and to carry out, our business operation independently of
Jinmao Group;
(ii) our Group has full rights to hold and enjoy the benefit of all relevant licenses
independently from Jinmao Group material to the operation of our business; and
(iii) our Group has a diversified base of customers that are unrelated to Jinmao Group,
and has independent access to such customers, our suppliers as well as our other
business partners.
Connected transactions of our Group expected to continue after the Spin-off
Details of the continuing connected transactions of our Group, including those with China
Jinmao and its associates, which will continue after the Listing are set out in the section headed
“Connected Transactions” in this prospectus. All such transactions will be conducted on arm’s
length and on normal commercial terms in the ordinary and usual course of business of our
Group, in accordance with the requirements under Chapter 14A of the Listing Rules and the
pricing policy of our Group and our connected persons and not be prejudicial to the interests
of any of the parties.
Our Directors are of the view that such continuing connected transactions will not affect
our operational independence as a whole.
DEED OF NON-COMPETITION
China Jinmao has irrevocably and unconditionally undertaken to us in the Deed of
Non-Competition which will take effect upon completion of the Spin-off, that it will not, and
will procure its close associates (save for members of our Group) not to, directly or indirectly
carry on, engage, invest, participate or otherwise be interested in any business which is in
competition, directly or indirectly, with our business, namely, the provision of property
management services, community value-added services and value-added services to non-
property owners (the “Restricted Business”), except where China Jinmao and/or its close
associates hold in aggregate less than 30% of the total issued share capital of any company
which is engaged in any business that is or may be in competition with the Restricted Business,
and China Jinmao and/or its close associates together do not possess the right to appoint or
control the composition of a majority of the board of directors of such company.
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The above restrictions do not apply to the Zhuhai Property Management Business as
described under the paragraphs headed “Property management services with respect to the
Zhuhai Project” above. China Jinmao has undertaken to our Group that if the general meeting
of the property owners of the Zhuhai Project decides to change the property management
service provider and establish the property owners’ association, and a public tender process is
launched for the selection of service provider for the management of the Zhuhai Project, China
Jinmao shall not, and shall procure its close associates not to, participate in the public tender
process, and shall provide and procure its close associates to provide necessary assistance to
our Group for our participation in the process should our Group choose to do so.
Further, China Jinmao has also undertaken to us in the Deed of Non-Competition that, if
any business opportunity relating to the Restricted Business (the “Competing Business
Opportunity”) is identified by/made available to it or any of its close associates (save for
members of our Group), it shall, and shall procure its close associates to, refer such Competing
Business Opportunity to our Company on a timely basis by giving written notice (the “Offer
Notice”) to our Company within 30 business days of identifying such Competing Business
Opportunity, the nature of the Competing Business Opportunity, the investment or acquisition
costs and all other details reasonably necessary for our Company to consider whether to pursue
such Competing Business Opportunity.
Upon receiving the Offer Notice, our Company shall seek approval from a board
committee comprising only our independent non-executive Directors who do not have an
interest in the Competing Business Opportunity (the “Independent Board Committee”) as to
whether to pursue or decline the Competing Business Opportunity. Any Director who has
actual or potential interest in the Competing Business Opportunity shall abstain from attending
(unless their attendance is specifically requested by the Independent Board Committee) and
voting at, and shall not be counted in the quorum for, any meeting convened to consider such
Competing Business Opportunity. The Independent Board Committee shall consider the
financial impact of pursuing the Competing Business Opportunity offered, whether the
Competing Business Opportunity is consistent with our Group’s strategies and development
plans and the general market conditions of our business. If appropriate, the Independent Board
Committee may appoint independent financial advisers and legal advisers to assist in the
decision making process in relation to such Competing Business Opportunity. The Independent
Board Committee shall, within 30 business days of receipt of the Offer Notice (or such further
period of time agreed by our Company and China Jinmao), inform China Jinmao in writing on
behalf of our Company its decision whether to pursue or decline the Competing Business
Opportunity.
China Jinmao shall be entitled but not obliged to pursue such Competing Business
Opportunity if (i) it receives a notice from the Independent Board Committee declining such
Competing Business Opportunity, or if the Independent Board Committee fails to respond
within 30 business days or such further period of time agreed by our Company and China
Jinmao as mentioned above; and (ii) the principal terms on which China Jinmao subsequently
carries on, engages, invests, participates or otherwise is interested in such Restricted Business
are not more favourable in any material aspect than those offered or made available to our
RELATIONSHIP WITH CHINA JINMAO
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Company. If there is any material change in the nature, terms or conditions of such Competing
Business Opportunity, China Jinmao shall refer or procure the referral of such revised
Competing Business Opportunity to our Company as if it were a new Competing Business
Opportunity.
The Deed of Non-Competition will lapse automatically if China Jinmao ceases to be our
controlling shareholder or our Shares cease to be listed on the Stock Exchange.
China Jinmao has further undertaken to us that it will provide and procure its close
associates to provide on best endeavor basis, all information necessary for the annual review
by our independent non-executive Directors for the enforcement of the Deed of Non-
Competition. Our independent non-executive Directors will make an annual declaration in our
annual report on the compliance with the Deed of Non-Competition in accordance with the
principle of voluntary disclosure in the corporate governance report.
In order to promote good corporate governance practices and to improve transparency, the
Deed of Non-Competition includes the following provisions:
• our independent non-executive Directors shall review, at least on an annual basis,
the compliance with the Deed of Non-Competition by China Jinmao;
• we will disclose the decisions on matters reviewed by the Independent Board
Committee (including the reasons for not taking up the Competing Business
Opportunity referred to our Company) and the review by our independent
non-executive Directors on the compliance with, and the enforcement of, the Deed
of Non-Competition in our annual report or by way of announcement to the public
in compliance with the requirements of the Listing Rules; and
• in the event that any of our Directors and/or their respective close associates has
material interests in any matter to be deliberated by our Board in relation to the
compliance and enforcement of the Deed of Non-Competition, he/she may not vote
on the resolutions of our Board approving the matter and shall not be counted
towards the quorum for the voting pursuant to the applicable provisions in the
Articles of Association.
Under the Deed of Non-Competition, China Jinmao and its close associates are not
allowed to hold a controlling interest in any company which is engaged in business that may
be in competition with the Restricted Business, and have no control over the board of directors
of such company. As such, they will not be able to exercise meaningful influence over the
management and operations of such company. In view of the non-controlling and passive
investment nature of the interest, our Directors are of the view and the Joint Sponsors concur,
that the Deed of Non-Competition will be effective in managing any potential competition
between China Jinmao and its close associates on the one hand, and our Group on the other
hand.
RELATIONSHIP WITH CHINA JINMAO
– 345 –
CORPORATE GOVERNANCE
China Jinmao has confirmed that it fully comprehends its obligations to act in our
Shareholders’ best interests as a whole. Our Directors believe that there are adequate corporate
governance measures in place to manage existing and potential conflicts of interest. In order
to further avoid potential conflicts of interest, we have implemented the following measures:
(a) as part of our preparation for the Global Offering, we have amended our Articles of
Association to comply with the Listing Rules. In particular, our Articles of
Association provided that, unless otherwise provided, a Director shall not vote on
any resolution approving any contract or arrangement or any other proposal in which
such Director or any of his/her associates have a material interest, and if he/she shall
do so his/her vote shall not be counted (nor shall such Director be counted in the
quorum for the resolution);
(b) a Director with material interests shall make full disclosure in respect of matters that
may have actual or potential conflict with any of our interest and abstain from the
board meetings on matters in which such Director or his/her associates have a
material interest, unless the attendance or participation of such Director at such
meeting of the Board is specifically requested by a majority of the independent
non-executive Directors;
(c) we are committed that our Board should include a balanced composition of
executive Directors, non-executive Directors and independent non-executive
Directors. We have appointed independent non-executive Directors and we believe
our independent non-executive Directors possess sufficient experience and they are
free of any business or other relationship which could interfere in any material
manner with the exercise of their independent judgment and will be able to provide
an impartial, external opinion to protect the interests of our public Shareholders. For
details of our independent non-executive Directors, please refer to “Directors and
Senior Management — Directors — Independent non-executive Directors” in this
prospectus;
(d) we have appointed First Shanghai Capital Limited as our compliance advisor, which
will provide advice and guidance to us in respect of compliance with the applicable
laws and the Listing Rules including various requirements relating to Directors’
duties and corporate governance;
(e) we have adopted the internal control and corporate governance measures to ensure
that the terms of our continuing connected transactions are fair and reasonable and
not prejudicial to the interests of our Company and the minority Shareholders, as
further described under the section headed “Connected Transactions – Internal
Control Measures”.
RELATIONSHIP WITH CHINA JINMAO
– 346 –
(f) as required by the Listing Rules, our independent non-executive Directors shall
review any continuing connected transaction annually and confirm in our annual
report that such transactions have been entered into in our ordinary and usual course
of business, are either on normal commercial terms or on terms no less favorable to
us than those available to or from Independent Third Parties and on terms that are
fair and reasonable and in the interests of our Shareholders as a whole;
(g) China Jinmao has undertaken to us in the Deed of Non-Competition that it will not,
and will procure its close associates not to, engage in any Restricted Business, save
for the exceptions as disclosed under the paragraphs headed “Deed of
Non-Competition” above, which will protect our Group from potential competition
with respect to our provision of property management services;
(h) on an annual basis, our independent non-executive Directors will review the
non-compete undertakings provided by China Jinmao and its compliance with such
undertakings; and
(i) our Company will disclose in its annual report each year the compliance status of the
Deed of Non-Competition.
RELATIONSHIP WITH CHINA JINMAO
– 347 –
OVERVIEW
Pursuant to Chapter 14A of the Listing Rules, our Directors, substantial shareholders and
chief executive or those of our subsidiaries (other than the directors, substantial shareholders
and chief executive of our insignificant subsidiaries), any person who was a director of our
Company or our subsidiaries within 12 months preceding the Listing Date and any of their
respective associates will become a connected person of our Company upon Listing. Upon the
Listing, our transactions with such connected persons will constitute connected transactions
under Chapter 14A of the Listing Rules.
As of the Latest Practicable Date, our Company was wholly owned by China Jinmao.
Immediately following completion of the Bonus Issue, the Distribution and the Global Offering
(without taking into account the Distribution Adjustment and assuming the Offer Size
Adjustment Option and the Over-allotment Option are not exercised), our Company will be
owned as to approximately 67.5% by China Jinmao. As such, China Jinmao is a Controlling
Shareholder of our Company for the purpose of the Listing Rules. Sinochem Holdings is the
ultimate controlling shareholder of China Jinmao. Accordingly, China Jinmao and its
associates (“Jinmao Connected Persons”, excluding, for the avoidance of doubt, our Group)
as well as Sinochem Holdings and its associates (“Sinochem Connected Persons ”, excluding,
for the avoidance of doubt, the Jinmao Connected Persons) are our connected persons by virtue
of Rule 14A.07 of the Listing Rules and for the purposes of connected transactions under
Chapter 14A of the Listing Rules.
The following transactions of our Group with the Jinmao Connected Persons and the
Sinochem Connected Persons which will continue after the Listing will constitute continuing
connected transactions for our Company under Chapter 14A of the Listing Rules.
CONTINUING CONNECTED TRANSACTIONS WHICH ARE FULLY EXEMPT FROM
THE REPORTING, ANNUAL REVIEW, ANNOUNCEMENT, CIRCULAR AND
INDEPENDENT SHAREHOLDERS’ APPROVAL REQUIREMENTS
Trademark License Deed
On April 15, 2021, our Company entered into a trademark license deed (the “Trademark
License Deed”) with Shanghai Jinmao Investment, a wholly-owned subsidiary of China
Jinmao, pursuant to which Shanghai Jinmao Investment agreed to irrevocably and
unconditionally grant a non-exclusive and non-transferable license to our Group to use certain
trademarks registered in the PRC and Hong Kong on a royalty-free basis. For details of the
licensed trademarks which are material to our business, please refer to “Statutory and General
Information — 2. Further Information about our Business — (b) Intellectual Property Rights
of the Group” in Appendix V to this prospectus.
CONNECTED TRANSACTIONS
– 348 –
The Trademark License Deed, in relation to each of the trademarks licensed thereunder,
shall be of a term commencing from April 15, 2021 and ending on the expiry date of the
registration of such trademark. The Trademark License Deed shall automatically terminate in
the event of and upon our Company ceasing to be accounted for as a subsidiary of China
Jinmao and our financial results ceasing to be consolidated in the consolidated accounts of
China Jinmao, and may be terminated by written consent of the parties thereto. Our Directors
believe that entering into the Trademark License Deed with a term of more than three years will
promote the stability of operations of our Group and is beneficial to our Company and our
Shareholders as a whole. The Joint Sponsors are of the view that it is normal business practice
for agreements of this type to be of such duration.
Shanghai Jinmao Investment is a wholly-owned subsidiary of China Jinmao, and is
therefore a connected person of our Company for the purpose of the Listing Rules.
Accordingly, the transactions under the Trademark License Deed will constitute continuing
connected transactions for our Company under Chapter 14A of the Listing Rules upon Listing.
As the right to use the licensed trademarks is granted to us on a royalty-free basis, the
transactions under the Trademark License Deed will be within the de minimis threshold under
Rule 14A.76(1) of the Listing Rules and will be exempted from the reporting, annual review,
announcement, circular and independent Shareholders’ approval requirements under Chapter
14A of the Listing Rules.
Cost Sharing Services Framework Agreement
On February 21, 2022, our Company entered into a cost sharing services framework
agreement (the “Cost Sharing Services Framework Agreement”) with China Jinmao,
pursuant to which our Company (for itself and on behalf of our Group) agreed to share certain
non-essential administrative resources with the Jinmao Connected Persons, to optimize the
overall administrative cost structure, including certain information technology systems and
financial management software, on a clear cost allocation basis with reference to the number
of active users of the systems and software (the “Cost Sharing Arrangements”). The Cost
Sharing Services Framework Agreement shall take effect upon the Listing Date and expire on
December 31, 2023, which may be renewed as the parties may mutually agree, subject to
compliance with the requirements under the Listing Rules and all other applicable laws and
regulations.
For the years ended December 31, 2018, 2019 and 2020 and the nine months ended
September 30, 2021, the aggregate costs borne by our Group under the Cost Sharing
Arrangements amounted to approximately RMB1,562,000, RMB1,417,000, RMB2,528,000
and RMB4,162,000, respectively.
CONNECTED TRANSACTIONS
– 349 –
As the Cost Sharing Arrangements between our Group and the Jinmao Connected Persons
are on a cost basis, and are identifiable and are allocated to our Group and the Jinmao
Connected Persons on a fair and equitable basis, these continuing connected transactions are
considered fully exempt continuing connected transactions under Rule 14A.98 of the Listing
Rules and will be exempted from the reporting, annual review, announcement, circular and
independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.
CONTINUING CONNECTED TRANSACTIONS WHICH ARE SUBJECT TO THE
REPORTING, ANNUAL REVIEW, ANNOUNCEMENT, CIRCULAR AND
INDEPENDENT SHAREHOLDERS’ APPROVAL REQUIREMENTS
Considering the long-standing business relationship between our Group and Jinmao
Group and Sinochem Holdings, and the mutual understanding of the standards, requirements
and specific needs of each other, our Group will continue to provides certain property
management and related services to the Jinmao Connected Persons and the Sinochem
Connected Persons after the Listing.
As the applicable percentage ratios under the Listing Rules in respect of the annual caps
for each of the property management and related services are more than 5%, each of such
transactions (the “Non-Exempt Continuing Connected Transactions”) will be subject to the
reporting, annual review, announcement, circular and independent Shareholders’ approval
requirements under Chapter 14A of the Listing Rules. Details of the Non-Exempt Continuing
Connected Transactions are set forth below.
Property Management Services Framework Agreement
Description of the transaction
On February 21, 2022, our Company entered into a property management services
framework agreement with China Jinmao (the “Property Management Services Framework
Agreement”), pursuant to which our Company (for itself and on behalf of our Group) agreed
to provide property management services to the Jinmao Connected Persons, in respect of
property units developed by the Jinmao Connected Persons which have been sold but not yet
been delivered to the buyers of such property units, and properties owned, used or operated by
the Jinmao Connected Persons (the “Property Management Services”).
The Property Management Services Framework Agreement shall take effect upon the
Listing Date and expire on December 31, 2023, which may be renewed as the parties may
mutually agree, subject to compliance with the requirements under the Listing Rules and all
other applicable laws and regulations.
CONNECTED TRANSACTIONS
– 350 –
Pricing policies
The fees payable by the Jinmao Connected Persons to our Group under the Property
Management Services Framework Agreement will be determined on arm’s length basis with
reference to (i) the size and location of the relevant properties, (ii) the scope and standards of
the Property Management Services, (iii) our expected operational costs (including, among
others, labor costs, material costs and administrative costs) in relation to the provision of the
Property Management Services, and (iv) the fees charged by other property management
service providers for similar services in respect of similar types of properties in the market.
The fees charged by us to the Jinmao Connected Persons shall not be higher than the standard
fees designated by the relevant regulatory authorities (if applicable), and the terms offered by
us to the Jinmao Connected Persons shall not be less favorable to our Group than the terms
offered by us to our independent customers for the same or similar type and scope of property
management services.
Historical transaction amounts
The total transaction amounts for the provision of the Property Management Services by
our Group to the Jinmao Connected Persons for the years ended December 31, 2018, 2019 and
2020 and the nine months ended September 30, 2021 are set forth below:
Year ended December 31,
Nine months
ended
September 30,
2018 2019 2020 2021
(RMB’000) (RMB’000) (RMB’000) (RMB’000)
Amount of fees charged
by our Group for the
Property Management
Services 63,229 55,940 62,125 73,589
CONNECTED TRANSACTIONS
– 351 –
Proposed annual caps and factors taken into account in determining annual caps
It is estimated that the maximum annual amounts of fees chargable by our Group and
payable by the Jinmao Connected Persons in relation to the Property Management Services for
the two years ending December 31, 2022 and 2023 will not, in aggregate, exceed the amounts
set out in the table below:
Year ending December 31,
2022 2023
(RMB’000) (RMB’000)
Maximum aggregate annual amount of fees
charged by our Group for the Property
Management Services 140,000 182,000
The following factors were considered in arriving at the above annual caps:
앩 the historical transaction amounts and growth trend during the Track Record Period;
앩 the estimated revenue to be recognized based on the existing signed contracts. As at
September 30, 2021, we were contracted to manage 83 properties developed by the
Jinmao Connected Persons which were yet to be delivered with a total contracted
GFA of approximately 21.3 million sq.m.;
앩 the estimated GFA to be delivered by the Jinmao Connected Persons in the two years
ending December 31, 2023, taking into consideration the properties under
development and land bank held by the Jinmao Connected Persons as at December
31, 2020 as well as their business plan, in particular, the saleable/leasable GFA of
approximately 82.7 million sq.m. which were yet to be delivered by Jinmao Group
as disclosed in the annual report of China Jinmao for the year ended December 31,
2020 and their estimated delivery schedule;
앩 the estimated management fees to be charged in respect of properties owned or used
by the Jinmao Connected Persons, with reference to the management fees charged
during the Track Record Period as well as the prevailing market rates for similar
services in respect of similar types of properties; and
앩 the expected increase in demand of the Jinmao Connected Persons for the Property
Management Services, taking into account the business growth of Jinmao Group in
recent years as well as its development for the next few years. In particular, the
contracted sales GFA of Jinmao Group increased from approximately 5.0 million
sq.m. for the year ended December 31, 2018 to approximately 11.3 million sq.m. for
the year ended December 31, 2020, and further to approximately 13.2 million sq.m.
for the year ended December 31, 2021.
CONNECTED TRANSACTIONS
– 352 –
Sales Assistance Services Framework Agreement
Description of the transaction
On February 21, 2022, our Company entered into a sales assistance services framework
agreement (the “Sales Assistance Services Framework Agreement”) with China Jinmao,
pursuant to which our Company (for itself and on behalf of our Group) agreed to provide sales
assistance service to the Jinmao Connected Persons with respect to properties developed by
them, to assist with their sales and marketing activities at property sales venues and display
units (the “Sales Assistance Services”). The Sales Assistance Services Framework Agreement
shall take effect upon the Listing Date and expire on December 31, 2023, which may be
renewed as the parties may mutually agree, subject to compliance with the requirements under
the Listing Rules and all other applicable laws and regulations.
Pricing policies
The fees payable by the Jinmao Connected Persons to our Group under the Sales
Assistance Services Framework Agreement will be determined on arm’s length basis with
reference to (i) the size and location of the relevant properties, (ii) the scope of the Sales
Assistance Services, (iii) our expected operational costs (including, among others, labor costs,
material costs and administrative costs) in relation to the provision of the Sales Assistance
Services, and (iv) the fees charged by other service providers for similar services in respect of
similar types of properties in the market. The terms offered by us to the Jinmao Connected
Persons shall not be less favorable to our Group than the terms offered by us to our independent
customers for the same or similar type and scope of sales assistance services.
Historical transaction amounts
The total transaction amounts for the provision of the Sales Assistance Services by our
Group to the Jinmao Connected Persons for the years ended December 31, 2018, 2019 and 2020
and the nine months ended September 30, 2021 are set forth below:
Year ended December 31,
Nine months
ended
September 30,
2018 2019 2020 2021
(RMB’000) (RMB’000) (RMB’000) (RMB’000)
Amount of fees charged
by our Group for the
Sales Assistance
Services 130,154 188,401 217,785 162,503
CONNECTED TRANSACTIONS
– 353 –
Proposed annual caps and factors taken into account in determining annual caps
Our Directors estimate that the maximum annual amounts of fees chargable by our Group
and payable by the Jinmao Connected Persons in relation to the Sales Assistance Services for
the two years ending December 31, 2022 and 2023 will not, in aggregate, exceed the amounts
set out in the table below:
Year ending December 31,
2022 2023
(RMB’000) (RMB’000)
Maximum aggregate annual amount of fees
charged by our Group for the Sales
Assistance Services 330,000 390,000
The following factors were considered in arriving at the above annual caps:
• the historical transaction amounts and growth trend during the Track Record Period;
• the estimated increase in demand for the Sales Assistance Services as a result of the
projected growth in sales activities of the Jinmao Connected Persons for the two
years ending December 31, 2023, taking into consideration the properties under
development and land bank held by the Jinmao Connected Persons as at December
31, 2020 and the estimated time of pre-sale as well as their business plan;
• the estimated service fees to be charged in respect of the Sales Assistance Services,
with reference to the service fees charged during the Track Record Period as well as
the prevailing market rates for similar services in respect of similar types of
properties; and
• the estimated revenue from the Sales Assistance Services as a percentage of the
expected contracted sales amount of the Jinmao Connected Persons with reference
to the historical percentage ratio of approximately 0.1% for each of the years ended
December 31, 2018, 2019 and 2020.
Property Agency Services Framework Agreement
Description of the transaction
On February 21, 2022, our Company entered into a property agency services framework
agreement (the “Property Agency Services Framework Agreement”) with China Jinmao,
pursuant to which our Company (for itself and on behalf of our Group) agreed to provide
property agency services to the Jinmao Connected Persons, by sourcing potential purchasers
and providing assistance in entering into sales contracts with buyers, with respect to newly
CONNECTED TRANSACTIONS
– 354 –
developed properties and unsold car park spaces developed by the Jinmao Connected Persons
(the “Property Agency Services”). The Property Agency Services Framework Agreement shall
take effect upon the Listing Date and expire on December 31, 2023, which may be renewed as
the parties may mutually agree, subject to compliance with the requirements under the Listing
Rules and all other applicable laws and regulations.
Pricing policies
Property Agency Services for newly developed properties
With respect to the Property Agency Services for newly developed properties, our Group
will charge a commission calculated at a fixed percentage of the sales price of the relevant
properties. The commission to be charged will be determined on arm’s length basis with
reference to (i) the size and location of the relevant properties, (ii) our expected operational
costs (including, among others, labor costs and administrative costs) in relation to the provision
of the Property Agency Services, and (iii) the fees charged by other service providers for
similar services in respect of similar types of properties in the market. The terms offered by
the Jinmao Connected Persons to us shall not be less favorable to our Group than the terms
offered to other sales agents for property agency services with respect to the same project.
Property Agency Services for car park spaces
With respect to the Property Agency Services for car park spaces, our Group will charge
either (i) a commission calculated at a fixed percentage of the sales price of the relevant car
park spaces or a fixed amount on top of the sales price of the relevant car park spaces, or (ii)
the difference between the actual sales price paid by the purchaser and the pre-determined
minimum sales price. The specific pricing mechanism will be determined by the parties on a
case by case basis.
The fees, if charged on a fixed percentage or fixed amount basis, will be determined on
arm’s length basis with reference to (i) the location of the relevant car park spaces, and the
supply and demand of car park spaces in the vicinity of the project, (ii) our expected
operational costs (including, among others, labor costs and administrative costs) in relation to
the provision of the Property Agency Services, and (iii) the fees charged by other service
providers for similar services in respect of similar car park spaces in the market.
If the fees are calculated based on the difference between the actual sales price paid by
the purchaser and the pre-determined minimum sales price, our Group may be required to pay
to the Jinmao Connected Persons a refundable deposit (the “Deposit”) up to the total minimum
sales price of the car park spaces to be sold under the project. The minimum sales price will
be determined on arm’s length basis with reference to (i) the location of the relevant car park
spaces, and the supply and demand of car park spaces in the vicinity of the project, (ii) the
available market data of the indicative price range of similar car park spaces in the vicinity of
the project, and (iii) the valuation of the relevant car park spaces determined by an independent
valuer (if such valuation is considered necessary and an independent valuer is engaged). Upon
CONNECTED TRANSACTIONS
– 355 –
the consummation of a sale transaction, our Group will receive the actual sales price of the car
park space from the purchaser which will cover the related Deposit in respect of such car park
space whereas the remainder thereof will be recognized as our commission from such Property
Agency Services. Upon completion or termination of a project, the remaining sum of the
Deposit in respect of unsold car park spaces, if any, will be refunded to our Group in full.
Under each of the above pricing mechanisms, the terms offered by the Jinmao Connected
Persons to us shall not be less favorable to our Group than the terms offered to other sales
agents for property agency services with respect to similar car park spaces.
Historical transaction amounts
Our Group commenced providing the Property Agency Services to the Jinmao Connected
Persons with respect to newly developed properties in November 2020. As at September 30,
2021, no revenue was recognized from the provision of the Property Agency Services with
respect to newly developed properties.
Our Group commenced providing the Property Agency Services to the Jinmao Connected
Persons with respect to car park spaces in March 2021. For the nine months ended September
30, 2021, the revenue of our Group from the provision of the Property Agency Services with
respect to car park spaces amounted to approximately RMB18,498,000.
Proposed annual caps and factors taken into account in determining annual caps
It is estimated that the maximum annual amounts of fees chargable by our Group and
payable by the Jinmao Connected Persons in relation to the Property Agency Services for the
two years ending December 31, 2022 and 2023 will not, in aggregate, exceed the amounts set
out in the table below:
Year ending December 31,
2022 2023
(RMB’000) (RMB’000)
Maximum aggregate annual amount of fees
charged by our Group for the Property
Agency Services
— For newly developed properties 10,000 20,000
— For car park spaces 150,000 200,000
Total 160,000 220,000
CONNECTED TRANSACTIONS
– 356 –
The following factors were considered in arriving at the above annual caps:
• in respect of newly developed properties:
앩 our engagement under the existing signed contracts to provide the Property
Agency Services for 11 residential projects developed by the Jinmao
Connected Persons;
앩 the estimated value of newly developed properties to be sold by the Jinmao
Connected Persons, based on their sales plan, existing projects available for
sale, projects under development and land bank as at December 31, 2020 and
future development, which may require the Property Agency Services for the
two years ending December 31, 2023; and
앩 the estimated commission of approximately 3% as a percentage of the sales
price of the relevant properties for the two years ending December 31, 2023;
• in respect of car park spaces:
앩 our engagement under the existing signed contracts to provide the Property
Agency Services for over 2,900 car park spaces developed by the Jinmao
Connected Persons;
앩 the estimated number of unsold car park spaces of the Jinmao Connected
Persons which may require the Property Agency Services for the two years
ending December 31, 2023 as well as the estimated sell-through rate of such
car park spaces; and
앩 the arrangement that our Group may charge a commission based on the
difference between the actual sales price and the pre-determined minimum
sales price of the car park spaces, which, if calculated as a percentage of the
estimated sales price of the relevant car park spaces, is expected to be within
the range of 15% to 50%.
The provision of the Property Agency Services is a relatively new business of our Group.
Despite the low historical transaction amount due to the short history of such business,
considering (i) our long-term cooperation relationship with Jinmao Group and our ability to
access a vast number of potential buyers leveraging our active engagement and close
relationship with the owners and residents of the properties under our management, (ii) our
existing engagement for the provision of the Property Agency Services, and the sales plan and
business growth trend of the Jinmao Connected Persons, and (iii) our increased efforts and
resources devoted to the property agency business, such as increasing the number of service
points in the residential communities under our management and organizing marketing
CONNECTED TRANSACTIONS
– 357 –
activities to attract more property owners and residents, we expect that the transaction amount
of the Property Agency Services for the two years ending December 31, 2023 will increase
substantially as compared to the historical amounts.
Consultancy and Other Value-added Services Framework Agreement
Description of the transaction
On February 21, 2022, our Company entered into a consultancy and other value-added
services framework agreement (the “Consultancy and Other Value-added Services
Framework Agreement”) with China Jinmao, pursuant to which our Company (for itself and
on behalf of our Group) agreed to provide certain consultancy and other value-added service
to the Jinmao Connected Persons, including but not limited to (i) consultancy services from the
perspective of property management with respect to property development site selection,
positioning, preliminary planning and design, engineering and construction, (ii) pre-delivery
services, such as site clearing, assistance with preparatory work and maintenance of order, and
pre-delivery inspection and assessment, (iii) post-delivery services mainly comprising repair
and maintenance services during the post-delivery warranty periods, (iv) engineering services
for the upgrade of smart management hardware, and (v) community value-added services as
may be required by the Jinmao Connected Persons from time to time, such as management and
operation services in respect of car park spaces owned by the Jinmao Connected Persons (the
“Value-added Services”). The Consultancy and Other Value-added Services Framework
Agreement shall take effect upon the Listing Date and expire on December 31, 2023, which
may be renewed as the parties may mutually agree, subject to compliance with the
requirements under the Listing Rules and all other applicable laws and regulations.
Pricing policies
The fees payable by the Jinmao Connected Persons to our Group under the Consultancy
and Other Value-added Services Framework Agreement will be determined on arm’s length
basis with reference to (i) the size and location of the relevant properties, (ii) the scope of the
Value-added Services, (iii) our expected operational costs (including, among others, labor
costs, material costs and administrative costs) in relation to the provision of the Value-added
Services, and (iv) the fees charged by other service providers for similar services in respect of
similar types of properties in the market. The terms offered by us to the Jinmao Connected
Persons shall not be less favorable to our Group than the terms offered by us to our independent
customers for the same or similar type and scope of value-added services.
CONNECTED TRANSACTIONS
– 358 –
Historical transaction amounts
The total transaction amounts for the provision of the Value-added Services by our Group
to the Jinmao Connected Persons for the years ended December 31, 2018, 2019 and 2020 and
the nine months ended September 30, 2021 are set forth below:
Year ended December 31,
Nine months
ended
September 30,
2018 2019 2020 2021
(RMB’000) (RMB’000) (RMB’000) (RMB’000)
Amount of fees charged
by our Group for the
Value-added Services 53,210 70,519 87,104 195,554
Proposed annual caps and factors taken into account in determining annual caps
It is estimated that the maximum annual amounts of fees chargable by our Group and
payable by the Jinmao Connected Persons in relation to the Value-added Services for the two
years ending December 31, 2022 and 2023 will not, in aggregate, exceed the amounts set out
in the table below:
Year ending December 31,
2022 2023
(RMB’000) (RMB’000)
Maximum aggregate annual amount of fees
charged by our Group for the Value-added
Services 536,000 615,000
The following factors were considered in arriving at the above annual caps:
• the historical transaction amounts and growth trend during the Track Record Period;
• the estimated size and number of properties to be developed and delivered by the
Jinmao Connected Persons in the two years ending December 31, 2023, taking into
consideration the properties under development and land bank held by the Jinmao
Connected Persons as at December 31, 2020 as well as their business plan;
• the estimated service fees to be charged in respect of the Value-added Services on
a per sq.m. basis with reference to the prevailing market rates for the provision of
the same type of services; and
CONNECTED TRANSACTIONS
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• the expected increase in demand of the Jinmao Connected Persons for the
Value-added Services, taking into account the following factors:
앩 the business growth trend of the Jinmao Connected Persons. In particular, the
contracted sales GFA of Jinmao Group increased from approximately 5.0
million sq.m. for the year ended December 31, 2018 to approximately 11.3
million sq.m. for the year ended December 31, 2020, and further to
approximately 13.2 million sq.m. for the year ended December 31, 2021;
앩 the delivery schedule of the projects of the Jinmao Connected Persons. The
Value-added Services include services provided at different stages of a
development cycle, and closely relate to the delivery schedule. Taking into
account the substantial increase in the contracted sales GFA of Jinmao Group
in recent years and the delivery schedule of properties which is typically two
years from pre-sale, a large number of properties developed by Jinmao Group
are delivered and to be delivered in 2021 and onwards. This will contribute to
the expected increase in revenue from the Value-added Services which cover
services before and after delivery of properties;
앩 the wider scope of services to be rendered by our Group since 2021. Along with
the business growth of Jinmao Group, it is expected that Jinmao Group will
focus more on its main business of property development, and engage relevant
service providers, such as our Group, to provide various services to improve its
project design and performance, incorporating more feedback from the end
users’ perspective to ensure the high quality and customer satisfaction of its
properties delivered. In this connection, the Jinmao Connected Persons have
engaged our Group to carry out pre-delivery inspection and assessment on its
projects delivered in 2021 and assist them in dealing with quality issues
identified during the inspection and assessment. The Jinmao Connected
Persons have also since 2021 engaged our Group to provide repair and
maintenance services for its 36 projects with a GFA of approximately 6.9
million sq.m. during the post-delivery warranty periods which typically last
two years. Furthermore, with the increase of the city operation projects of
Jinmao Group, the scope of the Value-added Services provided by our Group
to the Jinmao Connected Persons has been expanded since 2021 to include the
city operation projects and to cover the consultancy services at the early stage
of project development, including site selection, positioning, preliminary
planning and design, engineering and construction; and
CONNECTED TRANSACTIONS
– 360 –
앩 for the nine months ended September 30, 2021, our Group has already recorded
a revenue of approximately RMB195.6 million from the provision of the
Value-added Services to the Jinmao Connected Persons, representing
approximately 224.5% of the full year amount of 2020. Due to the continued
business growth of the Jinmao Connected Persons and the expansion of scope
of the Value-added Services as disclosed above, it is expected that our revenue
from the Jinmao Connected Persons for the provision of the Value-added
Services will continue to increase during the two years ending December 31,
2023.
Sinochem Framework Agreement
Description of the transaction
On February 21, 2022, our Company entered into a framework agreement with Sinochem
Holdings (the “Sinochem Framework Agreement”), pursuant to which our Company (for
itself and on behalf of our Group) agreed to provide certain services to the Sinochem
Connected Persons, including (i) property management services in respect of the industrial
parks, research institutes and office buildings held by the Sinochem Connected Persons, as well
as office spaces used by the Sinochem Connected Persons (the “Sinochem Property
Management Services”), and (ii) community value-added services as may be required by the
Sinochem Connected Persons from time to time, such as management services in respect of car
park spaces used by the Sinochem Connected Persons (the “Sinochem Value-added Services”,
together with the Sinochem Property Management Services, the “Sinochem Services”).
The Sinochem Framework Agreement shall take effect upon the Listing Date and expire
on December 31, 2023, which may be renewed as the parties may mutually agree, subject to
compliance with the requirements under the Listing Rules and all other applicable laws and
regulations.
Pricing policies
The fees payable by the Sinochem Connected Persons to our Group under the Sinochem
Framework Agreement will be determined on arm’s length basis with reference to (i) the size
and location of the relevant properties, (ii) the scope and standards of the Sinochem Services,
(iii) our expected operational costs (including, among others, labor costs, material costs and
administrative costs) in relation to the provision of the Sinochem Services, and (iv) the fees
charged by other service providers for similar services in the market. The fees charged by us
to the Sinochem Connected Persons shall not be higher than the standard fees designated by
the relevant regulatory authorities (if applicable), and the terms offered by us to the Sinochem
Connected Persons shall not be less favorable to our Group than the terms offered by us to our
independent customers for the same or similar type and scope of services.
CONNECTED TRANSACTIONS
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Historical transaction amounts
The total transaction amounts for the provision of the Sinochem Services by our Group
to the Sinochem Connected Persons for the years ended December 31, 2018, 2019 and 2020 and
the nine months ended September 30, 2021 are set forth below:
Year ended December 31,
Nine months
ended
September 30,
2018 2019 2020 2021
(RMB’000) (RMB’000) (RMB’000) (RMB’000)
Amount of fees charged
by our Group for the
Sinochem Services
– Sinochem Property
Management Services 31,791 34,569 40,486 32,020
– Sinochem Value-added
Services 1,633 1,574 1,805 1,201
Total 33,424 36,143 42,291 33,221
Proposed annual caps and factors taken into account in determining annual caps
It is estimated that the maximum annual amounts of fees chargable by our Group and
payable by the Sinochem Connected Persons in relation to the Sinochem Services for the two
years ending December 31, 2022 and 2023 will not, in aggregate, exceed the amounts set out
in the table below:
Year ending December 31,
2022 2023
(RMB’000) (RMB’000)
Maximum aggregate annual amount of fees
charged by our Group for the Sinochem
Services
– Sinochem Property Management Services 60,000 78,000
– Sinochem Value-added Services 4,000 5,000
Total 64,000 83,000
CONNECTED TRANSACTIONS
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The following factors were considered in arriving at the above annual caps:
• in respect of the Sinochem Property Management Services:
앩 the historical transaction amount and growth trend during the Track Record
Period;
앩 the scale of industrial parks, research institutes and office buildings held by the
Sinochem Connected Persons and office spaces used by the Sinochem
Connected Persons, and the estimated management fees for providing services
in respect of similar types of properties in the market; and
앩 the expected increase in demand of the Sinochem Connected Persons for the
Sinochem Property Management Services, taking into accounts the business
plan of the Sinochem Connected Persons, in particular their three industrial
parks in pipeline, which are expected to be delivered in 2022 and 2023;
• in respect of the Sinochem Value-added Services, which mainly involve the
provision of management services for car park spaces used by the Sinochem
Connected Persons:
앩 the historical transaction amount during the Track Record Period;
앩 the number of car park spaces currently used by the Sinochem Connected
Persons and in respect of which our Group has been providing management
services, and the estimated management fees for providing such services
during the two years ending December 31, 2023; and
앩 the expected increase in demand of the Sinochem Connected Persons for the
Sinochem Value-added Services, including the additional number of car park
spaces which may require our management services for the two years ending
December 31, 2023, and any additional community value-added services that
may be required by the Sinochem Connected Persons from time to time.
CONNECTED TRANSACTIONS
– 363 –
INTERNAL CONTROL MEASURES
We have adopted the following internal control and corporate governance measures to
ensure that the terms of our transactions with the Jinmao Connected Persons and the Sinochem
Connected Persons are fair and reasonable and not prejudicial to the interests of our Company
and the minority Shareholders:
• our Board (including our independent non-executive Directors) will be responsible for
reviewing and evaluating the terms of the framework agreements for the continuing
connected transactions (including any renewal thereof), in particular the pricing
principles and annual caps, to ensure that such terms are fair and reasonable to our Group
and compliant with relevant laws and regulations, our Group’s internal policies and the
Listing Rules;
• various internal departments of our Company (including but not limited to our finance
department and legal department) will regularly monitor the implementation of the
continuing connected transactions and keep track of the aggregate transaction amounts
under the relevant framework agreements to ensure that the pricing principles and annual
caps contained therein are complied with;
• our Group will independently evaluate the projects developed by the Jinmao Connected
Persons and the Sinochem Connected Persons, including the size and location of the
relevant projects, the scope and standards of the services required and our expected
operational costs for providing such services, before taking on any particular project;
• when determining the fees payable by the Jinmao Connected Persons and the Sinochem
Connected Persons to our Group under the framework agreements, our Group will
regularly research into prevailing market conditions and practices and make reference to
the pricing and terms offered by our Group to Independent Third Parties for similar
transactions, to ensure that the terms and conditions offered to the Jinmao Connected
Persons and the Sinochem Connected Persons are fair and reasonable and are no less
favorable to our Group than those offered to other comparable Independent Third Parties;
and
• our independent non-executive Directors and auditors will conduct annual review of the
continuing connected transactions under the framework agreements and provide annual
confirmations in accordance with Rules 14A.55 and 14A.56 of the Listing Rules.
CONNECTED TRANSACTIONS
– 364 –
APPLICATION FOR WAIVER
Our Directors (including our independent non-executive Directors) consider that disclosure
of the Non-Exempt Continuing Connected Transactions in full compliance with the Listing Rules
would be impracticable and would add unnecessary administrative costs to our Group. In
addition, our Directors (including the independent non-executive Directors) believe that it is in
our Group’s interests to continue these continuing connected transactions after the Listing.
Pursuant to Rule 14A.105 of the Listing Rules, we have applied for, and the Stock
Exchange has granted, a waiver from strict compliance with the announcement, circular and
independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules in
respect of the Non-Exempt Continuing Connected Transactions, subject to the condition that
the aggregate amounts of each of the Non-Exempt Continuing Connected Transactions for each
financial year shall not exceed the relevant amounts set forth in the respective annual caps (as
stated above).
As required by the Listing Rules, our independent non-executive Directors shall review
the continuing connected transactions annually and confirm in the annual report and accounts
of our Company that such transactions have been entered into in our Company’s ordinary and
usual course of business, are either on normal commercial terms or on terms no less favourable
to our Group than those available to, or from, independent third parties, and on terms that are
fair and reasonable and in the interests of the Shareholders as a whole.
DIRECTORS’ VIEW
Our Directors (including our independent non-executive Directors) consider that all the
Non-Exempt Continuing Connected Transactions have been and will be carried out (i) in the
ordinary and usual course of our business, (ii) on normal commercial terms or better, and (iii)
in accordance with the respective terms that are fair and reasonable and in the interests of our
Company and our Shareholders as a whole.
Our Directors (including our independent non-executive Directors) are also of the view
that the proposed annual caps of the Non-Exempt Continuing Connected Transactions are fair
and reasonable and are in the interests of our Company and our Shareholders as a whole.
JOINT SPONSORS’ VIEW
The Joint Sponsors have reviewed the relevant information and historical figures prepared
and provided by our Company relating to the Non-Exempt Continuing Connected Transactions.
Based on the Joint Sponsors’ due diligence, the Joint Sponsors are of the view (i) that the
Non-Exempt Continuing Connected Transactions have been and will be entered into in the
ordinary and usual course of our business, on normal commercial terms or better, and are fair
and reasonable and in the interests of our Company and our Shareholders as a whole, and (ii)
that the proposed annual caps of the Non-Exempt Continuing Connected Transactions are fair
and reasonable and in the interests of our Company and our Shareholders as a whole.
CONNECTED TRANSACTIONS
– 365 –
DIRECTORS AND SENIOR MANAGEMENT
The table below sets forth certain information concerning our Directors:
Name Age
Date of
joining our
Group
(Note)
Date of
appointment
as Director
Existing
position(s) in
our Company
Roles and
responsibilities
Executive Directors
Mr. Xie Wei
( )
47 October 12,
2015
August 26,
2021
Executive
Director and
the chief
executive
officer
Responsible for the
daily operations,
formulation of the
overall strategy,
business planning
and operation
decisions of
our Group
Ms. Zhou Liye
( )
47 May 13,
2021
August 26,
2021
Executive
Director and
the chief
financial officer
Responsible for the
overall financial and
cost management,
internal audit, tax
planning and capital
market-related
matters of our
Group
Non-executive Directors
Mr. Jiang Nan
( )
48 August 26,
2021
August 26,
2021
Non-executive
Director and
chairman of
the Board
Responsible for
formulation of
business strategies
and providing
guidance for the
overall development
of our Group
Ms. He Yamin
( )
49 February 4,
2013
August 26,
2021
Non-executive
Director
Responsible for
formulation of
business strategies
and providing
guidance for the
overall development
of our Group
DIRECTORS AND SENIOR MANAGEMENT
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Name Age
Date of
joining our
Group
(Note)
Date of
appointment
as Director
Existing
position(s) in
our Company
Roles and
responsibilities
Ms. Qiao Xiaojie
( )
48 August 26,
2021
August 26,
2021
Non-executive
Director
Responsible for
formulation of
business strategies
and providing
guidance for the
overall development
of our Group
Independent non-executive Directors
Dr. Chen Jieping
( )
68 Listing Date Listing Date Independent
non-executive
Director
Responsible
for providing
independent advice
on the operation
and management of
our Group
Dr. Han Jian
( )
49 Listing Date Listing Date Independent
non-executive
Director
Responsible
for providing
independent advice
on the operation
and management of
our Group
Mr. Sincere Wong
( )
57 Listing Date Listing Date Independent
non-executive
Director
Responsible
for providing
independent advice
on the operation
and management of
our Group
Note: denotes the time from which the relevant Director first became involved in matters relating to the business of
our Group while under the employment of Jinmao Group or our Group (where applicable).
Mr. Xie Wei and Ms. Zhou Liye are each an executive Director and also a member of our
senior management team. The senior management team of our Group comprises, in addition to
our executive Directors, the following persons listed below:
DIRECTORS AND SENIOR MANAGEMENT
– 367 –
Name Age
Date of
joining our
Group
Date of
appointment
to current
position
Existing
position(s) in
our Company
Roles and
responsibilities
Mr. Wang Yongli
( )
58 February 1,
2003
August 26,
2021
Vice president Responsible for
operation and
management of
consultancy
business
Mr. Li Yulong
( )
35 May 30,
2016
August 26,
2021
Vice president Responsible
for business
innovation, strategic
planning and
technology
development, as
well as operation
and management of
business in Beijing
and Qingdao
regions
Mr. Wei Dong
( )
53 August 15,
2013
August 26,
2021
Vice president Responsible for
health, safety and
environment
management and
smart community
management
Mr. Cai Yun
( )
43 December 7,
2016
August 26,
2021
Vice president Responsible for
operation and
management of
business in
Shanghai, Nanjing
and Changsha
regions
Mr. Zhan Yu
( )
39 March 11,
2021
August 26,
2021
Vice president Responsible
for investment
and market
development
DIRECTORS AND SENIOR MANAGEMENT
– 368 –
Name Age
Date of
joining our
Group
Date of
appointment
to current
position
Existing
position(s) in
our Company
Roles and
responsibilities
Ms. Zhao Meihua
( )
43 June 26,
2015
August 26,
2021
Assistant to
president
Responsible for
human resource
management, as
well as operation
and management of
business in
Chongqing,
Guangzhou and
Fuzhou regions
None of our Directors or members of our senior management are related to other
Directors or other members of our senior management.
DIRECTORS
Our Board currently consists of eight Directors, comprising two executive Directors,
three non-executive Directors and three independent non-executive Directors. The powers and
duties of our Board include convening general meetings and reporting our Board’s work at our
Shareholders’ meetings, determining our business and investment plans, preparing our annual
financial budgets and final reports, formulating proposals for profit distributions and
exercising other powers, functions and duties as conferred by the Articles of Association.
Executive Directors
Mr. Xie Wei (
)
Mr. Xie Wei, aged 47, is an executive Director and the chief executive officer of our
Company. He was appointed as an executive Director in August 2021. He is mainly responsible
for the daily operations, formulation of the overall strategy, business planning and operation
decisions of our Group.
Mr. Xie Wei graduated with an Executive Master of Business Administration (EMBA)
from Nankai University ( ) in Tianjin, the PRC in December 2012.
Prior to joining our Group and Jinmao Group, from August 1995 to July 2015, he held
various positions such as regional manager, deputy general manager and general manager in
Beijing Vanke Real Estate Service Co., Ltd. ( ), a real estate service
provider in the PRC, where he took charge of the property management business segment.
DIRECTORS AND SENIOR MANAGEMENT
– 369 –
Mr. Xie Wei joined Jinmao Group in July 2015 and was appointed as a vice president of
China Jinmao in October 2015 where he was responsible for customer relations and property
management business. He has concurrently served as a director and the chairman of Jinmao PM
since October 2015 and the general manager of Jinmao PM since November 2016, where he
is responsible for the overall operation and management of property management business. He
was appointed as a director of Jinmao Shanghai in April 2021. Mr. Xie Wei will resign from
his position as vice president of China Jinmao with effect from the Listing Date.
Mr. Xie Wei has been serving as the vice chairman of the Beijing Property Management
Association ( ) since December 2015, and the deputy secretary-general
of the China Property Management Institute ( ) since April 2016.
Ms. Zhou Liye (
)
Ms. Zhou Liye, aged 47, is an executive Director and the chief financial officer of our
Company. She was appointed as an executive Director in August 2021. She is mainly
responsible for the overall financial and cost management, internal audit, tax planning and
capital market-related matters of our Group.
Ms. Zhou Liye obtained a post-graduate master’s degree in accounting from Central
University of Finance and Economics ( ) in Beijing, the PRC in March 2001. She
then obtained a post-graduate doctoral degree in accounting also from Central University of
Finance and Economics in June 2008. She has been a member (and currently a non-practicing
member) of The Chinese Institute of Certified Public Accountants ( ) since
August 2002, and obtained the senior accountant qualification from the Beijing Advanced
Professional and Technical Qualification Evaluation Committee (
) in February 2008. Ms. Zhou Liye has been a member of the first expert committee
of the China Real Estate Finance Association ( ) since
January 2020, and the vice chairman of the financial professional committee of the China Real
Estate Association ( ) since April 2018.
From April 2001 to October 2006, Ms. Zhou Liye worked in Sinochem Fertilizer
Company Limited ( ), a company principally engaged in fertilizer production
and trading in the PRC, in the finance department. From November 2006 to February 2008, she
worked in Sinochem Group in the accounting management department.
Ms. Zhou Liye joined Jinmao Group in April 2008. She served in the capital market
department of China Jinmao as deputy general manager from April 2008 to February 2011 and
as general manager from February 2011 to September 2016. Between September 2014 and
September 2016, she concurrently served as the capital market director of China Jinmao. From
September 2016 to June 2019, she served as general manager of JM Capital Limited (
), a subsidiary of China Jinmao, where she was responsible for its overall operation
and management. From June 2019 to May 2021, she was deputy general manager of Jinmao
DIRECTORS AND SENIOR MANAGEMENT
– 370 –
Capital Holdings Limited ( ), a subsidiary of China Jinmao, where she
was responsible for property holding and investment, fund operations and financing and
strategic operations. Ms. Zhou Liye joined our Group in May 2021 as the financial controller
of Jinmao PM.
Non-executive Directors
Mr. Jiang Nan (
)
Mr. Jiang Nan, aged 48, is a non-executive Director and the chairman of the Board. He
was appointed as a non-executive Director in August 2021. He is mainly responsible for
formulation of business strategies and providing guidance for the overall development of our
Group.
Mr. Jiang Nan graduated with a bachelor’s degree in finance from China Institute of
Finance ( ) (now known as School of Banking and Finance of the University of
International Business and Economics ( )) in Beijing, the PRC in
July 1995. He then obtained a master’s degree in finance from Central University of Finance
and Economics in September 2003. He obtained the Accounting Qualification Certificate from
the Ministry of Personnel of the PRC in May 1999, and has been an affiliated member and an
associate member of the Association of International Accountants since September 2008 and
May 2020, respectively.
From July 1995, Mr. Jiang Nan worked in the finance department of Sinochem Group, as
a member of the overseas finance division from July 1995 to September 1999 and as a deputy
manager of the finance division from September 1999 to August 2002. From August 2002 to
January 2006, he served as the manager of the finance department of Sinochem Hong Kong,
the offshore investment platform enterprise of Sinochem Group, where he was responsible for
the operation of overseas funds of Sinochem Group.
Mr. Jiang Nan joined Jinmao Group in January 2006 as the chief financial officer of China
Jinmao. Mr. Jiang Nan served as an executive director of China Jinmao from 2007 to 2011, and
has since August 2015 been re-appointed as an executive director of China Jinmao. He has been
in charge of strategic management, accounting and finance, budget assessment, capital market
and investor relations of Jinmao Group. He has also been concurrently serving as the general
manager of Jinmao Capital Holdings Limited since June 2019, where he is responsible for its
overall operation and management. He has also served as a non-executive director of Jinmao
(China) Hotel Investments and Management Limited (“Jinmao Hotel”), a company whose
share stapled units were listed on the Stock Exchange prior to its privatization in October 2020
with the stock code before delisting of 6139, since March 2014.
DIRECTORS AND SENIOR MANAGEMENT
– 371 –
Ms. He Yamin ( )
Ms. He Yamin (with the former name of He Liyuan ( )) aged 49, is a non-executive
Director. She was appointed as a non-executive Director in August 2021. She is mainly
responsible for formulation of business strategies and providing guidance for the overall
development of our Group.
Ms. He Yamin obtained a bachelor’s degree in education majoring in political education
from Beijing Normal University ( ) in Beijing, the PRC in July 1994. She then
completed a postgraduate program in applied psychology also in Beijing Normal University in
October 2005.
Prior to joining our Group and Jinmao Group, Ms. He Yamin worked in the Chinese
People’s Liberation Army from September 1994 to July 1995, in the management bureau of the
general staff department. From August 1995 to August 1996, she worked in Hong Kong
Wanguo Trade City Company ( ). From September 1996 to September
1997, she worked in Beijing Personal Data Assistant Electronics Group ( ).
From September 1997 to February 2005, she worked in Lenovo Group Ltd., a multinational
technology company whose shares are listed on the Stock Exchange with the stock code of 992,
in the human resources department. From February 2005 to December 2010, she worked in the
human resources department of the Sinochem Group.
Ms. He Yamin joined Jinmao Group in December 2010, where she served as the general
manager of the human resources department of China Jinmao up until September 2014, and has
been serving as the human resources director of China Jinmao since September 2014. Ms. He
Yamin was appointed as a director of Jinmao PM in February 2013.
Ms. Qiao Xiaojie (
)
Ms. Qiao Xiaojie (with the former Chinese name of ), aged 48, is a non-executive
Director. She was appointed as a non-executive Director in August 2021. She is mainly
responsible for formulation of business strategies and providing guidance for the overall
development of our Group.
Ms. Qiao Xiaojie obtained a bachelor’s degree in accounting from North China University
of Technology ( ) in Beijing, the PRC in July 1995. She then obtained a master’s
degree in accounting from Central University of Finance and Economics in December 2006.
She obtained the senior accountant qualification from Beijing Senior Specialized Technique
Qualification Evaluation Committee of the PRC in February 2007, and has been a member of
The Chinese Institute of Certified Public Accountants ( ) since May 1999
and a member of The Institute of Certified Management Accountants of the Institute of
Management Accountants United States of America since September 2011.
DIRECTORS AND SENIOR MANAGEMENT
– 372 –
Prior to joining our Group and Jinmao Group, Ms. Qiao Xiaojie worked in Beijing Three
Gorges Economic Development Group ( ), a company which provides
economic and technological support to the development of the Three Gorges, as the accounting
head of the finance department, from July 1995 to August 1997. From August 1997 to February
2008, she held accounting head and deputy general manager positions in the finance
department of China Resources Land (Beijing) Company Ltd. ( ( ) ),
a real estate developer in the PRC.
Ms. Qiao Xiaojie joined Jinmao Group in February 2008, where she served as the general
manager of the financial management department of China Jinmao up until January 2013. She
then joined Sinochem Group in January 2013, where she served as the deputy general manager
of the accounting management department from January 2013 to February 2014, the deputy
general manager in charge of daily operations of the analysis and valuation department from
February 2014 to May 2015, the general manager of the analysis and valuation department
from May 2015 to December 2016 and the deputy director of the strategy implementation
department from December 2016 to September 2017. She subsequently rejoined Jinmao Group
in September 2017, where she has been serving as the deputy financial controller of China
Jinmao.
Independent non-executive Directors
Dr. Chen Jieping (
)
Dr. Chen Jieping, aged 68, has been appointed as an independent non-executive Director
and his appointment will take effect from the Listing Date. He is mainly responsible for
providing independent advice on the operation and management of our Group.
Dr. Chen Jieping obtained a bachelor of science majoring in hotel and restaurant
management and a master of hospitality management from the University of Houston in Texas,
the United States in August 1990. He then obtained a master of business administration and a
doctoral degree in business administration also from the University of Houston in May 1992
and August 1995, respectively.
Dr. Chen Jieping has over 20 years of experience in accounting. From September 1995 to
August 2008, he was a faculty member of the Department of Accountancy at the City
University of Hong Kong, and between November 2005 and August 2008 he served as the Head
of the department. He was a professor of accounting at China Europe International Business
School from August 2008 to December 2018 and is currently an emeritus professor.
Dr. Chen Jieping has served as an independent non-executive director in Huafa Property
Services Group Company Limited (a company listed on the Stock Exchange with the stock
code of 982) and Saurer Intelligent Technology Co. Ltd. (a company listed on the Shanghai
Stock Exchange with the stock code of 600545), since July 2014 and September 2017,
respectively. He also served as an independent non-executive director in each of Shenzhen
Worldunion Properties Consultancy Incorporated (a company listed on the Shenzhen Stock
DIRECTORS AND SENIOR MANAGEMENT
– 373 –
Exchange with the stock code of 2285) from September 2013 to October 2019, Xinjiang La
Chapelle Fashion Co., Ltd. (“La Chapelle”, formerly known as Shanghai La Chapelle Fashion
Co., Ltd., a company listed on the Stock Exchange with the stock code of 6116 and on the
Shanghai Stock Exchange with the stock code of 603157) from April 2016 to October 2019,
and Jinmao Hotel (a company whose share stapled units were listed on the Stock Exchange
prior to its privatization in October 2020 with the stock code before delisting of 6139) from
March 2014 to October 2020.
In September 2019, the Shanghai Stock Exchange issued a public criticism against La
Chapelle and its relevant responsible persons, being several then directors and officers,
including Dr. Chen Jieping who was an independent non-executive director and the chairman
of the audit committee at the time for the inaccuracy of information disclosed in La Chapelle’s
profit estimation and the delay in publishing an announcement on the adjustment of its profit
estimation (the “Incident”). The Shanghai Stock Exchange decided that having initially
published a profit warning announcement in January 2019 anticipating a significant reduction
in profit for the year 2018, La Chapelle had failed to issue a further profit warning
announcement promptly to clarify that it now anticipated a loss, which affected the reasonable
expectations of the investors.
Notwithstanding the Incident involving Dr. Chen Jieping, the Directors (other than Dr.
Chen Jieping) are of the view that Dr. Chen Jieping has the experience, knowledge and skills
required for a director of a listed company and is therefore suitable to be a Director pursuant
to Rules 3.08 and 3.09 of the Listing Rules having considered the following reasons:
• According to the decision of the Shanghai Stock Exchange, there is no finding of
fraud or dishonesty against Dr. Chen Jieping which would affect his suitability as a
director of a listed company. The criticism of the Shanghai Stock Exchange does not
by itself disqualify Dr. Chen Jieping as a director of public companies in the PRC.
• Dr. Chen Jieping has extensive experience in serving directorship in various public
companies. To the best knowledge of our Company having made all reasonable
enquiries, Dr. Chen Jieping does not have any other non-compliance record during
his directorship in La Chapelle or any other listed companies except for the Incident
above.
• Dr. Chen Jieping is the chairman of the audit committee of each of Huafa Property
Services Group Company Limited and Saurer Intelligent Technology Co. Ltd., and
was the chairman of the audit committee of Jinmao Hotel until its privatization in
October 2020. All such companies where Dr. Chen Jieping served as an independent
non-executive director and the chairman of the audit committee at the time of the
Incident decided to continue to engage Dr. Chen Jieping after the occurrence of the
Incident, which demonstrated his value to those companies and his ability to
discharge his duties as an independent non-executive director and the chairman of
the audit committee.
DIRECTORS AND SENIOR MANAGEMENT
– 374 –
• Dr. Chen Jieping has participated in continuous professional development to
develop and refresh his knowledge and skills and to keep abreast of the latest
development of the regulatory requirements, including attending trainings and
reading materials on topics including corporate governance, regulatory updates,
finance and accounting, and industry development. Dr. Chen Jieping also attended
the training conducted by our Hong Kong legal advisors in August 2021 covering
topics including, among other, directors’ duties and responsibilities, continuing
obligations of listed companies under the Listing Rules, and the consequences for
breaching the Listing Rules and the laws of Hong Kong.
Dr. Han Jian (
)
Dr. Han Jian, aged 49, has been appointed as an independent non-executive Director and
her appointment will take effect from the Listing Date. She is mainly responsible for providing
independent advice on the operation and management of our Group.
Dr. Han Jian obtained a bachelor’s degree in English language and literature from Renmin
University of China ( ) in Beijing, the PRC in July 1995. She then obtained the
degree of doctor of philosophy majoring in human resources management from the School of
Industrial and Labor Relations of Cornell University in New York State, the United States in
January 2005.
Dr. Han Jian has been a professor of management at China Europe International Business
School since 2008. Dr. Han Jian has been an independent non-executive director of Midea
Group Co., Ltd. ( , a company listed on the Shenzhen Stock Exchange
with the stock code of 333), since September 2018. She also served as an external director of
Shenzhen Jiang & Associates Creative Design Co., Ltd. ( ,a
company listed on the Shenzhen Stock Exchange with the stock code of 300668) from June
2015 to June 2018.
Mr. Sincere Wong (
)
Mr. Sincere Wong, aged 57, has been appointed as an independent non-executive Director
and his appointment will take effect from the Listing Date. He is mainly responsible for
providing independent advice on the operation and management of our Group.
Mr. Sincere Wong received his bachelor’s degree in social science from The Chinese
University of Hong Kong in December 1986. He passed the Common Professional Examination
at Wolverhampton Polytechnic (now known as University of Wolverhampton) in the United
Kingdom in July 1990, and the Solicitors’ Final Examination of the Law Society of England
and Wales with first class honours in October 1991. He was then admitted as a solicitor of the
High Court of Hong Kong in October 1993 and a solicitor of the Supreme Court of England
& Wales in February 1994.
DIRECTORS AND SENIOR MANAGEMENT
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From September 1996 to January 2005, Mr. Sincere Wong served as an in-house legal
counsel of Hutchison Whampoa Group ( ), a multinational conglomerate engaging
mainly in ports and related services, property and hotels, retail, infrastructure, energy and
telecommunications, where he was involved in cross-border acquisitions and day-to-day
commercial transactions of a container terminal operator. From February 2005 to November
2006, he served as an in-house legal counsel of China Resources Enterprise, Limited (now
known as China Resources Beer (Holdings) Company Limited, whose shares are listed on the
Stock Exchange with the stock code of 291 and whose business focus is on the manufacturing,
sales and distribution of beer products). From November 2006 to June 2010, he served as the
chief legal officer of Shui On Construction and Materials Limited (now known as SOCAM
Development Limited, whose shares are listed on the Stock Exchange with the stock code of
983 and whose business focus is on construction and property businesses in the PRC, Hong
Kong and Macau). From July 2010 to May 2011, he served as the vice president of the legal
department and company secretary of Sateri Holdings Limited (a global specialty cellulose
producer subsequently renamed as Bracell Limited, whose shares were listed on the Stock
Exchange with the stock code of 1768 prior to its privatization and delisting in October 2016).
From August 2011 to April 2016, he worked at the Listing Department of Hong Kong
Exchanges and Clearing Limited, and he served as a vice president at the time of his departure,
primarily responsible for reviewing IPO applications and making recommendations to the
Listing Committee. In May 2016, he became the founding partner of Wong Heung Sum &
Lawyers ( ) (formerly known as Sincere Wong & Co. ( )).
Mr. Sincere Wong has served as an independent non-executive director of Bank of Gansu
Co., Ltd (a company listed on the Stock Exchange with the stock code of 2139), U Banquet
Group Holding Limited (now known as Net-a-Go Technology Company Limited, a company
listed on the Stock Exchange with the stock code of 1483) and Fulu Holdings Limited (a
company listed on the Stock Exchange with the stock code of 2101), since August 2017,
September 2018, and August 2020, respectively. From January 2019 to March 2020, he also
served as a non-executive director of MOS House Group Limited (a retailer and supplier of
overseas manufactured tiles in Hong Kong and Macau, whose shares are listed on the Stock
Exchange with the stock code of 1653).
Save as disclosed above, none of our Directors has held any other directorships in listed
companies during the three years immediately preceding the date of this prospectus.
Save as disclosed above and in the section headed “Statutory and General Information —
3. Further Information about our Directors and Substantial Shareholders” in Appendix V to this
prospectus, to the best of the knowledge, information and belief of our Directors having made
all reasonable enquiries, there was no information relating to our Directors that is required to
be disclosed pursuant to Rule 13.51(2) of the Listing Rules or any other matters concerning any
Directors that needs to be brought to the attention of our Shareholders as of the Latest
Practicable Date.
DIRECTORS AND SENIOR MANAGEMENT
– 376 –
SENIOR MANAGEMENT
Mr. Wang Yongli (
)
Mr. Wang Yongli, aged 58, has been a deputy general manager of Jinmao PM since May
2015 and a vice president of our Company since August 2021. He is primarily responsible for
the operation and management of the consultancy business of our Group.
Mr. Wang Yongli graduated from Beijing Finance Management Cadre School (
) in Beijing, the PRC in July 2005, majoring in corporate management.
Prior to joining our Group, Mr. Wang Yongli worked in Beijing Xiangshan Hotel (
), as the manager of the front office department, from March 1979 to November 2000.
From November 2000 to November 2001, he served as the deputy general manager of Haihang
Hotel ( ) under Huahai Real Estate Development Company (
), where he was responsible for the management of the daily operations of Haihang Hotel.
Mr. Wang Yongli joined our Group in February 2003, where he held various positions in
Jinmao PM such as project manager, director of the client relations department and deputy
general manager, prior to his promotion to his current position.
Mr. Li Yulong (
)
Mr. Li Yulong, aged 35, has been a deputy general manager of Jinmao PM since May 2016
and a vice president of our Company since August 2021. He is primarily responsible for the
business innovation, strategic planning and technology development of our Group, as well as
the operation and management of the business of our Group in Beijing and Qingdao regions.
Mr. Li Yulong graduated with bachelor’s degrees in computer science and technology and
agricultural and forestry economics from Shanxi Agricultural University ( )in
Shanxi, the PRC in June 2009 and July 2009, respectively. He then obtained a post-graduate
master of business administration from Peking University ( ) in Beijing, the PRC in
July 2021. He obtained the intermediate business management economist qualification from
Beijing Municipal Human Resources and Social Security Bureau of the PRC (
) in November 2014.
Prior to joining our Group, Mr. Li Yulong served as the director of the cooperation and
development department of Beijing Vanke Real Estate Service Co., Ltd. (
), a property management company in the PRC, from July 2009 to May 2016, where he
was responsible for market expansion, investment mergers and acquisitions and equity
cooperation.
Mr. Li Yulong joined our Group in May 2016, and has been serving in his current position
in Jinmao PM since.
DIRECTORS AND SENIOR MANAGEMENT
– 377 –
Mr. Wei Dong ( )
Mr. Wei Dong, aged 53, has been a deputy general manager of Jinmao PM since May 2017
and a vice president of our Company since August 2021. He is primarily responsible for the
health, safety and environment management and smart community management of our Group.
Mr. Wei Dong graduated with a diploma in economics and trade from the Party School of
Beijing Municipal Committee of the Chinese Communist Party ( ) in Beijing,
the PRC in July 1999. He then completed a training program in business management from
Capital University of Economics and Business ( ) in Beijing, the PRC in
August 2006.
Prior to joining our Group, Mr. Wei Dong worked in The Great Wall Sheraton Hotel
Beijing ( ), as the assistant manager of the housekeeping department, from
September 1987 to December 2002. From December 2002 to June 2006, he worked in Scitech
Hotel ( ), as the manager of the housekeeping department. From August 2006 to
August 2011, he served as the operations director of Wangfujing Hotel Management Co., Ltd.
( ), a hospitality company in the PRC. From August 2011 to August
2013, he worked in Beijing Eastern Garden International Conference Co., Ltd. (
), a subsidiary of Sinochem Group engaged in the operation of the
accommodation and other facilities within Eastern Garden, a hotel and conference center, as
the manager of the room division department.
Mr. Wei Dong joined our Group in August 2013, where he successively served as the
assistant to the general manager and deputy general manager in Jinmao PM taking charge of
health, safety and environment management and smart community management, prior to his
promotion to his current position.
Mr. Cai Yun (
)
Mr. Cai Yun, aged 43, has been a deputy general manager of Jinmao PM since January
2020 and a vice president of our Company since August 2021. He is primarily responsible for
the operation and management of the business of our Group in Shanghai, Nanjing and
Changsha regions.
Mr. Cai Yun graduated with a bachelor’s degree in modern building electronics (
) from Shanghai University of Engineering Science ( ) in Shanghai,
the PRC in July 2001. He then obtained a post-graduate master of business administration from
Shanghai International Studies University ( ) in Shanghai, the PRC in June
2017.
DIRECTORS AND SENIOR MANAGEMENT
– 378 –
Prior to joining our Group, from August 2001 to April 2003, Mr. Cai Yun served as the
deputy project manager of the project department of Cornell Properties Services (Shanghai)
Co., Ltd. ( ( ) ), a property management company in the PRC, where
he assisted the project manager in the operation and management of property management
projects. From April 2003 to May 2004, he served as the deputy project manager of the project
department of Shanghai Lianyang Gangli Property Management Co., Ltd. (
), a property management company in the PRC, where he was responsible for the
operation and management of property management projects. From May 2004 to May 2005, he
served as the project officer of the engineering department of Hutchison Estate Service &
Agency (Shanghai) Limited ( ( ) ) (now known as Cayley Property
Management (Shanghai) Co., Ltd. ( ( ) )), a property management
company in the PRC, where he was responsible for the engineering management of properties.
From May 2005 to May 2006, he served as the deputy project manager of the engineering
department of Shanghai Shimao Real Estate Co., Ltd. ( ), a real estate
company in the PRC, where he was responsible for the management of the engineering
business segment of the company. From May 2006 to November 2006, he worked in Savills
Property Services (Shanghai) Company Limited ( ( ) ),
an integrated property services provider in the PRC, as the engineering manager. From
November 2006 to June 2010, he worked in Shanghai China Merchants Property Management
Co., Ltd. ( ), a property management company in the PRC, as the
engineering manager of the quality management department. From August 2010 to June 2013,
he worked in Cheung Kong Holdings (Shanghai) Enterprises Management Company Limited
( ( ) ), a property management and consultancy company in the
PRC, as the engineering manager of the property department. From June 2013 to December
2016, he served as the assistant general manager of Shanghai Vanke Real Estate Service Co.,
Ltd. ( ), a property management company and property services
provider in the PRC, as well as the general manager of the commercial and office management
centre where he was responsible for the operation and management of the non-residential
business.
Mr. Cai Yun joined our Group in December 2016, where he held various positions in
Jinmao PM such as regional general manager being responsible for the overall operation and
management of the Shanghai region, and assistant to general manager and deputy general
manager being responsible for the operation and management of business in the Shanghai,
Nanjing and Changsha regions, prior to his promotion to his current position. Since April 2021,
he has also served as a director of Jinmao Shanghai where he is responsible for its overall
operation and management.
Mr. Zhan Yu (
)
Mr. Zhan Yu, aged 39, has been a deputy general manager of Jinmao PM since March
2021 and a vice president of our Company since August 2021. He is primarily responsible for
the investment and market development of our Group.
DIRECTORS AND SENIOR MANAGEMENT
– 379 –
Mr. Zhan Yu graduated with a bachelor’s degree in law from North China University of
Technology in January 2004. He then obtained a post-graduate master’s degree in economic
law from Beijing Jiaotong University ( ) in Beijing, the PRC in July 2007.
Prior to joining our Group, Mr. Zhan Yu worked in Shanxi Securities Co., Ltd. (
), a securities company in the PRC whose shares are listed on the Shenzhen
Stock Exchange with the stock code of 002500, in the office of the board of directors, from July
2007 to May 2012, where he was responsible for pushing forward the company’s listing and
its corporate governance. From May 2012 to April 2016, he worked as the general manager of
the investment department in Shanzheng Investment Co., Ltd. ( ), a
company engaging in investment and asset management in the PRC, where he was responsible
for equity investment and fund management. From April 2016 to September 2019, he held
executive director and investment director positions of CMIG Futurelife Holdings Group
Company Limited ( ), a community value-added service provider
and resource integrator in the property management industry in the PRC, where he was
responsible for investment mergers and acquisitions of property companies and community
value-added project investment. From September 2019 to March 2021, he worked in Sichuan
Languang Justbon Services Group Co., Ltd. ( ), a property
management service provider in the PRC whose shares are listed on the Stock Exchange with
the stock code of 2606, as the general manager of the investment development centre, where
he was responsible for investment mergers and acquisitions of property companies and market
expansion.
Mr. Zhan Yu joined our Group in March 2021, and has been serving in his current position
in Jinmao PM since.
Ms. Zhao Meihua (
)
Ms. Zhao Meihua, aged 43, has been the assistant to the general manager of Jinmao PM
since June 2015 and an assistant to president of our Company since August 2021. She is
primarily responsible for the human resource management of our Group, as well as the
operation and management of the business of our Group in Chongqing, Guangzhou and Fuzhou
regions.
Ms. Zhao Meihua obtained a bachelor’s degree in economics, majoring in corporate
management from Renmin University of China ( ) in Beijing, the PRC in July
1999. She then obtained a post-graduate master’s degree in management also from Renmin
University of China in January 2010. She obtained the intermediate human resources
management economist qualification from Beijing Municipal Human Resources and Social
Security Bureau of the PRC in November 2010, as well as the level 1 corporate human resource
management qualification and the level 1 corporate trainer qualification from Vocational Skills
Appraisal Centre of Human Resources and Social Security Bureau of the PRC (
) in March 2011 and December 2013, respectively.
DIRECTORS AND SENIOR MANAGEMENT
– 380 –
Prior to joining our Group and Jinmao Group, from July 1999 to July 2002, she worked
in Beijing Yanlong Consulting Co., Ltd. ( ), an information and
corporate management consultancy and talent development company in the PRC, as the
administration and human resources manager of the administration department. From July 2002
to October 2004, she served as an assistant consultant in Guangzhou Zhiren Consulting Service
Co., Ltd., Beijing Branch ( ), a corporate management and human
resources consultancy company in the PRC, where she was responsible for human resources
consultancy. From November 2004 to September 2005, she worked in Jinyindao (Beijing)
Network Technology Co., Ltd. ( ( ) ), an e-commerce
company in the PRC, as the manager of human resources department. From October 2005 to
December 2006, she worked in Wangfujing Hotel Management Co., Ltd., as the assistant to the
manager of the human resources department. From December 2006 to March 2008, she worked
in Xinda Huawang Communication Technology Co., Ltd. ( ), as the
manager of the human resources department. In April 2008, she rejoined Wangfujing Hotel
Management Co., Ltd., as the director of the human resources department, up until February
2013.
Ms. Zhao Meihua joined Jinmao Group in February 2013, where she served as the senior
manager of the human resources department of China Jinmao up until June 2015. She then
joined our Group in June 2015, and has been serving in her current position in Jinmao PM
since.
COMPANY SECRETARY
Ms. Ho Wing Tsz Wendy ( ) has been appointed as the company secretary of our
Company and her appointment will take effect from the Listing Date. She is also an executive
director of corporate services division of Tricor Services Limited, a global professional
services provider specializing in integrated business, corporate and investor services.
Ms. Ho Wing Tsz Wendy has over 25 years of experience in the corporate secretarial field
and has been providing professional corporate services to Hong Kong listed companies as well
as multinational, private and offshore companies. She is currently the company secretary or
joint company secretary of six listed companies on the Stock Exchange, namely, Wynn Macau,
Limited (stock code: 1128), Bank of Chongqing Co., Ltd. (stock code: 1963), China Everbright
Water Limited (stock code: 1857), China Merchants Bank Co., Ltd. (stock code: 3968), Brii
Biosciences Limited (stock code: 2137) and Angelalign Technology Inc. (stock code: 6699).
Ms. Ho Wing Tsz Wendy is a Chartered Secretary, a Chartered Governance Professional
and a fellow of both The Hong Kong Chartered Governance Institute (“HKCGI”) and The
Chartered Governance Institute (formerly known as The Institute of Chartered Secretaries and
Administrators in the United Kingdom). She is a Council Member of HKCGI. Ms. Ho Wing Tsz
Wendy has obtained a master of business administration from The Hong Kong Polytechnic
University in September 2019.
DIRECTORS AND SENIOR MANAGEMENT
– 381 –
BOARD COMMITTEES
Our Board has established the Audit Committee, the Remuneration and Nomination
Committee and the Strategy and Investment Committee and delegated various responsibilities
to these committees, which assist our Board in discharging its duties and overseeing particular
aspects of our Group’s activities.
Audit Committee
Our Company has established the Audit Committee (with effect from the Listing Date)
with written terms of reference in compliance with Rule 3.21 of the Listing Rules and
paragraph C.3 of the Corporate Governance Code (“CG Code”) as set out in Appendix 14 to
the Listing Rules. The Audit Committee consists of three members, namely Dr. Chen Jieping
and Mr. Sincere Wong who are independent non-executive Directors and Ms. Qiao Xiaojie who
is a non-executive Director. The chairperson of the Audit Committee is Dr. Chen Jieping, who
holds the appropriate professional qualifications as required under Rules 3.10(2) and 3.21 of
the Listing Rules.
The primary duties of the Audit Committee include, among others, (i) assisting the Board
in ensuring that our Group has an effective financial reporting, risk management and internal
control system in compliance with the Listing Rules; (ii) overseeing the integrity of the
financial statements of our Group; (iii) selecting, and assessing the independence and
qualifications of, our Company’s external auditor; (iv) ensuring effective communication
between our Directors and the internal and external auditors of our Company; (v) providing
advice and comments to our Board; and (vi) performing other duties and responsibilities as
may be assigned by the Board.
Remuneration and Nomination Committee
Our Company has established the Remuneration and Nomination Committee (with effect
from the Listing Date) with written terms of reference in compliance with Rule 3.25 of the
Listing Rules and paragraphs A.5 and B.1 of the CG Code. The Remuneration and Nomination
Committee consists of Dr. Han Jian and Dr. Chen Jieping who are independent non-executive
Directors and Ms. He Yamin who is a non-executive Director. The chairperson of the
Remuneration and Nomination Committee is Dr. Han Jian.
The primary duties of the Remuneration and Nomination Committee include, among
others, (i) establishing, reviewing and providing advices to our Board on our policy and
structure concerning remuneration of our Directors and senior management and on the
establishment of a formal and transparent procedure for developing policies concerning such
remuneration; (ii) determining the terms of the specific remuneration package of each Director
and senior management; (iii) reviewing and approving performance-based remuneration by
reference to corporate goals and objectives resolved by our Directors from time to time; (iv)
reviewing the structure, size and composition of our Board on a regular basis and make
recommendations to the Board regarding any proposed changes to the composition of our
DIRECTORS AND SENIOR MANAGEMENT
– 382 –
Board; (v) identifying, selecting or making recommendations to our Board on the selection of
individuals nominated for directorship, and ensure the diversity of our Board members; (vi)
assessing the independence of our independent non-executive Directors; and (vii) making
recommendations to our Board on relevant matters relating to the appointment, re-appointment
and removal of our Directors and succession planning for our Directors.
Strategy and Investment Committee
Our Company has established the Strategy and Investment Committee. The Strategy and
Investment Committee consists of four members, namely Mr. Jiang Nan who is a non-executive
Director, Mr. Xie Wei and Ms. Zhou Liye who are executive Directors, and Mr. Sincere Wong
who is an independent non-executive Director. The chairperson of the Strategy and Investment
Committee is Mr. Jiang Nan.
The primary duties of the Strategy and Investment Committee include, among others,
(i) formulating the Group’s development strategies; (ii) evaluating investment projects;
(iii) studying material strategic cooperation projects; and (iv) performing other duties and
responsibilities as may be assigned by the Board.
REMUNERATION OF DIRECTORS AND SENIOR MANAGEMENT
Our Directors and members of our senior management receive compensation from our
Group in the form of salaries, bonuses and other benefits in kind such as contributions to a
retirement benefit scheme.
The aggregate remuneration (including fees, salaries, contributions to a retirement benefit
scheme, discretionary bonuses and other allowances and other benefits in kind) paid to our
Directors for the years ended December 31, 2018, 2019 and 2020 and the nine months ended
September 30, 2021 was RMB2.3 million, RMB2.2 million, RMB2.8 million and RMB2.9
million, respectively. Save as disclosed in Note 8 to the Accountants’ Report in Appendix I to
this prospectus, no other amounts have been paid or are payable by any member of our Group
to our Directors during the Track Record Period.
The aggregate amount of wages, salaries and bonuses, pension costs and other allowances
and other benefits in kind paid to our five highest paid individuals in respect of each of the
three years ended December 31, 2018, 2019 and 2020 and the nine months ended September
30, 2021 was approximately RMB7.6 million, RMB9.1 million, RMB9.7 million and RMB8.2
million, respectively.
No remuneration was paid by us to our Directors or the five highest paid individuals as
an inducement to join or upon joining us or as a compensation for loss of office during the
Track Record Period. Further, none of our Directors had waived or agreed to waive any
remuneration during the Track Record Period.
DIRECTORS AND SENIOR MANAGEMENT
– 383 –
Under the existing arrangements that are currently in force as of the date of this
prospectus, the aggregate remuneration (including fees, salaries, contributions to pension
schemes and other allowances and other benefits in kind but excluding discretionary bonuses)
payable to our Directors for the year ending December 31, 2021 is estimated to be around
RMB4.5 million in aggregate.
Our Board will review and determine the remuneration and compensation packages of our
Directors and senior management and will, following the Listing, receive recommendation
from the Remuneration and Nomination Committee which will take into account salaries paid
by comparable companies, time commitment and responsibilities of our Directors and
performance of our Group.
CORPORATE GOVERNANCE
Our Company recognizes the importance of incorporating elements of good corporate
governance in the management structures and internal control procedures of our Group so as
to achieve effective accountability.
Our Company has adopted the code provisions stated in the CG Code. Our Company is
committed to the view that the Board should include a balanced composition of executive
Directors, non-executive Directors and independent non-executive Directors so that there is a
strong independent element on the Board, which can effectively exercise independent judgment.
BOARD DIVERSITY POLICY
Our Board has adopted a board diversity policy which sets out the approach to achieve
diversity on our Board. Our Company recognizes and embraces the benefits of having a diverse
Board and sees increasing diversity at the Board level as an essential element in supporting the
attainment of our Company’s strategic objectives and sustainable development. Our Company
seeks to achieve Board diversity through the consideration of a number of factors, including
but not limited to talent, skills, gender, age, cultural and educational background, ethnicity,
professional experience, independence, knowledge and length of service. We will select
potential Board candidates based on merit and his/her potential contribution to our Board while
taking into consideration our own business model and specific needs from time to time. All
Board appointments will be based on meritocracy and candidates will be considered against
objective criteria, having due regard to the benefits of diversity on our Board.
Our Board has a balanced mix of knowledge, skills and experience, including but without
limitation to property development, property management, financial management, human resources
and administrative management. They obtained degrees in various majors including but without
limitation to finance, philosophy, applied psychology, accounting and business administration. We
have three independent non-executive Directors who have different industry backgrounds,
including accounting, human resource management and law. Taking into account our business
model and specific needs as well as the presence of four female Directors out of a total of eight
Board members, we consider that the composition of our Board satisfies our board diversity policy.
DIRECTORS AND SENIOR MANAGEMENT
– 384 –
We recognize the particular importance of gender diversity. Our Board currently
comprises eight Directors, including four female Directors. We have taken and will continue
to take steps to promote and enhance gender diversity at all levels of our Company, including
but without limitation at our Board and senior management levels. Our board diversity policy
provides that our Board shall take opportunities when selecting and making recommendations
on suitable candidates for Board appointments with the aim to maintain the proportion of
female members after Listing. We will also ensure that there is gender diversity when
recruiting staff at mid to senior level so that we will have a pipeline of female senior
management and potential successors to our Board going forward. It is our objective to
maintain an appropriate balance of gender diversity with reference to the stakeholders’
expectation and international and local recommended best practices.
Our Remuneration and Nomination Committee is responsible for ensuring the diversity of
our Board members. After Listing, our Remuneration and Nomination Committee will review
our board diversity policy and its implementation from time to time to monitor its continued
effectiveness and we will disclose the implementation of our board diversity policy, including
any measurable objectives set for implementing the board diversity policy and the progress on
achieving these objectives, in our corporate governance report on an annual basis.
COMPLIANCE ADVISOR
We have appointed First Shanghai Capital Limited as our compliance advisor pursuant to
Rule 3A.19 of the Listing Rules. Pursuant to Rule 3A.23 of the Listing Rules, our compliance
advisor will advise us in the following circumstances:
• before the publication of any regulatory announcement, circular or financial report;
• when a transaction, which might be a notifiable or connected transaction, is
contemplated, including share issues and share repurchases;
• where we propose to use the proceeds from the Global Offering in a manner different
from that detailed in this prospectus or where our business activities, developments
or results deviate from any forecast, estimate, or other information in this
prospectus; and
• where the Stock Exchange makes an inquiry of us regarding unusual movements in
the price or trading volume of our Shares.
The term of the appointment shall commence on the Listing Date and end on the date on
which we distribute our annual report in respect of our financial results for the first full
financial year commencing after the Listing Date and such appointment may be subject to
extension by mutual agreement.
DIRECTORS AND SENIOR MANAGEMENT
– 385 –
So far as our Directors are aware, immediately prior to and following the completion of
the Bonus Issue, the Distribution and the Global Offering (assuming that there will be no
change in the shareholding structure of China Jinmao, Sinochem Hong Kong, Sinochem
Corporation, Sinochem Group and Sinochem Holdings from the Latest Practicable Date up to
the Listing), the following persons will have an interest or a short position in the Shares or the
underlying Shares of our Company which will be required to be disclosed to our Company and
the Stock Exchange pursuant to the provisions of Division 2 and 3 of Part XV of the SFO:
Name of
Shareholder
Nature of
interest
Shares held
immediately prior to
the completion
of the Bonus Issue, the
Distribution and
the Global Offering
Shares held immediately
after the Bonus Issue, the
Distribution and the Global
Offering (assuming that no
Distribution Adjustment is
made, and the Offer Size
Adjustment Option and the
Over-allotment Option are
not exercised)
Shares held immediately
after the Bonus Issue, the
Distribution and the Global
Offering (assuming that no
Distribution Adjustment is
made and the Offer Size
Adjustment Option is not
exercised, but the
Over-allotment Option is
exercised in full)
Shares held immediately
after the Bonus Issue, the
Distribution and the Global
Offering (assuming that the
Offer Size Adjustment
Option is exercised in full
and the Distribution
Adjustment is made
accordingly, but the
Over-allotment Option is
not exercised)
Shares held immediately
after the Bonus Issue, the
Distribution and the
Global Offering (assuming
that the Offer Size
Adjustment Option is
exercised in full and the
Distribution Adjustment
is made accordingly and
the Over-allotment Option
is exercised in full)
Number Percentage Number Percentage Number Percentage Number Percentage Number Percentage
China Jinmao Beneficial
owner
2 (L) 100.0% 608,319,969 (L) 67.5% 608,319,969 (L) 66.4% 625,960,526 (L) 68.3% 625,960,526
(L)
67.0%
Sinochem
Hong Kong
Interest in
controlled
corporation
(1)
2 (L) 100.0% 608,319,969 (L) 67.5% 608,319,969 (L) 66.4% 625,960,526 (L) 68.3% 625,960,526
(L)
67.0%
Beneficial
owner
– – 67,616,133 (L) 7.5% 67,616,133 (L) 7.4% 61,393,334 (L) 6.7% 61,393,334
(L)
6.6%
Sinochem
Corporation
Interest in
controlled
corporation
(1)
2 (L) 100.0% 675,936,102 (L) 75.0% 675,936,102 (L) 73.7% 687,353,860 (L) 75.0% 687,353,860
(L)
73.6%
Sinochem Group Interest in
controlled
corporation
(1)
2 (L) 100.0% 675,936,102 (L) 75.0% 675,936,102 (L) 73.7% 687,353,860 (L) 75.0% 687,353,860
(L)
73.6%
Sinochem Holdings Interest in
controlled
corporation
(1)
2 (L) 100.0% 675,936,102 (L) 75.0% 675,936,102 (L) 73.7% 687,353,860 (L) 75.0% 687,353,860
(L)
73.6%
Notes:
(1) Sinochem Holdings held the entire equity interests in Sinochem Group, which in turn held the entire equity
interests in Sinochem Corporation. Sinochem Corporation held the entire equity interests in Sinochem Hong
Kong, which in turn held an approximately 35.3% interest in China Jinmao as of the Latest Practicable Date.
For the purpose of the SFO, Sinochem Holdings, Sinochem Group, Sinochem Corporation and Sinochem Hong
Kong are all deemed to be interested in the Shares beneficially owned by China Jinmao, and Sinochem
Holdings, Sinochem Group and Sinochem Corporation are all deemed to be interested in the Shares
beneficially owned by Sinochem Hong Kong.
(2) The letter (L) denotes the person’s long interest in our Shares.
SUBSTANTIAL SHAREHOLDERS
– 386 –
Save as disclosed above, our Directors are not aware of any person who will, immediately
following the completion of the Bonus Issue, the Distribution and the Global Offering, have an
interest or a short position in the Shares or underlying Shares which will be required to be
disclosed to our Company and the Stock Exchange under the provisions of Division 2 and 3
of Part XV of the SFO or will be, directly or indirectly, interested in 10% or more of the
nominal value of any class of share capital carrying rights to vote in all circumstances at
general meetings of our Company or any of our subsidiaries. Our Directors are not aware of
any arrangement which may at a subsequent date result in a change of control in our Company.
SUBSTANTIAL SHAREHOLDERS
– 387 –
ISSUED SHARE CAPITAL
Pursuant to the Companies Ordinance, with effect from March 3, 2014, companies
incorporated in Hong Kong no longer have an authorized share capital and there is no longer
the concept of par value in respect of issued shares. The following is a description of the share
capital of our Company in issue as of the Latest Practicable Date and to be issued as fully paid
or credited as fully paid immediately following the completion of the Bonus Issue and the
Global Offering:
Issued and to be issued, fully paid or credited as fully paid:
(a) Assuming the Offer Size Adjustment Option and the Over-allotment Option are not
exercised –
Shares in issue as at the date of this prospectus: 2 Shares
Shares to be issued pursuant to the Bonus Issue: 799,999,998 Shares
Shares to be issued pursuant to the Global Offering: 101,411,500 Shares
Total issued Shares upon completion of the Global Offering: 901,411,500 Shares
(b) Assuming the Offer Size Adjustment Option is exercised in full but the Over-allotment
Option is not exercised –
Shares in issue as at the date of this prospectus: 2 Shares
Shares to be issued pursuant to the Bonus Issue: 799,999,998 Shares
Shares to be issued pursuant to the Global Offering: 116,623,000 Shares
Total issued Shares upon completion of the Global Offering: 916,623,000 Shares
(c) Assuming the Over-allotment Option is exercised in full but the Offer Size Adjustment
Option is not exercised –
Shares in issue as at the date of this prospectus: 2 Shares
Shares to be issued pursuant to the Bonus Issue: 799,999,998 Shares
Shares to be issued pursuant to the Global Offering: 116,623,000 Shares
Total issued Shares upon completion of the Global Offering: 916,623,000 Shares
(d) Assuming the Offer Size Adjustment Option and the Over-allotment Option are exercised
in full –
Shares in issue as at the date of this prospectus: 2 Shares
Shares to be issued pursuant to the Bonus Issue: 799,999,998 Shares
Shares to be issued pursuant to the Global Offering: 134,116,000 Shares
Total issued Shares upon completion of the Global Offering: 934,116,000 Shares
SHARE CAPITAL
– 388 –
ASSUMPTIONS
The above table assumes that the Global Offering becomes unconditional and is
completed in accordance with the relevant terms and conditions and that the Shares are issued
pursuant to the Bonus Issue and the Global Offering. The above does not take into account any
Shares which may be issued or repurchased by our Company pursuant to the general mandates
granted to our Directors to issue or repurchase Shares as described below.
RANKING
The Offer Shares are ordinary shares in the share capital of our Company and will rank
equally and carry the same rights in all respects with all Shares currently in issue or to be
issued as mentioned in this prospectus and, in particular, will rank in full for all dividends or
other distributions declared, made or paid on the Shares in respect of a record date which falls
after the date of this prospectus save for the entitlement under the Bonus Issue.
GENERAL MANDATE TO ISSUE SHARES
Subject to the Global Offering becoming unconditional, our Directors have been granted
a general mandate to allot, issue and deal with Shares or securities convertible into Shares and
to make or grant share sale plans, offers, agreements or options which would or might require
the exercise of such powers to allot, issue and deal with the Shares, with an aggregate number
of Shares allotted or agreed to be allotted, otherwise than by way of rights issue or pursuant
to the exercise of any options which may be granted under any share option scheme or by virtue
of scrip dividend schemes or similar arrangements in accordance with our Articles, not more
than the sum of:
(i) 20% of the aggregate number of Shares in issue immediately following completion
of the Bonus Issue and the Global Offering on the Listing Date (excluding Shares
which may be allotted and issued pursuant to the exercise of the Over-allotment
Option); and
(ii) the aggregate number of Shares repurchased by our Company (if any) under the
general mandate to repurchase Shares granted to our Directors referred to below.
SHARE CAPITAL
– 389 –
This general mandate will expire at the earliest of:
(i) the conclusion of our Company’s next annual general meeting; or
(ii) the expiration of the period within which the next annual general meeting of our
Company is required by the Articles or any other applicable laws and regulations of
Hong Kong to be held; or
(iii) when varied, revoked or renewed by an ordinary resolution of our Shareholders in
a general meeting.
Please refer to the section headed “Appendix V — Statutory and General Information —
1. Further Information about Our Group — (c) Written Resolutions of our Sole Shareholder
passed on February 18, 2022” for details of this general mandate.
GENERAL MANDATE TO REPURCHASE SHARES
Subject to the Global Offering becoming unconditional, our Directors have been granted
a general mandate to exercise all the powers of our Company to repurchase Shares with a total
number of Shares of not more than 10% of the aggregate number of Shares immediately
following completion of the Bonus Issue and the Global Offering but excluding any Shares
which may be issued pursuant to the exercise of the Over-allotment Option.
This mandate only relates to repurchases made on the Stock Exchange, or any other
approved stock exchange(s) on which the Shares are listed (and which is recognized by the SFC
and the Stock Exchange for this purpose), and which are made in accordance with all
applicable laws and/or requirements of the Listing Rules. A summary of the relevant Listing
Rules is set out in “Appendix V — Statutory and General Information — 1. Further Information
about Our Company — (f) Repurchase by our Company of our own securities”.
This mandate will expire at the earliest of:
(i) the conclusion of our Company’s next annual general meeting; or
(ii) the expiration of the period within which the next annual general meeting of our
Company is required by the Articles or any other applicable laws and regulations of
Hong Kong to be held; or
(iii) when varied, revoked or renewed by an ordinary resolution of our Shareholders in
a general meeting.
Please refer to the section headed “Appendix V — Statutory and General Information —
1. Further Information about Our Group — (c) Written Resolutions of our Sole Shareholder
passed on February 18, 2022” for details of this repurchase mandate.
SHARE CAPITAL
– 390 –
CIRCUMSTANCES UNDER WHICH GENERAL MEETING AND CLASS MEETING
ARE REQUIRED
Pursuant to the Companies Ordinance and the Articles of Association, our Company may
from time to time by ordinary Shareholders’ resolution (i) increase its capital; (ii) capitalize its
profits; (iii) allot and issue bonus shares; (iv) convert its shares into a larger or smaller number;
(v) dividing its shares into several classes; (vi) cancel any shares which have not been taken
or that have been forfeited; and (vii) make provisions for the issue and allotment of shares. In
addition, our Company may reduce its share capital by Shareholders’ special resolution. For
details, see “Appendix IV — Summary of Articles of Association — Alteration of Capital”.
Further, subject to the provisions of the Companies Ordinance, all or any of the special
rights (unless otherwise provided by the terms of issue) attached to any class of shares may be
varied or abrogated either with the consent in writing of the holders of not less than 75% of
the total voting rights of the holders of the shares of that class, or with the sanction of a special
resolution passed at a general meeting of the holders of the shares of that class. For details, see
“Appendix IV — Summary of Articles of Association — Variation of Rights”.
SHARE CAPITAL
– 391 –
THE CORNERSTONE PLACING
We have entered into cornerstone investment agreements (each a “Cornerstone
Investment Agreement”, and together the “Cornerstone Investment Agreements”) with the
cornerstone investors set forth below (each a “Cornerstone Investor”, and together the
“Cornerstone Investors”), who have agreed to, subject to certain conditions, subscribe or
cause their designated entities to subscribe for such number of Offer Shares (rounded down to
the nearest whole board lot of 500 Shares) which may be purchased at the Offer Price with an
aggregate amount of approximately HK$646.33 million (exclusive of the brokerage fee, the
SFC transaction levy, the Stock Exchange trading fee and the FRC transaction levy) (the
“Cornerstone Placing”).
Assuming an Offer Price of HK$7.52 (being the low-end of the indicative Offer Price
range set out in this prospectus), the total number of Offer Shares to be subscribed for by the
Cornerstone Investors would be 85,946,500 Offer Shares, representing (i) assuming that the
Offer Size Adjustment Option is not exercised, approximately 84.8% of the Offer Shares
(assuming the Over-allotment Option is not exercised), approximately 73.7% of the Offer
Shares (assuming the Over-allotment Option is fully exercised), approximately 9.5% of our
total issued share capital immediately upon the completion of the Global Offering (assuming
the Over-allotment Option is not exercised) and approximately 9.4% of our total issued share
capital immediately upon the completion of the Global Offering (assuming the Over-allotment
Option is fully exercised), and (ii) assuming that the Offer Size Adjustment Option is exercised
in full, approximately 73.7% of the Offer Shares (assuming the Over-allotment Option is not
exercised), approximately 64.1% of the Offer Shares (assuming the Over-allotment Option is
fully exercised), approximately 9.4% of our total issued share capital immediately upon the
completion of the Global Offering (assuming the Over-allotment Option is not exercised) and
approximately 9.2% of our total issued share capital immediately upon the completion of the
Global Offering (assuming the Over-allotment Option is fully exercised).
Assuming an Offer Price of HK$7.83 (being the mid-point of the indicative Offer Price
range set out in this prospectus), the total number of Offer Shares to be subscribed for by the
Cornerstone Investors would be 82,543,500 Offer Shares, representing (i) assuming that the
Offer Size Adjustment Option is not exercised, approximately 81.4% of the Offer Shares
(assuming the Over-allotment Option is not exercised), approximately 70.8% of the Offer
Shares (assuming the Over-allotment Option is fully exercised), approximately 9.2% of our
total issued share capital immediately upon the completion of the Global Offering (assuming
the Over-allotment Option is not exercised) and approximately 9.0% of our total issued share
capital immediately upon the completion of the Global Offering (assuming the Over-allotment
Option is fully exercised), and (ii) assuming that the Offer Size Adjustment Option is exercised
in full, approximately 70.8% of the Offer Shares (assuming the Over-allotment Option is not
exercised), approximately 61.5% of the Offer Shares (assuming the Over-allotment Option is
fully exercised), approximately 9.0% of our total issued share capital immediately upon the
completion of the Global Offering (assuming the Over-allotment Option is not exercised) and
approximately 8.8% of our total issued share capital immediately upon the completion of the
Global Offering (assuming the Over-allotment Option is fully exercised).
OUR CORNERSTONE INVESTORS
– 392 –
Assuming an Offer Price of HK$8.14 (being the high-end of the indicative Offer Price
range set out in this prospectus), the total number of Offer Shares to be subscribed for by the
Cornerstone Investors would be 79,400,000 Offer Shares, representing (i) assuming that the
Offer Size Adjustment Option is not exercised, approximately 78.3% of the Offer Shares
(assuming the Over-allotment Option is not exercised), approximately 68.1% of the Offer
Shares (assuming the Over-allotment Option is fully exercised), approximately 8.8% of our
total issued share capital immediately upon the completion of the Global Offering (assuming
the Over-allotment Option is not exercised) and approximately 8.7% of our total issued share
capital immediately upon the completion of the Global Offering (assuming the Over-allotment
Option is fully exercised), and (ii) assuming that the Offer Size Adjustment Option is exercised
in full, approximately 68.1% of the Offer Shares (assuming the Over-allotment Option is not
exercised), approximately 59.2% of the Offer Shares (assuming the Over-allotment Option is
fully exercised), approximately 8.7% of our total issued share capital immediately upon the
completion of the Global Offering (assuming the Over-allotment Option is not exercised) and
approximately 8.5% of our total issued share capital immediately upon the completion of the
Global Offering (assuming the Over-allotment Option is fully exercised).
The Cornerstone Investors will acquire the Offer Shares pursuant to, and as part of, the
International Offering. Our Company is of the view that, leveraging on the Cornerstone
Investors’ investment experience, the Cornerstone Placing will help raise the profile of our
Company and to signify that such investors have confidence in the growth and development of
the property management services industry in the PRC and in particular the future growth and
business prospects of our Group.
If there is over-allocation in the International Offering, there may be deferred delivery of
the Offer Shares to be subscribed by the Cornerstone Investors under the Cornerstone Placing.
All Cornerstone Investors have agreed that the Joint Representatives may, in their sole
discretion, defer the delivery of all or part of the Offer Shares that such Cornerstone Investors
have subscribed for to a date later than the Listing Date. All of the Cornerstone Investors,
including the aforesaid Cornerstone Investors who have agreed to a potential delayed delivery
arrangement, have agreed to pay for the relevant Offer Shares that they have subscribed before
dealings in the Company’s Offer Shares commence on the Stock Exchange. The Offer Shares
to be subscribed by the Cornerstone Investors will rank pari passu in all respects with the other
fully paid Offer Shares in issue and will be counted towards the public float of our Company
under Rule 8.24 of the Listing Rules.
There are no side agreements/arrangement between our Company and the Cornerstone
Investors or any benefit, direct or indirect, conferred on the Cornerstone Investors by virtue of
or in relation to the Cornerstone Placing, and the Cornerstone Investors do not have any
preferential rights in the Cornerstone Investment Agreements compared with other public
Shareholders, other than a guaranteed allocation of the relevant Offer Shares at the Offer Price.
None of the Cornerstone Investors will have any representation on the Board nor become a
substantial shareholder of our Company immediately upon completion of the Global Offering,
and the Cornerstone Investors will not subscribe for any Offer Shares under the Global
Offering other than pursuant to the Cornerstone Investment Agreements.
OUR CORNERSTONE INVESTORS
– 393 –
Canny Elevator Co., Ltd ( )(“Canny Elevator”) will subscribe for
our Offer Shares through UBS SDIC Fund Management Co., Ltd. (
)(“UBS SDIC Fund Management”), a qualified domestic institutional investor as approved
by the relevant PRC authorities (“QDII”), which is considered a “connected client” of Essence
International Securities (Hong Kong) Limited, a Joint Global Coordinator, Joint Bookrunner,
Joint Lead Manager and Underwriter, under paragraph 13 of Appendix 6 to the Listing Rules
by virtue of being a member of the same group. For details, please refer to “Our Cornerstone
Investors” below. An application has been made to the Stock Exchange, and the Stock
Exchange has granted its consent, under paragraph 5(1) of Appendix 6 to the Listing Rules to
allow Offer Shares to be placed to UBS SDIC Fund Management.
We became acquainted with each of the Cornerstone Investors mainly through
introduction by the relevant Underwriters. As confirmed by each of the Cornerstone Investors,
their respective interest in our Company as a Cornerstone Investor is based on their confidence
in our Company’s business and prospects. As confirmed by each Cornerstone Investor, save for
Keltic Investment (HK) Limited (“Keltic”), their subscription under the Cornerstone Placing
would be financed by their own internal financial resources and/or financial resources of their
ultimate beneficial owners.
To the best knowledge of our Company,
(i) each of the Cornerstone Investors (and, for Cornerstone Investors who will
subscribe for our Offer Shares through a QDII, such QDIIs) is an Independent Third
Party and is not our connected person, is not an existing Shareholder of our
Company or a close associate of such existing Shareholder, and is independent of
other Cornerstone Investors;
(ii) none of the Cornerstone Investors is accustomed to take instructions from our
Company, the Directors, the chief executive of our Company, the Controlling
Shareholders, the substantial Shareholders or the existing Shareholders or any of its
subsidiaries or their respective close associates in relation to the acquisition,
disposal, voting or other disposition of securities of the Company registered in their
name or otherwise held by them;
(iii) none of the subscription of the relevant Offer Shares by any of the Cornerstone
Investors is financed by the Company, the Directors, the chief executive of the
Company, the Controlling Shareholders, the substantial Shareholders or the existing
Shareholders or any of its subsidiaries or their respective close associates; and
(iv) save for Canny Elevator, each of the Cornerstone Investors are not listed on any
stock exchange.
The total number of Offer Shares to be subscribed by the Cornerstone Investors pursuant
to the Cornerstone Placing may be affected by reallocation of the Offer Shares between the
International Offering and the Hong Kong Public Offering in the event of over-subscription
under the Hong Kong Public Offering as described in the section headed “Structure of the
OUR CORNERSTONE INVESTORS
– 394 –
Global Offering — The Hong Kong Public Offering — Reallocation”. Details of the actual
number of Offer Shares to be allocated to the Cornerstone Investors will be disclosed in the
allotment results announcement to be issued by the Company on or around March 9, 2022.
To the extent that any Cornerstone Investor has engaged a QDII to subscribe for the
relevant Offer Shares on its behalf, such Cornerstone Investor will procure the QDII to comply
with the terms of its Cornerstone Investment Agreement in order to ensure the compliance of
such Cornerstone Investor with its obligations under its Cornerstone Investment Agreement.
OUR CORNERSTONE INVESTORS
The Company has entered into Cornerstone Investment Agreements with (i) Keltic, (ii)
Canny Elevator, (iii) Guangdong Keshun Investment Holding Co., Ltd (
)(“Guangdong Keshun”), (iv) Fuhui Capital Investment Limited (“Fuhui Capital”) and
(v) Qian He Capital Management Co Ltd — Qian He Capital Global Selection of Private-
Equity Investment Fund ( — )(“Qian He Fund”), in
respect of the Cornerstone Placing.
The following tables set out certain details of the Cornerstone Placing:
Based on the Offer Price of HK$7.52 (being the low-end of the indicative Offer Price range)
and assuming the Offer Size Adjustment Option is not exercised
Approximate % of
total number of
Offer Shares
Approximate % of
the International
Offer Shares
Approximate
shareholding
percentage in our
Company immediately
upon the completion
of the Global Offering
Cornerstone
Investor
Investment
Amount
(1)
Number
of Offer
Shares
(2)
Assuming
the Over-
allotment
Option
is not
exercised
Assuming
the Over-
allotment
Option is
exercised
in full
Assuming
the Over-
allotment
Option
is not
exercised
Assuming
the Over-
allotment
Option is
exercise
in full
Assuming
the Over-
allotment
Option
is not
exercised
Assuming
the Over-
allotment
Option is
exercise
in full
(in million)
Keltic RMB100 16,348,500 16.1% 14.0% 17.9% 15.4% 1.8% 1.8%
Canny Elevator HK$99 13,164,500 13.0% 11.3% 14.4% 12.4% 1.5% 1.4%
Guangdong
Keshun RMB50 8,174,000 8.1% 7.0% 9.0% 7.7% 0.9% 0.9%
Fuhui Capital RMB200 32,697,000 32.2% 28.0% 35.8% 30.7% 3.6% 3.6%
Qian He Fund US$15 15,562,500 15.3% 13.3% 17.1% 14.6% 1.7% 1.7%
Total HK$646.33 85,946,500 84.8% 73.7% 94.2% 80.7% 9.5% 9.4%
OUR CORNERSTONE INVESTORS
– 395 –
Notes:
(1) Calculated based on the exchange rates as described in the section headed “Information about this Prospectus
and the Global Offering — Exchange Rate Conversion”. The actual investment amount of each Cornerstone
Investor in Hong Kong dollars may vary due to the actual exchange rate prescribed in the relevant Cornerstone
Investment Agreement.
(2) Subject to rounding down to the nearest whole board lot of 500 Shares.
Based on the Offer Price of HK$7.52 (being the low-end of the indicative Offer Price range)
and assuming the Offer Size Adjustment Option is exercised in full
Approximate % of
total number of
Offer Shares
Approximate % of
the International
Offer Shares
Approximate
shareholding
percentage in our
Company immediately
upon the completion
of the Global Offering
Cornerstone
Investor
Investment
Amount
(1)
Number
of Offer
Shares
(2)
Assuming
the Over-
allotment
Option
is not
exercised
Assuming
the Over-
allotment
Option is
exercised
in full
Assuming
the Over-
allotment
Option
is not
exercised
Assuming
the Over-
allotment
Option is
exercise
in full
Assuming
the Over-
allotment
Option
is not
exercised
Assuming
the Over-
allotment
Option is
exercise
in full
(in million)
Keltic RMB100 16,348,500 14.0% 12.2% 15.6% 13.4% 1.8% 1.8%
Canny Elevator HK$99 13,164,500 11.3% 9.8% 12.5% 10.8% 1.4% 1.4%
Guangdong
Keshun RMB50 8,174,000 7.0% 6.1% 7.8% 6.7% 0.9% 0.9%
Fuhui Capital RMB200 32,697,000 28.0% 24.4% 31.2% 26.7% 3.6% 3.5%
Qian He Fund US$15 15,562,500 13.3% 11.6% 14.8% 12.7% 1.7% 1.7%
Total HK$646.33 85,946,500 73.7% 64.1% 81.9% 70.2% 9.4% 9.2%
Notes:
(1) Calculated based on the exchange rates as described in the section headed “Information about this Prospectus
and the Global Offering — Exchange Rate Conversion”. The actual investment amount of each Cornerstone
Investor in Hong Kong dollars may vary due to the actual exchange rate prescribed in the relevant Cornerstone
Investment Agreement.
(2) Subject to rounding down to the nearest whole board lot of 500 Shares.
OUR CORNERSTONE INVESTORS
– 396 –
Based on the Offer Price of HK$7.83 (being the mid-point of the indicative Offer Price range) and
assuming the Offer Size Adjustment Option is not exercised
Approximate % of
total number of
Offer Shares
Approximate % of the
International
Offer Shares
Approximate
shareholding
percentage in our
Company immediately
upon the completion
of the Global Offering
Cornerstone
Investor
Investment
Amount
(1)
Number
of Offer
Shares
(2)
Assuming
the Over-
allotment
Option
is not
exercised
Assuming
the Over-
allotment
Option is
exercised
in full
Assuming
the Over-
allotment
Option
is not
exercised
Assuming
the Over-
allotment
Option is
exercise
in full
Assuming
the Over-
allotment
Option
is not
exercised
Assuming
the Over-
allotment
Option is
exercise
in full
(in million)
Keltic RMB100 15,701,000 15.5% 13.5% 17.2% 14.7% 1.7% 1.7%
Canny Elevator HK$99 12,643,500 12.5% 10.8% 13.9% 11.9% 1.4% 1.4%
Guangdong
Keshun RMB50 7,850,500 7.7% 6.7% 8.6% 7.4% 0.9% 0.9%
Fuhui Capital RMB200 31,402,000 31.0% 26.9% 34.4% 29.5% 3.5% 3.4%
Qian He Fund US$15 14,946,500 14.7% 12.8% 16.4% 14.0% 1.7% 1.6%
Total HK$646.33 82,543,500 81.4% 70.8% 90.4% 77.5% 9.2% 9.0%
Notes:
(1) Calculated based on an exchange rate as described in the section headed “Information about this Prospectus
and the Global Offering — Exchange Rate Conversion”. The actual investment amount of each Cornerstone
Investor in Hong Kong dollars may vary due to the actual exchange rate prescribed in the relevant Cornerstone
Investment Agreement.
(2) Subject to rounding down to the nearest whole board lot of 500 Shares.
OUR CORNERSTONE INVESTORS
– 397 –
Based on the Offer Price of HK$7.83 (being the mid-point of the indicative Offer Price range)
and assuming the Offer Size Adjustment Option is exercised in full
Approximate % of
total number of
Offer Shares
Approximate % of the
International
Offer Shares
Approximate
shareholding
percentage in our
Company immediately
upon the completion
of the Global Offering
Cornerstone
Investor
Investment
Amount
(1)
Number
of Offer
Shares
(2)
Assuming
the Over-
allotment
Option
is not
exercised
Assuming
the Over-
allotment
Option is
exercised
in full
Assuming
the Over-
allotment
Option
is not
exercised
Assuming
the Over-
allotment
Option is
exercise
in full
Assuming
the Over-
allotment
Option
is not
exercised
Assuming
the Over-
allotment
Option is
exercise
in full
(in million)
Keltic RMB100 15,701,000 13.5% 11.7% 15.0% 12.8% 1.7% 1.7%
Canny Elevator HK$99 12,643,500 10.8% 9.4% 12.0% 10.3% 1.4% 1.4%
Guangdong
Keshun RMB50 7,850,500 6.7% 5.9% 7.5% 6.4% 0.9% 0.8%
Fuhui Capital RMB200 31,402,000 26.9% 23.4% 29.9% 25.6% 3.4% 3.4%
Qian He Fund US$15 14,946,500 12.8% 11.1% 14.2% 12.2% 1.6% 1.6%
Total HK$646.33 82,543,500 70.8% 61.5% 78.6% 67.4% 9.0% 8.8%
Notes:
(1) Calculated based on an exchange rate as described in the section headed “Information about this Prospectus
and the Global Offering — Exchange Rate Conversion”. The actual investment amount of each Cornerstone
Investor in Hong Kong dollars may vary due to the actual exchange rate prescribed in the relevant Cornerstone
Investment Agreement.
(2) Subject to rounding down to the nearest whole board lot of 500 Shares.
OUR CORNERSTONE INVESTORS
– 398 –
Based on the Offer Price of HK$8.14 (being the high-end of the indicative Offer Price range)
and assuming the Offer Size Adjustment Option is not exercised
Approximate % of
total number of
Offer Shares
Approximate % of the
International
Offer Shares
Approximate
shareholding
percentage in our
Company immediately
upon the completion
of the Global Offering
Cornerstone
Investor
Investment
Amount
(1)
Number
of Offer
Shares
(2)
Assuming
the Over-
allotment
Option
is not
exercised
Assuming
the Over-
allotment
Option is
exercised
in full
Assuming
the Over-
allotment
Option
is not
exercised
Assuming
the Over-
allotment
Option is
exercise
in full
Assuming
the Over-
allotment
Option
is not
exercised
Assuming
the Over-
allotment
Option is
exercise
in full
(in million)
Keltic RMB100 15,103,000 14.9% 13.0% 16.5% 14.2% 1.7% 1.6%
Canny Elevator HK$99 12,162,000 12.0% 10.4% 13.3% 11.4% 1.3% 1.3%
Guangdong
Keshun RMB50 7,551,500 7.4% 6.5% 8.3% 7.1% 0.8% 0.8%
Fuhui Capital RMB200 30,206,500 29.8% 25.9% 33.1% 28.4% 3.4% 3.3%
Qian He Fund US$15 14,377,000 14.2% 12.3% 15.8% 13.5% 1.6% 1.6%
Total HK$646.33 79,400,000 78.3% 68.1% 87.0% 74.6% 8.8% 8.7%
Notes:
(1) Calculated based on an exchange rate as described in the section headed “Information about this Prospectus
and the Global Offering — Exchange Rate Conversion”. The actual investment amount of each Cornerstone
Investor in Hong Kong dollars may vary due to the actual exchange rate prescribed in the relevant Cornerstone
Investment Agreement.
(2) Subject to rounding down to the nearest whole board lot of 500 Shares.
OUR CORNERSTONE INVESTORS
– 399 –
Based on the Offer Price of HK$8.14 (being the high-end of the indicative Offer Price range)
and assuming the Offer Size Adjustment Option is exercised in full
Approximate % of
total number of
Offer Shares
Approximate % of the
International
Offer Shares
Approximate
shareholding
percentage in our
Company immediately
upon the completion
of the Global Offering
Cornerstone
Investor
Investment
Amount
(1)
Number
of Offer
Shares
(2)
Assuming
the Over-
allotment
Option
is not
exercised
Assuming
the Over-
allotment
Option is
exercised
in full
Assuming
the Over-
allotment
Option
is not
exercised
Assuming
the Over-
allotment
Option is
exercise
in full
Assuming
the Over-
allotment
Option
is not
exercised
Assuming
the Over-
allotment
Option is
exercise
in full
(in million)
Keltic RMB100 15,103,000 13.0% 11.3% 14.4% 12.3% 1.6% 1.6%
Canny Elevator HK$99 12,162,000 10.4% 9.1% 11.6% 9.9% 1.3% 1.3%
Guangdong
Keshun RMB50 7,551,500 6.5% 5.6% 7.2% 6.2% 0.8% 0.8%
Fuhui Capital RMB200 30,206,500 25.9% 22.5% 28.8% 24.7% 3.3% 3.2%
Qian He Fund US$15 14,377,000 12.3% 10.7% 13.7% 11.7% 1.6% 1.5%
Total HK$646.33 79,400,000 68.1% 59.2% 75.6% 64.8% 8.7% 8.5%
Notes:
(1) Calculated based on an exchange rate as described in the section headed “Information about this Prospectus
and the Global Offering — Exchange Rate Conversion”. The actual investment amount of each Cornerstone
Investor in Hong Kong dollars may vary due to the actual exchange rate prescribed in the relevant Cornerstone
Investment Agreement.
(2) Subject to rounding down to the nearest whole board lot of 500 Shares.
The following information on the Cornerstone Investors was provided to the Company by
the Cornerstone Investors.
1. Keltic
Keltic is a private investment management company headquartered in Hong Kong, and
has been involved in the investments in funds and secondary market securities and the
fund-raising for its Canadian subsidiary. Keltic employs a main investment strategy of
purchasing and investing in equity in primary and secondary markets in Hong Kong and/or the
United States, with a focus on real estate projects, financing services, and project development
and management. Keltic is a wholly-owned subsidiary of Shenzhen Kaier Hanxiang Shiye Co.,
Ltd. ( ), which is a company established in the PRC in September
OUR CORNERSTONE INVESTORS
– 400 –
2016 with a registered capital of RMB250 million, principally engaged in investment activities
as an investment holding platform, and is wholly-owned by Mr. Li Weiguo ( ), an
Independent Third Party. Mr. Li Weiguo is also the chairman and actual controller of Beijing
Oriental Yuhong Waterproof Technology Co., Ltd. ( ), a
company listed on the Shenzhen Stock Exchange (stock code: 002271).
Keltic expects to fund its cornerstone investment with its internal resources and
potentially by obtaining external financing. Keltic may obtain external financing from
authorized financial institutions, including but not limited to an affiliate (“ABCI Affiliate”) of
one of our Joint Bookrunners and Joint Lead Managers, ABCI Capital Limited. The loan, if
obtained, will be on normal commercial terms after arm’s length negotiations with no other
direct or indirect benefits given by ABCI Affiliate. The financings are provided in the usual and
ordinary course of business of ABCI Affiliate. The Offer Shares to be subscribed for by Keltic
may be charged to ABCI Affiliate as security for the loan facilities.
2. Canny Elevator
Canny Elevator is a joint stock company established in the PRC which is listed on the
SME board of the Shenzhen Stock Exchange (stock code: 002367) and controlled by Mr. Wang
Youlin ( ). Canny Elevator is the first company to get listed within the PRC
domestic elevator industry and has been ranked by the Elevator World magazine as one of the
top 10 global manufacturers in the elevator industry for five consecutive years from 2017 to
2021. Canny Elevator has four manufacturing bases in Suzhou, Chengdu and Zhongshan.
Canny Elevator confirmed that Canny Elevator is not required to obtain any approval from the
Shenzhen Stock Exchange or shareholders of Canny Elevator to invest in the Company.
For the purpose of this cornerstone investment, Canny Elevator has engaged UBS SDIC
Fund Management, an asset manager which is a QDII, to subscribe for and hold such Offer
Shares on its behalf on a discretionary basis. UBS SDIC Fund Management is a collective
investment scheme established in the PRC in June 2002, and the account for the cornerstone
investment by Canny Elevator in the Offer Shares under management by UBS SDIC Fund
Management is a special account for Canny Elevator only. UBS SDIC Fund Management is an
indirect subsidiary of SDIC Capital Co., Ltd. ( ), a state-owned company
listed on the Shanghai Stock Exchange (stock code: 600061), principally engaged in finance
investment and management businesses and controlled by State Development & Investment
Corp. Ltd. ( ), which is also the indirect holding company of
Essence International Securities (Hong Kong) Limited, a Joint Global Coordinator, Joint
Bookrunner, Joint Lead Manager and Underwriter. UBS SDIC Fund Management confirmed
that UBS SDIC Fund Management itself and the investors of the collective investment schemes
managed by UBS SDIC Fund Management are all Independent Third Parties.
OUR CORNERSTONE INVESTORS
– 401 –
3. Guangdong Keshun
Guangdong Keshun is a private company established in the PRC which targets
investments in the manufacturing and commercial sectors, including upstream and downstream
investments in buildings and property-related sectors. For the purpose of this cornerstone
investment, Guangdong Keshun has engaged an asset manager which is a QDII to subscribe for
or purchase and hold the relevant Offer Shares on its behalf. Guangdong Keshun is beneficially
owned as to 99% by Mr. Chen Weizhong ( ) and 1% by Mr. Chen Zhizhong (
), both Independent Third Parties. Mr Chen Weizhong is also a controlling shareholder
and actual controller of Keshun Waterproof Technologies Co., Ltd. (
), a company listed on the Shenzhen Stock Exchange (stock code: 300737) (“Keshun”).
Keshun is a manufacturer in the construction waterproofing industry in the PRC which focuses
on providing comprehensive waterproofing solutions and integrating the use of engineering
building materials and civic building materials.
4. Fuhui Capital
Fuhui Capital is an investment holding company incorporated in the British Virgin Islands
and is wholly-owned by China Lesso Group Holdings Limited (“China Lesso”), a company
listed on the Main Board of the Stock Exchange (stock code: 2128). China Lesso and its
subsidiaries are principally engaged in manufacturing of building materials and interior
decoration products in the PRC, and have been a supplier of building materials to Jinmao
Group since 2019. China Lesso is one of the constituent stocks of the Hang Seng Composite
MidCap Index and is a stock eligible for trading through the Shanghai-Hong Kong Stock
Connect and Shenzhen-Hong Kong Stock Connect. In addition, China Lesso was officially
made a constituent stock of MSCI China index in November 2019. Fuhui Capital confirmed
that no approval is required to be obtained from the Stock Exchange and the shareholders of
China Lesso for the subscription or purchase by Fuhui Capital of the Offer Shares pursuant to
the relevant Cornerstone Investment Agreement.
5. Qian He Fund
Qian He Fund is a fund established in 2021 pursuant to the Interim Measures on Pilot
Program for Outbound Investment by Qualified Domestic Limited Partners in Hainan Province
( ), whose business focuses on
investment management activities such as investments in securities and funds, and is owned as
to 72% by Ms. Tao Qin ( ), an Independent Third Party. The fund manager of Qian He
Fund, Qianhe Capital Management Co., Ltd. ( )(“Qianhe Capital”), is
principally engaged in the management of entrusted asset management and investment
management. Mr. Wang Yawei, the founder of and the holder of 90% equity in Qianhe Capital,
and also an Independent Third Party, has over 20 years of experience in investment. Qianhe
Capital upholds the principle of value investment, provides absolute returns for institutional
and individual clients, and by leveraging its diversified values, Qianhe Capital aims to discover
investment targets with core competitiveness and underestimated growth potential. With the
application of investment instruments and technologies, Qianhe Capital has achieved
sustainable and steady growth of the net assets under its management.
OUR CORNERSTONE INVESTORS
– 402 –
CONDITIONS PRECEDENT
The obligation of each of the Cornerstone Investors to acquire the relevant Offer Shares
under the respective Cornerstone Investment Agreements is subject to, among other things, the
following closing conditions:
(a) the Hong Kong Underwriting Agreement and the International Underwriting
Agreement being entered into and having become effective and unconditional (in
accordance with their respective original terms or as subsequently waived or varied
by agreement of the parties thereto) by no later than the time and date as specified
in the Underwriting Agreements, and neither of the Underwriting Agreements
having been terminated;
(b) the Offer Price having been agreed upon between the Company and the Joint
Representatives (for themselves and on behalf of the Underwriters of the Global
Offering);
(c) the Listing Committee having granted the listing of, and permission to deal in, the
Shares as well as other applicable waivers and approvals and such approval,
permission or waiver not having been revoked prior to the commencement of
dealings in the Shares on the Stock Exchange;
(d) no relevant laws or regulations shall have been enacted or promulgated by any
governmental authority which prohibits the consummation of the transactions
contemplated in the Global Offering or in the Cornerstone Investment Agreements,
and there shall be no orders or injunctions from a court of competent jurisdiction in
effect precluding or prohibiting consummation of such transactions; and
(e) the representations, warranties, undertakings, acknowledgements and confirmations
of the relevant Cornerstone Investor under the relevant Cornerstone Investment
Agreement are (as of the date of the Cornerstone Investment Agreement) and will be
(as of the closing of the subscription of the Offer Shares in accordance with the
terms and conditions of the Cornerstone Investment Agreement) accurate and true in
all respects and not misleading and that there is no material breach of the relevant
Cornerstone Investment Agreement on the part of the relevant Cornerstone Investor.
RESTRICTIONS ON DISPOSAL OF OFFER SHARES BY THE CORNERSTONE
INVESTORS
Each of the Cornerstone Investors has agreed that it will not, whether directly or
indirectly, at any time during the period of six months following the Listing Date (the
“Lock-up Period”), dispose of any of the Offer Shares they have purchased pursuant to the
relevant Cornerstone Investment Agreements, save for certain limited circumstances for the
relevant Cornerstone Investor, such as transfers to any of its wholly-owned subsidiaries who
will be bound by the same obligations of such Cornerstone Investor, including the Lock-up
Period restriction.
OUR CORNERSTONE INVESTORS
– 403 –
You should read the following section in conjunction with our consolidated financial
information, including the accompanying notes thereto, as set out in the Accountants’
Report included in Appendix I to this prospectus. The Accountants’ Report contains our
audited consolidated financial statements as of and for the years ended December 31,
2018, 2019 and 2020 and the nine months ended September 30, 2021 and our unaudited
consolidated financial statements for the nine months ended September 30, 2020. Our
consolidated financial information has been prepared in accordance with HKFRSs, which
may differ in material respects from generally accepted accounting principles in other
jurisdictions.
The following discussion and analysis contain forward-looking statements that
reflect our current views with respect to future events and financial performance. These
statements are based on our assumptions and analysis in light of our experience and
perception of historical trends, current conditions and expected future developments, as
well as other factors we believe are appropriate under the circumstances. However,
whether actual outcomes and developments will meet our expectations and predictions
depends on a number of risks and uncertainties. Our future results could differ materially
from those anticipated in these forward-looking statements. In evaluating our business,
you should carefully consider the information provided in this prospectus, including but
not limited to the sections headed “Risk Factors” and “Business”.
OVERVIEW
We are a fast-growing upscale property management and city operation service provider
in China. According to China Index Academy, the average property management fee for
properties under our management was significantly higher than the industry average of the Top
100 Property Management Companies in 2018, 2019 and 2020. According to China Index
Academy, we are an industry-leading company in terms of multiple indicators in the three
dimensions of scope of service, service standards and service fees. China Jinmao, our
Controlling Shareholder, is a top tier property developer in China. We provide a full range of
high-quality property management and value-added services to one of the fastest-growing
portfolios of high-end residential properties, according to China Index Academy. We also
manage and operate a diversified and growing portfolio of commercial properties primarily
comprising office buildings and shopping malls, as well as public properties such as schools,
government facilities and other public spaces. As of September 30, 2021, the total GFA under
our property management services was approximately 23.2 million sq.m.
We are engaged in three business lines, namely (i) property management services, (ii)
value-added services to non-property owners, and (iii) community value-added services. We
also provide city operation services, the scope of which spans across our three business lines.
We were established over 25 years ago to focus on the provision of property management
services in China. In addition to property management services, we offer value-added services
FINANCIAL INFORMATION
– 404 –
to non-property owners (such as sales assistance, consultancy and other value-added services).
We also offer a variety of community value-added services, which are provided mainly to the
owners and residents of the properties we manage.
We experienced rapid growth during the Track Record Period. Our revenue increased
from RMB574.5 million in 2018 to RMB788.3 million in 2019 and further to RMB944.2
million in 2020, representing a CAGR of 28.2% from 2018 to 2020. Our revenue in the nine
months ended September 30, 2020 and 2021 was RMB665.3 million and RMB1,048.7 million,
respectively. Meanwhile, our profit for the year increased from RMB17.5 million in 2018 to
RMB22.6 million in 2019 and further to RMB77.1 million in 2020, representing a CAGR of
110.0% from 2018 to 2020. Our profit for the nine months ended September 30, 2020 and 2021
was RMB53.3 million and RMB109.4 million, respectively.
BASIS OF PRESENTATION
Pursuant to the Reorganization, as more fully explained in the paragraph headed
“Reorganization” in the section headed “History, Reorganization and Corporate Structure” in
the prospectus, our Company became the holding company of the companies now comprising
our Group subsequent to the end of the Track Record Period on May 25, 2021. The companies
now comprising our Group and the commercial business units were under the common control
of China Jinmao before and after the Reorganization. Accordingly, the financial information set
forth in the Accountants’ Report has been prepared on a consolidated basis by applying the
principles of merger accounting as if the Reorganization and the transfer of the Commercial
Property Management Business had been completed at the beginning of the Track Record
Period.
Our consolidated statements of profit or loss and other comprehensive income, statements
of changes in equity and statements of cash flows for the Track Record Period and our
unaudited financial information for the nine months ended September 30, 2020 include the
results and cash flows of all companies now comprising our Group and the commercial
business units from the earliest date presented or since the date when the subsidiaries and the
commercial business units first came under the common control of China Jinmao, whichever
is a shorter period. Our consolidated statements of financial position as of December 31, 2018,
2019 and 2020 and September 30, 2021 have been prepared to present the assets and liabilities
of the subsidiaries and the commercial business units using the existing book values from
China Jinmao’s perspective. No adjustments are made to reflect fair values, or recognize any
new assets or liabilities as a result of the Reorganization and the transfer of the Commercial
Property Management Business.
The financial information set forth in the Accountants’ Report has been prepared in
accordance with Hong Kong Financial Reporting Standards (“HKFRSs”, which include all
Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (“HKASs”) and
Interpretations) issued by the HKICPA and accounting principles generally accepted in Hong
Kong. We have early adopted all HKFRSs effective for the accounting period commencing
from January 1, 2021 and amendments to HKFRS 16 Covid-19-Related Rent Concessions
FINANCIAL INFORMATION
– 405 –
beyond June 30, 2021, together with the relevant transitional provisions, in the preparation of
the financial information throughout the Track Record Period and the period covered by the
interim comparative financial information.
The financial information has been prepared under the historical cost convention, except
for investment properties which have been measured at fair value.
KEY FACTORS AFFECTING OUR RESULTS OF OPERATIONS
Our results of operations and financial position are affected by a number of factors,
including those factors set out in “Risk Factors” in this prospectus and those discussed below:
Business Scale
Our results of operations are affected by the scale of contracted GFA and GFA under
management. During the Track Record Period, we generated the majority of our revenue from
our property management services. Accordingly, our business and results of operations depend
on our ability to maintain and grow our contracted GFA, which in turn is affected by our ability
to obtain new service contracts through organic growth and our business expansion capability
including acquiring existing property management companies. As of December 31, 2018, 2019
and 2020 and September 30, 2021, the aggregate contracted GFA amounted to 21.9 million
sq.m., 30.8 million sq.m., 40.5 million sq.m. and 45.7 million sq.m, respectively.
A portion of our total contracted GFA does not generate management services fees
because the relevant properties have not been delivered and our provision of property
management services has not yet started. Therefore, our financial position and results of
operations are also affected by our GFA under management. Our GFA under management
amounted to 10.2 million sq.m., 12.7 million sq.m., 17.7 million sq.m. and 23.2 million sq.m.
as of December 31, 2018, 2019 and 2020 and September 30, 2021, respectively.
In addition, the demand for our value-added services was also driven by our GFA under
management, business needs resulting from property developers’ activities and our valued-
added service offerings, including value-added services to non-property owners and
community value-added services. Accordingly, our ability to maintain and grow our contracted
GFA and GFA under management as well as to improve our service portfolios would have a
significant impact on our results of operations.
Business Mix
We have three business lines, namely, property management services, value-added
services to non-property owners and community value-added services. Our profit margins vary
across different business lines. Our business and results of operations are affected by our
business mix. Any change in the structure of revenue contribution from our business lines or
change in profit margin of any business line may have a corresponding impact on our overall
profit margins.
FINANCIAL INFORMATION
– 406 –
The following tables set out the breakdowns of our revenue and gross profit margins by
business line for the Track Record Period:
For the year ended December 31,
For the nine months ended
September 30,
2018 2019 2020 2020 2021
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
Revenue
Property management
services 335,117 58.3 462,277 58.6 567,481 60.1 409,498 61.6 578,238 55.2
— Residential properties 164,568 28.6 201,501 25.6 276,914 29.3 199,400 30.0 335,210 32.0
— Non-residential properties 170,549 29.7 260,776 33.0 290,567 30.8 210,098 31.6 243,028 23.2
Value-added services to
non-property owners 178,613 31.1 250,838 31.8 294,401 31.2 198,982 29.9 371,624 35.4
Community value-added
services
(1)
60,773 10.6 75,208 9.6 82,328 8.7 56,842 8.5 98,823 9.4
Total revenue 574,503 100.0 788,323 100.0 944,210 100.0 665,322 100.0 1,048,685 100.0
Note:
(1) Includes gross rental income from investment properties operating leases.
For the year ended December 31,
For the nine months
ended September 30,
2018 2019 2020 2020 2021
Gross
profit
margin
Gross
profit
margin
Gross
profit
margin
Gross
profit
margin
Gross
profit
margin
(%) (%) (%) (%) (%)
Property management services 11.1 11.9 17.8 19.0 17.5
Value-added services to
non-property owners 27.1 27.3 34.4 32.3 46.1
Community value-added
services
(1)
48.6 37.4 39.6 38.2 39.0
Overall 20.0 19.2 24.9 24.6 29.6
Note:
(1) Includes gross rental income from investment properties operating leases.
FINANCIAL INFORMATION
– 407 –
The following table sets out the breakdown of our revenue by source of projects for the
periods indicated:
For the year ended December 31, Nine months ended September 30,
2018 2019 2020 2020 2021
Revenue Revenue Revenue Revenue Revenue
Amount % Amount % Amount % Amount % Amount %
(RMB in thousands, except percentages)
Property management
services 335,117 58.3 462,277 58.6 567,481 60.1 409,498 61.6 578,238 55.2
— Properties developed by
Jinmao Group and
Sinochem Group (and
their respective joint
ventures and associates) 308,277 53.6 431,282 54.7 524,854 55.6 380,716 57.3 534,714 51.0
— Properties developed by
Independent Third Parties 26,840 4.7 30,995 3.9 42,627 4.5 28,782 4.3 43,524 4.2
Value-added services to
non-property owners 178,613 31.1 250,838 31.8 294,401 31.2 198,982 29.9 371,624 35.4
— Properties developed by
Jinmao Group and
Sinochem Group (and
their respective joint
ventures and associates) 176,539 30.7 247,956 31.4 284,019 30.1 192,601 28.9 360,499 34.4
— Properties developed by
Independent Third Parties 2,074 0.4 2,882 0.4 10,382 1.1 6,381 1.0 11,125 1.0
Community value-added
services 60,773 10.6 75,208 9.6 82,328 8.7 56,842 8.5 98,823 9.4
— Properties developed by
Jinmao Group and
Sinochem Group (and
their respective joint
ventures and associates) 59,921 10.5 74,547 9.5 81,604 8.6 56,702 8.5 97,347 9.3
— Properties developed by
Independent Third Parties 852 0.1 661 0.1 724 0.1 140 0.0 1,476 0.1
Total 574,503 100.0 788,323 100.0 944,210 100.0 665,322 100.0 1,048,685 100.0
FINANCIAL INFORMATION
– 408 –
The following table sets out the breakdown of gross profit and gross profit margin by
source of projects for the periods indicated:
For the year ended December 31, Nine months ended September 30,
2018 2019 2020 2020 2021
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
Property management
services 37,105 11.1 54,868 11.9 100,978 17.8 77,831 19.0 101,163 17.5
— Properties developed
by Jinmao Group and
Sinochem Group (and
their respective joint
ventures and
associates) 38,548 12.5 54,557 12.6 97,375 18.6 75,386 19.8 97,410 18.2
— Properties developed
by Independent Third
Parties -1,443 -5.4 311 1.0 3,603 8.5 2,445 8.5 3,753 8.6
Value-added services to
non-property owners 48,373 27.1 68,558 27.3 101,170 34.4 64,231 32.3 171,157 46.1
— Properties developed
by Jinmao Group and
Sinochem Group (and
their respective joint
ventures and
associates) 47,149 26.7 67,115 27.1 97,266 34.2 61,852 32.1 169,429 47.0
— Properties developed
by Independent Third
Parties 1,224 59.0 1,443 50.1 3,904 37.6 2,379 37.3 1,728 15.5
Community value-added
services 29,556 48.6 28,097 37.4 32,641 39.6 21,739 38.2 38,575 39.0
— Properties developed
by Jinmao Group and
Sinochem Group (and
their respective joint
ventures and
associates) 29,650 49.5 28,043 37.6 32,551 39.9 21,661 38.2 38,177 39.2
— Properties developed
by Independent Third
Parties -94
(1)
-11.0 54 8.2 90 12.4 78 55.7 398 27.0
Total 115,034 20.0 151,523 19.2 234,789 24.9 163,801 24.6 310,895 29.6
Note:
(1) This is attributable to our one-off and non-recurring cleaning services provided to a government facility and
not representative of our revenue model for community value-added services.
FINANCIAL INFORMATION
– 409 –
Gross profit margins of our property management services provided for properties
developed by Jinmao Group and Sinochem Group (and their respective joint ventures and
associates) and for properties developed by Independent Third Parties both increased
throughout the Track Record Period, mainly attributable to our enhanced economies of scale
and improved cost-saving measures and operational efficiency. Gross profit margin of our
property management services provided for properties developed by Jinmao Group and
Sinochem Group and their respective joint ventures and associates in the nine months ended
September 30, 2020 was higher than that for the same period in 2021. This is mainly due to
relatively lower employee benefit expenses in the nine months ended September 30, 2020
attributable to a reduction in our required contribution to the social insurance fund as we
received local government relief effective during that period in response to the COVID-19
outbreak. During the Track Record Period, gross profit margin of our property management
services provided to properties developed by Jinmao Group and Sinochem Group (and their
respective joint ventures and associates) was generally higher than that for properties
developed by Independent Third Parties. This is mainly because the property portfolio
developed by Jinmao Group and its joint ventures and associates primarily comprised high-end
residential properties, commercial properties and office buildings in first- and second-tier
cities, whereas the property portfolio developed by Independent Third Parties comprised more
public properties such as government facilities and schools. For instance, residential
properties, commercial properties and office buildings accounted for 100.0%, 100.0%, 100.0%
and 99.8% of the total GFA of the property portfolio developed by Jinmao Group and its joint
ventures and associates managed by us as of December 31, 2018, 2019 and 2020 and September
30, 2021, respectively, whereas public properties only accounted for 0.0%, 0.0%, 0.0% and
0.2% during the same periods. In contrast, public properties accounted for 91.0%, 85.7%,
63.9% and 50.1% of the total GFA of the property portfolio developed by Independent Third
Parties managed by us as of December 31, 2018, 2019 and 2020 and September 30, 2021,
respectively, whereas residential properties, commercial properties and office buildings
accounted for 9.0%, 14.3%, 36.1% and 49.9% during the same periods. According to China
Index Academy, property management services for public properties typically generate
relatively lower gross profit margin as compared to that for residential properties, commercial
properties and office buildings. Gross profit margin of our property management services
provided to Independent Third Parties increased throughout the Track Record Period, mainly
due to the shifting composition of the property portfolio developed by Independent Third
Parties under our management. In 2018 and 2019, we mainly provided property management
services for public properties such as government facilities and schools developed by
Independent Third Parties. Since 2020, we have gradually entered into more management
contracts for residential properties developed by Independent Third Parties and strategically
terminated certain school projects with low gross margin, and therefore our gross profit margin
of property management services provided to Independent Third Parties has steadily increased.
FINANCIAL INFORMATION
– 410 –
In 2018 and 2019, gross profit margin of our value-added services to non-property owners
for properties developed by Jinmao Group and Sinochem Group (and their respective joint
ventures and associates) was generally lower than that for properties developed by Independent
Third Parties. This is mainly because our value-added services provided to Jinmao Group and
Sinochem Group (and their respective joint ventures and associates) during this period were
primarily sales assistance services, whereas our value-added services provided to Independent
Third Parties were primarily consultancy and other value-added services. For instance,
consultancy and other value-added services contributed to 20.9%, 18.8%, 21.6% and 53.9% of
revenue generated from our value-added services provided to Jinmao Group and Sinochem
Group (and their respective joint ventures and associates) in 2018, 2019 and 2020 and the nine
months ended September 30, 2021. According to China Index Academy, consultancy and other
value-added services typically generate relatively higher gross profit margin as compared to
sales assistance services. In the nine months ended September 30, 2021, gross profit margin of
our value-added services to non-property owners for properties developed by Jinmao Group
and Sinochem Group (and their respective joint ventures and associates) increased mainly due
to the expanded service offerings including preliminary planning and design services and
post-delivery services, which typically generate higher profit margins compared to other value
added services to non-property owners we offer. Our gross profit margin of value-added
services to non-property owners for properties developed by Independent Third Parties
decreased during the Track Record Period. Our value-added services to non-property owners
for properties developed by Independent Third Parties in 2018 and 2019 were mainly
consultancy services, and included a small portion of pre-delivery services, which are typically
one-off in nature and generate higher gross margins. From 2020, as we proactively reinforced
our efforts to seek property management engagements for projects developed by Independent
Third Parties, our value-added services to non-property owners for properties developed by
Independent Third Parties become more diversified and resulted in increasing revenue
contribution from sales assistance services, which typically have lower gross profit margin.
During the Track Record Period, gross profit margin of our community value-added
services provided for properties developed by Jinmao Group and Sinochem Group (and their
respective joint ventures and associates) was generally higher than that for properties
developed by Independent Third Parties. This is mainly because the property portfolio
developed by Jinmao Group and its joint ventures and associates primarily comprised high-end
residential properties, commercial properties and office buildings in first- and second-tier
cities, whereas the property portfolio developed by Independent Third Parties primarily
comprised public properties such as government facilities and schools which typically have
lower gross profit margin. For instance, residential properties, commercial properties and
office buildings accounted for 100.0%, 100.0%, 100.0% and 99.8% of the total GFA of the
FINANCIAL INFORMATION
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property portfolio developed by Jinmao Group and its joint ventures and associates managed
by us as of December 31, 2018, 2019 and 2020 and September 30, 2021, respectively, whereas
public properties only accounted for 0.0%, 0.0%, 0.0% and 0.2% during the same periods. In
contrast, public properties accounted for 91.0%, 85.7%, 63.9% and 50.1% of the total GFA of
the property portfolio developed by Independent Third Parties managed by us as of
December 31, 2018, 2019 and 2020 and September 30, 2021, respectively, whereas residential
properties, commercial properties and office buildings accounted for 9.0%, 14.3%, 36.1% and
49.9% during the same periods. In addition, we mainly provided community space operation
services and community living services for residential properties, commercial properties and
office buildings, whereas the services we provided for public properties were mainly cleaning,
maintenance and security services. According to China Index Academy, gross margin of
community space operation services and community living services typically generate
relatively higher gross margin compared to cleaning, maintenance and security services.
Further, as the contribution from residential properties, commercial properties and office
buildings to the GFA of the property portfolio developed by Independent Third Parties
gradually increased and we continued to develop our platform services for interior decoration
and community living services during the Track Record Period, gross profit margin of our
community value-added services provided for properties developed by Independent Third
Parties gradually increased.
In 2018, negative gross margin of our community value-added services provided for
properties developed by Independent Third Parties was mainly attributable to expenses
associated with certain ad hoc services provided to Independent Third Parties. In 2019, gross
profit margin of our community value-added services provided for properties developed by
Independent Third Parties was lower than that for properties developed by Jinmao Group and
Sinochem Group and their respective joint ventures and associates, mainly because the
Independent Third Party projects to which we provided community value-added services were
specified services for local governments which had lower gross profit margin. Gross profit
margin of our community value-added services provided for properties developed by
Independent Third Parties increased in 2020 and the nine months ended September 30, 2021,
mainly because we expanded our community value-added service offerings to include services
with higher gross profit margin such as platform services for interior decoration and
community living services.
FINANCIAL INFORMATION
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The following table sets out the breakdown of our Group’s (i) contracted GFA, (ii)
undelivered GFA, and (iii) number of properties for contracted GFA by source of projects as
of the dates indicated:
As of December 31,
As of
September 30,
2018 2019 2020 2021
Contracted GFA (’000
sq.m.) 21,861.2 30,788.4 40,525.5 45,730.2
— Properties developed by
Jinmao Group and
Sinochem Group (and
their respective joint
ventures and associates) 20,823.2 29,950.5 37,835.9 41,379.0
— Properties developed by
Independent Third Parties 1,038.0 837.9 2,689.6 4,351.2
Undelivered GFA (’000
sq.m.) 11,638.1 18,127.8 22,874.0 22,489.4
— Properties developed by
Jinmao Group and
Sinochem Group (and
their respective joint
ventures and associates) 11,638.1 18,026.9 22,343.1 21,260.3
— Properties developed by
Independent Third Parties – 100.9 530.9 1,229.1
Number of properties for
contracted GFA 107 148 190 228
— Properties developed by
Jinmao Group and
Sinochem Group (and
their respective joint
ventures and associates) 99 137 164 188
— Properties developed by
Independent Third Parties 8 11 26 40
FINANCIAL INFORMATION
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The following table sets out the breakdown of our revenue by type of properties for the
periods indicated:
For the year ended December 31, Nine months ended September 30,
2018 2019 2020 2020 2021
Revenue Revenue Revenue Revenue Revenue
Amount % Amount % Amount % Amount % Amount %
(RMB in thousands, except percentages)
Property management
services 335,117 58.3 462,277 58.6 567,481 60.1 409,498 61.6 578,238 55.2
— Residential properties 164,568 28.6 201,501 25.6 276,914 29.3 199,400 30.0 335,210 32.0
— Non-residential properties 170,549 29.7 260,776 33.0 290,567 30.8 210,098 31.6 243,028 23.2
Value-added services to
non-property owners 178,613 31.1 250,838 31.8 294,401 31.2 198,982 29.9 371,624 35.4
— Residential properties 167,972 29.2 236,522 30.0 280,418 29.7 187,567 28.2 352,463 33.6
— Non-residential properties 10,641 1.9 14,316 1.8 13,983 1.5 11,415 1.7 19,161 1.8
Community value-added
services 60,773 10.6 75,208 9.6 82,328 8.7 56,842 8.5 98,823 9.4
— Residential properties 28,813 5.0 31,861 4.0 40,342 4.3 30,957 4.7 62,785 6.0
— Non-residential properties 31,960 5.6 43,347 5.6 41,986 4.4 25,885 3.8 36,038 3.4
Total 574,503 100.0 788,323 100.0 944,210 100.0 665,322 100.0 1,048,685 100.0
The following table sets out the breakdown of gross profit and gross profit margin by type
of properties for the periods indicated:
For the year ended December 31, Nine months ended September 30,
2018 2019 2020 2020 2021
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
Property management
services 37,105 11.1 54,868 11.9 100,978 17.8 77,831 19.0 101,163 17.5
— Residential properties 2,712 1.6 5,301 2.6 36,788 13.3 33,729 16.9 54,159 16.2
— Non-residential
properties 34,393 20.2 49,567 19.0 64,190 22.1 44,102 21.0 47,004 19.3
Value-added services to
non-property owners 48,373 27.1 68,558 27.3 101,170 34.4 64,231 32.3 171,157 46.1
— Residential properties 44,758 26.6 63,136 26.7 93,647 33.4 57,656 30.7 159,366 45.2
— Non-residential
properties 3,615 34.0 5,422 37.9 7,523 53.8 6,575 57.6 11,791 61.5
Community value-added
services 29,556 48.6 28,097 37.4 32,641 39.6 21,739 38.2 38,575 39.0
— Residential properties 12,031 41.8 3,581 11.2 14,524 36.0 12,155 39.3 24,819 39.5
— Non-residential
properties 17,525 54.8 24,516 56.6 18,117 43.2 9,584 37.0 13,756 38.2
Total 115,034 20.0 151,523 19.2 234,789 24.9 163,801 24.6 310,895 29.6
FINANCIAL INFORMATION
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Gross profit margin of our property management services provided for residential
properties increased throughout the Track Record Period, mainly attributable to our enhanced
economies of scale and improved cost-saving measures and operational efficiency. For
instance, we have enhanced cost control and management at a granular level and continue to
evaluate the effectiveness of our cost control measures on a regular basis. Our profit per capita,
calculated as net profit divided by staff cost, increased significantly by 16.5% from 2019 to
2020. Gross profit margin of our property management services provided for residential
properties was relatively low in 2018 and 2019 compared to that of 2020, primarily because (i)
we had 29 residential projects under management across seven regional centers and 40
residential projects under management across eight regional centers nationwide in 2018 and
2019, respectively, with a very low density of projects under management in each regional
center, (ii) in order to maintain the quality of services and prepare for future business
expansion, we had a full set of staff across three business lines within each region despite we
provided services to only a few projects across each region in 2018 and 2019, and (iii) the high
costs were mitigated over time as these regional centers began to provide services to more
projects in the same region, thus achieving economies of scale. For example, the GFA under
management of projects to which our regional center in Nanjing provided services increased
by over 200% to 1.0 million sq.m. as of December 31, 2020 from 0.3 million sq.m. as of
December 31, 2019. The GFA under management of these projects was 0.2 million sq.m. as of
December 31, 2018. As the GFA under management for these projects increased, the cost of
sales per sq.m. decreased by 63.3% from 2019 to 2020 and by 75.5% from 2018 to 2020.
Gross profit margin of our property management services provided to non-residential
properties in the nine months ended September 30, 2020 was higher than that in the same
period of 2021. This is mainly due to relatively lower employee benefit expenses in the nine
months ended September 30, 2020 attributable to a reduction in our required contribution to the
social insurance fund as we received local government relief effective during that period in
response to the COVID-19 outbreak. The government relief is one-off and non-recurring in
nature and was a key driver for the increased overall gross profit margins and gross profit
margins of our property management services in the nine months ended September 30, 2020
and in 2020. Excluding the impact from the government relief, the increases in gross profit
margin of our residential property management services in the nine months ended September
30, 2020 and in 2020 as compared to the respective same periods of 2019 would have been
mainly attributable to the effect of economies of scale and cost-control measure. For example,
our GFA under management for residential properties increased significantly by 32.5% from
December 2018 to December 2019 and by 38.6% from December 2019 to December 2020. The
number of properties under our management has also increased. In particular, the number of
properties under our management in China’s eastern region increased significantly by 27.3%
from December 2018 to December 2019 and by 60.7% from December 2019 to December
2020. Due to our optimized personnel management and efficient staffing, our profit per capita,
calculated as net profit divided by staff cost, increased significantly by 16.5% from 2019 to
2020.
FINANCIAL INFORMATION
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Gross profit margins of our value-added services to non-property owners provided for
residential properties and for non-residential properties both increased throughout the Track
Record Period, mainly attributable to our enhanced economies of scale and improved
cost-saving measures and operational efficiency. During the Track Record Period, gross profit
margin of our value-added services to non-property owners provided for residential properties
was generally lower than that for non-residential properties, mainly because the value-added
services to non-property owners provided for residential properties included sales assistance
services which typically have lower gross profit margin.
In 2018, 2019 and 2020, gross profit margin of our community value-added services
provided for residential properties was lower than that for non-residential properties, mainly
because community space operation services for residential properties typically have lower
gross profit margin than that for commercial properties and office buildings. Gross profit
margin of our community value-added services provided for residential properties increased in
2020 and the nine months ended September 30, 2021, mainly because we expanded our
community value-added service offerings to include services with higher gross profit margin
such as platform services for interior decoration and community living services. Gross profit
margin of our community value-added services provided for residential properties in 2019 was
lower than that in other periods, mainly due to the high costs incurred for our hot water supply
system which commenced operation in 2019. Gross profit margin of our community
value-added services provided for residential properties improved in the subsequent periods
due to our re-negotiation with property developers. In 2020, gross profit margin of our
community value-added services provided for non-residential properties was lower than that in
other periods, mainly due to the decreased income from car parking services provided for
commercial properties and office buildings under the impact of the COVID-19 outbreak.
The following table sets out the breakdown of our Group’s (i) contracted GFA, (ii)
undelivered GFA, and (iii) number of properties for contracted GFA by type of properties as
of the dates indicated:
As of December 31,
As of
September 30,
2018 2019 2020 2021
Contracted GFA (’000
sq.m.) 21,861.2 30,788.4 40,525.5 45,730.2
— Residential properties 19,461.8 27,559.4 36,444.9 41,355.4
— Non-residential properties 2,399.4 3,229.0 4,080.6 4,374.8
Undelivered GFA (’000
sq.m.) 11,638.1 18,127.8 22,874.0 22,489.4
— Residential properties 11,591.8 17,129.5 21,989.1 21,592.1
— Non-residential properties 46.3 998.3 884.9 897.3
Number of properties for
contracted GFA 107 148 190 228
— Residential properties 85 118 152 182
— Non-residential properties 22 30 38 46
FINANCIAL INFORMATION
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The following table sets out the breakdown of our revenue by types of ultimate paying
customers for the periods indicated:
For the year ended December 31, Nine months ended September 30,
2018 2019 2020 2020 2021
Revenue Revenue Revenue Revenue Revenue
Amount % Amount % Amount % Amount % Amount %
(RMB in thousands, except percentages)
Property management
services 335,117 58.3 462,277 58.6 567,481 60.1 409,498 61.6 578,238 55.2
— Jinmao Group and
Sinochem Group (and
their respective joint
ventures and associates) 95,020 16.5 90,509 11.5 102,611 10.9 78,009 11.7 105,609 10.1
— Independent Third Parties 240,097 41.8 371,768 47.1 464,870 49.2 331,489 49.9 472,629 45.1
Value-added services to
non-property owners 178,613 31.1 250,838 31.8 294,401 31.2 198,982 29.9 371,624 35.4
— Jinmao Group and
Sinochem Group (and
their respective joint
ventures and associates) 164,457 28.6 232,210 29.5 279,610 29.6 190,796 28.7 353,669 33.7
— Independent Third Parties 14,156 2.5 18,628 2.3 14,791 1.6 8,186 1.2 17,955 1.7
Community value-added
services 60,773 10.6 75,208 9.6 82,328 8.7 56,842 8.5 98,823 9.4
— Jinmao Group and
Sinochem Group (and
their respective joint
ventures and associates) 20,540 3.6 28,546 3.6 28,568 3.0 19,661 3.0 24,527 2.3
— Independent Third Parties 40,233 7.0 46,662 6.0 53,760 5.7 37,181 5.5 74,296 7.1
Total 574,503 100.0 788,323 100.0 944,210 100.0 665,322 100.0 1,048,685 100.0
Our revenue generated from value-added services to non-property owners attributable to
property developers which are related parties increased in the nine months ended September
30, 2021 compared to the same period of 2020 primarily due to an increase in revenue
generated from preliminary planning and design services and post-delivery services provided
to Jinmao Group and its joint ventures and associates.
Our gross profit margins for property management services are generally affected by
factors such as: (i) the number of projects within the same geographic location and the
optimization level of labor and resources to benefit from project synergies, and (ii) our
operating capabilities, including the implementation of cost control measures (such as through
the adoption of automation and smart management).
FINANCIAL INFORMATION
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The gross profit margins for our value-added services to non-property owners and
community value-added services are generally higher than the gross profit margins for our
property management services which are relatively more labor-intensive.
We endeavor to continue to optimize our overall gross profit margins by continuing to
diversify our revenue streams, improving cost efficiency through centralized, standardized and
smart management, as well as benefiting from the economies of scale of our increased GFA
under management. For more details regarding the fluctuation in our gross profit margins
during the Track Record Period, see “— Period to Period Comparison — Gross profit and
Gross Profit Margin”.
Ability to Manage Staff Costs
Our results of operations are affected by our ability to manage our staff costs. During the
Track Record Period, staff costs were the largest component of our cost of sales and amounted
to RMB148.4 million, RMB204.3 million, RMB214.5 million, RMB162.3 million and
RMB203.3 million, respectively, accounting for 32.3%, 32.1%, 30.2%, 32.4% and 27.6% of
our cost of sales for the years ended December 31, 2018, 2019 and 2020 and the nine months
ended September 30, 2020 and 2021, respectively. The general increases over the Track Record
Period in staff costs were mainly attributable to the increase in the number of our employees
as we expanded our business, together with increases in overall compensation level.
To cope with rising labor cost while maintaining our service quality, we have
implemented a number of measures to reduce our reliance on manual labor, which include
standardized and automated smart office and management, adoption of online service platforms
to enhance efficiency, as well as deployment of intelligent devices. For more details about our
cost-saving measures, see “Business — Standardization and Smart Management”.
Brand Positioning and Pricing of Services
Our financial conditions and results of operations are affected by our ability to be
engaged for property management projects and to maintain or increase the fees we charge for
our services, which are partially affected by our brand recognition and industry position. A
well-recognized brand would also help us obtain more value-added service engagements from
third-party property developers, and explore more cooperation opportunities with such
property developers for new property management projects.
Our established brand and reputation have enabled us to maintain and increase the fee
rates we charge for our services. We generally price our property management services by
taking into account a number of factors, including (i) the types and geographic locations of the
properties; (ii) the scope of the services to be provided; (iii) our estimated costs and targeted
profit margins; (iv) the quality, facilities and software systems of the properties; (v) local
government guidance prices for property management fees (where applicable); and (vi)
competition from peer companies (including the pricing of property management services
FINANCIAL INFORMATION
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provided to comparable properties). The balance between pricing our services competitively
while ensuring our service quality and an attractive profit margin is key to our financial
condition and results of operations.
Competition
The property management industry is fragmented and competitive in the PRC with
approximately 200,000 participants in the property management industry in 2020, according to
China Index Academy. As an upscale comprehensive property management and city operation
service provider with a diversified property management portfolio, we primarily compete
against large national and regional property management companies in the PRC in terms of our
property management services. For value-added services, we compete against other property
management companies as well as other industry participants providing similar services.
We believe that the principal competitive factors include, among others, business scale,
price and quality of services, brand recognition and financial resources. Our ability to compete
effectively and maintain or improve our market position depends on our ability to solidify our
competitive strengths. If we are unable to effectively compete with market players and
maintain or increase our market share, our revenue and profitability may be adversely
impacted. For more details about the industry and markets that we operate in, see “Industry
Overview” and “Risk Factors — Risks relating to our Business and Industry — We are in a
competitive business with various competitors and if we do not compete successfully against
existing and new competitors, our business, financial position, results of operations and
prospects may be materially and adversely affected”.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
We have identified certain accounting policies that are significant to the preparation of
our financial statements. Some of our accounting policies involve subjective assumptions and
estimates, as well as complex judgements relating to accounting items. In each case, the
determination of these items requires management to make subjective and complex judgements
based on information and financial data that may change in future periods. When reviewing our
financial statements, you should consider (i) our significant accounting policies, (ii) the
judgements and other uncertainties affecting the application of such policies, and (iii) the
sensitivity of reported results to changes in conditions and assumptions, where applicable. We
set out below those accounting policies that we believe are of critical importance to us or
involve the most significant estimates and judgements used in the preparation of our financial
statements. Our significant accounting policies, estimates and judgments, which are important
for an understanding of our financial condition and results of operations, are set out in further
details in Note 2 and Note 3 of the Accountants’ Report in Appendix I to this prospectus.
FINANCIAL INFORMATION
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Revenue Recognition
Revenue from contracts with customers
We provide property management services, value-added services to non-property owners
and community value-added services to property developers, property owners or tenants,
property owners’ associations or residents.
Property management services mainly include security, cleaning and greening, repair and
maintenance services to owners or tenants of properties. For property management services, we
bill a fixed amount for services provided on a monthly basis and recognizes as revenue the
amount which we have a right to invoice and that corresponds directly with the value of
performance completed.
Value-added services to non-property owners mainly include (i) sales assistance services,
mainly including pre-sale preparation, marketing, cleaning, security and maintenance services
at property sales venues and display units; (ii) consultancy services, including preliminary
planning and design services, construction consultancy services, pre-delivery services prior to
delivery of properties to end buyers (mainly clearing, cleaning, assistance at property delivery
venues (“Start-up Services”), and property inspection services and follow-up with
rectification services (“Inspection and Follow-up Services”)), post-delivery services (mainly
repair and maintenance), and other consultancy services (mainly sales agency services with
respect to newly developed properties and carpark spaces). We agree the price for each service
with the customers upfront and issues the monthly or quarterly bill to the customers which
varies based on the actual level of service completed. Revenue from sales assistance services,
construction consultancy services, Start-up Services and post-delivery services is recognised
over time, in the amount to which we have a right to invoice, because the customer
simultaneously receives and consumes the benefits provided by us. Revenue from preliminary
planning and design consultancy services, Inspection and Follow-up Services and sales agency
services is recognised at the point in time when the services are rendered and accepted by the
property developers.
Community value-added services mainly include community space operation services,
community living services, agency services with respect to secondary sales of properties, and
platform services for interior decoration. Revenue from community space operation services
and community living services is recognized when the related services are rendered. Revenue
from agency services and platform services for interior decoration is recognized at the point in
time when the services are rendered and accepted by the customers.
For property management services income from properties managed under a lump sum
basis, where we act as principal and are primarily responsible for providing the property
management services to the property owners, we recognize the fee received or receivable from
property owners as our revenue and all related property management costs as our cost of
services. For property management services income from properties managed under a
FINANCIAL INFORMATION
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commission basis, we recognize the revenue, which is calculated as a certain percentage of the
total property management fee received or receivable from the property, for arranging and
monitoring the services as provided by other suppliers to the property owners.
Revenue from other sources
Rental income is recognized on a time proportion basis over the lease terms. Variable
lease payments that do not depend on an index or a rate are recognized as income in the
accounting period in which they are incurred.
Other income
Interest income is recognized on an accrual basis using the effective interest method by
applying the rate that exactly discounts the estimated future cash receipts through the expected
life of the financial instrument or a shorter period, when appropriate, to the net carrying amount
of the financial asset.
Current and Deferred Income Tax
Current tax
Current tax assets and liabilities for the current and prior year are measured at the amount
expected to be recovered from or paid to the taxation authorities, based on tax rates and tax
laws that have been enacted or substantively enacted by the end of each of each reporting
period, taking into consideration interpretations and practices prevailing in the countries in
which we operate.
Deferred tax
Deferred tax is provided, using the liability method, on all temporary differences at the
end of the reporting period between the tax bases of assets and liabilities and their carrying
amounts for financial reporting purposes.
Deferred tax liabilities are recognized for all taxable temporary differences, except (i)
when the deferred tax liability arises from the initial recognition of goodwill or an asset or
liability in a transaction that is not a business combination and, at the time of the transaction,
affects neither the accounting profit nor taxable profit or loss; and (ii) in respect of taxable
temporary differences associated with investments in subsidiaries, when the timing of the
reversal of the temporary differences can be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future.
FINANCIAL INFORMATION
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Deferred tax assets are recognized for all deductible temporary differences, the
carryforward of unused tax credits and any unused tax losses to the extent that it is probable
that taxable profit will be available against which the deductible temporary differences, the
carryforward of unused tax credits and unused tax losses can be utilized, subject to certain
exceptions. For details, see Note 17 to the Accountants’ Report.
Deferred tax assets and deferred tax liabilities are offset if and only if we have a legally
enforceable right to set off current tax assets and current tax liabilities and the deferred tax
assets and deferred tax liabilities relate to income taxes levied by the same taxation authority
on either the same taxable entity or different taxable entities which intend either to settle
current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities
simultaneously, in each future period in which significant amounts of deferred tax liabilities or
assets are expected to be settled or recovered.
Leases
We assess at contract inception whether a contract is, or contains, a lease. A contract is,
or contains, a lease if the contract conveys the right to control the use of an identified asset for
a period of time in exchange for consideration.
Group as a lessee
We apply a single recognition and measurement approach for all leases, except for
short-term leases and leases of low-value assets. We recognizes lease liabilities to make lease
payments and right-of-use assets representing the right to use the underlying assets. At
inception or on reassessment of a contract that contains a lease component and non-lease
component, we adopt the practical expedient not to separate non-lease components and to
account for the lease component and the associated non-lease components (e.g., property
management services for leases of properties) as a single lease component.
(a) Right-of-use assets
Right-of-use assets are recognized at the commencement date of the lease (that is the
date the underlying asset is available for use). Right-of-use assets (related to office
properties and staff quarters) are measured at cost, less any accumulated depreciation and
amortization and any impairment losses, and adjusted for any remeasurement of lease
liabilities. The cost of right-of-use assets includes the amount of lease liabilities
recognized, initial direct costs incurred, and lease payments made at or before the
commencement date less any lease incentives received. Where applicable, the cost of a
right-of-use asset also includes an estimate of costs to dismantle and remove the
FINANCIAL INFORMATION
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underlying asset or to restore the underlying asset or the site on which it is located.
Right-of-use assets are depreciated and amortized on a straight-line basis over the shorter
of the lease terms and the estimated useful lives of the assets as follows:
Office properties and staff quarters 1.5 to 5 years
If ownership of the leased asset transfers to us by the end of the lease term or the
cost reflects the exercise of a purchase option, depreciation is calculated using the
estimated useful life of the asset.
(b) Lease liabilities
Lease liabilities are recognized at the commencement date of the lease at the present
value of lease payments to be made over the lease term. The lease payments include fixed
payments (including in-substance fixed payments) less any lease incentives receivable,
variable lease payments that depend on an index or a rate, and amounts expected to be
paid under residual value guarantees. The lease payments also include the exercise price
of a purchase option reasonably certain to be exercised by us and payments of penalties
for terminating a lease, if the lease term reflects we exercising the option to terminate.
The variable lease payments that do not depend on an index or a rate are recognized as
an expense in the period in which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, we use our incremental
borrowing rate at the lease commencement date because the interest rate implicit in the
lease is not readily determinable. After the commencement date, the amount of lease
liabilities is increased to reflect the accretion of interest and reduced for the lease
payments made. In addition, the carrying amount of lease liabilities is remeasured if there
is a modification, a change in future lease payments arising from a change in an index or
rate, a change in the lease term, a change in the in-substance fixed lease payments or a
change in assessment to purchase the underlying asset.
(c) Short-term leases and leases of low-value assets
We apply the short-term lease recognition exemption to short-term leases of
buildings and equipments (that is those leases that have a lease term of 12 months or less
from the commencement date and do not contain a purchase option). When we enter into
a lease in respect of a low-value asset, we decide whether to capitalize the lease on a
lease-by-lease basis. Lease payments on short-term leases and leases of low-value assets
are recognized as an expense on a straight-line basis over the lease term.
Group as a lessor
When we act as a lessor, we classify at lease inception (or when there is a lease
modification) each of our leases as either an operating lease or a finance lease.
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Leases in which we do not transfer substantially all the risks and rewards incidental to
ownership of an asset are classified as operating leases. When a contract contains lease and
non-lease components, we allocate the consideration in the contract to each component on a
relative stand-alone selling price basis. Rental income is accounted for on a straight-line basis
over the lease terms and is included in revenue in profit or loss due to its operating nature.
Initial direct costs incurred in negotiating and arranging an operating lease are added to the
carrying amount of the leased asset and recognized over the lease term on the same basis as
rental income. Contingent rents are recognized as revenue in the period in which they are
earned.
Leases that transfer substantially all the risks and rewards incidental to ownership of an
underlying asset to the lessee, are accounted for as finance leases.
When we are an intermediate lessor, a sublease is classified as a finance lease or operating
lease with reference to the right-of-use asset arising from the head lease. If the head lease is
a short-term lease to which we apply the on-balance sheet recognition exemption, we classify
the sublease as an operating lease.
Provisions
A provision is recognized when a present obligation (legal or constructive) has arisen as
a result of a past event and it is probable that a future outflow of resources will be required to
settle the obligation, provided that a reliable estimate can be made of the amount of the
obligation.
When the effect of discounting is material, the amount recognized for a provision is the
present value at the end of each of the Track Record Period of the future expenditures expected
to be required to settle the obligation. The increase in the discounted present value amount
arising from the passage of time is included in finance costs in profit or loss.
Provision for Expected Credit Losses (“ECLs”) on Trade Receivables and Other
Receivables
We use a provision matrix to calculate ECLs for trade receivables and other receivables.
The provision rates are based on days past due for groupings of various customer segments that
have similar loss patterns (i.e. by service type, customer type and rating).
The provision matrix is initially based on our historical observed default rates. We
calibrate the matrix to adjust the historical credit loss experience with forward-looking
information. For instance, if forecast economic conditions are expected to deteriorate over the
next year which can lead to an increased number of defaults in the property development
sector, the historical default rates are adjusted. At each reporting date, the historical observed
default rates are updated and changes in the forward-looking estimates are analyzed.
FINANCIAL INFORMATION
– 424 –
The assessment of the correlation among historical observed default rates, forecast
economic conditions and ECLs is a significant estimate. The amount of ECLs is sensitive to
changes in circumstances and forecast economic conditions. Our historical credit loss
experience and forecast of economic conditions may also not be representative of a customer’s
actual default in the future. For more details about the ECLs on our trade receivables and other
receivables, see Notes 19 and 20 to the Accountants’ Report.
Impairment of Non-financial Assets (Other Than Goodwill)
We assess whether there are any indicators of impairment for all non-financial assets
(including the right-of-use assets) at the end of each reporting period. An impairment exists
when the carrying value of an asset or a cash-generating unit exceeds its recoverable amount,
which is the higher of its fair value less costs of disposal and its value in use. The calculation
of the fair value less costs of disposal is based on available data from binding sales transactions
in an arm’s length transaction of similar assets or observable market prices less incremental
costs for disposing of the asset. When value in use calculations are undertaken, management
must estimate the expected future cash flows from the asset or cash-generating unit and choose
a suitable discount rate in order to calculate the present value of those cash flows.
Leases — Estimating the Incremental Borrowing Rate
We cannot readily determine the interest rate implicit in a lease, and therefore, use an
incremental borrowing rate (“IBR”) to measure lease liabilities. The IBR is the rate of interest
that we would have to pay to borrow over a similar term, and with a similar security, the funds
necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic
environment. The IBR therefore reflects what we “would have to pay”, which requires
estimation when no observable rates are available (such as for subsidiaries that do not enter
into financing transactions) or when it needs to be adjusted to reflect the terms and conditions
of the lease (for example, when leases are not in the subsidiary’s functional currency). We
estimate the IBR using observable inputs (such as market interest rates) when available and is
required to make certain entity-specific estimates (such as the subsidiary’s stand-alone credit
rating).
FINANCIAL INFORMATION
– 425 –
DESCRIPTION OF SELECTED CONSOLIDATED STATEMENTS OF PROFIT OR
LOSS AND OTHER COMPREHENSIVE INCOME
The following table sets out our select consolidated statements of comprehensive income
for the periods indicated. Our historical results presented below are not necessarily indicative
of the results that may be expected for any future period.
For the year ended December 31,
For the nine months
ended September 30,
2018 2019 2020 2020 2021
(RMB’000) (RMB’000) (RMB’000) (RMB’000) (RMB’000)
Revenue 574,503 788,323 944,210 665,322 1,048,685
Cost of sales (459,469) (636,800) (709,421) (501,521) (737,790)
Gross profit 115,034 151,523 234,789 163,801 310,895
Other income and gains 11,746 74,712 74,908 58,630 41,048
Selling and distribution
expenses (2,301) (954) (1,808) (1,185) (10,213)
Administrative expenses (82,346) (117,150) (134,920) (95,633) (148,702)
Other expenses, net (5,606) (4,441) (1,258) (32) (6,256)
Finance costs (10,165) (70,280) (64,186) (51,021) (33,537)
Profit before tax 26,362 33,410 107,525 74,560 153,235
Income tax expense (8,875) (10,786) (30,401) (21,231) (43,884)
Profit and total
comprehensive income
for the year/period 17,487 22,624 77,124 53,329 109,351
Attributable to:
— Owners of the parent 17,487 22,624 77,124 53,329 108,702
— Non-controlling interests ————649
17,487 22,624 77,124 53,329 109,351
FINANCIAL INFORMATION
– 426 –
Revenue
During the Track Record Period, we derived our revenue from the following three
business lines:
(i) Property management services, which primarily consisted of property management
fees for providing security, cleaning, greening, gardening and repair and
maintenance services, accounted for 58.3%, 58.6%, 60.1%, 61.6% and 55.2% of our
total revenue for the years ended December 31, 2018, 2019 and 2020 and the nine
months ended September 30, 2020 and 2021, respectively;
(ii) Value-added services to non-property owners, which primarily consisted of sales
assistance services, and consultancy services and other value-added services to
non-property owners, accounted for 31.1%, 31.8%, 31.2%, 29.9% and 35.4% of our
total revenue for the years ended December 31, 2018, 2019 and 2020 and the nine
months ended September 30, 2020 and 2021, respectively; and
(iii) Community value-added services, which primarily consisted of common space
operation services, real estate brokerage services, platform services for interior
decoration, and community living services, accounted for 10.6%, 9.6%, 8.7%, 8.5%
and 9.4% of our total revenue for the years ended December 31, 2018, 2019 and
2020 and the nine months ended September 30, 2020 and 2021, respectively.
Revenue from community space operation services also include gross rental income
from investment properties operating leases.
The following table sets out the breakdown of our total revenue by business line for the
periods indicated:
For the year ended December 31,
For the nine months ended
September 30,
2018 2019 2020 2020 2021
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
Revenue
Property management
services 335,117 58.3 462,277 58.6 567,481 60.1 409,498 61.6 578,238 55.2
— Residential properties 164,568 28.6 201,501 25.6 276,914 29.3 199,400 30.0 335,210 32.0
— Non-residential properties 170,549 29.7 260,776 33.0 290,567 30.8 210,098 31.6 243,028 23.2
Value-added services to
non-property owners 178,613 31.1 250,838 31.8 294,401 31.2 198,982 29.9 371,624 35.4
Community value-added
services
(1)
60,773 10.6 75,208 9.6 82,328 8.7 56,842 8.5 98,823 9.4
Total revenue 574,503 100.0 788,323 100.0 944,210 100.0 665,322 100.0 1,048,685 100.0
Note:
(1) Includes gross rental income from investment properties operating leases.
FINANCIAL INFORMATION
– 427 –
Revenue from property management services
Revenue from property management services increased during the Track Record Period,
primarily driven by the increase in GFA under management. Our GFA under management as of
December 31, 2018, 2019 and 2020 and September 30, 2021 was 10.2 million sq.m., 12.7
million sq.m., 17.7 million sq.m. and 23.2 million sq.m., respectively. For the years ended
December 31, 2018, 2019 and 2020 and the nine months ended September 30, 2020 and 2021,
our revenue from property management services generated on a lump sum basis accounted for
96.8%, 98.7%, 98.5%, 99.0% and 98.7% of our revenue from property management services,
respectively. Our overall average property management fee was approximately RMB6.2,
RMB5.9, RMB5.4 and RMB4.9 per sq.m. per month for the years ended December 31, 2018,
2019 and 2020 and the nine months ended September 30, 2021, respectively.
During the Track Record Period, we generated revenue from the management of a diverse
portfolio of properties covering residential properties, in particular, high-end ones, and
non-residential properties, including commercial properties, such as office buildings,
skyscrapers and shopping malls, and public and other properties, such as schools, government
facilities and other public spaces. The following table sets out the breakdown of our revenue
from property management services by property type for the periods indicated:
For the year ended December 31,
For the nine months ended
September 30,
2018 2019 2020 2020 2021
Revenue Revenue Revenue Revenue Revenue
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
Residential properties 164,568 49.1 201,501 43.6 276,914 48.8 199,400 48.7 335,210 58.0
Non-residential properties 170,549 50.9 260,776 56.4 290,567 51.2 210,098 51.3 243,028 42.0
Total 335,117 100.0 462,277 100.0 567,481 100.0 409,498 100.0 578,238 100.0
FINANCIAL INFORMATION
– 428 –
The following table sets out the breakdown of our revenue generated from property
management by source of projects for the periods indicated:
For the year ended December 31,
For the nine months ended
September 30,
2018 2019 2020 2020 2021
Revenue Revenue Revenue Revenue Revenue
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
Properties developed by
Jinmao Group and
Sinochem Group
(and their respective joint
ventures and associates)
(1)
308,277 92.0 431,282 93.3 524,854 92.5 380,716 93.0 534,714 92.5
Projects developed by
Independent Third
Parties
(2)
26,840 8.0 30,995 6.7 42,627 7.5 28,782 7.0 43,524 7.5
Total 335,117 100.0 462,277 100.0 567,481 100.0 409,498 100.0 578,238 100.0
Notes:
(1) “Properties developed by Jinmao Group and Sinochem Group (and their respective joint ventures and
associates)” refers to properties solely developed by Jinmao Group or Sinochem Group or jointly developed
by Jinmao Group, Sinochem Group and other parties.
(2) “Projects developed by Independent Third Parties” refers to projects not developed by Jinmao Group or
Sinochem Group, either solely or jointly with other parties.
The following table sets forth a breakdown of our revenue from property management
services by revenue model for the periods indicated:
For the year ended December 31,
For the nine months ended
September 30,
2018 2019 2020 2020 2021
Revenue Revenue Revenue Revenue Revenue
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
Lump sum basis 324,404 96.8 456,365 98.7 559,079 98.5 405,317 99.0 570,603 98.7
Commission basis 10,713 3.2 5,912 1.3 8,402 1.5 4,181 1.0 7,635 1.3
Total 335,117 100.0 462,277 100.0 567,481 100.0 409,498 100.0 578,238 100.0
During the Track Record Period, we derived substantially all of our property management
service revenue from property management fees charged on a lump sum basis, with the
remaining portion derived from property management fees charged on a commission basis.
FINANCIAL INFORMATION
– 429 –
Revenue from value-added services to non-property owners
During the Track Record Period, we provided value-added services to non-property
owners, including (i) sales assistance services to property developers to assist with their sales
and marketing activities at property sales venues and display units, and (ii) consultancy and
other value-added services to non-property owners, primarily including pre-delivery services
and consultancy services.
The following table sets out the breakdown of our revenue from value-added services to
non-property owners by service type for the periods indicated:
For the year ended December 31,
For the nine months ended
September 30,
2018 2019 2020 2020 2021
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
Sales assistance services 139,425 78.1 204,392 81.5 228,446 77.6 166,566 83.7 174,911 47.1
Consultancy and other
value-added services to
non-property owners 39,188 21.9 46,446 18.5 65,955 22.4 32,416 16.3 196,713 52.9
Total 178,613 100.0 250,838 100.0 294,401 100.0 198,982 100.0 371,624 100.0
Revenue from community value-added services
During the Track Record Period, we provided community value-added services mainly to
property owners and residents of our managed properties to address their daily life style needs
which included: (i) community space operation services, (ii) real estate brokerage services, (iii)
platform services for interior decoration, and (iv) community living services.
The following table sets out the breakdown of our revenue from community value-added
services by service type for the periods indicated:
For the year ended December 31,
For the nine months ended
September 30,
2018 2019 2020 2020 2021
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
Community space operation
services
(1)
45,198 74.4 57,348 76.3 61,101 74.3 43,164 75.9 72,552 73.4
Community living services 15,108 24.9 17,696 23.5 16,401 19.9 12,187 21.4 17,597 17.8
Platform services for interior
decoration 439 0.7 164 0.2 3,802 4.6 797 1.4 5,594 5.7
Real estate brokerage
services 28 0.0 — — 1,024 1.2 694 1.3 3,080 3.1
Total 60,773 100.0 75,208 100.0 82,328 100.0 56,842 100.0 98,823 100.0
Note:
(1) Includes gross rental income from investment properties operating leases.
FINANCIAL INFORMATION
– 430 –
Cost of Sales
Our cost of sales represents costs directly attributable to the provision of our services and
comprises (i) staff costs, (ii) sub-contracting costs, (iii) administrative costs, (iv) facilities and
equipment maintenance costs, (v) energy costs, (vi) depreciation and amortization, and (vii)
others, such as costs in relation to community activities.
The following table sets out the breakdown of our cost of sales by nature for the periods
indicated:
For the year ended December 31,
For the nine months ended
September 30,
2018 2019 2020 2020 2021
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
Staff costs 148,434 32.3 204,290 32.1 214,528 30.2 162,256 32.4 203,298 27.6
Sub-contracting costs 128,760 28.0 189,324 29.7 226,027 31.9 154,238 30.8 220,382 29.9
Administrative costs 87,733 19.1 103,915 16.3 121,053 17.1 84,974 16.9 185,098 25.1
Energy costs 37,354 8.1 52,077 8.2 47,286 6.7 35,363 7.1 50,936 6.9
Facilities and equipment
maintenance costs 27,542 6.0 47,481 7.5 52,738 7.4 32,646 6.5 37,973 5.1
Depreciation and
amortisation 1,866 0.4 2,609 0.4 6,235 0.9 4,641 0.9 7,354 1.0
Others 27,780 6.1 37,104 5.8 41,554 5.8 27,403 5.4 32,749 4.4
Total cost of sales 459,469 100.0 636,800 100.0 709,421 100.0 501,521 100.0 737,790 100.0
The following table sets out the breakdown of our cost of sales by business line for the
periods indicated:
For the year ended December 31,
For the nine months ended
September 30,
2018 2019 2020 2020 2021
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
Property management
services 298,012 64.9 407,409 64.0 466,503 65.8 331,667 66.1 477,075 64.7
Value-added services to
non-property owners 130,240 28.3 182,280 28.6 193,231 27.2 134,751 26.9 200,467 27.2
Community value-added
services
(1)
31,217 6.8 47,111 7.4 49,687 7.0 35,103 7.0 60,248 8.1
Total cost of sales 459,469 100.0 636,800 100.0 709,421 100.0 501,521 100.0 737,790 100.0
Note:
(1) Includes gross rental income from investment properties operating leases.
FINANCIAL INFORMATION
– 431 –
Gross Profit and Gross Profit Margin
The following table sets out the breakdown of our gross profit and gross profit margin by
business line for the periods indicated:
For the year ended December 31,
For the nine months ended
September 30,
2018 2019 2020 2020 2021
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
Property management
services 37,105 11.1 54,868 11.9 100,978 17.8 77,831 19.0 101,163 17.5
Value-added services to
non-property owners 48,373 27.1 68,558 27.3 101,170 34.4 64,231 32.3 171,157 46.1
Community value-added
services
(1)
29,556 48.6 28,097 37.4 32,641 39.6 21,739 38.2 38,575 39.0
Total/Overall 115,034 20.0 151,523 19.2 234,789 24.9 163,801 24.6 310,895 29.6
Note:
(1) Includes gross rental income from investment properties operating leases.
Our overall gross profit margins are primarily affected by our business mix, average
property management fee rates we charge for our property management services, geographic
concentration of GFA under management and cost control capabilities. For further details
regarding the change in our gross profit margin during the Track Record Period, see “— Period
to Period Comparison — Gross Profit and Gross Profit Margin”.
Other Income and Gains
Other income and gains include (i) bank interest income, (ii) loan interest income, (iii) tax
incentives on value-added tax, (iv) government grants, (v) others such as late fees charged to
customers who failed to make timely payments.
Our other income and gains were RMB11.7 million, RMB74.7 million, RMB74.9 million,
RMB58.6 million and RMB41.0 million for the years ended December 31, 2018, 2019 and
2020 and the nine months ended September 30, 2020 and 2021, respectively, which accounted
for approximately 2.0%, 9.5%, 7.9%, 8.8% and 3.9% of our total revenue for the respective
periods.
FINANCIAL INFORMATION
– 432 –
The following table sets out the breakdown of other income and gains for the periods
indicated:
For the year ended December 31,
For the nine months ended
September 30,
2018 2019 2020 2020 2021
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
Other income and gains
Bank interest income 1,243 10.6 864 1.2 1,313 1.8 958 1.6 2,085 5.1
Loan interest income 9,864 84.0 69,991 93.7 63,750 85.1 50,803 86.6 32,408 79.0
Tax incentives on
value-added tax — — 1,913 2.6 5,458 7.3 3,828 6.5 4,583 11.2
Government grants 465 4.0 1,647 2.2 3,364 4.5 2,669 4.6 1,503 3.7
Others 174 1.4 297 0.3 1,023 1.3 372 0.7 469 1.0
Total 11,746 100.0 74,712 100.0 74,908 100.0 58,630 100.0 41,048 100.0
Selling and Distribution Expenses
Selling and distribution expenses include staff costs and advertising and marketing
expenses.
Our selling and distribution expenses were RMB2.3 million, RMB1.0 million, RMB1.8
million, RMB1.2 million and RMB10.2 million for the years ended December 31, 2018, 2019
and 2020 and the nine months ended September 30, 2020 and 2021, respectively, accounting
for approximately 0.4%, 0.1%, 0.2%, 0.2% and 1.0% of our total revenue for the respective
periods.
Administrative Expenses
Administrative expenses primarily include (i) staff costs, (ii) office expenses, (iii)
outsourcing costs; (iv) depreciation and amortization; (v) transportation and travel expenses,
(vi) consulting and professional fee, and (vii) others, such as labor union service fees and
listing expenses.
Our administrative expenses were RMB82.3 million, RMB117.2 million, RMB134.9
million, RMB95.6 million and RMB148.7 million for the years ended December 31, 2018,
2019 and 2020 and the nine months ended September 30, 2020 and 2021, respectively, which
accounted for approximately 14.3%, 14.9%, 14.3%, 14.4% and 14.2% of our total revenue for
the respective periods. We have been dedicated to continuously maximizing our administrative
efficiency through optimization of management structure and execution of systematic lean
management.
FINANCIAL INFORMATION
– 433 –
The following table sets out the breakdown of administrative expenses for the periods
indicated:
For the year ended December 31,
For the nine months ended
September 30,
2018 2019 2020 2020 2021
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
Staff costs 65,409 79.4 92,662 79.1 105,546 78.2 76,965 80.5 104,999 70.6
Office expenses 5,922 7.2 6,459 5.5 7,225 5.4 5,505 5.8 6,601 4.4
Outsourcing 1,566 1.9 3,006 2.6 5,396 4.0 3,369 3.5 4,939 3.3
Depreciation and
amortization 1,832 2.2 3,482 3.0 4,723 3.5 2,852 3.0 8,002 5.4
Transportation and travel
expenses 4,052 4.9 4,624 3.9 3,852 2.9 2,140 2.2 2,487 1.7
Consulting and professional
fee 1,244 1.5 2,220 1.9 2,764 2.0 1,160 1.2 3,780 2.6
Others 2,321 2.9 4,697 4.0 5,414 4.0 3,642 3.8 17,894 12.0
Total 82,346 100.0 117,150 100.0 134,920 100.0 95,633 100.0 148,702 100.0
Other Expenses, Net
Other expenses primarily include fair value loss on investment properties and impairment
losses of financial assets including trade receivables and other receivables.
Our other expenses were RMB5.6 million, RMB4.4 million, RMB1.3 million, RMB0.03
million and RMB6.3 million for the years ended December 31, 2018, 2019 and 2020 and the
nine months ended September 30, 2020 and 2021, respectively, which accounted for
approximately 1.0%, 0.6%, 0.1%. 0.0% and 0.6% of our total revenue for the respective
periods.
FINANCIAL INFORMATION
– 434 –
Finance Costs
Finance costs mainly represent (i) interest on other borrowings and (ii) interest on lease
liabilities. Our finance costs were RMB10.2 million, RMB70.3 million, RMB64.2 million,
RMB51.0 million and RMB33.5 million for the three years ended December 31, 2018, 2019
and 2020 and the nine months ended September 30, 2020 and 2021, respectively, which
accounted for approximately 1.8%, 8.9%, 6.8%, 7.7% and 3.2% of our total revenue for the
respective periods.
The following table sets out the breakdowns of finance costs for the periods indicated:
For the year ended December 31,
For the nine months ended
September 30,
2018 2019 2020 2020 2021
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
Finance costs
— Interest on other
borrowings 9,864 97.0 69,991 99.6 63,750 99.3 50,803 99.6 32,841 97.9
— Interest on lease
liabilities 301 3.0 289 0.4 436 0.7 218 0.4 696 2.1
10,165 100.0 70,280 100.0 64,186 100.0 51,021 100.0 33,537 100.0
Income Tax Expenses
Income tax expense consists of current and deferred income taxes in the PRC. Our income
tax expenses were RMB8.9 million, RMB10.8 million, RMB30.4 million, RMB21.2 million
and RMB43.9 million for the years ended December 31, 2018, 2019 and 2020 and the nine
months ended September 30, 2020 and 2021, respectively.
Income tax provision in respect of operations in the PRC has been calculated at the
applicable tax rate on the estimated assessable profits for the years, based on the existing
legislation, interpretations and practices in respect thereof. The statutory tax rate was 25% for
the Track Record Period. The general enterprise income tax rate applied to us in PRC is 25%.
Some subsidiaries of us are qualified to enjoy preferential enterprise income tax rate during the
Track Record Period.
For the years ended December 31, 2018, 2019 and 2020 and the nine months ended
September 30, 2020 and 2021, our effective income tax rates were 33.7%, 32.3%, 28.3%,
28.5% and 28.6%, respectively. Our effective income rates were higher than the statutory
income tax rate of 25% for the years ended December 31, 2018, 2019 and 2020 and the nine
months ended September 30, 2020 primarily due to non-deductible costs in relation to our
payment of remuneration of certain employees. Our effective income rate was higher than the
FINANCIAL INFORMATION
– 435 –
statutory income tax rate of 25% during the Track Record Period primarily due to
non-deductible costs in relation to listing expenses, and contributions from China Jinmao for
equity-settled share option expenses related to the share options granted by China Jinmao to
certain employees of our Group and of China Jinmao who worked for us and for remuneration
of a director of our Company settled by a subsidiary of China Jinmao for his service rendered
to us. As the aforementioned contributions and remuneration expenses were not paid by us,
these expenses were not deductible for taxable profits. During the Track Record Period and up
to the Latest Practicable Date, we had no matters in dispute or unresolved with any tax
authority in any applicable jurisdiction.
NON-HKFRS MEASURES
To supplement our consolidated financial statements which are presented in accordance
with HKFRS, we also presented adjusted profit and total comprehensive income, adjusted net
profit margin and adjusted gearing ratio as additional financial measures. We believe that these
non-HKFRS measures facilitate comparison of our financial performance and position by
eliminating the impact of items.
We define adjusted profit and total comprehensive income as profit and total
comprehensive income for the year excluding income and costs related to borrowings and loans
due from related parties. We define adjusted total equity as total equity excluding income and
costs related to borrowings and loans due from related parties. We define adjusted bank and
other borrowings and lease liabilities as sum of long-term and short-term interest-bearing bank
and other borrowings and lease liabilities excluding borrowings related to ABS arrangement.
We calculate adjusted net profit margin by dividing adjusted profit and total
comprehensive income for the year by revenue for the same year. We calculate adjusted gearing
ratio by dividing adjusted bank and other borrowings and lease liabilities by adjusted total
equity as of the respective dates.
These non-HKFRS measures eliminate the effect of borrowings and loans due from
related parties and borrowings related to the ABS arrangement, which are not related to our
ordinary course of business. We believe that these measures provide more useful information
to investors and others in understanding and evaluating our consolidated results of operations
and financial position in the same manner as our management. Our presentation of these
non-HKFRS measures may not be comparable to similarly titled measures presented by other
companies. The use of these measures has limitations as an analytical tool, and you should not
consider them in isolation from, or as a substitute for analysis of, our results of operations or
financial condition as reported under HKFRS.
FINANCIAL INFORMATION
– 436 –
The following table reconciles our adjusted profit during the Track Record Period
presented to the most directly comparable financial measure calculated and presented in
accordance with HKFRS:
For the year ended December 31,
For the nine months
ended September 30,
2018 2019 2020 2020 2021
(RMB’000) (RMB’000) (RMB’000) (RMB’000) (RMB’000)
Profit for the
year/period 17,487 22,624 77,124 53,329 109,351
Less:
– Other income
and gains
related to
borrowings and
loans due from
related parties 9,864 69,991 63,750 50,803 32,408
Add:
– Finance costs
related to
interest-bearing
borrowings 9,864 69,991 63,750 50,803 32,841
Adjusted profit 17,487 22,624 77,124 53,329 109,784
The following table reconciles our adjusted total equity as of the dates indicated to the
most directly comparable financial measure calculated and presented in accordance with
HKFRS:
As of December 31,
As of
September 30,
2018 2019 2020 2021
(RMB’000) (RMB’000) (RMB’000) (RMB’000)
Total equity 79,655 107,831 49,134 145,494
Less:
– Other income
related to loans due
from related parties
and finance costs
related to interest-
bearing borrowings — — — (433)
Adjusted total equity 79,655 107,831 49,134 145,927
FINANCIAL INFORMATION
– 437 –
The following table reconciles our adjusted interest-bearing borrowings and lease
liabilities as of the dates indicated to the most directly comparable financial measure calculated
and presented in accordance with HKFRS:
As of December 31,
As of
September 30,
2018 2019 2020 2021
(RMB’000) (RMB’000) (RMB’000) (RMB’000)
Sum of long-term and
short-term interest-
bearing borrowings
and lease liabilities 1,346,825 1,220,460 1,098,788 26,452
Less:
– Borrowings related
to the 2018 ABS 1,341,000 1,214,997 1,080,992 —
Adjusted interest-
bearing borrowings
and lease liabilities 5,825 5,463 17,796 26,452
Our adjusted gearing ratio is nil during the Track Record Period.
The following table sets forth the impact of the 2018 ABS on our net profits and net profit
margins after excluding the other income and gains and finance costs and our gearing ratios
after excluding interest-bearing borrowings in relation to the 2018 ABS from our financial
results during the Track Record Period as of the dates and for the periods indicated:
As of and for the years ended
December 31,
As of and for the nine
months ended
September 30,
2018 2019 2020 2020 2021
(RMB’000, except for the percentages)
Before adjusting for
the 2018 ABS:
Profit for the
year/period 17,487 22,624 77,124 53,329 109,351
Net profit margin
(1)
3.0% 2.9% 8.2% 8.0% 10.4%
Gearing ratio
(2)
1,683.5% 1,126.8% 2,200.1% N/A —
After adjusting for
the 2018 ABS:
Profit for the
year/period 17,487 22,624 77,124 53,329 109,784
Net profit margin
(1)
3.0% 2.9% 8.2% 8.0% 10.5%
Gearing ratio
(2)
———N/A—
FINANCIAL INFORMATION
– 438 –
Notes:
(1) Net profit margin is calculated based on our profit for the year/period divided by our total revenue in
the same year/period, multiplied by 100%.
(2) Gearing ratio is calculated based on interest-bearing borrowings excluding lease liabilities divided by
total equity, multiplied by 100%.
PERIOD TO PERIOD COMPARISON
Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30,
2020
Revenue
Revenue increased by 57.6% to RMB1,048.7 million in the nine months ended
September 30, 2021 from RMB665.3 million in the same period in 2020. This increase was
mainly attributable to an increase in revenue from our property management services,
value-added services to non-property owners and community value- added services, as we
expanded our business scale.
• Property management services. Revenue from property management services
increased by 41.2% to RMB578.2 million in the nine months ended September 30,
2021 from RMB409.5 million in the same period in 2020. This increase was mainly
attributable to an increase in our GFA under management, which increased to 23.2
million sq.m. as of September 30, 2021.
• Value-added services to non-property owners. Revenue from value-added services to
non-property owners increased by 86.8% to RMB371.6 million in the nine months
ended September 30, 2021 from RMB199.0 million in the same period in 2020. This
increase was mainly attributable to an increase in our revenue from preliminary
planning and design services and post-delivery services as we expanded our service
offerings. We commenced preliminary planning and design services in 2021 which
generated revenue of RMB43.7 million in the nine months ended September 30,
2021.
• Community value-added services. Revenue from community value-added services
increased by 73.9% to RMB98.8 million in the nine months ended September 30,
2021 from RMB56.8 million in the same period in 2020. This increase was primarily
due to (i) an increase in the number of properties under our management as a result
of our expansion of business scale, which increased to 137 as of September 30,
2021; and (ii) increased revenue from community space operation services and
community living services, as a result of the increased GFA under our management,
which increased to 23.2 million sq.m. as of September 30, 2021.
FINANCIAL INFORMATION
– 439 –
Cost of sales
Cost of sales increased by 47.1% to RMB737.8 million in the nine months ended
September 30, 2021 from RMB501.5 million in the same period in 2020. This increase was
mainly attributable to an increase in our administrative costs, sub-contracting costs and staff
costs due to an expansion of our business scale.
Gross profit and gross profit margin
Our gross profit increased by 89.8% to RMB310.9 million in the nine months ended
September 30, 2021 from RMB163.8 million in the same period in 2020. As the increase in our
revenue outweighed the increase in cost of sales, our overall gross profit margin increased to
29.6% in the nine months ended September 30, 2021 from 24.6% in the same period in 2020
primarily due to the contribution from our new consultancy and other value-added service
offerings such as preliminary planning and design services and post-delivery services which
typically have higher profit margin.
• Property management services. Gross profit margin for property management
services decreased to 17.5% in the nine months ended September 30, 2021 from
19.0% in the same period in 2020 primarily because (i) our average property
management fees decreased in line with the change of composition of projects
delivered by Jinmao Group and (ii) we incurred less employee benefit expenses in
the nine months ended September 30, 2020 as a result of a reduction of our required
contribution to the social insurance fund as we received government relief in
relation to the COVID-19 in the nine months ended September 30, 2020.
• Value-added services to non-property owners. Gross profit margin for value-added
services to non-property owners increased to 46.1% in the nine months ended
September 30, 2021 from 32.3% in the nine months ended September 30, 2020
mainly due to increased revenue from our new consultancy and other value-added
service offerings such as preliminary planning and design services and post-delivery
services, which, according to China Index Academy, typically generate higher profit
margin compared with other value-added services to non-property owners we offer.
We commenced preliminary planning and design services in 2021 which generated
revenue of RMB43.7 million in the nine months ended September 30, 2021.
• Community value-added services. Gross profit margin for community value-added
services increased to 39.0% in the nine months ended September 30, 2021 from
38.2% in the same period in 2020 primarily due to increased revenue from our
community space operation services, which generally have higher profit margin
compared with other community value-added services we provide.
FINANCIAL INFORMATION
– 440 –
Other income and gains
Other income and gains decreased by 30.0% to RMB41.0 million in the nine months
ended September 30, 2021 from RMB58.6 million in the same period in 2020 primarily due to
decreased loan interest income as a subsidiary of Jinmao Group partially repaid a loan extended
by us using the proceeds from the 2018 ABS.
Selling and distribution expenses
Selling and distribution expenses increased by 761.9% to RMB10.2 million in the nine
months ended September 30, 2021 from RMB1.2 million in the same period in 2020. The
significant increase was because (i) we incurred less selling and distribution expenses in 2020
as a result of decreased selling and marketing activities during the COVID-19 break; and (ii)
the number of our selling and distribution staff increased by 272.7% from 11 as of September
30, 2020 to 41 as of September 30, 2021, which was in line with our increased efforts to expand
business into properties developed by Independent Third Parties starting from 2021.
Administrative expenses
Administrative expenses increased by 55.5% to RMB148.7 million in the nine months
ended September 30, 2021 from RMB95.6 million in the same period in 2020. This increase
was mainly attributable to (i) an increase in staff costs primarily as a result of our business
expansion, and (ii) an increase in our listing expenses.
Other expenses, net
We had other expenses of RMB6.3 million in the nine months ended September 30, 2021
compared with other expenses of RMB0.03 million in the same period in 2020, primarily due
to a reversal of previously recognized impairment losses of trade receivables in the nine
months ended September 30, 2020. The increase was also partially attributable to penalties of
RMB3.05 million incurred in the nine months ended September 30, 2021. The penalties were
relating to failure to charge end users electricity fees according to governmental pricing
standard for certain projects during the Track Record Period. We have implemented
rectification measures and enhanced internal control procedures to prevent future occurrence
of such incident. For details, see “Business — Non-Compliances — Failure to Meet
Governmental Pricing Standard When Charging Electricity Fees to End Users”.
Finance costs
Finance costs decreased by 34.3%, to RMB33.5 million in the nine months ended
September 30, 2021 from RMB51.0 million in the same period in 2020. This decrease was
primarily due to the decreased interest on the 2018 ABS as we partially repaid the principal.
FINANCIAL INFORMATION
– 441 –
Income tax expenses
Income tax expense increased by 106.7% to RMB43.9 million in the nine months ended
September 30, 2021, from RMB21.2 million in the same period in 2020. This increase was
primarily attributable to an increase in pre-tax profit to RMB153.2 million in the nine months
ended September 30, 2021 from RMB74.6 million in the same period in 2020.
Profit for the period
As a result of the foregoing, profit for the period increased by 105.0% to RMB109.4
million in the nine months ended September 30, 2021 from RMB53.3 million in the same
period in 2020 and net profit margin increased to 10.4% in the nine months ended September
30, 2021 from 8.0% in the same period in 2020.
Year Ended December 31, 2020 Compared to Year Ended December 31, 2019
Revenue
Revenue increased by 19.8% to RMB944.2 million in 2020 from RMB788.3 million in
2019. This increase was mainly attributable to an increase in the revenue of our property
management services, value-added services to non-property owners and community value-
added services, as we expanded our business scale.
• Property management services. Revenue from property management services
increased by 22.8% to RMB567.5 million in 2020 from RMB462.3 million in 2019.
This increase was mainly attributable to an increase in our GFA under management,
which increased to 17.7 million sq.m. as of December 31, 2020 from 12.7 million
sq.m. as of December 31, 2019, as a result of our business expansion.
• Value-added services to non-property owners. Revenue from value-added services to
non-property owners increased by 17.4% to RMB294.4 million in 2020 from
RMB250.8 million in 2019. This increase was mainly attributable to an increase in
our provision of sales assistance services and pre-delivery services due to an
increase in the number of sales activities conducted by property developers to whom
we provided services.
• Community value-added services. Revenue from community value-added services
increased by 9.5% to RMB82.3 million in 2020 from RMB75.2 million in 2019. This
increase was primarily due to increased revenue from community space operation
services and platform services for interior decoration as a result of the increased
GFA under our management, which increased to 17.7 million sq.m. as of December
31, 2020.
FINANCIAL INFORMATION
– 442 –
Cost of sales
Cost of sales increased by 11.4% to RMB709.4 million in 2020 from RMB636.8 million
in 2019. This increase was mainly attributable to an increase in our sub-contracting costs due
to an expansion of our business scale.
Gross profit and gross profit margin
Our gross profit increased by 55.0% to RMB234.8 million in 2020 from RMB151.5
million in 2019. Our overall gross profit margin increased to 24.9% in 2020 from 19.2% in
2019 primarily due to (i) the higher gross profit margin of our property management business,
and (ii) our increased revenue from pre-delivery services and community space operation
services. Such services typically generate higher gross profit margin compared to other
services we offer. The increase in our overall gross profit margin in 2020 was also partially
attributable to a reduction in our required contribution to the social insurance fund as we
received a one-off local government relief in response to the COVID-19 outbreak. According
to management’s estimation, excluding the impact of the government relief, our overall gross
profit margin in 2020 would have been around 2% lower.
• Property management services. Gross profit margin for property management
services increased to 17.8% in 2020 from 11.9% in 2019 mainly due to the effect of
economies of scale and cost-control measures. For example, our GFA under
management for residential properties increased significantly by 38.6% from
December 2019 to December 2020. The number of properties under our management
has also increased. In particular, the number of properties under our management in
China’s eastern region increased significantly by 60.7% from December 2019 to
December 2020.
• Value-added services to non-property owners. Gross profit margin for value-added
services to non-property owners increased to 34.4% in 2020 from 27.3% in 2019,
mainly due to the increased revenue from our pre-delivery services as a percentage
of our total revenue from value-added services to non-property owners. Revenue
generated from our pre-delivery services amounted to RMB40.4 million and
RMB59.3 million in 2019 and 2020. According to China Index Academy, pre-
delivery services typically generate a higher gross profit margin compared to other
value-added services to non-property owners.
• Community value-added services. Gross profit margin for community value-added
services increased to 39.6% in 2020 from 37.4% in 2019 primarily due to the
increased revenue from community space operation services and platform services
for interior decoration, which typically generate a higher gross profit margin. The
revenue generated from community space operation services and platform services
for interior decoration as a percentage of our community value-added services
increased from 76.5% in 2019 to 78.9% in 2020.
FINANCIAL INFORMATION
– 443 –
Other income and gains
Other income and gains remained relatively stable at RMB74.7 million in 2019 and
RMB74.9 million in 2020.
Selling and distribution expenses
Selling and distribution expenses increased by 89.5% to RMB1.8 million in 2020 from
RMB1.0 million in 2019. This increase was mainly due to an increase in advertising expenses
in relation to brand design and promotion, and upgrade of official website.
Administrative expenses
Administrative expenses increased by 15.2% to RMB134.9 million in 2020 from
RMB117.2 million in 2019. This increase was mainly attributable to an increase of RMB12.9
million in staff costs primarily due to the increase in the number of our employees as a result
of our business expansion.
Other expenses, net
Other expenses decreased by 71.7% to RMB1.3 million in 2020 from RMB4.4 million in
2019, primarily because we incurred more fair value losses on investment properties in relation
to our car park rental services in 2019 than in 2020.
Finance costs
Net finance costs decreased by 8.7% to RMB64.2 million in 2020 from RMB70.3 million
in 2019. This decrease was primarily due to the decreased interest on other borrowings as we
partially repaid the principal of the 2018 ABS.
Income tax expenses
Income tax expenses increased by 181.9% to RMB30.4 million in 2020 from RMB10.8
million in 2019. This increase was primarily attributable to an increase in pre-tax profit which
increased by 221.8% to RMB107.5 million in 2020 from RMB33.4 million in 2019.
Profit for the year
As a result of the foregoing, profit for the year increased by 240.9% to RMB77.1 million
in 2020 from RMB22.6 million in 2019 and net profit margin increased to 8.2% in 2020 from
2.9% in 2019.
FINANCIAL INFORMATION
– 444 –
Year Ended December 31, 2019 Compared to Year Ended December 31, 2018
Revenue
Revenue increased by 37.2% to RMB788.3 million in 2019 from RMB574.5 million in
2018. This increase was mainly attributable to an increase in the revenue from our property
management services, value-added services to non-property owners and community value-
added services, as we expanded our business scale.
• Property management services. Revenue from property management services
increased by 37.9% to RMB462.3 million in 2019 from RMB335.1 million in 2018.
This increase was mainly attributable to an increase in our GFA under management,
which increased to 12.7 million sq.m. as of December 31, 2019 from 10.2 million
sq.m. as of December 31, 2018, as we expanded our business scale and we began to
charge fees on a lump sum basis for certain projects which historically had been
charged on a commission basis.
• Value-added services to non-property owners. Revenue from value-added services to
non-property owners increased by 40.4% to RMB250.8 million in 2019 from
RMB178.6 million in 2018. This increase was primarily due to an increase in the
number of properties developed by Jinmao Group (and its joint ventures and
associates) to which we offered sales assistance services, which increased from 51
in 2018 to 81 in 2019.
• Community value-added services. Revenue from community value-added services
increased by 23.8% to RMB75.2 million in 2019 from RMB60.8 million in 2018.
This increase was primarily due to increased revenue from our community space
operation services as we managed more properties. The number of properties under
our management increased from 51 as of December 31, 2018 to 66 as of December
31, 2019.
Cost of sales
Cost of sales increased by 38.6% to RMB636.8 million in 2019 from RMB459.5 million
in 2018. This increase was mainly attributable to an increase in our staff costs and
sub-contracting costs as a result of an increase of our business scale.
FINANCIAL INFORMATION
– 445 –
Gross profit and gross profit margin
Our gross profit increased by 31.7% to RMB151.5 million in 2019 from RMB115.0
million in 2018. Our overall gross profit margin decreased to 19.2% in 2019 from 20.0% in
2018 primarily due to the decreased gross profit from community value-added services as a
result of the increased investments in our smart management systems.
• Property management services. Gross profit margin for property management
services increased to 11.9% in 2019 from 11.1% in 2018, which was mainly
attributable to our cost-saving measures aimed at increasing operational efficiency
in our services while maintaining our service quality. Due to our optimized
personnel management and efficient staffing, our profit per capita, calculated as net
profit divided by the number of our staff, increased by 21.0% from 2018 to 2019.
• Value-added services to non-property owners. Gross profit margin for value-added
services to non-property owners remained relatively stable at 27.1% and 27.3% in
2018 and 2019, respectively.
• Community value-added services. Gross profit margin for community value-added
services decreased to 37.4% in 2019 from 48.6% in 2018, primarily due to increased
staff costs in line with our business expansion, which increased from RMB148.4
million in 2018 to RMB204.3 million in 2019.
Other income and gains
Other income and gains increased by 536.1% to RMB74.7 million in 2019 from RMB11.7
million in 2018. This increase was primarily attributable to increased loan interest income of
RMB60.1 million derived from the loan to a subsidiary of Jinmao Group extended by us using
the proceeds from the 2018 ABS in late 2018.
Selling and distribution expenses
Selling and distribution expenses decreased by 58.5% to RMB1.0 million in 2019 from
RMB2.3 million in 2018, mainly because we incurred expenses in relation to enhanced
marketing efforts in 2018 while we did not incur such expenses in 2019.
FINANCIAL INFORMATION
– 446 –
Administrative expenses
Administrative expenses increased by 42.3% to RMB117.2 million in 2019 from
RMB82.3 million in 2018. This increase was mainly attributable to an increase of RMB27.3
million in staff costs primarily due to the increase in the number of our administrative related
staff as a result of our business expansion.
Other expenses, net
Other expenses decreased by 20.8% to RMB4.4 million in 2019 from RMB5.6 million in
2018, primarily because of a decrease in impairment provision made for past due balances of
certain of our trade receivables and other receivables as we considered the collection from
customers became more likely.
Finance costs
Finance costs increased by 591.4% to RMB70.3 million in 2019 from RMB10.2 million
in 2018, primarily due to the increased interest on other borrowings as we made more interest
payments in relation to the 2018 ABS for the full year in 2019 compared with two months’
interest payments in 2018.
Income tax expenses
Income tax expenses increased by 21.5% to RMB10.8 million in 2019 from RMB8.9
million in 2018. This increase was primarily attributable to an increase in pre-tax profit which
increased by 26.7% to RMB33.4 million in 2019 from RMB26.4 million in 2018.
Profit for the year
As a result of the foregoing, profit for the year increased by 29.4% to RMB22.6 million
in 2019 from RMB17.5 million in 2018 and net profit margin decreased to 2.9% in 2019 from
3.0% in 2018.
FINANCIAL INFORMATION
– 447 –
DESCRIPTION OF SELECTED CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
The following table sets out our consolidated statements of financial position as of the
dates indicated:
As of December 31,
As of
September 30,
2018 2019 2020 2021
(RMB’000) (RMB’000) (RMB’000) (RMB’000)
NON-CURRENT ASSETS
Property, plant and equipment 10,916 17,889 33,615 38,245
Investment properties 14,510 11,640 10,590 9,459
Right-of-use assets 1,926 2,433 15,970 24,982
Intangible assets 192 6,155 7,084 6,108
Deferred tax assets 1,578 1,607 2,457 4,085
Other receivables and other
assets 1,215,623 1,086,022 941,593 3,374
Total non-current assets 1,244,745 1,125,746 1,011,309 86,253
CURRENT ASSETS
Inventories 6,400 5,493 5,199 5,044
Trade receivables 88,801 155,291 203,713 451,537
Prepayments, other receivables
and other assets 440,526 544,576 644,196 515,762
Restricted cash — — — 1,278
Cash and cash equivalents 160,030 155,113 270,818 274,169
Total current assets 695,757 860,473 1,123,926 1,247,790
CURRENT LIABILITIES
Trade payables 82,897 90,655 112,036 150,737
Other payables and accruals 317,279 401,709 520,641 621,713
Contract liabilities 98,148 146,917 206,391 258,992
Interest-bearing borrowings 126,000 134,000 144,000 —
Lease liabilities 1,547 2,063 5,572 10,713
Tax payable 13,119 16,661 22,735 5,326
Total current liabilities 638,990 792,005 1,011,375 1,047,481
NET CURRENT ASSETS 56,767 68,468 112,551 200,309
FINANCIAL INFORMATION
– 448 –
As of December 31,
As of
September 30,
2018 2019 2020 2021
(RMB’000) (RMB’000) (RMB’000) (RMB’000)
TOTAL ASSETS LESS
CURRENT LIABILITIES 1,301,512 1,194,214 1,123,860 286,562
NON-CURRENT LIABILITIES
Other payables — — 123,657 123,657
Interest-bearing borrowings 1,215,000 1,080,997 936,992 —
Lease liabilities 4,278 3,400 12,224 15,739
Deferred tax liabilities 2,579 1,986 1,853 1,672
Total non-current liabilities 1,221,857 1,086,383 1,074,726 141,068
Net assets 79,655 107,831 49,134 145,494
Equity attributable to equity
holder of the parent
Share capital N/A N/A —* 66,947
Reserves 79,655 107,831 49,134 72,798
79,655 107,831 49,134 139,745
Non-controlling interests — — — 5,749
Total equity 79,655 107,831 49,134 145,494
Note:
* The amount is less than RMB1,000.
Property, Plant and Equipment
Property, plant and equipment mainly consists of electronic equipment, leasehold
improvements, and furniture and office equipment.
Property, plant and equipment increased from RMB10.9 million as of December 31, 2018
to RMB17.9 million as of December 31, 2019 and further to RMB33.6 million as of December
31, 2020 and to RMB38.2 million as of September 30, 2021, primarily due to the procurement
of electronic equipment, office equipment and IoT equipment for our business operations.
FINANCIAL INFORMATION
– 449 –
Investment Properties
Our investment properties consist of car park spaces owned by our wholly-owned
subsidiary Nanjing Ninggao. Our investment properties decreased from RMB14.5 million as of
December 31, 2018 to RMB11.6 million as of December 31, 2019 and RMB10.6 million as of
December 31, 2020, and further to RMB9.5 million as of September 30, 2021 mainly due to
the decreased fair value of the car park spaces as the remaining term of the lease agreement
was shortened over a period of time.
Right-of-use Assets
Leases are recognized as a right-of-use asset and a corresponding liability at the date at
which the leased asset is available for use by us. Assets arising from a lease are initially
measured at cost, less any accumulated depreciation and any impairment losses, and adjusted
for any remeasurement of lease liabilities. The right-of-use asset is depreciated over the shorter
of the estimated asset’s useful life and the lease term on a straight-line basis.
Our right-of-use assets increased from RMB1.9 million as of December 31, 2018 to
RMB2.4 million as of December 31, 2019, to RMB16.0 million as of December 31, 2020 and
further to RMB25.0 million as of September 30, 2021, mainly due to the increased number of
property leases as a result of the increasing demand for employee dormitories and office
properties as we expanded our business.
Intangible Assets
As of December 31, 2018, 2019 and 2020 and September 30, 2021, we recorded
intangible assets of RMB0.2 million, RMB6.2 million, RMB7.1 million and RMB6.1 million,
respectively, comprising software, information technology infrastructure and other smart
management systems for properties under our management. Our intangible assets increased
significantly from RMB0.2 million as of December 31, 2018 to RMB6.2 million as of
December 31, 2019 mainly due to increased purchases of software and operating systems to
improve our smart management capabilities.
Inventories
Our inventories mainly comprise consumables, spare parts and general merchandise.
FINANCIAL INFORMATION
– 450 –
The following table sets out the breakdown of our inventories as of the dates indicated:
As of December 31,
As of
September 30,
2018 2019 2020 2021
(RMB’000) (RMB’000) (RMB’000) (RMB’000)
Consumables and spare parts 5,895 5,072 4,801 4,735
General merchandise 505 421 398 309
Total 6,400 5,493 5,199 5,044
Our inventories were RMB6.4 million, RMB5.5 million, RMB5.2 million and RMB5.0
million as of December 31, 2018, 2019 and 2020 and September 30, 2021, respectively. The
decrease from RMB6.4 million as of December 31, 2018 to RMB5.2 million as of December
31, 2020 and further to RMB5.0 million as of September 30, 2021 was primarily attributable
to our improved inventory management.
As of December 31, 2021, RMB0.6 million, or 11.9%, of our total inventories as of
September 30, 2021 had been subsequently utilized.
Trade Receivables
Trade receivables comprise receivables from property management services, community
space operation services and sales assistance services. We typically do not grant a credit term
to individual customers for our property management services and customers for our
community value-added services. We typically grant a credit term of 90 days to 180 days to
property developers.
The following table sets out the breakdown of the trade receivables as of the dates
indicated.
As of December 31,
As of
September 30,
2018 2019 2020 2021
(RMB’000) (RMB’000) (RMB’000) (RMB’000)
Related parties 61,495 97,630 129,148 286,762
Third parties 31,396 60,910 78,186 169,409
92,891 158,540 207,334 456,171
Less: allowance for
impairment of trade
receivables (4,090) (3,249) (3,621) (4,634)
Total 88,801 155,291 203,713 451,537
FINANCIAL INFORMATION
– 451 –
Our trade receivables from third parties are primarily related to property management fees
and the balances of which increased during the Track Record Period. This was mainly
attributable to an increase in our property management revenue as we expanded our business
with an increase in our GFA under management. Our trade receivables from related parties are
primarily related to value-added services to non-property owners, the balances of which
increased during the Track Record Period along with the increase in revenue from our
value-added services to non-property owners. We had a higher balance of trade receivables as
of September 30, 2021 as compared to as of December 31, 2020. This was mainly due to the
seasonal fluctuations in the collection of our trade receivables which we believe reflects certain
of our customers’ tendency to pay their property management fees toward the year-end out of
payment preference and convenience.
As of December 31, 2021, RMB266.8 million, or 59.1%, of our total trade receivables as
of September 30, 2021 had been subsequently settled. As of December 31, 2021, RMB170.2
million, or 59.4%, of our total trade receivables from related parties as of September 30, 2021
had been subsequently settled. As of December 31, 2021, RMB96.6 million, or 58.6%, of our
total trade receivables from non-related parties as of September 30, 2021 had been
subsequently settled.
We seek to maintain strict control over our outstanding receivables. Overdue balances are
reviewed regularly by senior management. The following table sets out an aging analysis of our
trade receivables, based on the invoice date and net of loss allowance, as of the dates indicated:
As of December 31,
As of
September 30,
2018 2019 2020 2021
(RMB’000) (RMB’000) (RMB’000) (RMB’000)
Within 1 year 79,175 143,978 172,392 413,394
1 to 2 years 6,162 6,227 26,192 25,366
2 to 3 years 1,982 2,237 2,667 8,102
Over 3 years 1,482 2,849 2,462 4,675
88,801 155,291 203,713 451,537
We expect the settlement progress of related parties, namely Jinmao Group and its joint
ventures and associates, will remain similar and in accordance with the credit periods, if any,
granted after the Listing.
FINANCIAL INFORMATION
– 452 –
Trade receivables aged over one year amounted to RMB9.6 million, RMB11.3 million,
RMB31.3 million and RMB38.1 million as of December 31, 2018, 2019, 2020 and September
30, 2021, respectively, which accounted for 10.8%, 7.3%, 15.4% and 8.4% of our trade
receivables as of the respective dates. Our Directors consider that there is no material
recoverability issue with respect to such trade receivables aged over one year for the following
reasons: (i) such trade receivables are from independent third parties which are primarily
related to property management fees receivables from a large number of individual property
owners each involving a relatively limited amount of outstanding trade receivables, (ii) we
monitor long-aging trade receivables closely and request the collection status thereof to be
reported regularly to our headquarters and the management of regional offices, (iii) as further
elaborated in “Business — Property Management Services — Property Management Fees —
Collection of Property Management Fees”, we have taken various measures to enhance the
collection of such trade receivables. In the event of significant payment delays after repeatedly
failed collection attempts, we may resort to legal proceedings to collect the outstanding
property management fees, and (iv) we have, in accordance with applicable HKFRSs, made
provision for these long-aging trade receivables based on their respective expected credit loss
rate.
The following table sets out our trade receivables turnover days for the periods indicated:
For the year ended December 31,
For the
nine months
ended
September 30,
2018 2019 2020 2021
Trade receivables turnover
days
(1)
59 73 80 117
Trade receivables turnover
days from related parties
(1)
80 101 115 160
Trade receivables turnover
days from non-related
parties
(1)
39 51 53 81
Note:
(1) Our trade receivables turnover days for a period is derived by dividing the closing balances of trade
receivables by revenue for the period and then multiplying by the number of days in the period.
Trade receivables turnover days indicates the time required for us to collect cash
payments from provision of services. Our trade receivables turnover days were 59 days, 73
days, 80 days and 117 days in 2018, 2019 and 2020 and in the nine months ended
September 30, 2021. Our trade receivables turnover days increased from 2018 to 2020 mainly
attributable to increased sales assistance services provided to certain related parties to whom
we typically grant a longer credit period. Our trade receivables turnover days increased from
80 days in 2020 to 117 days in the nine months ended September 30, 2021 primarily because
FINANCIAL INFORMATION
– 453 –
we typically collect trade receivables at the end of the year. The turnover days of our trade
receivables from related parties are longer than that of our trade receivables from non-related
parties, mainly because the credit term we typically offer to our related parties is 90 to 180 days
while the credit term we offer to non-related parties is 0 to 90 days, pursuant to our credit
policy. We determine the length of credit term offered to each of our customers based on the
background, creditworthiness and collection rate of the customer. As our related parties are
mainly reputable and creditworthy state-owned enterprises with high certainty of collection,
we typically grant longer credit term to our related parties according to our credit policy rather
than due to their relationships with us. Going forward, we will continue to monitor and seek
to escalate the collection of trade receivables from Jinmao Group through a number of
measures, including utilizing our information technology systems, in particular our fee
collection system, to monitor and control the collection progress, proactively communicating
with related parties with respect to approaching payment deadlines and evaluating the accounts
to determine the appropriate collection strategy. In particular with respect to our collection
efforts in relation to community value added services and value-added services to non-property
owners, we have adopted several measures including checking monthly balances of receivables
with related party customers at the end of each month. We undertake to enhance our receivables
collection effort to reduce our trade receivable turnover days in accordance with the credit
periods we granted in the contract entered into with customers after the Listing.
We apply the HKFRS 9 simplified approach to measure expected credit losses which uses
a lifetime expected loss allowance for all trade receivables. To measure the expected credit
losses, trade receivables have been grouped based on shared credit risk characteristics and the
days past due. The expected credit losses also incorporate forward looking information.
As of December 31, 2018, 2019 and 2020 and September 30, 2021, the expected credit
loss rate was 4.40%, 2.05%, 1.75% and 1.02% respectively. Our expected credit loss rate
decreased during the Track Record Period primarily due to the collection of certain long-term
trade receivables from customers. As of December 31, 2018, 2019 and 2020 and September 30,
2021, the expected credit loss rate for trade receivables from third parties past due over three
years was 79.93%, 69.75%, 87.74% and 38.81%, respectively. The expected credit loss rate for
trade receivables from third parties past due over three years decreased from 87.74% as of
December 31, 2020 to 38.81% as of September 30, 2021. The decrease was primarily because
we increased our efforts to collect long-term trade receivables and collected RMB1.4 million
of trade receivables aged over three years in the nine months ended September 30, 2021,
resulting in a 31.1% decrease in expected credit loss of trade receivables aged over three years
from approximately RMB1.8 million as of December 31, 2020 to approximately RMB1.3
million as of September 30, 2021. As of December 31, 2018, 2019 and 2020 and September
30, 2021, we have assessed that the expected loss rate for trade receivables from related parties
was immaterial considering the good finance position and credit history of the entities. Thus,
no loss allowance provision for trade receivables from related parties was recognized during
the Track Record Period.
FINANCIAL INFORMATION
– 454 –
We have formulated and implemented various measures to expedite the recovery of our
trade receivables. For details, see “Business — Property Management Services — Property
Management Fees”. We set internal targets for collection of trade receivables with respect to
property management services and value-added services to non-property owners, respectively.
In determining the loss provision for trade receivables, we consider whether there is a
significant increase in credit risk of the receivables. To assess whether there is a significant
increase in credit risk, we compare the risk of default occurring on the receivables as of the
reporting date with the risk of default as of the date of initial recognition. For the years ended
December 31, 2018, 2019 and 2020 and the nine months ended September 30, 2021, we made
an allowance for impairment of trade receivables in the amount of RMB4.1 million, RMB3.2
million, RMB3.6 million and RMB4.6 million, respectively. During the Track Record Period
and up to the Latest Practicable Date, we did not experience any significant difficulty in
collecting trade receivables from both related parties and third parties.
Prepayments, Other Receivables and Other Assets
Prepayments, other receivables and other assets mainly include: (i) amounts due from
related parties, (ii) deposits of ABS arrangement, (iii) prepayments primarily in relation to
utility fees and lease payments, (iv) deposits placed for contract performance, tender and
bidding process and leases, (v) advances to employees, and (vi) payments on behalf of
residents and tenants, and (vii) others.
Amounts due from related parties mainly represent: (i) advances to related parties which
are non-trade in nature, (ii) receivables in relation to payments made on behalf of related
parties, (iii) interest receivable in relation to loans to related parties, and (iv) performance
guarantees and bidding guarantees placed with related parties.
Advance payments to employees for business purposes were primarily relating to petty
cash fund advanced to employees for payment of utilities, purchase of materials, expenses for
team-building activities and internal meetings and other costs or expenses to be incurred by
employees for our daily operations.
As of December 31, 2021, RMB4.2 million, or 80.9%, of advance payments to employees
for business purposes as of September 30, 2021 had been subsequently settled.
FINANCIAL INFORMATION
– 455 –
The following table sets out the breakdowns of our prepayments, other receivables and
other assets as of the dates indicated:
As of December 31,
As of
September 30,
2018 2019 2020 2021
(RMB’000) (RMB’000) (RMB’000) (RMB’000)
Current
Amounts due from related
parties 282,855 466,190 569,813 406,238
Deposits of ABS
arrangement 99,169 2,228 5,837 —
Prepayments 19,206 18,111 19,410 14,398
Deposits 10,840 11,748 8,040 13,816
Advances to employees 1,109 3,285 4,265 5,192
Other receivables 18,980 18,718 14,966 30,263
Payments on behalf of
residents/tenants
1
8,967 26,042 23,415 43,204
Others 262 — — 4,754
441,388 546,322 645,746 517,865
Impairment allowance (862) (1,746) (1,550) (2,103)
440,526 544,576 644,196 515,762
Non-current
Amounts due from related
parties 1,215,000 1,080,997 936,992 —
Other assets 623 5,025 4,601 3,374
1,215,623 1,086,022 941,593 3,374
Note:
1. Payments on behalf of residents/tenants represent the current accounts with the residents/tenants of
communities/properties managed by us.
We had current portion of prepayments, other receivables and other assets of RMB440.5
million, RMB544.6 million, RMB644.2 million and RMB515.8 million as of December 31,
2018, 2019 and 2020 and September 30, 2021 generally in line with our business expansion.
FINANCIAL INFORMATION
– 456 –
Non-current portion of other receivables and other assets decreased from RMB1,215.6
million as of December 31, 2018 to RMB1,086.0 million as of December 31, 2019 primarily
due to our partial repayment of the 2018 ABS and related parties’ repayments of cash advances
and interest-bearing loans. Non-current portion of other receivables and other assets decreased
from RMB1,086.0 million as of December 31, 2019 to RMB941.6 million as of December 31,
2020 mainly attributable to related parties’ repayments of certain interest-bearing loans.
Non-current portion of other receivables and other assets decreased from RMB941.6 million as
of December 31, 2020 to RMB3.4 million as of September 30, 2021 mainly attributable to
reclassification of certain amounts due from related parties to current portion reflecting their
payment schedule.
The outstanding amounts due from our related parties are non-trade in nature (excluding
prepayments included in the balance of due from related parties, which are trade in nature) and
had been settled as of the Latest Practicable Date.
Before allowance for impairment of other receivables, we had other receivables from
related parties of RMB1,497.9 million, RMB1,547.2 million, RMB1,506.8 million and
RMB409.6 million as of December 31, 2018, 2019 and 2020 and September 30, 2021,
respectively.
For further details regarding our other receivables from related parties, see “— Related
Party Transactions and Balances” and Note 29 of the Accountants’ Report as set out in
Appendix I to this prospectus.
Trade Payables
Trade payables primarily represent our obligations to pay for goods or services that have
been acquired in the ordinary course of business from suppliers.
The following table sets out the breakdown of our trade payables as of the dates indicated:
As of December 31,
As of
September 30,
2018 2019 2020 2021
(RMB’000) (RMB’000) (RMB’000) (RMB’000)
Trade payables
— Related parties 1,294 700 687 586
— Third parties 81,603 89,955 111,349 150,151
82,897 90,655 112,036 150,737
FINANCIAL INFORMATION
– 457 –
The increase in trade payables to third parties from RMB81.6 million as of December 31,
2018 to RMB90.0 million as of December 31, 2019, to RMB111.3 million as of December 31,
2020 and further to RMB150.2 million as of September 30, 2021 was primarily due to the
expansion of our business, reflecting an increase in the procurement of security and cleaning
services and facilities and equipment maintenance services.
Trade payables to related parties were in relation to procurement of information
technology services, dining services and other goods and services from related parties.
The following table sets out an aging analysis of our trade payables based on the invoice
date as of the dates indicated, and our average trade payables turnover days for the periods
indicated:
As of/for the year ended
December 31,
As of/for the
nine months
ended
September 30,
2018 2019 2020 2021
(RMB’000) (RMB’000) (RMB’000) (RMB’000)
Within 1 year 76,107 84,227 107,183 142,620
1 to 2 years 5,650 4,202 1,459 4,877
2 to 3 years 156 1,247 1,665 1,044
Over 3 years 984 979 1,729 2,196
82,897 90,655 112,036 150,737
Trade payables turnover
days
(1)
66 52 58 55
Note:
(1) Our trade payables turnover days for a period is derived by dividing the closing balances of trade
payables by cost of sales for the period multiplied by the number of days in the period.
FINANCIAL INFORMATION
– 458 –
Trade payables turnover days indicates the time we take to make payments to suppliers.
Our trade payables turnover days are well within the credit term typically granted by our
suppliers which ranged from 30 to 90 days.
As of December 31, 2021, RMB131.3 million, or 87.1%, of our total trade payables as of
September 30, 2021 had been subsequently settled.
Contract Liabilities
Contract liabilities represent our obligations to provide the contracted services primarily
comprising property management services. Our contract liabilities mainly arise from the
advance payments made by customers while the underlying services are yet to be provided. As
of December 31, 2018, 2019 and 2020 and September 30, 2021, we had contract liabilities of
RMB98.1 million, RMB146.9 million, RMB206.4 million and RMB259.0 million,
respectively, the general increase of which was primarily as a result of the growth of our
business.
The following table sets out the breakdown of the revenue-related contract liabilities
recognized by us as of the dates indicated:
As of December 31,
As of
September 30,
2018 2019 2020 2021
(RMB’000) (RMB’000) (RMB’000) (RMB’000)
Contract liabilities
— Third parties 94,142 130,589 183,829 232,270
— Related parties 4,006 16,328 22,562 26,722
98,148 146,917 206,391 258,992
FINANCIAL INFORMATION
– 459 –
Other Payables and Accruals
Other payables and accruals represent (i) amounts due to related parties, (ii) receipts on
behalf of residents and tenants, (iii) deposits and temporary receipts primarily in relation to
bidding and renovation, (iv) payroll and welfare payables, (v) other tax payables, and (vi) other
payables relating to stored value cards that employees use in cafeterias. The following table
sets out the components of our other payables and accruals as of the dates indicated:
As of December 31,
As of
September 30,
2018 2019 2020 2021
(RMB’000) (RMB’000) (RMB’000) (RMB’000)
Current
Amounts due to related
parties 115,768 151,480 231,567 246,599
Receipts on behalf of
residents/tenants 86,520 121,354 132,938 135,644
Deposits and temporary
receipts 34,148 40,549 48,259 66,245
Payroll and welfare payables 27,465 27,926 30,021 43,066
Other tax payables 11,362 17,237 23,283 37,535
Other payables 42,016 43,163 54,573 92,624
317,279 401,709 520,641 621,713
Non-current
Dividend payable — — 123,657 123,657
We had current portion of other payables and accruals of RMB317.3 million, RMB401.7
million, RMB520.6 million and RMB621.7 million as of December 31, 2018, 2019 and 2020
and September 30, 2021. Our current portion of other payables and accruals increased through
the Track Record Period generally in line with our business expansion.
The outstanding amounts due to our related parties are non-trade in nature and are
expected to be settled before the completion of the Spin-off, except for the outstanding
balances of RMB16.1 million due to certain non-wholly-owned entities of China Jinmao (“the
Non-wholly-owned JM Entities”) as of September 30, 2021 in relation to the collection of car
park rental income by our Group on their behalf, which are not expected to be settled before
the completion of the Spin-off. For details, see “— Related Party Transactions and Balances
— Related Party Balances”.
FINANCIAL INFORMATION
– 460 –
Dividend payable represents a dividend of RMB123.7 million declared by Jinmao PM to
its then shareholders, China Jinmao and its wholly-owned subsidiary, Beijing Chemsunny, in
2020. 85% of such dividend, RMB105.1 million was paid on January 11, 2022 and the
remainder will be paid by the end of 2022 through our internal funds.
As of December 31, 2021, we had settled RMB98.6 million, or 15.9%, of our other
payables and accruals as of September 30, 2021.
Interest-bearing Borrowings
Interest-bearing borrowings include an asset-backed securities arrangement with a
third-party securities company, pursuant to which we pledged the receivables for certain
properties under our management in 2018 (the “2018 ABS”). The 2018 ABS comprised a
priority tranche and a sub-prime tranche with aggregate principal of RMB1,460.0 million and
RMB80.0 million, respectively. The 2018 ABS bears interest at a rate ranging from 4.88% to
5.50% per annum. As of December 31, 2018, 2019 and 2020, and September 30, 2021,
RMB1,341.0 million, RMB1,215.0 million, RMB1,081.0 million and nil, respectively, of the
2018 ABS remained outstanding. As of the Latest Practicable Date, the 2018 ABS had been
fully repaid. The following table sets out the components of our interest-bearing borrowings as
of the dates indicated:
As of December 31,
As of
September 30,
2018 2019 2020 2021
(RMB’000) (RMB’000) (RMB’000) (RMB’000)
Current
Current portion of long term
other loans 126,000 134,000 144,000 —
Non-current
Other loans 1,215,000 1,080,997 936,992 —
1,341,000 1,214,997 1,080,992 —
Our interest-bearing borrowings decreased from RMB1,341.0 million as of December 31,
2018 to RMB1,215.0 million as of December 31, 2019, to RMB1,081.0 million as of December
31, 2020 and further to nil as of September 30, 2021, primarily because we had continued to
repay the 2018 ABS on a quarterly basis and fully repaid the 2018 ABS.
FINANCIAL INFORMATION
– 461 –
INDEBTEDNESS
As of December 31, 2018, 2019 and 2020 and September 30, 2021 and December 25,
2021, our interest-bearing borrowings amounted to RMB1,341.0 million, RMB1,215.0 million,
RMB1,081.0 million, nil and nil, respectively. As of the same dates, we had lease liabilities
amounting to RMB5.8 million, RMB5.5 million, RMB17.8 million, RMB26.5 million and
RMB35.3 million, respectively. The outstanding balances of other payables due to related
parties, including dividend payable, which were non-trade in nature, were not included in the
indebtedness statement.
Our Directors confirm that during the Track Record Period and up to the Latest
Practicable Date we did not have any material defaults in payment of our trade and non-trade
payables and borrowings nor breaches of covenants. Except as disclosed herein, we did not
have any banking facilities, outstanding loan capital, debt securities issued or agreed to be
issued, bank overdrafts and liabilities under acceptances or other similar indebtedness,
debentures, mortgages, charges or loans, or acceptance credits or hire purchase commitments,
guarantees or other material contingent liabilities or any covenant in connection therewith on
a consolidated basis as of December 25, 2021, being the latest practicable date for the purpose
of the indebtedness statement.
Borrowings
The following table sets out our borrowings as of the dates indicated:
As of December 31,
As of
September 30,
As of
December 25,
2018 2019 2020 2021 2021
(RMB’000) (RMB’000) (RMB’000) (RMB’000) (RMB’000)
Current
Current portion of
long term other
loans 126,000 134,000 144,000 — —
Non-current
Other loans 1,215,000 1,080,997 936,992 — —
1,341,000 1,214,997 1,080,992 — —
FINANCIAL INFORMATION
– 462 –
2018 ABS
In 2018, we entered into a non-recurring asset-backed security arrangement with an
independent third-party securities company. The ABS was secured by the right of receipt of the
property management fees for certain properties under our management. The 2018 ABS
comprised a priority tranche and a sub-prime tranche with aggregate principal of RMB1,460.0
million and RMB80.0 million, respectively. The 2018 ABS bears interest at a rate ranging from
4.88% to 5.50% per annum. As of December 31, 2018, 2019 and 2020, and September 30, 2021
and December 25, 2021, RMB1,341.0 million, RMB1,215.0 million, RMB1,081.0 million, nil
and nil, respectively, of the 2018 ABS remained outstanding. As of the Latest Practicable Date,
the 2018 ABS had been fully repaid.
In connection with the 2018 ABS, we extended a loan using proceeds from it to Jinmao
Group at an aggregate principal amount of RMB1,460.0 million at the same effective interest
rate as the 2018 ABS. We used the payment from Jinmao Group for the aforementioned loan
as the source of funding for the repayment of the 2018 ABS. We entered into the 2018 ABS
arrangement to use our future rights to receive property management fees for certain properties
under our management to support Jinmao Group’s financing.
The following table sets forth details about relevant accounts and balances associated
with the 2018 ABS during the Track Record Period.
As of/For the year ended
December 31,
As of/For the nine
months ended
September 30,
2018 2019 2020 2020 2021
(RMB’000) (RMB’000) (RMB’000) (RMB’000) (RMB’000)
Prepayments, other
receivables and
other assets —
Current portion 225,169 136,228 149,837 N/A —
Prepayments, other
receivables and
other assets —
Non-current portion 1,215,000 1,080,997 936,992 N/A —
Interest-bearing
borrowings —
Current portion 126,000 134,000 144,000 N/A —
Interest-bearing
borrowings —
Non-current portion 1,215,000 1,080,997 936,992 N/A —
Other income and
gains 9,864 69,991 63,750 50,803 32,408
Finance costs 9,864 69,991 63,750 50,803 32,841
FINANCIAL INFORMATION
– 463 –
The relevant current portion of prepayments, other receivables and other assets represents
the sum of (i) loans due from Jinmao Group, which equals to the relevant current portion of
our interest-bearing borrowings, and (ii) deposits of ABS arrangement due from the
independent securities company with whom we entered into the ABS arrangement placed by us
for the purpose of the ABS arrangement, which had been fully settled as of July 30, 2021. For
details, see Note 20 to Appendix I to this prospectus.
Lease Liabilities
Our lease liabilities primarily arose from lease contracts for office premises used in our
operations. Our total lease liabilities amounted to RMB5.8 million, RMB5.5 million, RMB17.8
million, RMB26.5 million and RMB35.3 million as of December 31, 2018, 2019 and 2020 and
September 30, 2021 and December 25, 2021, respectively.
The following table sets out the components of our lease liabilities as of the dates
indicated:
As of December 31,
As of
September 30,
As of
December 25,
2018 2019 2020 2021 2021
(RMB’000) (RMB’000) (RMB’000) (RMB’000) (RMB’000)
Lease liabilities
analysed into:
Current portion 1,547 2,063 5,572 10,713 9,108
Non-current 4,278 3,400 12,224 15,739 26,227
Total 5,825 5,463 17,796 26,452 35,335
LIQUIDITY AND CAPITAL RESOURCES
Overview
Our principal cash requirements are to pay for working capital needs and capital
expenditures for the expansion and procurement of property, plant and equipment and
intangible assets. Cash flows from operating activities have been, and are expected to continue
to be, our principal source of working capital in the foreseeable future. We plan to use a portion
of the net proceeds from the Global Offering for satisfying our working capital needs.
FINANCIAL INFORMATION
– 464 –
Working Capital Sufficiency
Our Directors are of the view that, after taking into account the financial resources
available to us, including our cash and cash equivalents, cash generated from operations, and
the estimated net proceeds of the Global Offering, we have sufficient working capital to satisfy
our requirements at present and for at least the next 12 months following the date of this
prospectus.
Cash Flows
The following table sets forth selected cash flow statement information for the periods
indicated:
For the year ended December 31,
For the nine months
ended September 30,
2018 2019 2020 2020 2021
(RMB’000) (RMB’000) (RMB’000) (RMB’000) (RMB’000)
Operating cash flows before
movements in working
capital 37,676 47,070 124,801 85,533 174,235
Movement in working capital (53,288) (24,164) 35,442 (62,387) (74,680)
Cash generated from/(used in)
operations (15,612) 22,906 160,243 23,146 99,555
Interest received 1,243 864 1,313 958 2,085
Income tax paid (5,456) (7,866) (25,310) (18,621) (63,102)
Net cash flows (used in)/from
operating activities (19,825) 15,904 136,246 5,483 38,538
Net cash flows (used in)/from
investing activities (1,334,955) 176,878 170,550 100,618 1,097,222
Net cash flows from/(used in)
financing activities 1,326,180 (197,699) (191,091) (116,090) (1,132,409)
Net (decrease)/increase in cash
and cash equivalents (28,600) (4,917) 115,705 (9,989) 3,351
Cash and cash equivalents at
beginning of the year/period 188,630 160,030 155,113 155,113 270,818
Cash and cash equivalents at
end of the year/period 160,030 155,113 270,818 145,124 274,169
FINANCIAL INFORMATION
– 465 –
Operating Activities
In the nine months ended September 30, 2021, we had net cash from operating activities
of RMB38.5 million, primarily attributable to our profit before tax of RMB153.2 million, as
adjusted for non-cash and non-operating items, which primarily include (i) finance costs of
RMB33.5 million and (ii) loan interest income of RMB32.4 million. The amount was further
adjusted by changes in income tax paid of RMB63.1 million and working capital. The changes
in working capital primarily included (i) an increase in other payables and accruals of
RMB98.9 million attributable to increased amounts due to related parties generally in line with
our business growth and (ii) an increase in contract liabilities of RMB52.6 million due to
increased advance payments made by customers for property management services in line with
the enlarged portfolio of properties under our management, partially offset by (i) an increase
in trade receivables of RMB248.8 million due to an increase in business volume and revenue
from sales assistance services provided to certain related parties to whom we typically grant
a longer credit term, and (ii) an increase in prepayments, other receivables and other assets of
RMB14.9 million, which was generally in line with our business growth.
In the nine months ended September 30, 2020, we had net cash from operating activities
of RMB5.5 million, primarily attributable to our profits before tax of RMB74.6 million, as
adjusted for non-cash and non-operating items, which primarily include (i) finance costs of
RMB51.0 million and (ii) loan interest income of RMB50.8 million. The amount was further
adjusted by changes in income tax paid of RMB18.6 million and working capital. The changes
in working capital primarily included (i) an increase in other payables and accruals of
RMB89.0 million attributable to increased amounts due to related parties and (ii) an increase
in contract liabilities of RMB40.1 million due to increased advance payments made by
customers for property management services in line with the enlarged portfolio of properties
under our management, partially offset by (i) an increase in prepayments, other receivables and
other assets of RMB153.7 million generally in line with our business growth and (ii) an
increase in trade receivables of RMB69.7 million mainly due to an increase in business volume
and revenue from sales assistance services provided to certain related parties to whom we
typically grant a longer credit term.
In 2020, we had net cash from operating activities of RMB136.2 million, primarily
attributable to our profit before tax of RMB107.5 million, as adjusted for non-cash and
non-operating items, which primarily include (i) finance costs of RMB64.2 million and (ii)
loan interest income of RMB63.8 million. The amount was further adjusted by changes in
income tax paid of RMB25.3 million and working capital. The changes in working capital
primarily included (i) an increase in other payables and accruals of RMB92.1 million
attributable to increased amounts due to related parties and (ii) an increase in contract
liabilities of RMB59.5 million due to increased advance payments made by customers for
property management services in line with the enlarged portfolio of properties under our
management, partially offset by (i) an increase in prepayments, other receivables and other
assets of RMB89.0 million, which was generally in line with our business growth, and (ii) an
increase in trade receivables of RMB48.8 million generally in line with our business
expansion.
FINANCIAL INFORMATION
– 466 –
In 2019, we had net cash from operating activities of RMB15.9 million, primarily
attributable to our profit before tax of RMB33.4 million, as adjusted for non-cash and
non-operating items, which primarily include (i) finance costs of RMB70.3 million and (ii)
loan interest income of RMB70.0 million. The amount was further adjusted by changes in
income tax paid of RMB7.9 million and working capital. The changes in working capital
primarily included (i) an increase in other payables and accruals of RMB85.4 million
attributable to increased amounts due to related parties and (ii) an increased in contract
liabilities of RMB48.8 million due to increased advance payments made by customers for
property management services in line with the enlarged portfolio of properties under our
management, partially offset by (i) an increase in prepayments, other receivables and other
assets of RMB101.3 million, which was generally in line with our business growth, and (ii) an
increase in trade receivables of RMB65.6 million due to increased sale of property
management services, community space operation services and sales assistance services along
with our business expansion.
In 2018, we had net cash used in operating activities of RMB19.8 million, primarily
attributable to our profit before tax of RMB26.4 million, as adjusted for non-cash and
non-operating items, which primarily include (i) finance costs of RMB10.2 million and (ii)
loan interest income of RMB9.9 million. The amount was further adjusted by changes in
income tax paid of RMB5.5 million and working capital. The changes in working capital
primarily included (i) an increase in other payables and accruals by RMB53.8 million
attributable to increased amounts due to related parties, (ii) an increased in trade payables by
RMB30.0 million due to the increased purchases of materials from suppliers and the increased
procurement of security and cleaning services and (iii) an increased in contract liabilities by
RMB21.7 million due to increased advance payments made by customers for property
management services in line with the enlarged portfolio of properties under our management,
partially offset by an increase in prepayments, other receivables and other assets of RMB146.5
million, which was generally in line with our business growth.
Investing Activities
In the nine months ended September 30, 2021, we had net cash from investing activities
of RMB1,097.2 million, primarily reflecting repayment from related parties of RMB1,081.0
million and loan interest received of RMB28.7 million.
In the nine months ended September 30, 2020, we had net cash from investing activities
of RMB100.6 million, primarily reflecting repayment from related parties of RMB66.0 million
and loan interest received of RMB48.0 million, partially offset by purchase of items of
property, plant and equipment of RMB13.1 million.
In 2020, we had net cash from investing activities of RMB170.6 million, primarily
reflecting (i) repayment from related parties of RMB134.0 million and (ii) loan interest
received of RMB63.5 million, partially offset by purchase of items of property, plant and
equipment of RMB23.9 million.
FINANCIAL INFORMATION
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In 2019, we had net cash from investing activities of RMB176.9 million, primarily
reflecting (i) repayment from related parties of RMB126.0 million and (ii) loan interest
received of RMB69.6 million, partially offset by purchase of items of property, plant and
equipment of RMB12.0 million.
In 2018, we had net cash used in investing activities of RMB1,335.0 million, primarily
reflecting cash advanced made to related parties of RMB1,460.0 million, partially offset by
repayment from related parties of RMB119.0 million.
Financing Activities
In the nine months ended September 30, 2021, we had net cash used in financing activities
of RMB1,132.4 million, primarily reflecting (i) repayment of interest-bearing borrowings of
RMB1,081.0 million, (ii) interest paid of RMB30.5 million in relation to the 2018 ABS and (iii)
acquisition of subsidiaries under common control of RMB19.9 million.
In the nine months ended September 30, 2020, we had net cash used in financing activities
of RMB116.1 million, primarily reflecting repayment of interest-bearing borrowings of
RMB66.0 million and interest paid of RMB48.4 million in relation to the 2018 ABS.
In 2020, we had net cash used in financing activities of RMB191.1 million, primarily
reflecting (i) repayments of other borrowings of RMB134.0 million in relation to our partial
repayment of the 2018 ABS and (ii) interest paid of RMB63.9 million in relation to the
aforementioned borrowings by us.
In 2019, we had net cash used in financing activities of RMB197.7 million, primarily
reflecting (i) repayments of other borrowings of RMB126.0 million in relation to our partial
repayment of the 2018 ABS and (ii) interest paid of RMB69.9 million in relation to the
aforementioned borrowings by us.
In 2018, we had net cash from financing activities of RMB1,326.2 million, primarily
reflecting proceeds from the 2018 ABS of RMB1,460.0 million, which was partially offset by
(i) repayments of other borrowings of RMB119.0 million in relation to our partial repayment
of the 2018 ABS and (ii) interest paid of RMB13.3 million in relation to the aforementioned
borrowings by us.
FINANCIAL INFORMATION
– 468 –
Net Current Assets
The following table sets out our current assets, current liabilities and net current assets
or liabilities as of the dates indicated:
As of December 31,
As of
September 30,
As of
December 31,
2018 2019 2020 2021 2021
(RMB’000) (RMB’000) (RMB’000) (RMB’000) (RMB’000)
Current assets
Inventories 6,400 5,493 5,199 5,044 4,523
Trade receivables 88,801 155,291 203,713 451,537 447,847
Prepayments, other
receivables and other
assets 440,526 544,576 644,196 515,762 364,490
Restricted cash — — — 1,278 1,278
Cash and cash
equivalents 160,030 155,113 270,818 274,169 553,395
Total current assets 695,757 860,473 1,123,926 1,247,790 1,371,533
Current liabilities
Trade payables 82,897 90,655 112,036 150,737 174,144
Other payables and
accruals 317,279 401,709 520,641 621,713 705,367
Contract liabilities 98,148 146,917 206,391 258,992 343,556
Interest-bearing
borrowings 126,000 134,000 144,000 – –
Lease liabilities 1,547 2,063 5,572 10,713 8,972
Tax payable 13,119 16,661 22,735 5,326 4,709
Total current
liabilities 638,990 792,005 1,011,375 1,047,481 1,236,748
Net current assets 56,767 68,468 112,551 200,309 134,785
Our net current assets decreased from RMB200.3 million as of September 30, 2021 to
RMB134.8 million as of December 31, 2021, primarily due to (i) an RMB151.3 million
decrease in prepayments, other receivables and other assets as a result of our year-end
collection activities and repayments made by related parties, (ii) an RMB84.6 million increase
in contract liabilities in line with the increased number of projects under our management, and
(iii) an RMB83.7 million increase in other payables and accruals as a result of reclassification
of non-current dividend payable into current dividend payable in the fourth quarter of 2021,
FINANCIAL INFORMATION
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partially offset by an RMB279.2 million increase in cash and cash equivalents due to increased
proceeds from our business operations as a result of our expanded business operations, our
year-end collection activities, and repayments made by related parties.
Our net current assets increased from RMB112.6 million as of December 31, 2020 to
RMB200.3 million as of September 30, 2021, primarily due to (i) an RMB128.4 million
decrease in prepayments, other receivables and other assets generally in line with our business
growth, and (ii) an RMB247.8 million increase in trade receivables attributable to an increase
in business volume and revenue from sales assistance services provided to certain related
parties to whom we typically grant a longer credit term, and (iii) an RMB144.0 million
decrease in interest-bearing borrowings due to the repayment of the 2018 ABS according to its
payment schedule.
Our net current assets increased from RMB68.5 million as of December 31, 2019 to
RMB112.6 million as of December 31, 2020, primarily due to (i) an RMB115.7 million
increase in cash and cash equivalents due to increased proceeds from our business operations
and (ii) an RMB99.6 million increase in prepayments, other receivables and other assets, which
was generally in line with our business growth, partially offset by (i) an RMB118.9 million
increase in our other payables and accruals as a result of increased amounts due to related
parties and (ii) an RMB59.5 million increase in our contract liabilities as a result of the
increased advance payments made by customers for property management services in line with
the enlarged portfolio of properties under our management.
Our net current assets increased from RMB56.8 million as of December 31, 2018 to
RMB68.5 million as of December 30, 2019, primarily due to (i) an RMB104.1 million increase
in our prepayments, other receivables and other assets, which was generally in line with our
business growth and (ii) an RMB66.5 million increase in our trade receivables as a result of
increased sales from our property management services, community space operation services
and sales assistance services in line with our business expansion, partially offset by (i) an
RMB84.4 million increase in our other payables and accruals as a result of the increased
amounts due to related parties and (ii) an RMB48.8 million increase in our contract liabilities
as a result of the increased advance payments made by customers for property management
services in line with the enlarged portfolio of properties under our management.
CAPITAL COMMITMENTS
During the Track Record Period, we did not have any material capital commitment.
CAPITAL EXPENDITURES
During the Track Record Period, we incurred capital expenditures mainly for purchase of
property, plant and equipment such as buildings, furniture, equipment and vehicles, as well as
purchases of intangible assets such as software.
FINANCIAL INFORMATION
– 470 –
The table below sets out the breakdown of our following capital expenditures for the
periods indicated:
For the year ended December 31,
For the
nine months
ended
September 30,
2018 2019 2020 2021
(RMB’000) (RMB’000) (RMB’000) (RMB’000)
Purchase of property, plant and
equipment 7,078 11,958 23,857 11,293
Purchase of intangible assets 61 7,014 3,111 1,272
Total 7,139 18,972 26,968 12,565
We currently expect our capital expenditures for the year ending December 31, 2021 to
be RMB28.2 million, which will be used mainly for the procurement of office equipment,
software and electronic equipment.
RELATED PARTY TRANSACTIONS AND BALANCES
Related Party Transactions
During the Track Record Period, we had certain related party transactions, mainly (i)
provision of services, (ii) rental cost and expenses, (iii) purchase of services, and (iv) interest
income.
These related party transactions were conducted in accordance with terms as agreed
between us and the respective related parties. Our Directors confirm that all the
aforementioned related party transactions during the Track Record Period were conducted on
normal commercial terms that are reasonable and in our interest as a whole. Our Directors
further confirm that these related party transactions would not distort our results of operations
for the Track Record Period or make our historical results not reflective of our future
performance.
Provision of services
For the years ended December 31, 2018, 2019 and 2020 and nine months ended
September 30, 2020 and 2021, we had provided services, including property management
services, value-added services to non-property owners and community value-added services, to
related parties, primarily comprising Jinmao Group and its joint ventures and associates, in an
aggregate amount of RMB280.0 million, RMB351.3 million, RMB410.8 million, RMB288.5
million and RMB483.8 million, respectively.
FINANCIAL INFORMATION
– 471 –
Lease expenses
For the years ended December 31, 2018, 2019 and 2020 and nine months ended
September 30, 2020 and 2021, we incurred rental cost and expenses to Jinmao Group amounted
RMB1.7 million, RMB1.7 million, RMB2.5 million, RMB1.3 million and RMB5.6 million,
respectively. Such leases are mainly for offices and car park spaces.
Purchase of services
For the years ended December 31, 2018, 2019 and 2020 and the nine months ended
September 30, 2020 and 2021, we had purchased information technology services from Jinmao
Group and other subsidiaries of Sinochem Group of RMB1.6 million, RMB1.4 million,
RMB2.5 million, RMB1.9 million and RMB4.2 million, respectively.
Equity-settled share option expenses
For the years ended December 31, 2018, 2019 and 2020 and the nine months ended
September 30, 2020 and 2021, we granted share options to certain management of our Group
in respect to their services and incurred equity-settled share option expenses of RMB1.0
million, RMB3.8 million, RMB3.6 million, RMB2.7 million and RMB1.3 million, respectively.
Interest Income
For the years ended December 31, 2018, 2019 and 2020 and the nine months ended
September 30, 2020 and 2021, we recorded interest income on loans by Jinmao Group and
other subsidiaries of Sinochem Group in the amount of RMB9.9 million, RMB70.1 million,
RMB63.9 million, RMB50.9 million and RMB32.6 million. Jinmao Group obtained a loan
facility comprising proceeds from the 2018 ABS from us in 2018 at a principal amount of
RMB1,460.0 million. We placed deposits with other subsidiaries of Sinochem Group which
generated interest income at variable interest rates.
The Article 61 of the General Lending Provisions ( ) issued by the PBOC
prohibits any financing arrangements or lending transactions between non-financial
institutions. Further, pursuant to Article 73 of the General Lending Provisions, the PBOC may
impose on the non-compliant lender a fine of one to five times the income received by the
lender from such loans. Notwithstanding the General Lending Provisions, the Supreme
People’s Court has made new interpretations concerning financing arrangements and lending
transactions between non-financial institutions in the Provisions of the Supreme People’s Court
on Several Issues concerning the Application of Law in the Trial of Private Lending
Cases ( ) (the “Judicial
Interpretations on Private Lending Cases ”) which came into effect on September 1, 2015
and amended on August 19, 2020 and December 29, 2020. According to Article 10 of the
Judicial Interpretations on Private Lending Cases, the Supreme People’s Court recognizes the
FINANCIAL INFORMATION
– 472 –
validity of financing arrangements and lending transactions between non-financial institutions
so long as certain requirements, such as the interest rates charged, are satisfied and there is no
violation of mandatory provisions of laws and regulations.
As of the Latest Practicable Date, we had not received any notice of claim or was subject
to any investigation or penalty relating to the loans we provided to related parties during the
Track Record Period. Our Directors confirm that all borrowings between related parties and us
had been fully settled as of the Latest Practicable Date. Our Directors further confirm that we
will not engage in any borrowing arrangement with related parties in violation of the applicable
laws and regulations in the future.
Related Party Balances
The following table sets out the breakdown of our related party balances as of the dates
indicated:
As of December 31,
As of
September 30,
2018 2019 2020 2021
(RMB’000) (RMB’000) (RMB’000) (RMB’000)
Prepayments and receivables
from related parties
Trade receivables
— Other subsidiaries of
Sinochem Group 794 1,159 1,615 3,232
— Joint ventures of
Sinochem Group — — — 91
— Associates of
Sinochem Group 48 — — —
— Jinmao Group 44,038 68,108 89,154 218,700
— Joint ventures of
Jinmao Group 12,771 19,825 25,275 44,469
— Associates of Jinmao Group 3,844 8,538 13,104 20,270
Sub-total 61,495 97,630 129,148 286,762
FINANCIAL INFORMATION
– 473 –
As of December 31,
As of
September 30,
2018 2019 2020 2021
(RMB’000) (RMB’000) (RMB’000) (RMB’000)
Prepayment and other
receivables
— Other subsidiaries of
Sinochem Group 110 5 638 7,988
— Joint ventures of Sinochem
Group — — — 80
— Associates of Sinochem
Group — — — 17
— Jinmao Group 1,497,322 1,546,759 1,505,744 393,905
— Joint ventures of
Jinmao Group 423 423 423 252
— Associates of Jinmao Group — — — 3,996
Sub-total 1,497,855 1,547,187 1,506,805 406,238
Deposits placed with
Sinochem Finance 70,033 53,587 120,490 55,056
Payables to related parties
Trade payables
— Other subsidiaries of
Sinochem Group 337 232 109 70
— Jinmao Group 957 468 578 516
Sub-total 1,294 700 687 586
FINANCIAL INFORMATION
– 474 –
As of December 31,
As of
September 30,
2018 2019 2020 2021
(RMB’000) (RMB’000) (RMB’000) (RMB’000)
Other payables
— Other subsidiaries of
Sinochem Group 2,066 2,607 4,391 14,475
— Joint ventures of Sinochem
Group — — — 82
— Associates of
Sinochem Group 445 663 809 329
— Jinmao Group 112,996 148,203 349,616 346,568
— Joint ventures of
Jinmao Group 261 7 348 6,102
— Associates of Jinmao Group – – 60 2,700
Sub-total 115,768 151,480 355,224 370,256
Lease liabilities
— Jinmao Group 5,184 4,888 15,632 23,398
Contract liabilities
— Other subsidiaries of
Sinochem Group 679 381 407 2,687
— Joint ventures of Sinochem
Group — — — 65
— Associates of
Sinochem Group — 1 — 140
— Jinmao Group 2,081 12,816 15,491 14,571
— Joint ventures of
Jinmao Group 756 1,904 4,347 5,197
— Associates of Jinmao Group 490 1,226 2,317 4,062
Sub-total 4,006 16,328 22,562 26,722
The outstanding balances of due from and due to our related parties consist of (i) trade
receivables, trade payables, prepayments, lease liabilities and contract liabilities with related
parties and deposits placed with Sinochem Finance which are trade in nature; and (ii) other
receivables and other payables with related parties which are non-trade in nature. All of the
non-trade balances with our related parties had been settled as of the Latest Practicable Date,
except for (i) an outstanding balance of RMB31.6 million as of September 30, 2021 due to
Jinmao Group (and its joint ventures and associates), which are expected to be settled before
FINANCIAL INFORMATION
– 475 –
the completion of the Spin-off, and (ii) the outstanding balances due to the Non-wholly-owned
JM Entities of RMB16.1 million as of September 30, 2021 in relation to the collection of car
park rental income by our Group on their behalf, which are not expected to be settled before
the completion of the Spin-off, as further explained below.
As of September 30, 2021, we had an outstanding balance of RMB16.1 million due to the
Non-wholly-owned JM Entities. The outstanding balance relates to the car park management
services provided by us to owners of the car park spaces, including the Non-wholly-owned JM
Entities, whereby we help owners manage and lease their car park spaces and collect rents on
their behalf. The rents received from lessees, after deducting commission fees charged by us,
shall be remitted to the owners of the car park spaces according to the payment schedule
individually negotiated with the owners. We will not be able to settle the outstanding balance
due to the Non-wholly-owned JM Entities for the rents received on their behalf prior to the
Spin-off because (i) it takes uncertain amount of time to negotiate pricing and payment term
with external third parties, which are shareholders of these Non-wholly-owned JM Entities; (ii)
external third parties need to go through internal procedures to decide whether to agree on the
settlement and the terms thereof; and (iii) certain entities in charge of the projects have been
liquidated, resulting in difficulties in determining parties that should be receiving the settled
balances. For further details on related party transactions and balances, see Note 29 of the
Accountants’ Report in Appendix I to this prospectus.
CONTINGENT LIABILITIES
As of the Latest Practicable Date, we did not have any outstanding guarantees or other
material contingent liabilities. Our Directors confirm that there was no material change in our
indebtedness, capital commitments and contingent liabilities since the latest date for liquidity
disclosure and up to the Latest Practicable Date.
OFF BALANCE SHEET TRANSACTIONS
During the Track Record Period and up to the Latest Practicable Date, we did not enter
into any financial guarantees or other commitments to guarantee the payment obligations of
any third parties. We have not entered into any derivative agreements that are indexed to our
equity interests and classified as shareholder’s equity, or that are not reflected in our
consolidated financial statements. We do not have any material off-balance sheet arrangements,
nor do we have any retained or contingent interest in assets transferred to an unconsolidated
entity that serves as credit, liquidity or market risk support to such entity. We do not have any
variable interest in any unconsolidated entity that provides financing, liquidity, market risk or
credit support to us or engages in leasing, hedging or research and development services with
us.
FINANCIAL INFORMATION
– 476 –
KEY FINANCIAL RATIOS
The following table sets out our key financial ratios as of the dates or for the periods
indicated:
As of/for the year ended
December 31,
As of/for the
nine months ended
September 30,
2018 2019 2020 2020 2021
Current ratio
(1)
1.1 1.1 1.1 N/A 1.2
Quick ratio
(2)
1.1 1.1 1.1 N/A 1.2
Return on equity
(3)
22.0% 21.0% 157.0% N/A 75.2%
Return on total assets
(4)
0.9% 1.1% 3.6% N/A 8.2%
Gross profit margin
(5)
20.0% 19.2% 24.9% 24.6% 29.6%
Net profit margin
(6)
3.0% 2.9% 8.2% 8.0% 10.4%
Notes:
(1) Current ratio is calculated by dividing total current assets by total current liabilities as of the date
indicated.
(2) Quick ratio is calculated by dividing total current assets less inventories by total current liabilities as
of the date indicated.
(3) Return on equity is calculated by dividing profit for the year/period by the closing balances of total
equity for the relevant year/period and multiplied by 100%.
(4) Return on total assets is calculated by dividing profit for the year/period by the closing balances of total
assets for the relevant year/period and multiplied by 100%.
(5) Gross profit margin is calculated by dividing gross profit by total revenue for the relevant year/period.
(6) Net profit margin is calculated by dividing profit by total revenue for the relevant year/period.
Current Ratio
Our current ratio remained relatively stable at 1.1 as of December 31, 2018, 2019 and
2020 and at 1.2 as of September 30, 2021, respectively.
Quick Ratio
Our quick ratio remained relatively stable at 1.1 as of December 31, 2018, 2019 and 2020
and at 1.2 as of September 30, 2021, respectively.
FINANCIAL INFORMATION
– 477 –
Return on Equity
Our return on equity decreased from 22.0% in 2018 to 21.0% in 2019, primarily due to
an increase in our net assets resulting from our partial repayments of the 2018 ABS. Our return
on equity increased significantly from 21.0% in 2019 to 157.0% in 2020, primarily due to a
significant increase in our profit from 2019 to 2020 as well as a significant decrease in total
equity from 2019 to 2020 due to the dividends declared by subsidiaries of the Company to their
then shareholders.
Return on Total Assets
Our return on total assets increased from 0.9% in 2018 to 1.1% in 2019 and further to
3.6% in 2020 mainly as a result of an increase in our profit for the year during the three years.
Gross profit margin and net profit margin
For further details on the changes of our gross profit margins and net profit margins for
the Track Record Period, see “— Period to Period Comparison”.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT FINANCIAL RISKS
In the normal course of business, we are exposed to various types of financial risks,
mainly including market risk (including currency risk and fair value interest rate risk), credit
risk and liquidity risk. Our overall risk management focuses on the unpredictability of
economic conditions and seeks to minimize potential adverse effects on our financial
performance. We do not hold or issue derivative financial instruments either for hedging or for
trading purposes, or enter into any other hedging arrangements. For further details, see Note
32 of the Accountants’ Report in Appendix I to this prospectus.
Credit Risk
We are exposed to credit risk in relation to trade receivables, other receivables, cash and
cash equivalents and restricted cash.
FINANCIAL INFORMATION
– 478 –
The following table sets forth the credit quality and the maximum exposure to credit risk
based on our credit policy as of the dates indicated.
As of December 31,
As of
September 30,
2018 2019 2020 2021
(RMB’000) (RMB’000) (RMB’000) (RMB’000)
Trade receivables
(1)
92,891 158,540 207,334 456,171
Financial assets included
in prepayments, other
receivables and
other assets
(2)
:
— Normal 1,626,776 1,580,507 1,535,253 448,341
— Doubtful 8,967 26,042 23,415 43,204
Restricted cash
— Not yet past due — — — 1,278
Cash and cash equivalents
— Not yet past due 160,030 155,113 270,818 274,169
Total 1,888,664 1,920,202 2,036,820 1,223,163
Notes:
(1) We apply the simplified approach for impairment of trade receivables. For further details, see Note 19
of the Accountants’ Report in Appendix I to this prospectus.
(2) The credit quality of the financial assets included in prepayments, other receivables and other assets is
considered to be “normal” when they are not past due and there is no information indicating that the
financial assets had a significant increase in credit risk since initial recognition. Otherwise, the credit
quality of the financial assets is considered to be “doubtful”.
The doubtful financial assets included in prepayments, other receivables and other assets
represent property management fees due from customers in projects to which we charge property
management fees on a commission basis. Our Directors believe that there is no material
recoverability issue with these receivables and no further impairment is required. We have
adopted a number of internal control measures on the collection of property management fees.
For instance, we may send payment reminders to property developers, property owners and
residents in writing when the property management fees become due. Our staff will visit the
customer to make inquiries and may call such customers to follow up with the overdue payments;
if in the event of significant payment delays after repeatedly failed collection attempts, we may
initiate legal proceedings against such customers to claim the outstanding amounts.
We expect that there is no significant credit risk associated with cash and cash equivalents
since they are substantially deposited at state-owned banks, other medium or large-sized banks
and other financial institutions with high credit rating. Our management does not expect that
there will be any significant losses from non-performance by these counterparties.
FINANCIAL INFORMATION
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We expect that the credit risk associated with trade receivables and other receivables due
from related parties is considered to be low, since related parties have strong capacity to meet
contractual cash flow obligation in the near term. Thus, the impairment provision recognized
during the Track Record Period was nil for the trade receivables and other receivables due from
related parties.
We trade only with recognized and credit worthy third parties. We manage concentrations
of credit risk by analyzing individual customers and counterparties. There are no significant
concentrations of credit risk from third parties as the customer bases of our trade receivables
and other receivables are widely dispersed. In addition, receivable balances are monitored on
an ongoing basis.
Liquidity Risk
Liquidity risk is the risk that we will encounter difficulty in meeting financial obligation
due to shortage of funds. Our exposure to liquidity risk arises primarily from mismatches of
the maturities of financial assets and liabilities. We manage to maintain a balance between
continuity of funding to finance its working capital needs as well as capital expenditure in
respect of its management projects, and flexibility through the use of stand-by credit facilities.
Interest Rate Risk
We are not exposed to material interest rate risk as we do not have long term debt
obligations with a floating interest rate.
Foreign Currency Risk
We are not exposed to material foreign currency risk as we conduct our business
principally in PRC and all the transactions are denominated in RMB.
DIVIDENDS
No dividend was declared or paid by our Company during the Track Record Period and
up to the Latest Practicable Date. Certain subsidiaries now comprising our Group had provided
for or paid dividends of RMB123.7 million and RMB28.2 million to their then shareholders in
2020, respectively. For details, see Note 11 to Appendix I to this prospectus.
Any declaration of dividends is subject to our results of operations, working capital and
cash position, future business and earnings, capital requirements, contractual restrictions, if
any, as well as any other factors which our Directors may consider relevant from time to time.
In addition, any declaration and payment as well as the amount of the dividends will be subject
to constitutional documents and the relevant laws.
FINANCIAL INFORMATION
– 480 –
DISTRIBUTABLE RESERVES
The distributable reserves of our Company represented share premium and retained
earnings. Our Company was incorporated in Hong Kong on September 14, 2020 and has not
carried out any business since the date of its incorporation. As of September 30, 2021, our
Company had no distributable reserves. Certain subsidiaries now comprising our Group had
distributable reserves as of September 30, 2021.
LISTING EXPENSES
The total listing expenses for the Listing of the Shares are estimated to be approximately
HK$65.2 million (assuming an Offer Price of HK$7.83 per Share, being the mid-point of the
indicative Offer Price range), among which, approximately HK$23.6 million is directly
attributable to the issuance of Shares and will be charged to equity upon completion of the
Listing, and approximately HK$41.6 million will be charged to our consolidated statement of
profit or loss and other comprehensive income. During the Track Record Period, we incurred
listing expenses of RMB12.5 million, which were charged to our consolidated statement of
profit or loss and other comprehensive income. Our total listing expenses account for
approximately 8.2% of our gross proceeds from the Global Offering (assuming an Offer Price
of HK$7.83 per Share, being the mid-point of the indicative Offer Price range and not taking
into account the Offer Size Adjustment Option and the Over-allotment Option). The
aforementioned estimated listing expenses of approximately HK$65.2 million include (i)
professional fees paid and payable to the professional parties for their services rendered in
relation to the Listing and the Global Offering which are non-underwriting related expenses,
including sponsor fees, fees paid and payable to legal advisers, reporting accountants, the
internal control consultant and the independent industry consultant of approximately HK$35.1
million, (ii) other non-underwriting related fees and expenses of approximately HK$11.0
million, and (iii) the underwriting commission (including SFC transaction levy, Stock
Exchange trading fee and FRC transaction levy) of approximately HK$19.1 million, payable
to the Underwriters in connection with the offering of Offer Shares under the Global Offering.
The listing expenses above are the latest practicable estimates and are provided for reference
only and actual amounts may differ. Our Directors do not expect such expenses to have a
material adverse impact on our financial results for the year ending December 31, 2021.
UNAUDITED PRO FORMA ADJUSTED NET TANGIBLE ASSETS
Please refer to Part A of Appendix II to this prospectus for the unaudited pro forma
statement of adjusted net tangible assets, and is set out therein to illustrate the effect of the
Global Offering on the net tangible assets attributable to the equity holders of our Company
as of September 30, 2021 as if the Global Offering had taken place on September 30, 2021 and
assuming the Offer Size Adjustment Option and the Over-allotment Option are not exercised.
FINANCIAL INFORMATION
– 481 –
MATERIAL ADVERSE CHANGE
Our Directors confirm that, since September 30, 2021 and up to the date of this
prospectus, there has been no material adverse change in our financial or trading position or
prospects and no event has occurred that would materially and adversely affect the information
shown in our consolidated financial statements set out in the Accountants’ Report included in
Appendix I to this prospectus.
NO ADDITIONAL DISCLOSURE REQUIRED UNDER THE LISTING RULES
Our Directors confirm that, as of the Latest Practicable Date, there were no circumstances
which would have given rise to any disclosure requirement under Rules 13.13 to 13.19 of the
Listing Rules had the Shares been listed on the Stock Exchange on that date.
FINANCIAL INFORMATION
– 482 –
FUTURE PLANS
See the section headed “Business — Business Strategies” for a detailed description of our
future plans.
USE OF PROCEEDS
We estimate that the net proceeds of the Global Offering (after deducting underwriting
commissions and estimated expenses payable by us in connection with the Global Offering and
assuming the Offer Size Adjustment Option and the Over-allotment Option are not exercised),
assuming an Offer Price of HK$7.83 per Offer Share (being the mid-point of the indicative
Offer Price range), will be approximately HK$728.9 million. We intend to apply the net
proceeds in the following manner:
(1) approximately 55%, or HK$400.9 million, will be used to pursue selective strategic
investment and acquisition opportunities with companies engaged in property
management, city operation services and/or community operations and to expand
our business scale and solidify our leading industry position, among which:
• approximately 50%, or HK$364.4 million, will be used to acquire, invest in or
cooperate with other property management companies and professional service
providers in the upstream and downstream of city operation services which are
suitable for and complementary to our business operations and strategies with
a view to enlarge our business scale, expand our geographic coverage and
diversify our type of properties managed; and
• approximately 5%, or HK$36.4 million, will be used to acquire or invest in
companies which provide community products and services complementary to
those of ours, including companies engaging in areas such as community health
management and interior decoration, to utilize the expertise and experience of
these companies and tap into the needs of the property owners and residents in
these areas and to enrich our source of value-added service income.
Please refer to “— Plans for Strategic Acquisitions and Investments” for further
details;
FUTURE PLANS AND USE OF PROCEEDS
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(2) approximately 22%, or HK$160.4 million, will be used to upgrade our systems for
smart management services and for the development of our smart communities and
smart city solutions, aiming to offer a higher-quality living experience with more
convenience for our property owners and residents and further enhance cost-
efficiency for our property management and city operation services, among which:
(i) approximately 10%, or HK$72.9 million, will be used to purchase and
upgrade hardware for the deployment of smart devices and Internet of
Things facilities, in order to improve the efficiency of property
management and operations, reduce the cost of basic property management
services, and provide customers with the experience of a more thoughtful
servicescape. We plan to use approximately 4%, 3%and 3% of the net proceeds
of the Global Offering for such expansion plan, or HK$29.2 million, HK$21.9
million and HK$21.9 million in 2022, 2023 and 2024, respectively.
The following table sets forth details for the purchase and upgrade of hardware
for the deployment of, among others, the following smart devices and Internet
of Things facilities:
Smart devices and
Internet of Things
facilities Major features, functions and benefits
Expected
useful life
Expected
cost
Anti-tailing AB door We plan to introduce an anti-tailing AB door
system which involves the installation of two
gates at the entrance of the community with
anti-tailing detectors installed between the two
gates to ensure that only one person can pass
the gates each time and the first gate must be
locked before the second gate can be opened,
so as to prevent unauthorized entries to the
community, and reduce the number of security
guards required to station at each entrance of
the community
Eight years HK$22.3
million
FUTURE PLANS AND USE OF PROCEEDS
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Smart devices and
Internet of Things
facilities Major features, functions and benefits
Expected
useful life
Expected
cost
Smart entrance system We plan to increase the coverage of our smart
entrance system integrating QR code
recognition, face recognition and temperature
measurement systems to 70% of the projects
under our management by the end of 2024, to
allow property owners and residents to enter
the community by using the QR code
generated from the “Home” ( ) mobile
application or scanning their faces to achieve
touchless entry and enhance the convenience
of user experience
Six years HK$14.3
million
Smart car park
management system
We plan to (a) increase the coverage of our car
park management system equipped with
automatic license plate detection and
recognition system to 70% of the projects
under our management by the end of 2024 to
reduce the need of security guards and lower
labor costs, and (b) enhance the automatic
control capabilities of the smart car park
management system, such as introducing a
detection system to monitor the movement of
vehicles at the entrance and exit of the car
parks and initiate a call to the central control
room automatically once a vehicle is found to
have stopped at the entrance or exit for a
period of time exceeding the pre-set time limit
Five years HK$9.9
million
FUTURE PLANS AND USE OF PROCEEDS
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Smart devices and
Internet of Things
facilities Major features, functions and benefits
Expected
useful life
Expected
cost
Quality control system We plan to invest in our quality control system,
including, among others:
(a) Video surveillance system for real-time
remote monitoring of key areas to
enhance our management efficiency and
lower our dependence on manual labor
(b) AI intelligent patrol system which uses
remote video monitoring technology and
AI intelligent algorithm to conduct
inspection automatically
(c) Edge servers to provide local processing,
storage and analysis of the data from the
Internet of Things devices, such as video
cameras, thereby reducing workload on
the origin server
(d) Street lamp system to realize remote
control of street lamps such as setting
operation schedule of the lamps through
central planning and control, which can
realize energy saving and consumption
reduction of the street lamps within the
properties under management
(e) Greening sprinkler system to realize
automatic watering by greening sprinkler
to lower the dependence on manual labor
(f) Anti-falling object system to deter and
retrospect the behavior of falling objects
using video monitoring technology and AI
intelligent algorithm
Five to
eight
years
HK$17.6
million
FUTURE PLANS AND USE OF PROCEEDS
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Smart devices and
Internet of Things
facilities Major features, functions and benefits
Expected
useful life
Expected
cost
Equipment and facility
monitoring system
We plan to optimize our equipment and facility
monitoring system, including, among others,
(a) synchronizing the patrol system with the
smart entrance system to realize real-time
upload of the patrol data, and (b) upgrading
our IBA system with more comprehensive
monitoring points and real-time upload of data
collected to improve our operational efficiency
and lower our dependence on manual labor.
Five to
eight
years
HK$8.8
million
The intended use of net proceeds for each hardware are the total expected cost
of purchases and upgrades, including (a) fixed costs which will be incurred
regardless of the number of properties being upgraded such as labor costs for
developing the upgrades (where applicable) and (b) variables costs which will
vary depending on the size and number of properties being upgraded such as
cost for hardware materials. The expected costs of purchases and upgrades are
estimated based on current price quotation obtained from potential suppliers or
available market price. As a whole, our Directors believe that the purchases
and upgrades of the aforementioned hardware can enhance the operational and
cost efficiency through remote control and real-time collection and analysis of
data and increase user experience through more convenient and time-saving
access systems.
(ii) approximately 10%, or HK$72.9 million, will be used to develop smart city
solutions. We plan to focus on the research and development of the following
five main categories of smart city solutions, in order for us to build a leading
brand of smart city operations and management:
(a) we plan to invest approximately HK$6.9 million, to assist the government
in the establishment of an infrastructure electronic filing and monitoring
system which involves the installation of sensors in urban municipal
infrastructure, such as roads, bridges and well covers, and the real-time
collection and intelligent analysis of data with respect to the operation of
the infrastructure;
(b) we plan to invest approximately HK$10.4 million, to assist the
government in the implementation of specific urban management,
including, among others, (i) deploying monitoring devices along river
course and in water areas to monitor water quality and sewage outlets and
to conduct intelligent analysis thereon, (ii) installing cameras in major
transportation stations and using IoT technologies, AI intelligent
FUTURE PLANS AND USE OF PROCEEDS
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algorithm and big data analysis to monitor and manage traffic flows, and
(iii) developing an urban sanitation and greening platform using video
surveillance and input from citizens for real-time collection and analysis
of data with respect to city sanitation conditions to facilitate the
identification of specific locations with sanitary issues;
(c) we plan to invest approximately HK$19.1 million, to assist the
government in the implementation of urban comprehensive management,
including, among others, (i) using IoT technologies, AI intelligent
algorithm and big data analysis to establish platforms with respect to
garbage classification, public security, traffic monitoring, etc., and (ii)
creating an urban operation panorama based on building information
model (BIM) to present the overall development of the city in the form
of 3D images and perform real-time monitoring and visual analysis of
various data of the city;
(d) we plan to invest approximately HK$11.5 million, to assist the
government in the establishment of a social service platform, including,
among others, developing a urban service mobile application which
consolidates urban resources such as medical services, education,
transportation, logistics and catering services and enables citizens to
select services based on their personal needs; and
(e) we plan to invest approximately HK$25.0 million, to assist the
government in the establishment of a basic safeguard platform, including,
among others, (i) an IBA system that allows the real-time monitoring of
the operation of equipment and facilities located at main buildings within
the city through IoT technologies, (ii) a project management platform that
shows the information about urban construction projects, including their
dynamic distribution and construction progress, by using 3D technology
in geographic information system (GIS) and building information model
(BIM) technologies, and (iii) a smart park management platform that is
designed to collect, consolidate, manage and analyze data of industrial
parks in a city with the support of IoT, cloud computing, multi-media and
other technologies, so as to achieve the comprehensive management and
operation of the parks.
It is expected that the smart city solutions will be applied in approximately
60% of the projects under our management by the end of 2024.
(iii) approximately 2%, or HK$14.6 million, will be used for the upgrade and
maintenance of our digitalized management and service platforms, in
particular, our “Jinxiaomao” ( ) system and “Home” ( ) mobile
application, in order to enhance property operation efficiency and ensure
on-site service quality and customer satisfaction.
FUTURE PLANS AND USE OF PROCEEDS
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Our “Jinxiaomao” ( ) system is an online platform which enables our
employees to carry out smart management conveniently and effectively. We
plan to upgrade our Jinxiaomao” ( ) system in a number of aspects,
including, among others, (a) changing the work allocation system from
directing a work request to a specific employee as and when the task arises to
providing each employee a daily individualized to-do-list, so that tasks can be
allocated in a more structured and efficient manner and employees can plan
their time of the day more efficiently, and (b) introducing a system where
employees will need to record the resources used and the reasons thereof, in
order for us to better track and manage resource availability and to perform
budget control.
Our “Home” ( ) mobile application is our online customer portal. We plan
to introduce a number of new features to our “Home” ( ) mobile
application, including, among others, (a) a smart control function to allow
property owners to control their home devices, such as lights and ventilation
system, remotely using their smartphones, (b) function to generate the
projected results of interior decoration based on different furniture
combinations to enable property owners to choose the set of furniture which
best suits the layout of the property units, which is expected to further promote
our platform services for interior decoration, and (c) function to enable
property owners to view property inspection reports of their property units
prepared by our staff after on-site inspection and make request for further
inspection or repairs or maintenance directly on the mobile application.
We also plan to optimize the integration of our equipment and facilities and our
information technology systems through IoT technologies, AI intelligent
algorithm and big data analysis, to enhance our centralized management,
reduce the requirement of manual labor in our daily operation and improve our
service quality. Specifically, we plan to improve (i) our equipment and facility
monitoring system to achieve 24/7 online monitoring, automatic inspection,
record keeping, automatic troubleshooting and warning for our equipment and
facilities, (ii) our patrol system to allow transmission of surveillance
photographs of key areas at regular intervals, which is expected to reduce the
number of hours of manual patrol by 8 hours per day, and (iii) the AI intelligent
algorithm to better and more efficiently locate areas within the community that
require cleaning services with a view to improving the work efficiency of
cleaning staff by 50%.
FUTURE PLANS AND USE OF PROCEEDS
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(3) approximately 13%, or HK$94.8 million, will be used to further develop our
community value-added services in an effort to diversify our service offering and
enhance profitability, among which:
(i) approximately 7%, or HK$51.0 million, will be used to develop our existing
community living services, including housekeeping, cleaning, new retail and
catering services. Specifically, (a) we plan to develop our housekeeping and
cleaning services by providing property owners and residents with daily house
cleaning and/or electronic appliance maintenance services, and to expand the
coverage of our housekeeping and cleaning services to all projects under our
management; (b) we plan to develop our new retail services by (i)
strengthening our cooperation with top brands and building business
relationships with large suppliers to shorten the supply chain and improve
customer satisfaction, and (ii) establishing front warehouses in the residential
communities under our management to facilitate efficient delivery to the
property owners and residents of products purchased on our mobile
application. In particular, we expect to establish no less than 40, 40 and 60
front warehouses in 2022, 2023 and 2024, respectively, with a view to
achieving service coverage of no less than 140 projects under our management
by the end of 2024; and (c) in addition to our existing catering services to
tenants in certain office buildings under our management, we also plan to work
with catering operators to provide healthy food options to property owners and
residents in the residential projects under our management;
(ii) approximately 3%, or HK$21.9 million, will be used to develop our existing
platform services for interior decoration, real estate brokerage services and
community space operation services. Specifically, (a) we plan to develop our
platform services for interior decoration by (i) building and maintaining good
relationships with top product suppliers and interior designers, such that the
property owners can benefit from a wide spectrum of interior design ideas as
well as a consistent supply of high quality decorative products to implement
the design ideas, (ii) organizing market activities at property sales venues, so
as to understand the demands of potential property buyers for interior
decoration services and identify potential customers at an early stage, and (iii)
offering new platform services to property owners, including partial renovation
services for properties delivered within one year and refurbishment services
for properties delivered for more than six years; (b) we plan to promote our real
estate brokerage services by establishing no less than 20, 30 and 30 physical
stores in the residential communities under our management in 2022, 2023 and
2024, respectively, with a view to attracting more property owners and
residents and expanding our service coverage to no less than 90 projects under
our management by the end of 2024; and (c) we will also step up our efforts
in providing other community space operation services, such as installing more
parcel lockers in the residential communities under our management to offer
greater convenience to the property owners and residents; and
FUTURE PLANS AND USE OF PROCEEDS
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(iii) approximately 3%, or HK$21.9 million, will be used to expand our business
outreach to the provision of new community value-added services, such as
community health management services. In particular, (a) we plan to establish
a direct drinking water system in some of the residential communities under
our management to supply property owners and residents with clean drinking
water which can be consumed from the tap. In this connection, we expect to
purchase no less than 60, 100 and 140 sets of equipment from third-party
vendors in 2022, 2023 and 2024, respectively, for supplying drinking water to
no less than 30, 50 and 70 projects for the relevant periods, respectively; (b)
we plan to establish a team of nutritionists to formulate health plans for
property owners and residents based on their health needs, and timely adjust
the health plans by making use of AI technology to analyze the data input by
our customers from time to time; and (c) we also plan to assist property owners
and residents in formulating individualized exercise programs. We expect to
establish no less than 30, 30 and 40 community fitness centers in 2022, 2023
and 2024, respectively, and work with personal trainers to provide fitness
solutions and one-on-one training sessions to customers.
We believe that people are demanding more control over the management of
their health and well-being, and COVID-19 outbreak has further accelerated
such a trend by highlighting the importance of preventative care. Further, to
better understand the lifestyle needs of property owners and residents and their
expectation for community value-added services, our Group conducted a
survey in 2020 where it had in-depth in-person interviews with 40 families and
analyzed the questionnaires collected from 284 families, covering
approximately 33 residential projects in the first-tier and second-tier cities,
including Beijing, Shanghai, Guangzhou, Shenzhen, Chengdu, Chongqing,
Ningbo, Hangzhou, Suzhou and Changsha. According to the survey results,
approximately 51% of the interviewees and respondents indicated that they
attached great importance to their overall health and fitness, and maintained
regular physical activity to improve the quality of life. Based on the above, our
Directors believe that there will be sufficient demand for the community health
management services. As advised by our PRC Legal Advisers, based on the
above intended scope of the new business, we may need to obtain the sanitary
permit for supplying drinking water, the food operation license for supplying
nutritious food, and the fire safety permit with respect to use and operation of
public gathering places for the establishment of community fitness centers. We
will comply with the applicable regulatory requirements and apply for the
relevant licenses and permits before we conduct any new business.
FUTURE PLANS AND USE OF PROCEEDS
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(4) approximately 10%, or HK$72.9 million, will be used for working capital and
general corporate purpose. We expect to have increasing needs of working capital as
a result of the rapid expansion of our business, as we enlarge our GFA under
management and enrich our property management portfolio, as well as our
diversifying service offerings along with any investment or acquisition if and when
suitable opportunities arise.
Plans for Strategic Acquisitions and Investments
As of the Latest Practicable Date, we had not identified or committed to any acquisition
targets for our use of net proceeds from the Global Offering. When determining the amount of
approximately HK$364.4 million, or 50% of the net proceeds, allocated to potential
acquisitions of, investment in and cooperation with other property management companies and
professional service providers in the upstream and downstream of city operation services, and
approximately HK$36.4 million, or 5% of the net proceeds, allocated to potential acquisitions
of and investment in companies providing community products and services, assuming an
Offer Price of HK$7.83 per Offer Share (being the mid-point of the indicative Offer Price
range), we have considered (i) the acquisition of or investment in majority equity interests of
property management companies at a price-earnings ratio of approximately 10 to 25 times, (ii)
the acquisition of or investment in approximately three to eight property management
companies and professional service providers in the upstream and downstream of city
operation services and approximately three to five companies providing community products
and services between the Latest Practicable Date and December 31, 2024, and (iii) our criteria
for strategic acquisitions and investments as disclosed below. We are more inclined to acquire
or invest in potential targets where we would have a majority interest, so that we can better
employ our investment strategies and business integration. The above-mentioned
considerations under the allocation of the net proceeds may be subject to changes based on
market conditions, the operation and financial performance of the target and the terms and
conditions of the acquisition or investment agreements.
Although our Directors had not identified any suitable targets as of the Latest Practicable
Date, we have determined the criteria for evaluating potential targets. These efforts are based
on the results of research, financial due diligence and preliminary assessments and feasibility
studies undertaken during the Track Record Period and up to the date of this prospectus.
Criteria for Strategic Acquisitions and Investments
When we evaluate a potential investment in property management companies or
acquisition target:
• we plan to strategically acquire or invest in property management companies that
focus on both residential properties and non-residential properties which would help
us further expand with respect to urban property management, as well as service
providers in the upstream and downstream of city operation services which are
suitable for and complementary to our business operations and strategies;
FUTURE PLANS AND USE OF PROCEEDS
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• we plan to strategically acquire or invest in companies with properties under
management in regions with development potential in the PRC that can facilitate
with our business integration in terms of geographic coverage, such as the
Beijing-Tianjin-Hebei Region, the Yangtze River Delta, the Greater Bay Area and
the Chengdu-Chongqing Economic Circle. Our existing property management
projects have already covered such regions. Accordingly, we expect to create
synergy between the property management projects of the acquired companies and
our existing property management projects and future property management projects
that we may obtain organically in these regions, by (i) sharing business contacts,
business opportunities and other local resources between different property
management projects, (ii) reducing costs and achieving economies of scales through
centralized purchase and manpower coordination in the same region, and (iii)
sharing experiences on local regulatory, cultural and business environment among
our Group;
• we would generally focus on those property management companies which have,
amongst others, (i) GFA under management of at least 1.0 million sq.m., (ii) an
annual revenue of at least RMB50.0 million for the most recent financial year, and
(iii) reputable brand and good corporate creditworthiness among customers and
industry. We would expect them to have obtained all required qualifications for
carrying out the relevant business with satisfactory credit record, built brand
awareness in the regional market or nationwide with a competent management team
possessing solid industry expertise, and maintained a proven track record of legal
compliance without involvement in any material administrative penalties or pending
legal proceedings and disputes; and
• when seeking opportunities to acquire or invest in service providers in the upstream
and downstream of city operation services, we would generally focus on those
companies which (i) possess professional service capabilities in the fields of
municipal management and municipal services, such as security, cleaning, gardening
or maintenance service providers, or have capabilities in providing technical support
services to our smart city solutions, (ii) operate in cities which we already have
presence, and (iii) have an annual revenue of at least RMB10.0 million for the most
recent financial year, with a view to further expanding and strengthening our service
capabilities in city operation service sector.
Based on the above-mentioned criteria, we plan to acquire or invest in approximately
three to eight property management companies and professional service providers in the
upstream and downstream of city operation services between the Latest Practicable Date and
December 31, 2024, with an estimated average investment payback period ranging from five
to ten years. Through acquiring such companies, we expect to further establish our presence
and enhance our brand awareness in such cities with a view to enhance our economies of scale.
FUTURE PLANS AND USE OF PROCEEDS
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We also plan to strategically acquire or invest in companies offering community products
and services to increase the product and service offerings under our value-added service
segment and improve our customer satisfaction. We plan to focus on suitable targets which: (i)
can provide property owners with valuable products or services, such as community health
management and interior decoration, (ii) already have a mature business model and a clear
financial model that could be scaled up, and (iii) can provide us with the opportunities to
expand into new markets, enhance our brand value and diversify our product and service
offerings. Particularly, we target companies operating in cities which we already have presence
with a total annual revenue of over RMB1.0 million in the most recent financial year. Based
on the above-mentioned criteria, we plan to acquire or invest in approximately three to five
companies offering community products and services between the Latest Practicable Date and
December 31, 2024, with an estimated average investment payback period ranging from five
to ten years. Through investing in such companies, we believe further synergies with our
existing products and services can be created and thus enhance our competitiveness given that
such companies provide products and services that are complementary to our value-added
services. For example, by investing in companies in the supply chain of healthy food, we will
be able to improve our new retail and catering services by providing healthy food options to
property owners and residents. Further, by investing in interior decoration companies with rich
experience in room renovation for kids and elderly people, we can help property owners make
their home safe for children and convenient for the elderly, which will form an effective
supplement to our existing platform services for interior decoration.
With respect to the targets for our strategic acquisitions and investments, we will also
consider other risk factors, including hidden liabilities, administrative penalties, outstanding
legal proceedings and disputes. The criteria are subject to adjustment based on changes in the
market conditions and our strategic needs.
As advised by China Index Academy, our Directors believe that our criteria for strategic
acquisitions and investments are in line with the industry practice. We believe that our
investment and acquisition plan could bolster our geographic presence and increase our market
share in the selected regions we expand into, and the enlarged business scale could further
reduce our overall management costs and increase our profitability.
Implementation of Acquisition Plan
Even though we have grown our business scale primarily through organic growth since
our inception, we plan to further expand our business scale through organic growth as well as
strategic acquisitions and investments. According to China Index Academy, reputable property
management companies actively increase their market shares and achieve better results of
operations through strategic acquisitions and investments in addition to organic growth. Our
Directors are of the view that the strategic acquisitions and investments will help us accelerate
our business expansion through expanding our strategic layout and increasing our market
share. Particularly, our Directors believe that to penetrate into a new market through acquiring
or investing in a well-established property management company typically can reduce the time
required for, and the uncertainties and additional costs associated with, entering into a new
FUTURE PLANS AND USE OF PROCEEDS
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market, as compared to expanding our property management service portfolio in a new market
by way of organic growth. In addition, we believe that strategic acquisitions and investments
will also help us reduce our reliance on Jinmao Group and Sinochem Group and their
respective joint ventures and associates, as it is expected that our contracted GFA and revenue
generated from properties developed by other third parties will increase following the
investments and acquisitions. We may establish business relationships with the independent
third-party property developers that developed the property projects managed by the acquired
targets, understand their service needs, gain their trust and improve our service quality
accordingly. We believe these knowledge and improvement may increase our chances to
procure property management service contracts for additional property projects developed by
such independent third-party property developers. Leveraging our experience with these
property developers, we believe we may also seek opportunities to develop business
relationship with other independent third-party property developers.
The plans for strategic acquisitions and investments are commensurate with our Group’s
shift in business strategies since 2020 to actively explore potential business opportunities to
manage properties developed by independent third-party property developers and to actively
pursue cooperation opportunities and explore acquisitions of quality targets, after having
successfully established a high quality image for our services and laid a solid foundation for
market expansion in the past. We established market development teams in 2020 who are also
responsible for exploring potential acquisition targets through referrals sourced from internal
staff networks and external marketing events. Once they identify a potential acquisition target,
they will work with our finance department to conduct due diligence investigation on the size,
business operation, indebtedness, financial condition and legal compliance status of the
potential target, commence business negotiations with the seller, and prepare a proposal for the
management to approve. For details, see “Relationship with China Jinmao — Independence
from China Jinmao — Operational independence — Efforts to extend services to Independent
Third Parties”.
According to China Index Academy, the PRC property management industry remains
fragmented while maintaining a trend of increasing market concentration toward the Top 100
Property Management Companies. This suggests that there continues to be a wide variety of
targets available, and underscores the need for us to acquire or invest in property management
companies so as to develop in line with this industry trend. See “Industry Overview — Market
Trends — Increasing Market Concentration” in this prospectus.
When implementing our acquisition plans, we will carefully evaluate the potential
business growth opportunities and values that a target may bring to our existing business. Of
the potential targets that satisfy our acquisition criteria as set out under the paragraphs headed
“Criteria for Strategic Acquisitions and Investments” above, we plan to prioritize the following
property management companies:
(i) companies with state-owned background. Under the guidelines of the SASAC
requiring state-owned enterprises to focus on their core business, it is expected that
there will be an increasing number of state-owned enterprises whose core business
FUTURE PLANS AND USE OF PROCEEDS
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is not property development selling their equity interests in property management
companies. Leveraging our status as a state-owned enterprise, we are in a strong
position to seek cooperation with state-owned enterprises and compete against our
competitors in the acquisition of state-owned property management companies.
State-owned companies are more likely to share similar corporate culture and
governance structure with us, which will facilitate the business integration between
our Group and the target companies following the acquisitions. According to China
Index Academy, there are approximately 360 state-owned property management
companies in the PRC that met our criteria of having a GFA under management of
at least 1.0 million sq.m. and an annual revenue of at least RMB50.0 million in
2020.
(ii) companies with property portfolio under management focusing on non-residential
properties, including (a) office buildings and shopping malls to further increase the
aggregate GFA of non-residential properties under our management with relatively
high gross profit margin, and (b) large-scale hospitals, universities and
transportation hubs that are complementary to our current property portfolio under
management, which will strengthen our capacity to manage a greater variety of
properties and help us establish greater brand awareness in the market. According to
China Index Academy, there were approximately 150 property management
companies focusing on non-residential properties in the PRC that met our criteria of
having a GFA under management of at least 1.0 million sq.m. and an annual revenue
of at least RMB50.0 million in 2020.
(iii) companies not affiliated with property developers and companies affiliated with
relatively small property developers. Property management companies not affiliated
with property developers may be more receptive to our acquisition or investment
efforts, as support from us as a listed property management company and Jinmao
Group may enhance their ability to compete. According to China Index Academy,
there were approximately 180 property management companies with a GFA under
management of at least 1.0 million sq.m. and an annual revenue of at least RMB50.0
million in 2020 that are not affiliated with property developers. On the other hand,
China Index Academy has also confirmed that acquiring or investing in property
management companies affiliated with property developers is also a common
practice within the industry. Our Directors consider that, for property management
companies affiliated with property developers of relatively small business size, there
are still potential opportunities for investment or acquisition as these companies are
more inclined to achieve better business development through consolidation with a
prominent, large-scale and fast-growing market player such as our Group.
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Given the fragmented nature of the PRC property management industry, there is a
sufficiently large number of potential targets available for our consideration that meet our
criteria for acquisitions or investment as demonstrated above. Therefore, despite the
competition that we may face from other market players for quality target companies, we
believe we can identify and acquire suitable property management companies to implement our
business strategies.
Furthermore, according to China Index Academy, acquisitions in the property
management industry are extending to segment markets with targets providing a wide spectrum
of value-added services from a variety of sectors that are complimentary to property
management, such as technologies, education, engineering and financial services. In line with
such market trends, our Directors consider that investment in or acquisitions of targets along
the business value chain provide abundant opportunities for our business expansion.
However, there is no assurance that we will be able to identify suitable opportunities or
successfully implement our acquisition plan, and the acquisitions involve certain risk and
uncertainties, such as inability to apply our business model or standardized business process
on the acquisition targets and failure to achieve the intended acquisition objectives and
benefits. See “Risk Factors — Risk relating to Our Business and Industry — Our mergers and
acquisitions may not achieve the desired benefits. We may face difficulties in integrating
acquired operations with our existing business” for details of the associated risk factors. In the
event that we could not successfully complete the above-mentioned acquisition plan including
failure to secure sufficient suitable targets, we would continue to explore acquisition
opportunities and may consider to adjust the selection criteria for target companies based on
the market conditions. Meanwhile, we will continue to expand our business by obtaining new
engagements from customers through actively participating in public tenders, establishing
strategic alliance with independent third-party property developers, and improving service
quality to attract and maintain customers and enhance brand recognition.
In the event that the net proceeds raised from the Global Offering are less than the capital
expenditure needed, we intend to fund our acquisition plans through other multiple sources,
including but not limited to our cash on hand, funds generated from our operations, borrowings
from domestic and overseas banks and other financial institutions, and funds raised through
private placement or other capital market transactions. We will evaluate our financing options
from time to time based on our business expansion plans and the availability and cost of
funding, and will select the financing channel that is most beneficial to the Shareholders.
Basis and Assumptions
Our future plans and business strategies are based on the following general assumptions:
• there will be no material change in the funding requirement for each of our future
plans described in this prospectus from the amount as estimated by our Directors;
FUTURE PLANS AND USE OF PROCEEDS
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• we will have sufficient financial resources to meet the planned capital expenditures
and business development requirements during the period to which our future plans
relate;
• the Global Offering will be completed in accordance with and as described in the
section entitled “Structure of the Global Offering” in this prospectus;
• there will be no material changes in existing accounting policies from those stated
in the audited consolidated financial statements of our Group for the Track Record
Period;
• our operations including our future plans will not be interrupted by any force
majeure, unforeseeable factors, extraordinary items or economic changes in respect
of inflation, interest rate and tax rate in the PRC and elsewhere;
• there will be no material changes in the bases or rates of taxation applicable to our
activities;
• we will not be materially affected by the risk factors as set out in the section headed
“Risk Factors” in this prospectus;
• we will continue our operation including but not limited to retaining our key staff
and maintaining our customers, suppliers and subcontractors in the same manner as
we did during the Track Record Period;
• there will be no material change in existing laws and regulations, or other
governmental policies relating to our Group and our business, or in the political or
market conditions in which we operate; and
• there will be no epidemic or disasters, natural, political or otherwise, which would
materially disrupt our businesses or operations.
If the Offer Price is set at the high-end of the indicative Offer Price range, being HK$8.14
per Offer Share, the net proceeds of the Global Offering (assuming the Offer Size Adjustment
Option and the Over-allotment Option are not exercised) will be increased to approximately
HK$759.6 million. We will apply the additional net proceeds for the above purposes on a
pro-rata basis.
If the Offer Price is set at the low-end of the indicative Offer Price range, being HK$7.52
per Offer Share, the net proceeds of the Global Offering (assuming the Offer Size Adjustment
Option and the Over-allotment Option are not exercised) will be decreased to approximately
HK$698.2 million. In such case, we will reduce the allocation of such net proceeds for the
above purposes on a pro-rata basis.
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If both the Offer Size Adjustment Option and the Over-allotment Option are exercised in
full, the net proceeds from the Global Offering will be approximately HK$978.8 million
(including additional net proceeds of approximately HK$116.2 million from the exercise of the
Offer Size Adjustment Option and approximately HK$133.7 million from the exercise of the
Over-allotment Option), assuming the Offer Price is set at the mid-point of the indicative Offer
Price range. If the Offer Price is set at the high-end of the indicative Offer Price range, the net
proceeds from the Global Offering (including the proceeds from the exercise of the Offer Size
Adjustment Option and the Over-allotment Option) will be approximately HK$1,019.4 million.
If the Offer Price is set at the low-end of the indicative Offer Price range, the net proceeds from
the Global Offering (including the proceeds from the exercise of the Offer Size Adjustment
Option and the Over-allotment Option) will be approximately HK$938.2 million. We will apply
any additional net proceeds from the exercise of the Offer Size Adjustment Option and the
Over-allotment Option to the above purposes on a pro-rata basis.
To the extent that the net proceeds of the Global Offering are not immediately required
for or applied to the above purposes, we may hold such funds in short-term deposits with
licensed banks and authorized financial institutions in Hong Kong or in the PRC for so long
as it is in our best interests.
We will make an appropriate announcement and comply with the requirements of the
Listing Rules if there is any material change to the above proposed use of proceeds.
FUTURE PLANS AND USE OF PROCEEDS
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HONG KONG UNDERWRITERS
ABCI Securities Company Limited
CCB International Capital Limited
China International Capital Corporation Hong Kong Securities Limited
CLSA Limited
CMB International Capital Limited
Essence International Securities (Hong Kong) Limited
The Hongkong and Shanghai Banking Corporation Limited
Huarong International Securities Limited
Huatai Financial Holdings (Hong Kong) Limited
Livermore Holdings Limited
Shenwan Hongyuan Securities (H.K.) Limited
(In alphabetical order)
UNDERWRITING
This prospectus is published solely in connection with the Hong Kong Public Offering.
The Hong Kong Public Offering is fully underwritten by the Hong Kong Underwriters on a
conditional basis. The International Offering is expected to be fully underwritten by the
International Underwriters subject to the terms and conditions of the International
Underwriting Agreement. If, for any reason, the Offer Price is not agreed between the Joint
Representatives (on behalf of the Underwriters) and our Company, the Global Offering will not
proceed and will lapse.
The Global Offering comprises the Hong Kong Public Offering of initially 10,142,000
Hong Kong Offer Shares and the International Offering of initially 91,269,500 International
Offer Shares, subject, in each case, to reallocation on the basis as described in the section
headed “Structure of the Global Offering” in this prospectus as well as to the Offer Size
Adjustment Option and the Over-allotment Option (in the case of the International Offering).
UNDERWRITING
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UNDERWRITING ARRANGEMENTS AND EXPENSES
Hong Kong Public Offering
Hong Kong Underwriting Agreement
Pursuant to the Hong Kong Underwriting Agreement and subject to the Offer Size
Adjustment Option, our Company is offering the Hong Kong Offer Shares for subscription on
the terms and conditions set out in this prospectus, the Application Forms and the Hong Kong
Underwriting Agreement at the Offer Price.
Subject to (a) the Stock Exchange granting approval for the listing of, and permission to
deal in, our Shares in issue and to be issued pursuant to the Bonus Issue, the Distribution and
the Global Offering on the Main Board of the Stock Exchange and such approval not having
been withdrawn and (b) certain other conditions set out in the Hong Kong Underwriting
Agreement, the Hong Kong Underwriters have agreed severally but not jointly to procure
subscribers for, or themselves to subscribe for, their respective applicable proportions of the
Hong Kong Offer Shares being offered which are not taken up under the Hong Kong Public
Offering on the terms and conditions set out in this prospectus, the Application Forms and the
Hong Kong Underwriting Agreement.
The Hong Kong Underwriting Agreement is conditional on the International Underwriting
Agreement having been executed and becoming unconditional and not having been terminated
in accordance with its terms.
Grounds for Termination
The Joint Representatives (for themselves and on behalf of the Hong Kong Underwriters)
shall be entitled by giving notice in writing to the Company, terminate the Hong Kong
Underwriting Agreement with immediate effect if at any time prior to 8:00 a.m. on the Listing
Date:
(A) there develops, occurs, exists or comes into effect:
(i) any new law or any change or development involving a prospective change in
existing Law or regulations, or any change or development involving a
prospective change in the interpretation or application thereof by any court or
other competent authority in or affecting any existing Law or regulations in
Hong Kong, the PRC, the United States, the United Kingdom, the European
Union (or any of its members), or Singapore (collectively “Relevant
Jurisdictions” and each a “Relevant Jurisdiction”), in each case, in or
affecting any of the Relevant Jurisdictions;
UNDERWRITING
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(ii) any change or development involving a prospective change or development, or
any event or series of events likely to result in or representing a change or
development, or prospective change or development, in local, national,
regional or international financial, political, military, industrial, economic,
trading, currency market, legal, fiscal or regulatory market conditions,
securities or any monetary or trading settlement system or financial markets
(including without limitation conditions in stock and bond markets, money and
foreign exchange markets, inter-bank markets and credit markets) in or
affecting any Relevant Jurisdiction;
(iii) any event or series of events, or series of events or circumstances (whether
national or international), in the nature of force majeure in or affecting directly
or indirectly any of the Relevant Jurisdictions (including, without limitation
the generality thereof, any act of government or order of any court, declaration
of a regional, national or international emergency or war, calamity, crisis, riot,
public disorder, outbreak, escalation, adverse mutation or aggravation of
diseases (including, without limitation, COVID-19, SARS, swine or avian flu,
H5N1, H1N1, H7N9 or related/mutated forms), pandemics, epidemics, strike,
labor dispute or lock-out, fire, explosion, flood, earthquake, civil commotion,
act of war, outbreak or escalation of hostilities (whether or not war has been
declared), act of God, act of terrorism (whether or not responsibility has been
claimed)), accidents or prolonged interruption or delay in transportation;
(iv) any material change or prospective change or development in, or any
materialization of any of the risks set out in the section headed “Risk Factors”
in the Prospectus;
(v) any moratorium, suspension or limitation (including, without limitation, any
imposition of or requirement for any minimum or maximum price limit or price
range) on trading in shares or securities generally on the Stock Exchange, the
New York Stock Exchange, the NASDAQ Global Market, the London Stock
Exchange, the Shanghai Stock Exchange, the Shenzhen Stock Exchange or the
Singapore Stock Exchange;
(vi) any change or prospective change in taxation, foreign exchange controls (or the
implementation of any foreign exchange controls), currency exchange rates or
foreign investment regulations (including a devaluation of the Hong Kong
dollar or RMB against any foreign currencies, a change in the system under
which the value of the Hong Kong dollar is linked to that of the United States
dollar or RMB is linked to any foreign currency or currencies) or the
implementation of any exchange control, in any Relevant Jurisdiction
adversely affecting an investment in the Shares;
UNDERWRITING
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(vii) any general moratorium on commercial banking activities in any Relevant
Jurisdiction or any disruption in commercial banking or foreign exchange
trading or securities trading or securities settlement or clearance services,
procedures or matters in any Relevant Jurisdictions;
(viii)the imposition of sanctions under any sanction Laws or regulations, in
whatever form, directly or indirectly, by, or for, any Relevant Jurisdiction
relevant to the business operations of any member of the Group;
(ix) the issue by the Company of a supplemental or amendment to the Prospectus,
Application Forms, Preliminary Offering Circular (as defined in the Hong
Kong Underwriting Agreement) or Offering Circular (as defined in the Hong
Kong Underwriting Agreement) or other documents in connection with the
offer and sale of the Shares pursuant to the Companies (Winding Up and
Miscellaneous Provisions) Ordinance or the Listing Rules or upon any
requirement or request of the Stock Exchange and/or the SFC, except with the
prior consent of the Joint Representatives;
(x) any Director of the Company being charged with an indictable offence or
prohibited by operation of Laws or otherwise disqualified from taking part in
the management of a company, or any litigation, dispute, legal action, claim,
investigation or other action (including arrest or detainment) or proceedings
being commenced, threatened or instigated against any material member of the
Group or any Director, or any announcement by any Authority or
governmental, political or regulatory body that it intends to commence such
investigation or take such action against any material member of the Group or
any Director, or vacating his/her office;
(xi) any material adverse change or any development involving any prospective
material adverse change in the assets, liabilities, business, general affairs,
management, prospects, shareholders’ equity, profits, losses, profitability,
results of operations, position or condition (financial, trading or otherwise) or
performance of the Group as a whole (including any material litigation or
claim of any third party being threatened or instigated against any member of
the Group or any Director);
(xii) any contravention by any material member of the Group or any Director of the
Companies Ordinance, the Companies (Winding Up and Miscellaneous
Provisions) Ordinance, the PRC Company Law, the Listing Rules or other
application Laws;
(xiii)non-compliance of the Hong Kong Public Offering Documents (or any other
documents used in connection with the contemplated offer of the Offer Shares)
or any aspect of the Global Offering with the Listing Rules or any other
applicable Laws; or
UNDERWRITING
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(xiv) an order or a petition being presented for the winding-up or liquidation of any
Group Company or any Group Company making any composition or
arrangement with its creditors or entering into a scheme of arrangement or any
resolution being passed for the winding-up of any Group Company or a
provisional liquidator, receiver or manager being appointed over all or part of
the assets or undertaking of any Group Company or anything analogous thereto
occurs in respect of any Group Company,
which, in any such case individually or in the aggregate, in the sole and absolute
opinion of the Joint Representatives (for themselves and on behalf of the Hong Kong
Underwriters):
(a) has, will or may have a material adverse effect in the assets, liabilities,
business, management, prospects, shareholder’s equity, profits, losses,
profitability, results of operations, position or condition (financial or
trading), or performance of the Group as a whole; or
(b) has, will have or may have a material adverse effect on the success or
marketability of the Global Offering or the level of Offer Shares being
applied for under the Hong Kong Public Offering or the level of interest
under the International Offering; or
(c) makes, will make it or may make it impracticable or inadvisable or
incapable or inexpedient to proceed with any part of the Hong Kong
Public Offering and/or the International Offering to proceed as envisaged
or the delivery of the Offer Shares on the Listing Date; or
(d) has or would have or may have the material effect of making any part of
the Hong Kong Underwriting Agreement (including underwriting)
incapable of performance in accordance with its terms or which prevents
the processing of applications and/or payments pursuant to the Global
Offering or pursuant to the underwriting thereof; or
(B) there comes to the notice of any Appointee:
(i) a prohibition (including but not limited to a governmental or regulatory
prohibition) on the Company for whatever reason from offering, allotting,
issuing or selling the Shares (including the Option Shares) pursuant to the
terms of the Global Offering, including the revocation of the prior approval of
the Spin-off granted by the Stock Exchange;
UNDERWRITING
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(ii) that any statement contained in any of the Hong Kong Public Offering
Documents (as defined in the Hong Kong Underwriting Agreement), the
Formal Notice and any notice, announcement, advertisement, communication
issued or used (by or on behalf of the Company) in connection with the Hong
Kong Public Offering (including any supplement or amendment thereto) was or
has become untrue, incomplete, inaccurate, incorrect in any material respect or
misleading or deceptive, or any forecast, estimate, expression of opinion,
intention or expectation expressed or contained in any of the Hong Kong
Public Offering Documents, the Formal Notice and/or any notice,
announcement, advertisement, communication (including any supplement or
amendment thereto) so issued or used on behalf of the Company is, when it was
issued or used, is not fair and honest and made on reasonable grounds or, where
appropriate, based on reasonable assumptions with reference to the facts and
circumstances then subsisting, when taken as a whole;
(iii) either (a) there has been a breach of any of the representations, warranties,
undertakings or provisions of either the Hong Kong Underwriting Agreement
or the International Underwriting Agreement by the Company or China Jinmao
or (b) any of the representations, warranties and undertakings given by the
Company or China Jinmao in the Hong Kong Underwriting Agreement or the
International Underwriting Agreement, as applicable, is (or would when
repeated be) untrue, incorrect, inaccurate or misleading in any material respect;
(iv) any of the Experts (other than the Joint Sponsors) has withdrawn its respective
consent to the issue of the Prospectus with the inclusion of its reports, letters,
summaries or legal opinions (as the case may be) and references to its name
included in the form and context in which they respectively appear;
(v) any breach of any of the obligations of the Company or China Jinmao (as
applicable) under the Hong Kong Underwriting Agreement or the International
Underwriting Agreement;
(vi) the Company has withdrawn the Prospectus, the Applications Forms, the
Preliminary Offering Circular, the Final Offering Circular (and/or any other
documents issued or used in connection with the Global Offering) or the
Global Offering;
(vii) the Admission by the Listing Committee is refused or not granted, other than
subject to customary conditions, on or before the Listing Date, or if granted,
the approval is subsequently withdrawn, cancelled, qualified (other than by
customary conditions), revoked or withheld;
(viii)
any matter has arisen or has been discovered which would, had it arisen or been
discovered immediately before the date of the relevant document, constitute a
material misstatement in, or a material omission from, any of the Prospectus,
UNDERWRITING
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the Application Forms, notices, announcements, advertisements,
communications or other documents (including any supplement or amendment
thereto) issued or used by or on behalf of the Company in connection with the
Hong Kong Public Offering; or
(ix) either a material portion of the investment commitments of the cornerstone
investors and/or a material portion of the total orders in the book-building
process (which, for the avoidance of doubt, includes without limitation the
aggregate investment commitments by the cornerstone investors after the
entering into of cornerstone investment agreements by the Company with such
cornerstone investors) at the time the International Underwriting Agreement is
entered into having been withdrawn, terminated or cancelled and such
withdrawn, terminated or cancelled orders not having been fully covered by
other orders at or before 4:00 p.m. on the Price Determination Date (the
“replacement order”) or any replacement order having been subsequently
withdrawn, terminated or cancelled, and the Joint Representatives, acting in
good faith, conclude that it is therefore inadvisable or impracticable to proceed
with the Global Offering.
Offer Size Adjustment Option
As part of the Global Offering, the Company has the Offer Size Adjustment Option under
the Hong Kong Underwriting Agreement, pursuant to which, the Company may issue and allot
any number of Shares up to an aggregate of 15,211,500 Shares under the Global Offering, at
the Offer Price, to cover additional market demand, if any. These additional Offer Shares (the
“Offer Size Adjustment Option Shares”), if any, will be allocated in such manner as closely as
practicable to maintain the proportionality between the Hong Kong Public Offering and the
International Offering following the application of the clawback arrangement described in
“Structure of the Global Offering — The Hong Kong Public Offering — Reallocation” below
and the Joint Representatives shall allocate additional new Shares to be offered by the
Company pursuant to the International Offering to the Hong Kong Public Offering in order to
maintain such proportionality and the relevant number of Offer Size Adjustment Option Shares
shall be allocated to the International Offering to maintain such proportionality.
LOCK UP ARRANGEMENTS
Undertakings to the Stock Exchange pursuant to the Listing Rules
(A) Undertakings by our Company
Pursuant to Rule 10.08 of the Listing Rules, our Company has undertaken to the Stock
Exchange that we will not exercise our power to issue any further Shares, or securities
convertible into Shares (whether or not of a class already listed) or enter into any agreement
to such an issue within six months from the Listing Date (whether or not such issue of our
UNDERWRITING
– 506 –
Shares or our securities will be completed within six months from the Listing Date), except (a)
pursuant to the Bonus Issue, the Distribution and the Global Offering or (b) under any of the
circumstances provided under Rule 10.08 of the Listing Rules.
(B) Undertakings by our Controlling Shareholders
Pursuant to Rule 10.07(1) of the Listing Rules, each of our Controlling Shareholders has
undertaken to the Stock Exchange and our Company that, except pursuant to any lending of
Shares pursuant to the Stock Borrowing Agreement, it shall not and shall procure that the
relevant registered holder(s) of the Shares controlled by it shall not without the prior written
consent of the Stock Exchange or unless otherwise in compliance with the applicable
requirement of the Listing Rules:
(a) in the period commencing on the date by reference to which disclosure of its holding
of Shares is made in this prospectus and ending on the date which is six months from
the Listing Date (the “First Six-Month Period”), dispose of, nor enter into any
agreement to dispose of or otherwise create any options, rights, interests or
encumbrances in respect of, any of our Shares in respect of which it is shown by this
prospectus to be the beneficial owner; or
(b) in the period of six months from the expiry of the First Six-Month Period, dispose
of, nor enter into any agreement to dispose of or otherwise create any options, rights,
interests or encumbrances in respect of, any such Shares referred to in paragraph (a)
above if, immediately following such disposal or upon the exercise or enforcement
of such options, rights, interests or encumbrances, it would cease to be a Controlling
Shareholder of our Company.
Pursuant to Note 3 to Rule 10.07(2) of the Listing Rules, each of our Controlling
Shareholders has undertaken to the Stock Exchange and our Company that, within the period
commencing on the date by reference to which disclosure of its holding of Shares is made in
this prospectus and ending on the date which is 12 months from the Listing Date, it will:
(1) when it pledges or charges any securities of our Company beneficially owned by it
in favor of an authorized institution (as defined in the Banking Ordinance (Chapter
155 of the Laws of Hong Kong)) pursuant to Note 2 to Rule 10.07(2) of the Listing
Rules, immediately inform our Company of such pledge or charge together with the
number of Shares so pledged or charged; and
(2) when it receives indications, either verbal or written, from the pledgee or chargee
that any of the pledged or charged securities of our Company will be disposed of,
immediately inform our Company of such indications.
Our Company will inform the Stock Exchange as soon as it has been informed of the
matters referred to in paragraphs (1) and (2) above (if any) by our Controlling Shareholders and
disclose such matters by way of an announcement in accordance with the Listing Rules.
UNDERWRITING
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Undertakings pursuant to the Hong Kong Underwriting Agreement
(A) Undertakings by our Company
Pursuant to the Hong Kong Underwriting Agreement, the Company has undertaken to
each of the Joint Representatives, the Joint Global Coordinators, the Joint Sponsors, the Joint
Bookrunners, the Joint Lead Managers and the Hong Kong Underwriters that except pursuant
to the Global Offering (including pursuant to the Offer Size Adjustment Option and the
Over-allotment Option, and otherwise pursuant to the Listing Rules) at any time during the
period commencing on the date of the Hong Kong Underwriting Agreement and ending on, and
including, the last date of the six months after the Listing Date, we will not, without the prior
written consent of the Joint Representatives (for themselves and on behalf of the Hong Kong
Underwriters) and unless permitted by and in compliance with the requirements of the Listing
Rules:
(a) allot, issue, sell, accept subscription for, offer to allot, issue or sell, contract or agree
to allot, issue or sell, mortgage, charge, pledge, hypothecate, lend, grant or sell any
option, warrant, contract or right to subscribe for or purchase, grant or purchase any
option, warrant, contract or right to allot, issue or sell, or otherwise transfer or
dispose of or create an encumbrance over, or contract or agree to transfer or dispose
of or create an encumbrance over, either directly or indirectly, conditionally or
unconditionally, or repurchase, any legal or beneficial interest in any Shares or any
other equity securities of the Company as applicable, or any interest in any of the
foregoing (including any securities convertible into or exchangeable or exercisable
for or that represent the right to receive, or any warrants or other rights to subscribe
for or purchase, any Shares or any other equity securities of the Company as
applicable) or deposit any of the foregoing with a depositary in connection with the
issue of depositary receipts;
(b) enter into any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of subscription or ownership of any legal or
beneficial interest in any Shares or any other securities of the Company as
applicable, or any equity interest in any of the foregoing (including any equity
securities convertible into or exchangeable or exercisable for or that represent the
right to receive, or any warrants or other rights to subscribe for or purchase, any
Shares or any other equity securities of the Company);
(c) enter into any transaction with the same economic effect as any transaction specified
in paragraphs (a) or (b) above; or
(d) offer to or agree to or announce any intention to effect any transaction specified in
paragraphs (a), (b) or (c) above,
UNDERWRITING
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in each case, whether the transaction is to be settled by delivery of Shares or such other equity
securities of the Company or in cash or otherwise (whether or not the allotment or issue of
Shares or such other equity securities of the Company will be completed within the First
Six-Month Period). In the event that, during the period of the six months following the expiry
of the First Six-Month Period “Second Six-Month Period”), the Company enters into any of
the transactions specified in paragraphs (a), (b) or (c) above or offers to or agrees to or
announces any intention to effect any such transaction, the Company undertakes to take all
reasonable steps to ensure that any such transaction, offer, agreement or announcement will not
create a disorderly or false market in the Shares or any other securities of the Company.
(B) Undertakings by China Jinmao
Pursuant to the Hong Kong Underwriting Agreement, China Jinmao has undertaken to the
Company and each of the Joint Representatives, the Joint Global Coordinators, the Joint
Sponsors, the Joint Bookrunners, the Joint Lead Managers and the Hong Kong Underwriters
that, without the prior written consent of the Joint Sponsors and Joint Representatives (for
themselves and on behalf of the Hong Kong Underwriters) and unless in compliance with the
requirements of the Listing Rules, it will not (save for any lending of the Shares by it pursuant
to the Stock Borrowing Agreement), during the First Six-Month Period,
(a) sell, offer to sell, contract or agree to sell, mortgage, charge, pledge, hypothecate,
lend, grant or sell any option, warrant, contract or right to purchase, grant or
purchase any option, warrant, contract or right to sell, or otherwise transfer or
dispose of or create an encumbrance over, or agree to transfer or dispose of or create
an encumbrance over, either directly or indirectly, conditionally or unconditionally,
any legal or beneficial interest in any Shares or any other equity securities of the
Company, or any interest in any of the foregoing (including any securities
convertible into or exchangeable or exercisable for or that represent the right to
receive, or any warrants or other rights to purchase, any Shares or any other equity
securities of the Company) beneficially owned by it as at the Listing Date (the
“Locked-up Securities”) or deposit any of the foregoing with a depositary in
connection with the issue of depositary receipts;
(b) enter into any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of any Locked-up Securities;
(c) enter into any transaction with the same economic effect as any transaction specified
in paragraphs (a) or (b) above; or
(d) offer to or agree to or announce any intention to effect any transaction specified in
paragraphs (a), (b) or (c) above,
UNDERWRITING
– 509 –
in each case, whether the transaction is to be settled by delivery of Shares or such other
securities of the Company or in cash or otherwise;
(i) it will not, at any time during the Second Six-Month Period, enter into any of
the transactions specified in paragraphs (a), (b) or (c) above in respect of the
Locked-up Securities or offer to or agree to or announce any intention to effect
any such transaction if, immediately following any sale, transfer or disposal or
upon the exercise or enforcement of any option, right, interest or encumbrance
pursuant to such transaction, its shareholding in the Company will be reduced
to below 30%;
(ii) until the expiry of the Second Six-Month Period, in the event that it enters into
any of the transactions specified in paragraphs (a), (b) or (c) above in respect
of the Locked-up Securities or offers to or agrees to or announces any intention
to effect any such transaction, it will take all reasonable steps to ensure that
any such transaction, offer, agreement or announcement will not create a
disorderly or false market in the Shares or any other securities of the Company;
and
(iii) at any time from the date of the Hong Kong Underwriting Agreement up to and
including the date falling 12 months after the Listing Date, it will (a) if and
when it pledges or charges any Shares or other equity securities of the
Company beneficially owned by it, immediately inform the Company in
writing of such pledge or charge together with the number of Shares or other
equity securities of the Company so pledged or charged; and (b) if and when
it receives indications, either verbal or written, from any pledgee or chargee
that any of the pledged or charged Shares or other equity securities of the
Company will be disposed of, immediately inform the Company in writing of
such indications,
provided that nothing in China Jinmao’s undertaking shall prevent it from (i) purchasing
additional Shares or other securities of the Company and disposing of such additional
Shares or securities of the Company in accordance with the Listing Rules, or (ii) using
the Shares or other securities of the Company or any interest therein beneficially owned
by them as security (including a charge or a pledge) in favor of an authorized institution
(as defined in the Banking Ordinance (Chapter 155 of the Laws of Hong Kong)) for a
bona fide commercial loan.
Hong Kong Underwriters’ Interests in our Company
Save for their respective obligations under the Hong Kong Underwriting Agreement and,
if applicable, the Stock Borrowing Agreement, as of the Latest Practicable Date, none of the
Hong Kong Underwriters were interested, legally or beneficially, directly or indirectly, in any
UNDERWRITING
– 510 –
Shares or any securities of any member of the Group or had any right or option (whether legally
enforceable or not) to subscribe for or purchase, or to nominate persons to subscribe for or
purchase, any Shares or any securities of any member of the Group.
Following the completion of the Global Offering, the Hong Kong Underwriters and their
affiliated companies may hold a certain portion of our Shares as a result of fulfilling their
respective obligations under the Hong Kong Underwriting Agreement.
International Offering
International Underwriting Agreement
In connection with the International Offering, our Company expects to enter into the
International Underwriting Agreement with the International Underwriters on the Price
Determination Date. Under the International Underwriting Agreement and subject to the Offer
Size Adjustment Option and the Over-allotment Option, the International Underwriters would,
subject to certain conditions set out therein, agree severally but not jointly to procure
subscribers or purchasers for, or themselves to subscribe for or purchase, their respective
applicable proportions of the International Offer Shares initially being offered pursuant to the
International Offering. It is expected that the International Underwriting Agreement may be
terminated on similar grounds as the Hong Kong Underwriting Agreement. Potential investors
should note that in the event that the International Underwriting Agreement is not entered into,
the Global Offering will not proceed. See the section headed “Structure of the Global Offering
— The International Offering” in this prospectus.
Over-allotment Option
The Company is expected to grant to the International Underwriters the Over-allotment
Option, exercisable by the Joint Representatives (for themselves and on behalf of the
International Underwriters) at any time from the Listing Date until 30 days after the last day
for lodging applications under the Hong Kong Public Offering, pursuant to which the Company
may be required to issue up to not more than 15% of the total number of Offer Shares available
under the Global Offering, including the Shares offered pursuant to the exercise of the Offer
Size Adjustment Option, if any, at the Offer Price to cover over-allocations in the International
Offering, if any, and such number of Shares will be equal to 15,211,500 Offer Shares, assuming
the Offer Size Adjustment Option is not exercised, or 17,493,000 Offer Shares, assuming the
Offer Size Adjustment Option is fully exercised. See the section headed “Structure of the
Global Offering — Over-allotment Option” in this prospectus.
UNDERWRITING
–511–
Commissions and Expenses
Subject to the Hong Kong Underwriting Agreement having become unconditional and not
having been terminated under its terms, the Company will pay the Joint Representatives (for
themselves and on behalf of the Hong Kong Underwriters) an underwriting commission equal
to 1.9% of the aggregate Offer Price of all the Offer Shares, out of which the Hong Kong
Underwriters will pay any sub-underwriting commissions payable.
The Company may, at its sole and absolute discretion, elect to pay to any one or all of the
Underwriters a discretionary incentive fee of up to 0.5% of the aggregate Offer Price of all the
Offer Shares.
For any unsubscribed Hong Kong Offer Shares reallocated to the International Offering,
the underwriting commission will not be paid to the Hong Kong Underwriters but will instead
be paid, at the rate applicable to the International Offering, to the relevant International
Underwriters.
The aggregate underwriting commissions payable to the Underwriters in relation to the
Global Offering (assuming an Offer Price of HK$7.83 per Offer Share (which is the mid-point
of the Offer Price range), the full payment of the discretionary incentive fee and the exercise
of the Offer Size Adjustment Option and the Over-allotment Option in full) will be
approximately HK$25.2 million.
The aggregate underwriting commissions and fees together with the Stock Exchange
listing fees, SFC transaction levy, FRC transaction levy and the Stock Exchange trading fee,
legal and other professional fees and printing and all other expenses relating to the Global
Offering are estimated to be approximately HK$65.2 million (assuming an Offer Price of
HK$7.83 per Offer Share (which is the mid-point of the Offer Price range), the Offer Size
Adjustment Option and the Over-allotment Option are not exercised at all and the full payment
of the discretionary incentive fee) and will be paid by our Company.
The commissions and fees were determined after arm’s length negotiations between our
Company and the Underwriters and/or other parties by reference to the current market
conditions.
Indemnity
Our Company has agreed to indemnify the Joint Sponsors and the Hong Kong
Underwriters for certain losses which they may suffer or incur, including losses arising from
their performance of their obligations under the Hong Kong Underwriting Agreement and any
breach by our Company of the Hong Kong Underwriting Agreement.
UNDERWRITING
– 512 –
ACTIVITIES BY SYNDICATE MEMBERS
The underwriters of the Hong Kong Public Offering and the International Offering
(together, the “Syndicate Members”) and their affiliates may each individually undertake a
variety of activities (as further described below) which do not form part of the underwriting or
stabilizing process.
The Syndicate Members and their affiliates are diversified financial institutions with
relationships in countries around the world. These entities engage in a wide range of
commercial and investment banking, brokerage, funds management, trading, hedging,
investing and other activities for their own account and for the account of others. In the
ordinary course of their various business activities, the Syndicate Members and their respective
affiliates may purchase, sell or hold a broad array of investments and actively trade securities,
derivatives, loans, commodities, currencies, credit default swaps and other financial
instruments for their own account and for the accounts of their customers. Such investment and
trading activities may involve or relate to assets, securities and/or instruments of our Company
and/or persons and entities with relationships with our Company and may also include swaps
and other financial instruments entered into for hedging purposes in connection with the
Group’s loans and other debt.
In relation to our Shares, the activities of the Syndicate Members and their affiliates could
include acting as agent for buyers and sellers of our Shares, entering into transactions with
those buyers and sellers in a principal capacity, including as a lender to initial purchasers of
our Shares (which financing may be secured by our Shares) in the Global Offering, proprietary
trading in our Shares, and entering into over the counter or listed derivative transactions or
listed or unlisted securities transactions (including issuing securities such as derivative
warrants listed on a stock exchange) which have as their underlying assets, assets including our
Shares. Such transactions may be carried out as bilateral agreements or trades with selected
counterparties. Those activities may require hedging activity by those entities involving,
directly or indirectly, the buying and selling of our Shares, which may have a negative impact
on the trading price of our Shares. All such activities could occur in Hong Kong and elsewhere
in the world and may result in the Syndicate Members and their affiliates holding long and/or
short positions in our Shares, in baskets of securities or indices including our Shares, in units
of funds that may purchase our Shares, or in derivatives related to any of the foregoing.
In relation to issues by Syndicate Members or their affiliates of any listed securities
having our Shares as their underlying securities, whether on the Stock Exchange or on any
other stock exchange, the rules of the stock exchange may require the issuer of those securities
(or one of its affiliates or agents) to act as a market maker or liquidity provider in the security,
and this will also result in hedging activity in our Shares in most cases.
UNDERWRITING
– 513 –
All such activities may occur both during and after the end of the stabilizing period
described in the section headed “Structure of the Global Offering” in this prospectus. Such
activities may affect the market price or value of our Shares, the liquidity or trading volume
in our Shares and the volatility of the price of our Shares, and the extent to which this occurs
from day to day cannot be estimated.
It should be noted that when engaging in any of these activities, the Syndicate Members
will be subject to certain restrictions, including the following:
(a) the Syndicate Members (other than the Stabilizing Manager or any person acting for
it) must not, in connection with the distribution of the Offer Shares, effect any
transactions (including issuing or entering into any option or other derivative
transactions relating to the Offer Shares), whether in the open market or otherwise,
with a view to stabilizing or maintaining the market price of any of the Offer Shares
at levels other than those which might otherwise prevail in the open market; and
(b) the Syndicate Members must comply with all applicable laws and regulations,
including the market misconduct provisions of the SFO, including the provisions
prohibiting insider dealing, false trading, price rigging and stock market
manipulation.
Certain of the Syndicate Members or their respective affiliates have provided from time
to time, and expect to provide in the future, investment banking and other services to our
Company and each of its affiliates for which such Syndicate Members or their respective
affiliates have received or will receive customary fees and commissions.
In addition, the Syndicate Members or their respective affiliates may provide financing to
investors to finance their subscriptions of Offer Shares in the Global Offering.
INDEPENDENCE OF THE JOINT SPONSORS
Each of the Joint Sponsors satisfies the independence criteria applicable to sponsors set
out in Rule 3A.07 of the Listing Rules.
UNDERWRITING
– 514 –
THE GLOBAL OFFERING
This prospectus is published in connection with the Hong Kong Public Offering as
part of the Global Offering. China International Capital Corporation Hong Kong
Securities Limited and The Hongkong and Shanghai Banking Corporation Limited (In
alphabetical order) are the Joint Representatives of the Global Offering.
The listing of our Shares on the Stock Exchange is sponsored by the Joint Sponsors. The
Joint Sponsors have made an application on behalf of our Company to the Stock Exchange for
the listing of, and permission to deal in, our Shares in issue and to be issued as mentioned in
this prospectus.
101,411,500 Offer Shares will initially be made available under the Global Offering
comprising:
(a) the Hong Kong Public Offering of initially 10,142,000 Shares (subject to
reallocation and the Offer Size Adjustment Option) in Hong Kong as described in
“— The Hong Kong Public Offering” below; and
(b) the International Offering of initially 91,269,500 Shares (subject to reallocation, the
Offer Size Adjustment Option and the Over-allotment Option) outside the United
States (including to professional and institutional investors within Hong Kong) in
offshore transactions in reliance on Regulation S, as described in “— The
International Offering” below.
Up to 15,211,500 additional Offer Shares may be offered pursuant to the exercise of the
Offer Size Adjustment Option referred to in “— Offer Size Adjustment Option” below.
Furthermore, up to an additional 15,211,500 Offer Shares (assuming the Offer Size Adjustment
Option is not exercised) or up to an additional 17,493,000 Offer Shares (assuming the Offer
Size Adjustment Option is exercised in full) may be offered pursuant to the exercise of the
Over-allotment Option referred to in “— Over-allotment Option” below.
Investors may either:
(i) apply for Hong Kong Offer Shares under the Hong Kong Public Offering; or
(ii) apply for or indicate an interest for International Offer Shares under the
International Offering,
but may not do both.
The Offer Shares will represent approximately 11.3% of the total Shares in issue
immediately following the completion of the Global Offering, assuming the Offer Size
Adjustment Option and the Over-allotment Option are not exercised. If the Over- allotment
Option is exercised in full assuming the Offer Size Adjustment Option is not exercised, the
STRUCTURE OF THE GLOBAL OFFERING
– 515 –
Offer Shares will represent approximately 12.7% of the total Shares in issue immediately
following the completion of the Global Offering. If both the Offer Size Adjustment Option and
the Over-allotment Option are exercised in full, the Offer Shares will represent approximately
14.4% of the total Shares in issue immediately following the completion of the Global
Offering.
References in this prospectus to applications, Application Forms, application monies or
the procedure for applications relate solely to the Hong Kong Public Offering.
THE HONG KONG PUBLIC OFFERING
Number of Offer Shares initially offered
Our Company is initially offering 10,142,000 Shares for subscription by the public in
Hong Kong at the Offer Price, representing 10% of the total number of Offer Shares initially
available under the Global Offering. The number of Offer Shares initially offered under the
Hong Kong Public Offering, subject to any reallocation of Offer Shares between the
International Offering and the Hong Kong Public Offering and the Offer Size Adjustment
Option, will represent approximately 1.1% of the total Shares in issue immediately following
the completion of the Global Offering (assuming the Offer Size Adjustment Option and the
Over-allotment Option are not exercised).
The Hong Kong Public Offering is open to members of the public in Hong Kong as well
as to institutional and professional investors. Professional investors generally include brokers,
dealers, companies (including fund managers) whose ordinary business involves dealing in
shares and other securities and corporate entities that regularly invest in shares and other
securities.
Completion of the Hong Kong Public Offering is subject to the conditions set out in
“— Conditions of the Global Offering” below.
Allocation
Allocation of Offer Shares to investors under the Hong Kong Public Offering will be
based solely on the level of valid applications received under the Hong Kong Public Offering.
The basis of allocation may vary, depending on the number of Hong Kong Offer Shares validly
applied for by applicants. Such allocation could, where appropriate, consist of balloting, which
could mean that some applicants may receive a higher allocation than others who have applied
for the same number of Hong Kong Offer Shares, and those applicants who are not successful
in the ballot may not receive any Hong Kong Offer Shares.
For allocation purposes only, the total number of Hong Kong Offer Shares available under
the Hong Kong Public Offering (after taking into account any reallocation referred to below)
will be divided equally (to the nearest board lot) into two pools: pool A (being 5,071,000
Shares) and pool B (being 5,071,000 Shares). The Hong Kong Offer Shares in pool A will be
STRUCTURE OF THE GLOBAL OFFERING
– 516 –
allocated on an equitable basis to applicants who have applied for Hong Kong Offer Shares
with an aggregate price of HK$5 million (excluding the brokerage, SFC transaction levy, FRC
transaction levy and the Stock Exchange trading fee payable) or less. The Hong Kong Offer
Shares in pool B will be allocated on an equitable basis to applicants who have applied for
Hong Kong Offer Shares with an aggregate price of more than HK$5 million (excluding the
brokerage, SFC transaction levy, FRC transaction levy and the Stock Exchange trading fee
payable) and up to the total value in pool B.
Investors should be aware that applications in pool A and applications in pool B may
receive different allocation ratios. If any Hong Kong Offer Shares in one (but not both) of the
pools are unsubscribed, such unsubscribed Hong Kong Offer Shares will be transferred to the
other pool to satisfy demand in that other pool and be allocated accordingly. For the purpose
of the immediately preceding paragraph only, the “price” for Hong Kong Offer Shares means
the price payable on application therefor (without regard to the Offer Price as finally
determined). Applicants can only receive an allocation of Hong Kong Offer Shares from either
pool A or pool B and not from both pools. Multiple or suspected multiple applications under
the Hong Kong Public Offering and any application for more than 5,071,000 Hong Kong Offer
Shares (being 50% of the Offer Shares initially available under the Hong Kong Public
Offering) is liable to be rejected.
Reallocation
The allocation of the Offer Shares between the Hong Kong Public Offering and the
International Offering is subject to reallocation. Paragraph 4.2 of Practice Note 18 of the
Listing Rules requires a clawback mechanism to be put in place which would have the effect
of increasing the number of Offer Shares under the Hong Kong Public Offering to a certain
percentage of the total number of Offer Shares offered under the Global Offering if certain
prescribed total demand levels are reached.
10,142,000 Offer Shares are initially available in the Hong Kong Public Offering,
representing 10% of the Offer Shares initially available for subscription under the Global
Offering. If the number of Offer Shares validly applied for under the Hong Kong Public
Offering represents (a) 15 times or more but less than 50 times, (b) 50 times or more but less
than 100 times and (c) 100 times or more of the total number of Offer Shares initially available
under the Hong Kong Public Offering, then Offer Shares will be reallocated to the Hong Kong
Public Offering from the International Offering. As a result of such reallocation, the total
number of Offer Shares available under the Hong Kong Public Offering will be increased to
30,424,000 Offer Shares (in the case of (a)), 40,565,000 Offer Shares (in the case of (b)) and
50,706,000 Offer Shares (in the case of (c)), representing approximately 30%, 40% and 50%
of the total number of Offer Shares initially available under the Global Offering, respectively
(before any exercise of the Offer Size Adjustment Option and the Over-allotment Option). In
each case, the additional Offer Shares reallocated to the Hong Kong Public Offering will be
allocated between pool A and pool B and the number of Offer Shares allocated to the
International Offering will be correspondingly reduced in such manner as the Joint
Representatives deem appropriate.
STRUCTURE OF THE GLOBAL OFFERING
– 517 –
In addition, the Joint Representatives may reallocate Offer Shares from the International
Offering to the Hong Kong Public Offering to satisfy valid applications under the Hong Kong
Public Offering.
If the Hong Kong Public Offering is not fully subscribed, the Joint Representatives may
reallocate all or any unsubscribed Hong Kong Offer Shares to the International Offering, in
such proportions as the Joint Representatives deem appropriate.
In addition to any mandatory allocation which may be required, the Joint Representatives
may, at their discretion, reallocate Offer Shares initially allocated for the International Offering
to the Hong Kong Public Offering to satisfy valid applications in pool A and pool B under the
Hong Kong Public Offering in accordance with Guidance Letter HKEX-GL-91-18. In the event
that (i) the International Offer Shares are undersubscribed and the Hong Kong Offer Shares are
fully subscribed or oversubscribed irrespective of the number of times; or (ii) the International
Offer Shares are fully subscribed or oversubscribed and the Hong Kong Offer Shares are fully
subscribed or oversubscribed as to less than 15 times of the number of Hong Kong Offer Shares
initially available under the Hong Kong Public Offering, then the Joint Representatives may
only reallocate Offer Shares from the International Offering to the Hong Kong Public Offering
other than pursuant to Practice Note 18 of the Listing Rules on the following conditions in
accordance with Guidance Letter HKEX-GL91-18:
(i) the total number of Offer Shares available under the Hong Kong Public Offering
following such reallocation shall be not more than double the number of Hong Kong
Offer Shares initially available under the Hong Kong Public Offering (i.e.
20,284,000 Offer Shares); and
(ii) the final Offer Price shall be fixed at the bottom of the Offer Price Range stated in
this prospectus.
Applications
Each applicant under the Hong Kong Public Offering will be required to give an
undertaking and confirmation in the application submitted by him that he and any person(s) for
whose benefit he is making the application has not applied for or taken up, or indicated an
interest for, and will not apply for or take up, or indicate an interest for, any International Offer
Shares under the International Offering. Such applicant’s application is liable to be rejected if
such undertaking and/or confirmation is/are breached and/or untrue (as the case may be) or if
he has been or will be placed or allocated International Offer Shares under the International
Offering.
Applicants under the Hong Kong Public Offering are required to pay, on application, the
maximum Offer Price of HK$8.14 per Offer Share in addition to the brokerage, SFC
transaction levy, FRC transaction levy and the Stock Exchange trading fee payable on each
Offer Share, amounting to a total of HK$4,111.02 for one board lot of 500 Shares. If the Offer
Price, as finally determined in the manner described in “— Pricing and Allocation” below, is
STRUCTURE OF THE GLOBAL OFFERING
– 518 –
less than the maximum Offer Price of HK$8.14 per Offer Share, appropriate refund payments
(including the brokerage, SFC transaction levy, FRC transaction levy and the Stock Exchange
trading fee attributable to the surplus application monies) will be made to successful
applicants, without interest.
THE DISTRIBUTION
Pursuant to the Listing Rules and in accordance with the corporate structure and
ownership of our Company, the Listing will constitute a Spin-off from China Jinmao, which
will be effected by way of the Distribution and the Global Offering. For details of the
Distribution, see “The Spin-off and Distribution” in this prospectus.
THE INTERNATIONAL OFFERING
Number of Offer Shares initially offered
The International Offering will consist of an offering of initially 91,269,500 Shares being
offered by our Company, representing 90% of the total number of Offer Shares initially
available under the Global Offering (subject to reallocation, the Offer Size Adjustment Option
and the Over-allotment Option). The number of Offer Shares initially offered under the
International Offering, subject to any reallocation of Offer Shares between the International
Offering and the Hong Kong Public Offering, will represent approximately 10.1% of the total
Shares in issue immediately following the completion of the Global Offering (assuming the
Offer Size Adjustment Option and the Over-allotment Option are not exercised).
Allocation
The International Offering will involve private placements of the Offer Shares to
institutional and professional investors and other investors anticipated to have a sizeable
demand for our Offer Shares in Hong Kong and other jurisdictions outside the United States
in offshore transactions in reliance on Regulation S. Professional investors generally include
brokers, dealers, companies (including fund managers) whose ordinary business involves
dealing in shares and other securities and corporate entities which regularly invest in shares
and other securities. Allocation of Offer Shares pursuant to the International Offering will be
effected in accordance with the “book-building” process described in “— Pricing and
Allocation” below and based on a number of factors, including the level and timing of demand,
the total size of the relevant investor’s invested assets or equity assets in the relevant sector and
whether or not it is expected that the relevant investor is likely to buy further Shares and/or
hold or sell its Shares after the Listing. Such allocation is intended to result in a distribution
of the Shares on a basis which would lead to the establishment of a solid professional and
institutional shareholder base to the benefit of the Group and the Shareholders as a whole.
STRUCTURE OF THE GLOBAL OFFERING
– 519 –
The Joint Representatives (on behalf of the Underwriters) may require any investor who
has been offered Offer Shares under the International Offering and who has made an
application under the Hong Kong Public Offering to provide sufficient information to the Joint
Representatives so as to allow them to identify the relevant applications under the Hong Kong
Public Offering and to ensure that they are excluded from any allocation of Offer Shares under
the Hong Kong Public Offering.
Reallocation
The total number of Offer Shares to be issued or sold pursuant to the International
Offering may change as a result of the clawback arrangement described in “— The Hong Kong
Public Offering — Reallocation” above, the exercise of the Offer Size Adjustment Option
and/or the Over-allotment Option in whole or in part and/or any reallocation of unsubscribed
Offer Shares originally included in the Hong Kong Public Offering.
OFFER SIZE ADJUSTMENT OPTION
In connection with the Global Offering, the Company has the Offer Size Adjustment
Option under the Hong Kong Underwriting Agreement. The Offer Size Adjustment Option
provides flexibility to increase the number of Offer Shares available for purchase under the
Global Offering to cover additional market demand, if any. The Offer Size Adjustment Option
is exercisable by the Company on or before the Price Determination Date, and will lapse
immediately thereafter.
Under the Offer Size Adjustment Option, the Company may issue any number of Shares
up to an aggregate of 15,211,500 additional Offer Shares at the Offer Price. These Offer Size
Adjustment Option Shares, if any, will be allocated in such manner as closely as practicable
to maintain the proportionality between the Hong Kong Public Offering and the International
Offering following the application of the clawback arrangement described in “–Reallocation”
in this section and the Joint Representatives shall allocate additional new Shares to be offered
by the Company pursuant to the International Offering to the Hong Kong Public Offering in
order to maintain such proportionality and the relevant number of Offer Size Adjustment
Option Shares shall be allocated to the International Offering to maintain such proportionality.
If the Offer Size Adjustment Option is exercised in full, the Offer Size Adjustment Option
Shares to be issued pursuant thereto will represent approximately 1.66% of the total Shares in
issue immediately following the completion of the Global Offering (assuming the Over-
allotment Option is not exercised) and the exercise of the Offer Size Adjustment Option.
STRUCTURE OF THE GLOBAL OFFERING
– 520 –
The dilution effect of the Offer Size Adjustment Option (assuming the Over-allotment
Option is not exercised) is set out below:
Number of Shares
issued under the
Global Offering
before the exercise
of the Offer Size
Adjustment Option
(“Original
Subscribers”)
Approximate
percentage of total
issued share capital
held by the Original
Subscribers before
the exercise of the
Offer Size
Adjustment Option
Number of
Shares issued
under the Global
Offering after
the exercise of
the Offer Size
Adjustment
Option
Approximate
percentage of total
issued share capital
held by the Original
Subscribers after
the exercise of the
Offer Size
Adjustment Option
101,411,500 11.25% 116,623,000 11.06%
The Offer Size Adjustment Option will not be used for price stabilization purposes and
will not be subject to the provisions of the Securities and Futures (Price Stabilization) Rules
(Chapter 571W of the Laws of Hong Kong). The Offer Size Adjustment Option will be in
addition to the Over-Allotment Option.
The Company will disclose in its allotment results announcement if and to what extent the
Offer Size Adjustment Option has been exercised, or will confirm that if the Offer Size
Adjustment Option has not been exercised by the Price Determination Date, it will lapse and
cannot be exercised at any future date.
OVER-ALLOTMENT OPTION
In connection with the Global Offering, our Company is expected to grant the
Over-allotment Option to the International Underwriters, exercisable by the Joint
Representatives (for themselves and on behalf of the International Underwriters).
Pursuant to the Over-allotment Option, the International Underwriters will have the right,
exercisable by the Joint Representatives (for themselves and on behalf of the International
Underwriters) at any time from the Listing Date until 30 days after the last day for lodging
applications under the Hong Kong Public Offering, to require our Company to issue up to an
aggregate of 15,211,500 Offer Shares (assuming the Offer Size Adjustment Option is not
exercised), or 17,493,000 Offer Shares (assuming the Offer Size Adjustment Option is fully
exercised), representing not more than 15% of the total number of Offer Shares under the
Global Offering, at the Offer Price under the International Offering to cover over-allocations
in the International Offering, if any.
If the Offer Size Adjustment Option is not exercised and the Over-allotment Option is
exercised in full, the additional Offer Shares to be issued pursuant thereto will represent
approximately 1.66% of the total Shares in issue immediately following the completion of the
Global Offering and the exercise of the Over-allotment Option. If the Offer Size Adjustment
Option and the Over-allotment Option are exercised in full, the additional Offer Shares to be
STRUCTURE OF THE GLOBAL OFFERING
– 521 –
issued pursuant to the Over-allotment Option will represent approximately 1.87% of the total
Shares in issue immediately following the completion of the Global Offering and the
Over-allotment Option. If the Over-allotment Option is exercised, an announcement will be
made.
STABILIZATION
Stabilization is a practice used by underwriters in some markets to facilitate the
distribution of securities. To stabilize, the underwriters may bid for, or purchase, the securities
in the secondary market during a specified period of time, to retard and, if possible, prevent
a decline in the initial public market price of the securities below the offer price. Such
transactions may be effected in all jurisdictions where it is permissible to do so, in each case
in compliance with all applicable laws and regulatory requirements, including those of Hong
Kong. In Hong Kong, the price at which stabilization is effected is not permitted to exceed the
offer price.
In connection with the Global Offering, the Stabilizing Manager (or any person acting for
it), on behalf of the Underwriters, may over-allocate or effect transactions with a view to
stabilizing or supporting the market price of our Shares at a level higher than that which might
otherwise prevail for a limited period after the Listing Date. However, there is no obligation
on the Stabilizing Manager (or any person acting for it) to conduct any such stabilizing action.
Such stabilizing action, if taken, (a) will be conducted at the absolute discretion of the
Stabilizing Manager (or any person acting for it) and in what the Stabilizing Manager
reasonably regards as the best interest of our Company, (b) may be discontinued at any time
and (c) is required to be brought to an end within 30 days from the last day for lodging
applications under the Hong Kong Public Offering.
Stabilization action permitted in Hong Kong pursuant to the Securities and Futures (Price
Stabilizing) Rules of the SFO includes (a) over-allocating for the purpose of preventing or
minimizing any reduction in the market price of our Shares, (b) selling or agreeing to sell our
Shares so as to establish a short position in them for the purpose of preventing or minimizing
any reduction in the market price of our Shares, (c) purchasing, or agreeing to purchase, our
Shares pursuant to the Over-allotment Option in order to close out any position established
under paragraph (a) or (b) above, (d) purchasing, or agreeing to purchase, any of our Shares
for the sole purpose of preventing or minimizing any reduction in the market price of our
Shares, (e) selling or agreeing to sell any Shares in order to liquidate any position established
as a result of those purchases and (f) offering or attempting to do anything as described in
paragraph (b), (c), (d) or (e) above.
Specifically, prospective applicants for and investors in our Offer Shares should note that:
(a) the Stabilizing Manager (or any person acting for it) may, in connection with the
stabilizing action, maintain a long position in our Shares;
STRUCTURE OF THE GLOBAL OFFERING
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(b) there is no certainty as to the extent to which and the time or period for which the
Stabilizing Manager (or any person acting for it) will maintain such a long position;
(c) liquidation of any such long position by the Stabilizing Manager (or any person
acting for it) and selling in the open market may have an adverse impact on the
market price of our Shares;
(d) no stabilizing action can be taken to support the price of our Shares for longer than
the stabilization period, which will begin on the Listing Date, and is expected to
expire on the 30th day after the last day for lodging applications under the Hong
Kong Public Offering. After this date, when no further stabilizing action may be
taken, demand for our Shares, and therefore the price of the Shares, could fall;
(e) the price of our Shares cannot be assured to stay at or above the Offer Price by the
taking of any stabilizing action; and
(f) stabilizing bids or transactions effected in the course of the stabilizing action may
be made at any price at or below the Offer Price and can, therefore, be done at a
price below the price paid by applicants for, or investors in, the Offer Shares.
Our Company will ensure or procure that an announcement in compliance with the
Securities and Futures (Price Stabilizing) Rules of the SFO will be made within seven days of
the expiration of the stabilization period.
Over-Allocation
Following any over-allocation of Shares in connection with the Global Offering, the
Stabilizing Manager (or any person acting for it) may cover such over-allocations by exercising
the Over-allotment Option in full or in part, by using Shares purchased by the Stabilizing
Manager (or any person acting for it) in the secondary market at prices that do not exceed the
Offer Price or through the Stock Borrowing Agreement as detailed below or a combination of
these means. The number of the Offer Shares which can be over-allocated will not exceed the
number of Offer Shares which may be sold pursuant to full exercise of the Over-allotment
Option.
STOCK BORROWING AGREEMENT
In order to facilitate the settlement of over-allocations, if any, in connection with the
Global Offering, the Stabilizing Manager (or any person acting for it) may choose to borrow
up to 17,493,000 Shares (being the maximum number of Shares which may be issued pursuant
to the exercise of the Over-allotment Option, assuming the Offer Size Adjustment Option is
exercised in full) from China Jinmao, pursuant to the Stock Borrowing Agreement, which is
expected to be entered into between the Stabilizing Manager (or its affiliates) and China
Jinmao on or around the Price Determination Date.
STRUCTURE OF THE GLOBAL OFFERING
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If the Stock Borrowing Agreement with China Jinmao is entered into, the borrowing of
Shares will only be effected by the Stabilizing Manager (or any person acting for it) for the
settlement of over-allocations in the International Offering and such borrowing arrangement is
not subject to the restrictions of Rule 10.07(1)(a) of the Listing Rules, provided that the
requirements set out in Rule 10.07(3) of the Listing Rules are complied with.
The same number of Shares so borrowed must be returned to China Jinmao or its
nominees, as the case may be, on or before the third business day following the earlier of (a)
the last day for exercising the Over-allotment Option and (b) the day on which the
Over-allotment Option is exercised in full.
The Shares borrowing arrangement described above will be effected in compliance with
all applicable laws, rules and regulatory requirements. No payment will be made to China
Jinmao by the Stabilizing Manager (or any person acting for it) in relation to such Shares
borrowing arrangement.
OFFER SIZE
The allocation and the total number of Offer Shares under the Global Offering will be
determined in the following manner:
• The allocation of Offer Shares between the International Offering and the Hong
Kong Public Offering will be subject to a reallocation adjustment depending on the
number of Offer Shares validly applied for under the Hong Kong Public Offering.
See “— The Hong Kong Public Offering — Reallocation” above for details.
• If the Offer Size Adjustment Option is exercised in full, the additional Offer Shares
made available as a result, representing approximately 15% of the number of Offer
Shares initially being offered under the Global Offering, will be allocated so as to
maintain the proportionality between the Hong Kong Public Offering and the
International Offering on a post-clawback basis. The Offer Size Adjustment Option
will lapse if it is not exercised by the Price Determination Date. See “— Offer Size
Adjustment Option” above for details.
• The number of Offer Shares to be made available under the International Offering
may be further increased if the Over-allotment Option is exercised. The maximum
number of additional International Offer Shares to be offered pursuant to the
exercise of the Over-allotment Option will represent approximately 15% of the
number of Offer Shares being offered under the Global Offering (including the
shares offered pursuant to the exercise of the Offer Size Adjustment Option, if any).
See “— Over-allotment Option” above for details.
STRUCTURE OF THE GLOBAL OFFERING
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The table below sets out a summary of the total number of Hong Kong Offer Shares and
International Offer Shares being offered in the Global Offering under different scenarios,
depending on (a) whether a reallocation pursuant to the clawback arrangement described in “—
The Hong Kong Public Offering — Reallocation” above occurs and (b) whether either of the
Offer Size Adjustment Option and the Over-allotment Option is exercised at all or exercised
in full, or both are exercised in full.
No clawback
reallocation
30%
clawback
reallocation
40%
clawback
reallocation
50%
clawback
reallocation
Total number of
Offer Shares
before the
exercise of the
Offer Size
Adjustment
Option and the
Over-allotment
Option
10,142,000
Hong Kong
Offer Shares
30,424,000
Hong Kong
Offer Shares
40,565,000
Hong Kong
Offer Shares
50,706,000
Hong Kong
Offer Shares
91,269,500
International
Offer Shares
70,987,500
International
Offer Shares
60,846,500
International
Offer Shares
50,705,500
International
Offer Shares
Total number of
Offer Shares
following the
exercise in full
of the Offer Size
Adjustment
Option only (the
Over-allotment
Option is not
exercised)
11,663,000
Hong Kong
Offer Shares
34,987,000
Hong Kong
Offer Shares
46,650,000
Hong Kong
Offer Shares
58,312,000
Hong Kong
Offer Shares
104,960,000
International
Offer Shares
81,636,000
International
Offer Shares
69,973,000
International
Offer Shares
58,311,000
International
Offer Shares
Total number of
Offer Shares
following the
exercise in full
of the Over-
allotment Option
only (the Offer
Size Adjustment
Option is not
exercised)
10,142,000
Hong Kong
Offer Shares
30,424,000
Hong Kong
Offer Shares
40,565,000
Hong Kong
Offer Shares
50,706,000
Hong Kong
Offer Shares
106,481,000
International
Offer Shares
86,199,000
International
Offer Shares
76,058,000
International
Offer Shares
65,917,000
International
Offer Shares
STRUCTURE OF THE GLOBAL OFFERING
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No clawback
reallocation
30%
clawback
reallocation
40%
clawback
reallocation
50%
clawback
reallocation
Total number of
Offer Shares
following the
full exercise of
the Offer Size
Adjustment
Option and the
Over-allotment
Option
11,663,000
Hong Kong
Offer Shares
34,987,000
Hong Kong
Offer Shares
46,650,000
Hong Kong
Offer Shares
58,312,000
Hong Kong
Offer Shares
122,453,000
International
Offer Shares
99,129,000
International
Offer Shares
87,466,000
International
Offer Shares
75,804,000
International
Offer Shares
PRICING AND ALLOCATION
Pricing for the Offer Shares for the purpose of the various offerings under the Global
Offering will be fixed on the Price Determination Date, which is expected to be on or about
Thursday, March 3, 2022 and, in any event, no later than Wednesday, March 9, 2022 by
agreement between the Joint Representatives (for themselves and on behalf of the
Underwriters) and our Company, and the number of Offer Shares to be allocated under the
various offerings will be determined shortly thereafter.
The Offer Price will not be more than HK$8.14 per Offer Share and is expected to be not
less than HK$7.52 per Offer Share, unless otherwise announced, as further explained below.
Applicants under the Hong Kong Public Offering must pay, on application, the maximum Offer
Price of HK$8.14 per Offer Share plus brokerage of 1.0%, SFC transaction levy of 0.0027%,
FRC transaction levy of 0.00015% and Stock Exchange trading fee of 0.005%, amounting to
a total of HK$4,111.02 for one board lot of 500 Shares. Prospective investors should be
aware that the Offer Price to be determined on the Price Determination Date may be, but
is not expected to be, lower than the minimum Offer Price stated in this prospectus.
The International Underwriters will be soliciting from prospective investors indications
of interest in acquiring Offer Shares in the International Offering. Prospective professional and
institutional investors will be required to specify the number of Offer Shares under the
International Offering they would be prepared to acquire either at different prices or at a
particular price. This process, known as “book-building,” is expected to continue up to, and to
cease on or about, the last day for lodging applications under the Hong Kong Public Offering.
The Joint Representatives (on behalf of the Underwriters) may, where they deem
appropriate, based on the level of interest expressed by prospective investors during the
book-building process in respect of the International Offering, and with the consent of our
Company, reduce the number of Offer Shares offered and/or the Offer Price range below that
stated in this prospectus at any time on or prior to the morning of the last day for lodging
applications under the Hong Kong Public Offering. In such a case, our Company will, as soon
STRUCTURE OF THE GLOBAL OFFERING
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as practicable following the decision to make such reduction, and in any event not later than
the morning of the last day for lodging applications under the Hong Kong Public Offering,
cause to be published on the websites of our Company and the Stock Exchange at
www.jinmaowy.com and www.hkexnews.hk, respectively, notices of the reduction. Upon the
issue of such a notice and supplemental prospectus, the revised number of Offer Shares and/or
the Offer Price range will be final and conclusive and the Offer Price, if agreed upon by the
Joint Representatives (on behalf of the Underwriters) and our Company, will be fixed within
such revised Offer Price range.
Before submitting applications for the Hong Kong Offer Shares, applicants should have
regard to the possibility that any announcement of a reduction in the number of Offer Shares
and/or the Offer Price range may not be made until the last day for lodging applications under
the Hong Kong Public Offering. Such notice will also include confirmation or revision, as
appropriate, of the working capital statement and the Global Offering statistics as currently set
out in this prospectus, and any other financial information which may change as a result of any
such reduction. In the absence of any such notice so published, the number of Offer Shares will
not be reduced and/or the Offer Price, if agreed upon by the Joint Representatives (for
themselves and on behalf of the Underwriters) and our Company, will under no circumstances
be set outside the Offer Price range as stated in this prospectus.
However, if the number of Offer Shares and/or the Offer Price range is reduced,
applicants under the Hong Kong Public Offering will be entitled to withdraw their applications
unless positive confirmations from the applicants to proceed are received.
ANNOUNCEMENT OF FINAL OFFER PRICE
The final Offer Price, the level of indications of interest in the International Offering, the
level of applications in the Hong Kong Public Offering, the basis of allocations of the Hong
Kong Offer Shares, the results of allocations in the Hong Kong Public Offering and if and to
what extent the Offer Size Adjustment Option has been exercised are expected to be made
available through a variety of channels in the manner described in the section headed “How to
Apply for Hong Kong Offer Shares — D. Publication of Results” in this prospectus.
UNDERWRITING
The Hong Kong Public Offering is fully underwritten by the Hong Kong Underwriters
under the terms and conditions of the Hong Kong Underwriting Agreement and is subject to
the Joint Representatives (for themselves and on behalf of the Underwriters) and our Company
agreeing on the Offer Price.
Our Company expects to enter into the International Underwriting Agreement relating to
the International Offering on the Price Determination Date.
These underwriting arrangements, including the Underwriting Agreements, are
summarized in the section headed “Underwriting” of this prospectus.
STRUCTURE OF THE GLOBAL OFFERING
– 527 –
CONDITIONS OF THE GLOBAL OFFERING
Acceptance of all applications for Offer Shares will be conditional on:
(a) the Stock Exchange granting approval for the listing of, and permission to deal in,
our Shares in issue and to be issued pursuant to the Global Offering (including any
additional Shares which may be issued pursuant to the exercise of the Offer Size
Adjustment Option and the Over-allotment Option) and the Bonus Issue, on the
Main Board of the Stock Exchange, the Distribution and such approval not
subsequently having been withdrawn or revoked prior to the Listing Date;
(b) the Offer Price having been agreed between the Joint Representatives (for
themselves and on behalf of the Underwriters) and our Company;
(c) the execution and delivery of the International Underwriting Agreement on or about
the Price Determination Date; and
(d) the obligations of the Hong Kong Underwriters under the Hong Kong Underwriting
Agreement and the obligations of the International Underwriters under the
International Underwriting Agreement becoming and remaining unconditional and
not having been terminated in accordance with the terms of the respective
agreements,
in each case on or before the dates and times specified in the respective Underwriting
Agreements (unless and to the extent such conditions are validly waived on or before such
dates and times) and, in any event, not later than the date which is 30 days after the date of
this prospectus.
If, for any reason, the Offer Price is not agreed between the Joint Representatives (for
themselves and on behalf of the Underwriters) and our Company on or before Wednesday,
March 9, 2022 the Global Offering will not proceed and will lapse.
The consummation of each of the Hong Kong Public Offering and the International
Offering is conditional upon the other offering becoming unconditional and not having been
terminated in accordance with its terms.
If the above conditions are not fulfilled or waived prior to the dates and times specified,
the Global Offering will lapse and the Stock Exchange will be notified immediately. Notice of
the lapse of the Hong Kong Public Offering will be published by our Company on the websites
of our Company and the Stock Exchange at www.jinmaowy.com and www.hkexnews.hk,
respectively, on the next day following such lapse. In such a situation, all application monies
will be returned, without interest, on the terms set out in “How to Apply for Hong Kong Offer
Shares — F. Refund of Application Monies.” In the meantime, all application monies will be
held in separate bank account(s) with the receiving banks or other bank(s) in Hong Kong
licensed under the Banking Ordinance (Chapter 155 of the Laws of Hong Kong).
STRUCTURE OF THE GLOBAL OFFERING
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Share certificates for the Offer Shares will only become valid at 8:00 a.m. on Thursday,
March 10, 2022 provided that the Global Offering has become unconditional in all respects at
or before that time and the right of termination as described in the section headed
“Underwriting — Underwriting Arrangements and Expenses — Hong Kong Public Offering —
Grounds for Termination” in this prospectus has not been exercised.
ADMISSION OF OUR SHARES INTO CCASS
All necessary arrangements have been made enabling our Shares to be admitted into
CCASS.
If the Stock Exchange grants the listing of, and permission to deal in, our Shares and the
Company complies with the stock admission requirements of HKSCC, our Shares will be
accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with
effect from the date of commencement of dealings in our Shares on the Stock Exchange or any
other date HKSCC chooses. Settlement of transactions between participants of the Stock
Exchange is required to take place in CCASS on the second settlement day after any trading
day.
All activities under CCASS are subject to the General Rules of CCASS and CCASS
Operational Procedures in effect from time to time.
Investors should seek the advice of their stockbroker or other professional advisor for
details of the settlement arrangements as such arrangement may affect their rights and interests.
DEALINGS IN THE SHARES
Assuming that the Hong Kong Public Offering becomes unconditional at or before 8:00
a.m. in Hong Kong on Thursday, March 10, 2022, it is expected that dealings in our Shares on
the Stock Exchange will commence at 9:00 a.m. on Thursday, March 10, 2022. Our Shares will
be traded in board lots of 500 Shares each and the stock code of our Shares will be 00816.
STRUCTURE OF THE GLOBAL OFFERING
– 529 –
IMPORTANT NOTICE TO INVESTORS:
FULLY ELECTRONIC APPLICATION PROCESS
We have adopted a fully electronic application process for the Hong Kong
Public Offering. We will not provide any printed copies of this prospectus or any
printed copies of any application forms for use by the public.
This document is available at the website of the Hong Kong Stock Exchange at
www.hkexnews.hk under the “HKEXnews > New Listings > New Listing Information”
section, and our website at www.jinmaowy.com. If you require a printed copy of this
document, you may download and print from the website addresses above.
The contents of the electronic version of the prospectus are identical to the printed
prospectus as registered with the Registrar of Companies in Hong Kong pursuant to
Section 38D of the Companies (Winding Up and Miscellaneous Provisions) Ordinance.
Set out below are procedures through which you can apply for the Hong Kong Offer
Shares electronically. We will not provide any physical channels to accept any
application for the Hong Kong Offer Shares by the public.
If you are an intermediary, broker or agent, please remind your customers, clients
or principals, as applicable, that this document is available online at the website
addresses above.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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A. APPLICATIONS FOR THE HONG KONG OFFER SHARES
1. How to Apply
If you apply for Hong Kong Offer Shares, then you may not apply for or indicate an
interest for International Offer Shares.
We will not provide any printed application forms for use by the public.
To apply for the Hong Kong Offer Shares, you may:
(1) apply online through the White Form eIPO service at www.eipo.com.hk;or
(2) apply through CCASS EIPO service to electronically cause HKSCC Nominees
to apply on your behalf, including by:
(i) instructing your broker or custodian who is a CCASS Clearing
Participant or a CCASS Custodian Participant to give electronic
application instructions via CCASS terminals to apply for the Hong
Kong Offer Shares on your behalf; or
(ii) (if you are an existing CCASS Investor Participant) giving electronic
application instructions through the CCASS Internet System
(https://ip.ccass.com) or through the CCASS Phone System by calling
+852 2979 7888 (using the procedures in HKSCC’s “An Operating Guide
for Investor Participants” in effect from time to time). HKSCC can also
input electronic application instructions for CCASS Investor
Participants through HKSCC’s Customer Service Center at 1/F, One &
Two Exchange Square, 8 Connaught Place, Central, Hong Kong by
completing an input request.
If you apply through channel (1) above, the Hong Kong Offer Shares successfully
applied for will be issued in your own name.
If you apply through channels (2)(i) or (2)(ii) above, the Hong Kong Offer Shares
successfully applied for will be issued in the name of HKSCC Nominees and deposited
directly into CCASS to be credited to your or a designated CCASS Participant’s stock
account.
None of you or your joint applicant(s) may make more than one application, except
where you are a nominee and provide the required information in your application.
We, the Joint Representatives, the White Form eIPO Service Provider and our and
their respective agents may reject or accept any application, in full or in part, for any
reason at our or their discretion.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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2. Who Can Apply
Eligibility for the Application
You can apply for the Hong Kong Offer Shares if you or any person(s) for whose
benefit you are applying:
• are 18 years of age or older;
• have a Hong Kong address; and
• are outside the United States, and are not a United States Person (as defined in
Regulation S under the U.S. Securities Act).
If an application is made by a person under a power of attorney, we and the Joint
Representatives may accept it at our or their discretion, and on any conditions we or they
think fit, including requiring evidence of the attorney’s authority.
The number of joint applicants may not exceed four and they may not apply by
means of the White Form eIPO service for the Hong Kong Offer Shares.
Unless permitted by the Listing Rules or any relevant waivers that have been granted
by the Stock Exchange, you cannot apply for any Hong Kong Offer Shares if:
• you are an existing beneficial owner of Shares and/or a substantial shareholder
of any of our subsidiaries;
• you are our director or chief executive and/or a director or chief executive
officer of its subsidiaries;
• you are a close associate (as defined in the Listing Rules) of any of the above
persons; or
• you have been allocated or have applied for any International Offer Shares or
otherwise participate in the International Offering.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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Items Required for the Application
If you apply for the Hong Kong Offer Shares online through the White Form eIPO
service, you must:
• have a valid Hong Kong identity card number; and
• provide a valid e-mail address and a contact telephone number.
If you are applying for the Hong Kong Offer Shares online by instructing your
broker or custodian who is a CCASS Clearing Participant or a CCASS Custodian
Participant to give electronic application instructions via CCASS terminals, please
contact them for the items required for the application.
3. Terms and Conditions of an Application
By applying through the application channels specified in this prospectus you:
• undertake to execute all relevant documents and instruct and authorize us and/or the
Joint Representatives (or their agents or nominees), as our agents, to execute any
documents for you and to do on your behalf all things necessary to register any Hong
Kong Offer Shares allocated to you in your name or in the name of HKSCC
Nominees as required by the Articles of Association;
• agree to comply with our Articles of Association, the Companies (Winding Up and
Miscellaneous Provisions) Ordinance and the Companies Ordinance;
• confirm that you have read the terms and conditions and application procedures set
out in this prospectus and agree to be bound by them;
• confirm that you have received and read this prospectus and have relied only on the
information and representations in this prospectus in making your application and
will not rely on any other information or representations, except those in any
supplement to this prospectus;
• confirm that you are aware of the restrictions on the Global Offering set out in this
prospectus;
• agree that none of us, the Relevant Persons and the White Form eIPO Service
Provider is or will be liable for any information and representations not in this
prospectus (and any supplement to this prospectus);
• undertake and confirm that you or the person(s) for whose benefit you have made
the application have not applied for or taken up, or indicated an interest for, and will
not apply for or take up, or indicate an interest for, any International Offer Shares
nor participated in the International Offering;
HOW TO APPLY FOR HONG KONG OFFER SHARES
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• agree to disclose to us, the Hong Kong Share Registrar, the receiving banks and the
Relevant Persons any personal data which we or any of them may require about you
and the person(s) for whose benefit you have made the application;
• if the laws of any place outside Hong Kong apply to your application, agree and
warrant that you have complied with all such laws and neither we nor the Relevant
Persons will breach any laws outside Hong Kong as a result of the acceptance of
your offer to purchase, or any action arising from your rights and obligations under
the terms and conditions in this prospectus;
• agree that once your application has been accepted, you may not rescind it because
of an innocent misrepresentation;
• agree that your application, any acceptance of it and the resulting contract will be
governed by, and construed in accordance with the laws of Hong Kong;
• represent, warrant and undertake that (i) you understand that the Hong Kong Offer
Shares have not been and will not be registered under the U.S. Securities Act; and
(ii) you and any person for whose benefit you are applying for the Hong Kong Offer
Shares are outside the United States (as defined in Regulation S) or are a person
described in paragraph (h)(3) of Rule 902 of Regulation S;
• warrant that the information you have provided is true and accurate;
• agree to accept the Hong Kong Offer Shares applied for or any lesser number
allocated to you under the application;
• authorize (i) us to place your name(s) or the name of HKSCC Nominees on our
register of members as the holder(s) of any Hong Kong Offer Shares allocated to you
and such other registers as required under our Articles of Association and (ii) us
and/or our agents to send any Share certificate(s) and/or any e-Refund payment
instructions and/or any refund check(s) to you or the first-named applicant for joint
applications by ordinary post at your own risk to the address stated on the
application, unless you have fulfilled the criteria mentioned in “— Personal
Collection” below to collect the Share certificate(s) and/or refund check(s) in
person;
• declare and represent that this is the only application made and the only application
intended by you to be made to benefit you or the person for whose benefit you are
applying;
• understand that we, our directors and the Joint Representatives will rely on your
declarations and representations in deciding whether or not to allocate any of the
Hong Kong Offer Shares to you and that you may be prosecuted for making a false
declaration;
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 534 –
• (if the application is made for your own benefit) warrant that no other application
has been or will be made for your benefit by giving electronic application
instructions to HKSCC directly or indirectly or through the White Form eIPO
service or by any one as your agent or by any other person; and
• (if you are making the application as an agent for the benefit of another person)
warrant that (i) no other application has been or will be made by you as agent for
or for the benefit of that person or by that person or by any other person as agent
for that person by giving electronic application instructions to HKSCC and (ii)
you have due authority to give electronic application instructions on behalf of that
other person as its agent.
Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance
For the avoidance of doubt, we and all other parties involved in the preparation of
this prospectus acknowledge that each applicant and CCASS Participant who gives or
causes to give electronic application instructions is a person who may be entitled to
compensation under Section 40 of the Companies (Winding Up and Miscellaneous
Provisions) Ordinance.
4. Minimum Application Amount and Permitted Numbers
Your application through the White Form eIPO service or the CCASS EIPO service
must be for a minimum of 500 Hong Kong Offer Shares and in one of the numbers set out in
the table. You are required to pay the amount next to the number you select.
JINMAO PROPERTY SERVICES CO., LIMITED (Stock Code: 00816)
(HK$8.14 per Hong Kong Offer Share)
NUMBER OF HONG KONG OFFER SHARES THAT MAY BE APPLIED FOR AND PAYMENTS
No. of
Hong Kong
Offer Shares
applied for
Amount
payable on
application
No. of
Hong Kong
Offer Shares
applied for
Amount
payable on
application
No. of
Hong Kong
Offer Shares
applied for
Amount
payable on
application
No. of
Hong Kong
Offer Shares
applied for
Amount
payable on
application
HK$ HK$ HK$ HK$
500 4,111.02 8,000 65,776.32 150,000 1,233,305.85 1,000,000 8,222,038.99
1,000 8,222.04 9,000 73,998.35 200,000 1,644,407.80 1,500,000 12,333,058.49
1,500 12,333.06 10,000 82,220.39 250,000 2,055,509.75 2,000,000 16,444,077.98
2,000 16,444.07 15,000 123,330.59 300,000 2,466,611.69 2,500,000 20,555,097.48
2,500 20,555.10 20,000 164,440.78 350,000 2,877,713.64 3,000,000 24,666,116.97
3,000 24,666.12 25,000 205,550.98 400,000 3,288,815.59 3,500,000 28,777,136.47
3,500 28,777.13 30,000 246,661.17 450,000 3,699,917.54 4,000,000 32,888,155.96
4,000 32,888.16 35,000 287,771.37 500,000 4,111,019.50 4,500,000 36,999,175.46
4,500 36,999.17 40,000 328,881.56 600,000 4,933,223.40 5,071,000
(1)
41,693,959.72
5,000 41,110.20 45,000 369,991.76 700,000 5,755,427.30
6,000 49,332.23 50,000 411,101.95 800,000 6,577,631.19
7,000 57,554.28 100,000 822,203.90 900,000 7,399,835.09
Note:
(1)
Maximum number of Hong Kong Offer Shares you may apply for.
No application for any other number of the Hong Kong Offer Shares will be considered
and any such application is liable to be rejected.
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 535 –
5. Applying Through the White Form eIPO Service
General
Individuals who meet the criteria in “— Who Can Apply” above may apply through
the White Form eIPO service for the Offer Shares to be allocated and registered in their
own names through the designated website at www.eipo.com.hk.
Detailed instructions for application through the White Form eIPO service are set
out on the designated website. If you do not follow the instructions, your application may
be rejected and may not be submitted to us. If you apply through the designated website,
you authorize the White Form eIPO Service Provider to apply on the terms and
conditions in this prospectus, as supplemented and amended by the terms and conditions
of the White Form eIPO Service Provider.
Time for Submitting Applications under the White Form eIPO Service
You may submit your application through the White Form eIPO service through the
designated website at www.eipo.com.hk (24 hours daily, except on the last day for
applications) from 9:00 a.m. on Friday, February 25, 2022 until 11:30 a.m. on Wednesday,
March 2, 2022 and the latest time for completing full payment of application monies in
respect of such applications will be 12:00 noon on Wednesday, March 2, 2022, the last
day for applications, or such later time as described in “— C. Effect of Bad Weather and
Extreme Conditions on the Opening and Closing of the Application Lists” below.
No Multiple Applications
If you apply by means of White Form eIPO, once you complete payment in respect
of any electronic application instruction given by you or for your benefit through the
White Form eIPO service to make an application for Hong Kong Offer Shares, an actual
application shall be deemed to have been made. For the avoidance of doubt, giving an
electronic application instruction under White Form eIPO more than once and obtaining
different application reference numbers without effecting full payment in respect of a
particular reference number will not constitute an actual application.
If you are suspected of submitting more than one application through the White
Form eIPO service or by any other means, all of your applications are liable to be
rejected.
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 536 –
Commitment to sustainability
The obvious advantage of White Form eIPO service is to save the use of paper via
the self-serviced and electronic application process. Computershare Hong Kong Investor
Services Limited, being the designated White Form eIPO Service Provider, will
contribute HK$2.0 for each “Jinmao Property Services Co., Limited” White Form eIPO
application submitted via www.eipo.com.hk to support sustainability.
6. Applying through CCASS EIPO Service
General
CCASS Participants may give electronic application instructions to apply for the
Hong Kong Offer Shares and to arrange payment of the money due on application and
payment of refunds under their participant agreements with HKSCC and the General
Rules of CCASS and the CCASS Operational Procedures.
If you are a CCASS Investor Participant, you may give these electronic
application instructions through the CCASS Internet System (https://ip.ccass.com)or
through the CCASS Phone System by calling +852 2979 7888 (using the procedures in
HKSCC’s “An Operating Guide for Investor Participants” in effect from time to time).
HKSCC can also input electronic application instructions for CCASS Investor
Participants through HKSCC’s Customer Service Center at 1/F, One & Two Exchange
Square, 8 Connaught Place, Central, Hong Kong by completing an input request.
If you are not a CCASS Investor Participant, you may instruct your broker or
custodian who is a CCASS Clearing Participant or a CCASS Custodian Participant to give
electronic application instructions via CCASS terminals to apply for the Hong Kong
Offer Shares on your behalf.
You will be deemed to have authorized HKSCC and/or HKSCC Nominees to
transfer the details of your application to us, the Joint Sponsors, the Joint Representatives
and the Hong Kong Share Registrar.
Applying through CCASS EIPO Service
Where you have applied through CCASS EIPO service (either indirectly through a
broker or custodian or directly) and an application is made by HKSCC Nominees on
your behalf:
• HKSCC Nominees will only be acting as a nominee for you and is not liable
for any breach of the terms and conditions of this prospectus; and
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 537 –
• HKSCC Nominees will do the following things on your behalf:
➢ agree that the Hong Kong Offer Shares to be allocated shall be registered
in the name of HKSCC Nominees and deposited directly into CCASS for
the credit of the CCASS Participant’s stock account on your behalf or
your CCASS Investor Participant’s stock account;
➢ agree to accept the Hong Kong Offer Shares applied for or any lesser
number allocated;
➢ undertake and confirm that you have not applied for or taken up, or
indicated an interest for, and will not apply for or take up, or indicate an
interest for, any International Offer Shares nor participated in the
International Offering;
➢ (if the electronic application instructions are given for your benefit)
declare that only one set of electronic application instructions has been
given for your benefit;
➢ (if you are an agent for another person) declare that you have only given
one set of electronic application instructions for the other person’s
benefit and are duly authorized to give those instructions as its agent;
➢ confirm that you understand that we, our directors and the Joint
Representatives will rely on your declarations and representations in
deciding whether or not to allocate any of the Hong Kong Offer Shares
to you and that you may be prosecuted for making a false declaration;
➢ authorize us to place HKSCC Nominees’ name on its register of members
as the holder of the Hong Kong Offer Shares allocated to you, and
despatch Share certificate(s) and/or refund monies in accordance with the
arrangements separately agreed between us and HKSCC;
➢ confirm that you have read the terms and conditions and application
procedures set out in this prospectus and agree to be bound by them;
➢ confirm that you have received and read this prospectus and have relied
only on the information and representations in this prospectus in causing
the application to be made and will not rely on any other information or
representations, except those in any supplement to this prospectus;
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 538 –
➢ agree that neither we nor any of the Relevant Persons is or will be liable
for any information and representations not in this prospectus (and any
supplement to this prospectus);
➢ agree to disclose to us, the Hong Kong Share Registrar, the receiving
banks and the Relevant Persons any personal data which we or they may
require about you;
➢ agree (without prejudice to any other rights which you may have) that
once HKSCC Nominees’ application has been accepted, it cannot be
rescinded for innocent misrepresentation;
➢ agree that any application made by HKSCC Nominees on your behalf is
irrevocable on or before the fifth day after the time of the opening of the
application lists (excluding any days which is Saturday, Sunday or public
holiday in Hong Kong), such agreement to take effect as a collateral
contract with us, and to become binding when you give the instructions
and such collateral contract to be in consideration of our agreement that
we will not offer any Hong Kong Offer Shares to any person on or before
the fifth day after the time of the opening of the application lists
(excluding any days which is Saturday, Sunday or public holiday in Hong
Kong) except by means of one of the procedures referred to in this
prospectus. However, HKSCC Nominees may revoke the application on
or before the fifth day after the time of the opening of the application lists
(excluding any days which is Saturday, Sunday or public holiday in Hong
Kong) if a person responsible for this prospectus under Section 40 of the
Companies (Winding Up and Miscellaneous Provisions) Ordinance gives
a public notice under that section on or before the fifth day after the time
of the opening of the application lists (excluding any day which is a
Saturday, Sunday or public holiday in Hong Kong) which excludes or
limits that person’s responsibility for this prospectus;
➢ agree that once HKSCC Nominees’ application is accepted, neither that
application nor your electronic application instructions can be revoked,
and that acceptance of that application will be evidenced by the
announcement of the results of the Hong Kong Public Offering by us;
➢ agree to the arrangements, undertakings and warranties under the
participant agreement between you and HKSCC, read with the General
Rules of CCASS and the CCASS Operational Procedures, for giving
electronic application instructions to apply for the Hong Kong Offer
Shares;
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 539 –
➢ agree with us, for ourselves and for the benefit of each shareholder (and
so that we will be deemed by our acceptance in whole or in part of the
application by HKSCC Nominees to have agreed, for us and on behalf of
each shareholder, with each CCASS Participant giving electronic
application instructions) to observe and comply with our Articles of
Association, the Companies (Winding Up and Miscellaneous Provisions)
Ordinance and the Companies Ordinance; and
➢ agree that your application, any acceptance of it and the resulting contract
will be governed by, and construed in accordance with the laws of Hong
Kong.
Effect of Applying through CCASS EIPO Service
By applying through CCASS EIPO service, you (and, if you are joint applicants,
each of you jointly and severally) are deemed to have done the following things. Neither
HKSCC nor HKSCC Nominees will be liable to us or any other person in respect of the
things mentioned below:
• instructed and authorized HKSCC to cause HKSCC Nominees (acting as
nominee for the relevant CCASS Participants) to apply for the Hong Kong
Offer Shares on your behalf;
• instructed and authorized HKSCC to arrange payment of the maximum Offer
Price, brokerage, SFC transaction levy, FRC transaction levy and Stock
Exchange trading fee by debiting your designated bank account and, in the case
of a wholly or partially unsuccessful application and/or if the Offer Price is less
than the maximum Offer Price initially paid on application, refund of the
application monies (including brokerage, SFC transaction levy, FRC
transaction levy and Hong Kong Stock Exchange trading fee) by crediting your
designated bank account; and
• instructed and authorized HKSCC to cause HKSCC Nominees to do on your
behalf all the things stated in this prospectus.
Time for Inputting Electronic Application Instructions
(1)
CCASS Clearing/Custodian Participants can input electronic application
instructions at the following times on the following dates:
Friday, February 25, 2022 — 9:00 a.m. to 8:30 p.m.
Monday, February 28, 2022 — 8:00 a.m. to 8:30 p.m.
Tuesday, March 1, 2022 — 8:00 a.m. to 8:30 p.m.
Wednesday, March 2, 2022 — 8:00 a.m. to 12:00 noon
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 540 –
CCASS Investor Participants can input electronic application instructions from
9:00 a.m. on Friday, February 25, 2022 until 12:00 noon on Wednesday, March 2, 2022
(24 hours daily, except on Wednesday, March 2, 2022, the last day for applications).
The latest time for inputting your electronic application instructions will be 12:00
noon on Wednesday, March 2, 2022, the last day for applications, or such later time as
described in “— C. Effect of Bad Weather and Extreme Conditions on the Opening and
Closing of the Application Lists” below.
If you are instructing your broker or custodian who is a CCASS Clearing
Participant or a CCASS Custodian Participant to give electronic application
instructions via CCASS terminals to apply for the Hong Kong Offer Shares on your
behalf, you are advised to contact your broker or custodian for the latest time for giving
such instructions which may be different from the latest time as stated above.
Note:
(1) The times in this subsection are subject to change as HKSCC may determine from time to time with
prior notification to CCASS Clearing Participants, CCASS Custodian Participants and/or CCASS
Investor Participants.
Personal Data
The following Personal Information Collection Statement applies to any personal
data held by us, the Hong Kong Share Registrar, the receiving banks and the Relevant
Persons about you in the same way as it applies to personal data about applicants other
than HKSCC Nominees. By applying through CCASS EIPO service, you agree to all of
the terms of the Personal Information Collection Statement below.
Personal Information Collection Statement
This Personal Information Collection Statement informs applicant for, and holder of,
the Hong Kong Offer Shares, of the policies and practices of us and our Hong Kong Share
Registrar in relation to personal data and the Personal Data (Privacy) Ordinance (Chapter
486 of the Laws of Hong Kong).
Reasons for the collection of your personal data
It is necessary for applicants and registered holders of the Hong Kong Offer Shares
to supply correct personal data to us or our agents and the Hong Kong Share Registrar
when applying for the Hong Kong Offer Shares or transferring the Hong Kong Offer
Shares into or out of their names or in procuring the services of the Hong Kong Share
Registrar.
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 541 –
Failure to supply the requested data may result in your application for the Hong
Kong Offer Shares being rejected, or in delay or the inability of us or our Hong Kong
Share Registrar to effect transfers or otherwise render their services. It may also prevent
or delay registration or transfers of the Hong Kong Offer Shares which you have
successfully applied for and/or the despatch of share certificate(s) to which you are
entitled.
It is important that the holders of the Hong Kong Offer Shares inform us and the
Hong Kong Share Registrar immediately of any inaccuracies in the personal data
supplied.
Purposes
Your personal data may be used, held, processed, and/or stored (by whatever means)
for the following purposes:
• processing your application and refund check, where applicable, verification of
compliance with the terms and application procedures set out in this prospectus
and announcing results of allocation of the Hong Kong Offer Shares;
• compliance with applicable laws and regulations in Hong Kong and elsewhere;
• registering new issues or transfers into or out of the names of the holders of our
Shares including, where applicable, HKSCC Nominees;
• maintaining or updating our Register of Members;
• verifying identities of the holders of our Shares;
• establishing benefit entitlements of holders of our Shares, such as dividends,
rights issues, bonus issues, etc.;
• distributing communications from us and our subsidiaries;
• compiling statistical information and profiles of the holder of our Shares;
• disclosing relevant information to facilitate claims on entitlements; and
• any other incidental or associated purposes relating to the above and/or to
enable us and the Hong Kong Share Registrar to discharge their obligations to
holders of the our Shares and/or regulators and/or any other purposes to which
the securities’ holders may from time to time agree.
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 542 –
Transfer of personal data
Personal data held by us and our Hong Kong Share Registrar relating to the holders
of the Hong Kong Offer Shares will be kept confidential but we and our Hong Kong Share
Registrar may, to the extent necessary for achieving any of the above purposes, disclose,
obtain or transfer (whether within or outside Hong Kong) the personal data to, from or
with any of the following:
• our appointed agents such as financial advisers, receiving bankers and overseas
principal share registrar;
• where applicants for the Hong Kong Offer Shares request a deposit into
CCASS, HKSCC or HKSCC Nominees, who will use the personal data for the
purposes of operating CCASS;
• any agents, contractors or third-party service providers who offer
administrative, telecommunications, computer, payment or other services to us
or the Hong Kong Share Registrar in connection with their respective business
operation;
• the Stock Exchange, the SFC and any other statutory regulatory or
governmental bodies or otherwise as required by laws, rules or regulations; and
• any persons or institutions with which the holders of the Hong Kong Offer
Shares have or propose to have dealings, such as their bankers, solicitors,
accountants or stockbrokers etc.
Retention of personal data
We and our Hong Kong Share Registrar will keep the personal data of the applicants
and holders of the Hong Kong Offer Shares for as long as necessary to fulfill the purposes
for which the personal data were collected. Personal data which is no longer required will
be destroyed or dealt with in accordance with the Personal Data (Privacy) Ordinance.
Access to and correction of personal data
Holders of the Hong Kong Offer Shares have the right to ascertain whether we or
the Hong Kong Share Registrar hold their personal data, to obtain a copy of that data, and
to correct any data that is inaccurate. We and the Hong Kong Share Registrar have the
right to charge a reasonable fee for the processing of such requests. All requests for access
to data or correction of data should be addressed to us, at our registered address disclosed
in the section headed “Corporate Information” in this prospectus or as notified from time
to time, for the attention of the secretary, or our Hong Kong Share Registrar for the
attention of the privacy compliance officer.
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 543 –
7. Warning for Electronic Applications
The application for the Hong Kong Offer Shares by CCASS EIPO service (directly or
indirectly through your broker or custodian) is only a facility provided to CCASS
Participants. Similarly, the application for the Hong Kong Offer Shares through the White
Form eIPO service is only a facility provided by the White Form eIPO Service Provider to
public investors. Such facilities are subject to capacity limitations and potential service
interruptions and you are advised not to wait until the last day for applications to make your
electronic application. We, the Relevant Persons, the White Form eIPO Service Provider take
no responsibility for such applications and provide no assurance that any CCASS Participant
applying through CCASS EIPO service or person applying through the White Form eIPO
service will be allocated any Hong Kong Offer Shares.
To ensure that CCASS Investor Participants can give their electronic application
instructions, they are advised not to wait until the last minute to input their instructions to the
systems. In the event that CCASS Investor Participants have problems in the connection to
CCASS Phone System/CCASS Internet System for submission of electronic application
instructions, they should go to HKSCC’s Customer Service Centre to complete an input
request form for electronic application instructions before 12:00 noon on Wednesday,
March 2, 2022, or such later time as described in “— C. Effect of Bad Weather and Extreme
Conditions on the Opening and Closing of the Application Lists”.
8. How Many Applications Can You Make
Multiple applications for the Hong Kong Offer Shares are not allowed except by
nominees.
All of your applications will be rejected if more than one application through the CCASS
EIPO service (directly or indirectly through your broker or custodian) or through the White
Form eIPO service is made for your benefit (including the part of the application made by
HKSCC Nominees acting on electronic application instructions), and the number of Hong
Kong Offer Shares applied by HKSCC Nominees will be automatically reduced by the number
of Hong Kong Offer Shares for which you have given such instructions and/or for which such
instructions have been given for your behalf.
For the avoidance of doubt, giving an electronic application instruction under the
White Form eIPO service more than once and obtaining different application reference
numbers without effecting full payment in respect of a particular reference number will not
constitute an actual application. However, any electronic application instructions to make an
application for the Hong Kong Offer Shares given by you or for your behalf to HKSCC will
be deemed to be an actual application for the purposes of considering whether multiple
applications have been made.
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 544 –
If an unlisted company makes an application and:
• the principal business of that company is dealing in securities; and
• you exercise statutory control over that company,
then the application will be treated as being made for your benefit.
“Unlisted company” means a company with no equity securities listed on the Stock
Exchange.
“Statutory control” means you:
• control the composition of the board of directors of the company;
• control more than half of the voting power of the company; or
• hold more than half of the issued share capital of the company (not counting any part
of it which carries no right to participate beyond a specified amount in a distribution
of either profits or capital).
B. HOW MUCH ARE THE HONG KONG OFFER SHARES
The maximum Offer Price is HK$8.14 per Offer Share. You must also pay brokerage of
1.0%, SFC transaction levy of 0.0027%, FRC transaction levy of 0.00015% and Stock
Exchange trading fee of 0.005%. This means that for one board lot of 500 Hong Kong Offer
Shares, you will pay HK$4,111.02.
You must pay the maximum Offer Price, together with brokerage, SFC transaction levy,
FRC transaction levy and Stock Exchange trading fee, in full upon application for the Hong
Kong Offer Shares under the terms and conditions set out in the Application Forms.
You may submit an application through the White Form eIPO service or the CCASS
EIPO service in respect of a minimum of 500 Hong Kong Offer Shares. If you make an
electronic application instruction for more than 500 Hong Kong Offer Shares, the number of
Hong Kong Offer Shares you apply for must be in one of the specified numbers set out in the
section headed “— A. Applications for the Hong Kong Offer Shares — 4. Minimum
Application Amount and Permitted Numbers.”
If your application is successful, brokerage will be paid to the Exchange Participants (as
defined in the Listing Rules), and SFC transaction levy and FRC transaction levy and the Stock
Exchange trading fee will be paid to the Stock Exchange (in the case of the SFC transaction
levy, collected by the Stock Exchange on behalf of SFC; and in the case of FRC transaction
levy, collected by Hong Kong Exchanges and Clearing Limited on behalf of the FRC).
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 545 –
For further details on the Offer Price, see “Structure of the Global Offering — Pricing and
Allocation.”
C. EFFECT OF BAD WEATHER AND EXTREME CONDITIONS ON THE OPENING
AND CLOSING OF THE APPLICATION LISTS
The application lists will not open or close if there is/are:
• a tropical cyclone warning signal number 8 or above;
• a “black” rainstorm warning; and/or
• Extreme Conditions.
in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Wednesday, March 2,
2022. Instead, they will open between 11:45 a.m. and 12:00 noon on the next business day
which does not have any of those warnings or Extreme Conditions in force in Hong Kong at
any time between 9:00 and 12:00 noon.
If the application lists do not open and close on Wednesday, March 2, 2022 or if there
is/are a tropical cyclone warning signal number 8 or above, a “black” rainstorm warning signal
and/or Extreme Conditions in force in Hong Kong that may affect the dates mentioned in
“Expected Timetable,” we will make an announcement on its website at www.jinmaowy.com
and the website of the Stock Exchange at www.hkexnews.hk.
D. PUBLICATION OF RESULTS
We expect to announce the Offer Price, the level of indications of interest in the
International Offering, the level of applications in the Hong Kong Public Offering and the basis
of allocations of the Hong Kong Offer Shares on Wednesday, March 9, 2022 on our website at
www.jinmaowy.com and the website of the Stock Exchange at www.hkexnews.hk.
The results of allocations and the Hong Kong identity card/passport/Hong Kong business
registration numbers of successful applicants under the Hong Kong Public Offering will be
available at the times and dates and in the manner set out below:
• in the announcement to be posted on our website and the website of the Stock
Exchange at www.jinmaowy.com and www.hkexnews.hk, respectively, by no later
than 8:00 a.m. on Wednesday, March 9, 2022;
• from the designated results of allocations website at www.iporesults.com.hk
(alternatively: English https://www.eipo.com.hk/en/Allotment; Chinese
https://www.eipo.com.hk/zh-hk/Allotment) with a “search by ID function” for the
Hong Kong Public Offering on a 24 hour basis from 8:00 a.m. on Wednesday, March
9, 2022 to 12:00 midnight on Tuesday, March 15, 2022; and
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 546 –
• from the allocation results telephone enquiry line by calling +852 2862 8555
between 9:00 a.m. and 6:00 p.m. from Wednesday, March 9, 2022 to Monday, March
14, 2022 (excluding Saturday, Sunday and public holiday in Hong Kong).
If we accept your offer to purchase (in whole or in part), which we may do by announcing
the basis of allocations and/or making available the results of allocations publicly, there will
be a binding contract under which you will be required to purchase the Hong Kong Offer
Shares if the conditions of the Global Offering are satisfied and the Global Offering is not
otherwise terminated. Further details are set out in the section headed “Structure of the Global
Offering.”
You will not be entitled to exercise any remedy of rescission for innocent
misrepresentation at any time after acceptance of your application. This does not affect any
other right you may have.
E. CIRCUMSTANCES IN WHICH YOU WILL NOT BE ALLOCATED THE HONG
KONG OFFER SHARES
You should note the following situations in which the Hong Kong Offer Shares will not
be allocated to you:
If your application is revoked:
By applying through the CCASS EIPO service or through the White Form eIPO service,
you agree that your application or the application made by HKSCC Nominees on your behalf
cannot be revoked on or before the fifth day after the time of the opening of the application
lists (excluding any days which is Saturday, Sunday or public holiday in Hong Kong). This
agreement will take effect as a collateral contract with us.
Your application or the application made by HKSCC Nominees on your behalf may only
be revoked on or before the fifth day after the time of the opening of the application lists
(excluding any days which is Saturday, Sunday or public holiday in Hong Kong) in the
following circumstances:
• if a person responsible for this prospectus under Section 40 of the Companies
(Winding Up and Miscellaneous Provisions) Ordinance gives a public notice under
that section on or before the fifth day after the time of the opening of the application
lists (excluding any day which is a Saturday, Sunday or public holiday in Hong
Kong) which excludes or limits that person’s responsibility for this prospectus; or
• if any supplement to this prospectus is issued, in which case the we will notify
applicants who have already submitted an application that they are required to
confirm their applications. If applicants have been so notified but have not
confirmed their applications in accordance with the procedure to be notified, all
unconfirmed applications will be deemed revoked.
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 547 –
If your application or the application made by HKSCC Nominees on your behalf has been
accepted, it cannot be revoked. For this purpose, acceptance of applications which are not
rejected will be constituted by notification in the press of the results of allocation, and where
such basis of allocation is subject to certain conditions or provides for allocation by ballot,
such acceptance will be subject to the satisfaction of such conditions or results of the ballot,
respectively.
If we or our agents exercise their discretion to reject your application:
We, the Joint Representatives, the White Form eIPO Service Provider and our and their
respective agents or nominees have full discretion to reject or accept any application, or to
accept only part of any application, without giving any reasons.
If the allotment of Hong Kong Offer Shares is void:
The allotment of Hong Kong Offer Shares will be void if the Listing Committee of the
Stock Exchange does not grant permission to list the Shares either:
• within three weeks from the closing date of the application lists; or
• within a longer period of up to six weeks if the Listing Committee notifies the
Company of that longer period within three weeks of the closing date of the
application lists.
If:
• you or the person for whose benefit you apply for, have applied for or taken up, or
indicated an interest for, or have been or will be placed or allocated (including
conditionally and/or provisionally) the Hong Kong Offer Shares and the
International Offer Shares;
• your payment is not made correctly;
• your electronic application instructions through the White Form eIPO service are
not completed in accordance with the instructions, terms and conditions on the
designated website at www.eipo.com.hk;
• you apply for more than 5,715,000 Hong Kong Offer Shares, being 50% of the Hong
Kong Offer Shares initially available under the Hong Kong Public Offering;
• we or the Joint Representatives believe that by accepting your application, a
violation of applicable securities or other laws, rules or regulations would result; or
• the Underwriting Agreements do not become unconditional or are terminated.
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 548 –
F. REFUND OF APPLICATION MONIES
If an application is rejected, not accepted or accepted in part only, or if the Offer Price
as finally determined is less than the maximum Offer Price per Offer Share (excluding
brokerage, SFC transaction levy, FRC transaction levy and Stock Exchange trading fee payable
thereon) paid on application, or if the conditions of the Global Offering as set out in the section
headed “Structure of the Global Offering — Conditions of the Global Offering” are not
satisfied or if any application is revoked, the application monies, or the appropriate portion
thereof, together with the related brokerage, SFC transaction levy, FRC transaction levy and
Stock Exchange trading fee, will be refunded, without interest.
Any refund of your application monies will be made on or before Wednesday, March 9,
2022.
G. DESPATCH/COLLECTION OF SHARE CERTIFICATES/E-REFUND PAYMENT
INSTRUCTIONS/REFUND CHEQUES
You will receive one Share certificate for all Hong Kong Offer Shares allocated to you
under the Hong Kong Public Offering (except pursuant to applications made through the
CCASS EIPO service where the Share certificates will be deposited into CCASS as described
below).
We will not issue temporary document of title in respect of the Offer Shares. We will not
issue receipt for sums paid on application.
Subject to arrangement on despatch/collection of Share certificates and refund cheques as
mentioned below, any refund cheques and Share certificate(s) are expected to be posted on or
before Wednesday, March 9, 2022. The right is reserved to retain any Share certificate(s) and
any surplus application monies pending clearance of check(s) or banker’s cashier order(s).
Share certificates will only become valid at 8:00 a.m. on Thursday, March 10, 2022,
provided that the Global Offering has become unconditional in all respects at or before that
time and the right of termination described in the section headed “Underwriting” in this
prospectus has not been exercised.
Investors who trade Shares on the basis of publicly available allocation details or prior to
the receipt of the Share certificates or prior to the Share certificates becoming valid do so
entirely at their own risk.
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 549 –
Personal Collection
• If you apply through White Form eIPO service:
➢ If you apply for 1,000,000 Hong Kong Offer Shares or more through the White
Form eIPO service and your application is wholly or partially successful, you
may collect your Share certificate(s) (where applicable) in person from the
Hong Kong Share Registrar, Computershare Hong Kong Investor Services
Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road
East, Wanchai, Hong Kong, from 9:00 a.m. to 1:00 p.m. on Wednesday,
March 9, 2022, or any other place or date notified by us.
➢ If you do not personally collect your Share certificate(s) within the time
specified for collection, they will be sent to the address specified in your
application instructions by ordinary post and at your own risk.
➢ If you apply for less than 1,000,000 Hong Kong Offer Shares through the
White Form eIPO service, your Share certificate(s) (where applicable) will be
sent to the address specified in your application instructions on or before
Wednesday, March 9, 2022 by ordinary post and at your own risk.
➢ If you apply and pay the application monies from a single bank account, any
refund monies will be despatched to that bank account in the form of e-Refund
payment instructions. If you apply and pay the application monies from
multiple bank accounts, any refund monies will be despatched to the address
specified in your application instructions in the form of refund check(s) by
ordinary post and at your own risk.
• If you apply through CCASS EIPO service:
Allocation of the Hong Kong Offer Shares
➢ For the purposes of allocating the Hong Kong Offer Shares, HKSCC Nominees
will not be treated as an applicant. Instead, each CCASS Participant who gives
electronic application instructions or each person for whose benefit
instructions are given will be treated as an applicant.
Deposit of Share Certificates into CCASS and Refund of Application Monies
➢ If your application is wholly or partially successful, your Share certificate(s)
will be issued in the name of HKSCC Nominees and deposited into CCASS for
the credit of your designated CCASS Participant’s stock account or your
CCASS Investor Participant stock account on Wednesday, March 9, 2022 or on
any other date determined by HKSCC or HKSCC Nominees.
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 550 –
➢ We expect to publish the application results of CCASS Participants (and where
the CCASS Participant is a broker or custodian, we will include information
relating to the relevant beneficial owner), your Hong Kong identity
card/passport/Hong Kong business registration number or other identification
code (Hong Kong business registration number for corporations) and the basis
of allocations of the Hong Kong Offer Shares in the manner as described in
“— D. Publication of Results” above on Wednesday, March 9, 2022. You
should check the announcement published by us and report any discrepancies
to HKSCC before 5:00 p.m. on Wednesday, March 9, 2022 or such other date
as determined by HKSCC or HKSCC Nominees.
➢ If you have instructed your broker or custodian who is a CCASS Clearing
Participant or a CCASS Custodian Participant to give electronic application
instructions via CCASS terminals to apply for the Hong Kong Offer Shares on
your behalf, you can also check the number of the Hong Kong Offer Shares
allocated to you and the amount of refund monies (if any) payable to you with
that broker or custodian.
➢ If you have applied as a CCASS Investor Participant, you can also check the
number of the Hong Kong Offer Shares allocated to you and the amount of
refund monies (if any) payable to you via the CCASS Phone System and the
CCASS Internet System (under the procedures contained in HKSCC’s “An
Operating Guide for Investor Participants” in effect from time to time) on
Wednesday, March 9, 2022. Immediately following the credit of the Hong
Kong Offer Shares to your stock account and the credit of the refund monies
to your bank account, HKSCC will also make available to you an activity
statement showing the number of the Hong Kong Offer Shares credited to your
CCASS Investor Participant stock account and the amount of refund monies (if
any) credited to your designated bank account.
➢ Refund of your application monies (if any) in respect of wholly and partially
unsuccessful applications and/or difference between the Offer Price and the
maximum Offer Price per Offer Share initially paid on application (including
brokerage, SFC transaction levy, FRC transaction levy and Stock Exchange
trading fee but without interest) will be credited to your designated bank
account or the designated bank account of your broker or custodian on
Wednesday, March 9, 2022.
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 551 –
H. ADMISSION OF OUR SHARES INTO CCASS
If the Stock Exchange grants the listing of, and permission to deal in, our Shares and we
comply with the stock admission requirements of HKSCC, our Shares will be accepted as
eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from
the date of commencement of dealings in our Shares on the Stock Exchange or any other date
HKSCC chooses. Settlement of transactions between Exchange Participants (as defined in the
Listing Rules) is required to take place in CCASS on the second settlement day after any
trading day.
All activities under CCASS are subject to the General Rules of CCASS and CCASS
Operational Procedures in effect from time to time.
Investors should seek the advice of their stockbroker or other professional adviser for
details of the settlement arrangements as such arrangements may affect their rights and
interests.
We have made all necessary arrangements to enable our Shares to be admitted into
CCASS.
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 552 –
The following is the text of a report, prepared for the purpose of incorporation in this
prospectus, received from our reporting accountants, Ernst & Young, Certified Public
Accountants, Hong Kong.
Ernst & Young
27/F, One Taikoo Place
979 King’s Road
Quarry Bay, Hong Kong
ACCOUNTANTS’ REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE
DIRECTORS OF JINMAO PROPERTY SERVICES CO., LIMITED, CHINA
INTERNATIONAL CAPITAL CORPORATION HONG KONG SECURITIES LIMITED
AND HSBC CORPORATE FINANCE (HONG KONG) LIMITED
Introduction
We report on the historical financial information of Jinmao Property Services Co.,
Limited (the “Company”) and its subsidiaries (together, the “Group”) set out on pages I-4 to
I-71, which comprises the consolidated statements of profit or loss, statements of
comprehensive income, statements of changes in equity and statements of cash flows of the
Group for each of the years ended 31 December 2018, 2019 and 2020, and the nine months
ended 30 September 2021 (the “Relevant Periods”), and the consolidated statements of
financial position of the Group as at 31 December 2018, 2019 and 2020 and 30 September 2021
and the statements of financial position of the Company as at 31 December 2020 and
30 September 2021, and a summary of significant accounting policies and other explanatory
information (together, the “Historical Financial Information”). The Historical Financial
Information set out on pages I-4 to I-71 forms an integral part of this report, which has been
prepared for inclusion in the prospectus of the Company dated 25 February 2022 (the
“Prospectus”) in connection with the initial listing of the shares of the Company on the Main
Board of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).
Directors’ responsibility for the Historical Financial Information
The directors of the Company are responsible for the preparation of the Historical
Financial Information that gives a true and fair view in accordance with the basis of
presentation and the basis of preparation set out in notes 2.1 and 2.2 to the Historical Financial
Information, respectively, and for such internal control as the directors determine is necessary
to enable the preparation of the Historical Financial Information that is free from material
misstatement, whether due to fraud or error.
Reporting accountants’ responsibility
Our responsibility is to express an opinion on the Historical Financial Information and to
report our opinion to you. We conducted our work in accordance with Hong Kong Standard on
Investment Circular Reporting Engagements 200 Accountants’ Reports on Historical Financial
APPENDIX I ACCOUNTANTS’ REPORT
– I-1 –
Information in Investment Circulars issued by the Hong Kong Institute of Certified Public
Accountants (“HKICPA”). This standard requires that we comply with ethical standards and
plan and perform our work to obtain reasonable assurance about whether the Historical
Financial Information is free from material misstatement.
Our work involved performing procedures to obtain evidence about the amounts and
disclosures in the Historical Financial Information. The procedures selected depend on the
reporting accountants’ judgement, including the assessment of risks of material misstatement
of the Historical Financial Information, whether due to fraud or error. In making those risk
assessments, the reporting accountants consider internal control relevant to the entity’s
preparation of the Historical Financial Information that gives a true and fair view in accordance
with the basis of presentation and the basis of preparation set out in notes 2.1 and 2.2 to the
Historical Financial Information, respectively, in order to design procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. Our work also included evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates
made by the directors, as well as evaluating the overall presentation of the Historical Financial
Information.
We believe that the evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Opinion
In our opinion, the Historical Financial Information gives, for the purposes of the
accountants’ report, a true and fair view of the financial position of the Group as at 31
December 2018, 2019 and 2020 and 30 September 2021 and of the financial position of the
Company as at 31 December 2020 and 30 September 2021, and of the financial performance
and cash flows of the Group for each of the Relevant Periods in accordance with the basis of
presentation and the basis of preparation set out in notes 2.1 and 2.2 to the Historical Financial
Information, respectively.
Review of interim comparative financial information
We have reviewed the interim comparative financial information of the Group which
comprises the consolidated statement of profit or loss, statement of comprehensive income,
statement of changes in equity and statement of cash flows for the nine months ended 30
September 2020 and other explanatory information (the “Interim Comparative Financial
Information”). The directors of the Company are responsible for the preparation and
presentation of the Interim Comparative Financial Information in accordance with the basis of
presentation and the basis of preparation set out in notes 2.1 and 2.2 to the Historical Financial
Information, respectively. Our responsibility is to express a conclusion on the Interim
Comparative Financial Information based on our review. We conducted our review in
accordance with Hong Kong Standard on Review Engagements 2410 Review of Interim
Financial Information Performed by the Independent Auditor of the Entity issued by the
APPENDIX I ACCOUNTANTS’ REPORT
– I-2 –
HKICPA. A review consists of making inquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with Hong Kong Standards
on Auditing and consequently does not enable us to obtain assurance that we would become
aware of all significant matters that might be identified in an audit. Accordingly, we do not
express an audit opinion. Based on our review, nothing has come to our attention that causes
us to believe that the Interim Comparative Financial Information, for the purposes of the
accountants’ report, is not prepared, in all material respects, in accordance with the basis of
presentation and the basis of preparation set out in notes 2.1 and 2.2 to the Historical Financial
Information, respectively.
Report on matters under the Rules Governing the Listing of Securities on the Stock
Exchange and the Companies (Winding Up and Miscellaneous Provisions) Ordinance
Adjustments
In preparing the Historical Financial Information, no adjustments to the Underlying
Financial Statements as defined on page I-4 have been made.
Dividends
We refer to note 11 to the Historical Financial Information which states that no dividends
have been paid by the Company in respect of the Relevant Periods.
No historical financial statements for the Company
As at the date of this report, no statutory financial statements have been prepared for the
Company since its date of incorporation.
Ernst & Young
Certified Public Accountants
Hong Kong
25 February 2022
APPENDIX I ACCOUNTANTS’ REPORT
– I-3 –
I HISTORICAL FINANCIAL INFORMATION
Preparation of Historical Financial Information
Set out below is the Historical Financial Information which forms an integral part of this
accountants’ report.
The financial statements of the Group for the Relevant Periods, on which the Historical
Financial Information is based, were audited by Ernst & Young in accordance with Hong Kong
Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants
(“HKICPA”) (the “Underlying Financial Statements”).
The Historical Financial Information is presented in Renminbi (“RMB”) and all values
are rounded to the nearest thousand (RMB’000) except when otherwise indicated.
APPENDIX I ACCOUNTANTS’ REPORT
– I-4 –
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS
Section II
Notes
Year ended 31 December
Nine months ended
30 September
2018 2019 2020 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
REVENUE 5 574,503 788,323 944,210 665,322 1,048,685
Cost of sales (459,469) (636,800) (709,421) (501,521) (737,790)
Gross profit 115,034 151,523 234,789 163,801 310,895
Other income and gains 5 11,746 74,712 74,908 58,630 41,048
Selling and distribution
expenses (2,301) (954) (1,808) (1,185) (10,213)
Administrative expenses (82,346) (117,150) (134,920) (95,633) (148,702)
Other expenses, net (5,606) (4,441) (1,258) (32) (6,256)
Finance costs 7 (10,165) (70,280) (64,186) (51,021) (33,537)
PROFIT BEFORE TAX 6 26,362 33,410 107,525 74,560 153,235
Income tax expense 10 (8,875) (10,786) (30,401) (21,231) (43,884)
PROFIT FOR THE
YEAR/PERIOD 17,487 22,624 77,124 53,329 109,351
Attributable to:
Owners of the parent 17,487 22,624 77,124 53,329 108,702
Non-controlling interests — — — — 649
17,487 22,624 77,124 53,329 109,351
EARNINGS PER SHARE
ATTRIBUTABLE TO
ORDINARY EQUITY
HOLDERS OF THE
PARENT
Basic and diluted 12 N/A N/A N/A N/A N/A
APPENDIX I ACCOUNTANTS’ REPORT
– I-5 –
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Year ended 31 December
Nine months ended
30 September
2018 2019 2020 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
PROFIT FOR THE
YEAR/PERIOD 17,487 22,624 77,124 53,329 109,351
OTHER COMPREHENSIVE
LOSS
Other comprehensive loss that
will not be reclassified to profit
or loss in subsequent periods:
Exchange differences on
translation of financial
statements of the Company ———— (2)
OTHER COMPREHENSIVE
LOSS FOR THE
YEAR/PERIOD, NET OF TAX ———— (2)
TOTAL COMPREHENSIVE
INCOME FOR THE
YEAR/PERIOD 17,487 22,624 77,124 53,329 109,349
Attributable to:
Owners of the parent 17,487 22,624 77,124 53,329 108,700
Non-controlling interests ————649
17,487 22,624 77,124 53,329 109,349
APPENDIX I ACCOUNTANTS’ REPORT
– I-6 –
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Section II
Notes
As at 31 December
As at
30 September
2018 2019 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000
NON-CURRENT ASSETS
Property, plant and equipment 13 10,916 17,889 33,615 38,245
Investment properties 14 14,510 11,640 10,590 9,459
Right-of-use assets 15(a) 1,926 2,433 15,970 24,982
Intangible assets 16 192 6,155 7,084 6,108
Deferred tax assets 17 1,578 1,607 2,457 4,085
Other receivables and other
assets 20 1,215,623 1,086,022 941,593 3,374
Total non-current assets 1,244,745 1,125,746 1,011,309 86,253
CURRENT ASSETS
Inventories 18 6,400 5,493 5,199 5,044
Trade receivables 19 88,801 155,291 203,713 451,537
Prepayments, other receivables
and other assets 20 440,526 544,576 644,196 515,762
Restricted cash 21 — — — 1,278
Cash and cash equivalents 21 160,030 155,113 270,818 274,169
Total current assets 695,757 860,473 1,123,926 1,247,790
CURRENT LIABILITIES
Trade payables 22 82,897 90,655 112,036 150,737
Other payables and accruals 23 317,279 401,709 520,641 621,713
Contract liabilities 5 98,148 146,917 206,391 258,992
Interest-bearing borrowings 24 126,000 134,000 144,000 —
Lease liabilities 15(a) 1,547 2,063 5,572 10,713
Tax payable 13,119 16,661 22,735 5,326
Total current liabilities 638,990 792,005 1,011,375 1,047,481
APPENDIX I ACCOUNTANTS’ REPORT
– I-7 –
Section II
Notes
As at 31 December
As at
30 September
2018 2019 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000
NET CURRENT ASSETS 56,767 68,468 112,551 200,309
TOTAL ASSETS LESS
CURRENT LIABILITIES 1,301,512 1,194,214 1,123,860 286,562
NON-CURRENT LIABILITIES
Other payables 23 — — 123,657 123,657
Interest-bearing borrowings 24 1,215,000 1,080,997 936,992 —
Lease liabilities 15(a) 4,278 3,400 12,224 15,739
Deferred tax liabilities 17 2,579 1,986 1,853 1,672
Total non-current liabilities 1,221,857 1,086,383 1,074,726 141,068
Net assets 79,655 107,831 49,134 145,494
EQUITY ATTRIBUTABLE TO
OWNERS OF THE PARENT
Share capital 25 N/A N/A —* 66,947
Reserves 26 79,655 107,831 49,134 72,798
79,655 107,831 49,134 139,745
Non-controlling interests — — — 5,749
Total equity 79,655 107,831 49,134 145,494
* The amount is less than RMB1,000.
APPENDIX I ACCOUNTANTS’ REPORT
– I-8 –
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Year ended 31 December 2018
Share
capital
Merger
reserve*
Other
reserve*
PRC statutory
surplus reserve*
Retained
profits*
Total
equity
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Note 26(a) Note 26(b) Note 26(c)
At 1 January 2018 — 15,000 1,371 5,676 36,953 59,000
Profit and total
comprehensive income
for the year — — — — 17,487 17,487
Transfer to statutory
surplus reserve — — — 468 (468) —
Contribution from the
immediate holding
company — — 3,168 — — 3,168
At 31 December 2018 — 15,000 4,539 6,144 53,972 79,655
Year ended 31 December 2019
Share
capital
Merger
reserve*
Other
reserve*
PRC statutory
surplus reserve*
Retained
profits*
Total
equity
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Note 26(a) Note 26(b) Note 26(c)
At 1 January 2019 — 15,000 4,539 6,144 53,972 79,655
Profit and total
comprehensive income
for the year — — — — 22,624 22,624
Transfer to statutory
surplus reserve — — — 40 (40) —
Contribution from
the immediate
holding company — — 5,552 — — 5,552
At 31 December 2019 — 15,000 10,091 6,184 76,556 107,831
APPENDIX I ACCOUNTANTS’ REPORT
– I-9 –
Year ended 31 December 2020
Share
capital
Merger
reserve*
Other
reserve*
PRC statutory
surplus reserve*
Retained
profits*
Total
equity
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Note 26(a) Note 26(b) Note 26(c)
At 1 January 2020 — 15,000 10,091 6,184 76,556 107,831
Profit and total
comprehensive income
for the year — — — — 77,124 77,124
Dividends declared by the
subsidiaries to the then
shareholders (note 11) — — — — (151,817) (151,817)
Transfer to statutory
surplus reserve — — — 84 (84) —
Contribution from the
immediate holding
company — — 5,996 — — 5,996
Capital injection upon
establishment of a
subsidiary by the
then shareholder — 10,000 — — — 10,000
At 31 December 2020 — 25,000 16,087 6,268 1,779 49,134
Nine months ended 30 September 2020
Share
capital
Merger
reserve*
Other
reserve*
PRC statutory
surplus reserve*
Retained
profits*
Total
equity
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Note 26(a) Note 26(b) Note 26(c)
At 1 January 2020 — 15,000 10,091 6,184 76,556 107,831
Profit and total
comprehensive income
for the period — — — — 53,329 53,329
Dividends declared by the
subsidiaries to the then
shareholders (note 11) — — — — (78,675) (78,675)
Contribution from the
immediate holding
company — — 4,203 — — 4,203
Capital injection upon
establishment of a
subsidiary by the then
shareholder — 750 — — — 750
At 30 September 2020 — 15,750 14,294 6,184 51,210 87,438
APPENDIX I ACCOUNTANTS’ REPORT
– I-10 –
Nine months ended 30 September 2021
Attributable to owners of the parent
Share
capital
Merger
reserve*
Other
reserve*
PRC
statutory
surplus
reserve*
Exchange
fluctuation
reserve*
Retained
profits* Total
Non-
controlling
interests
Total
equity
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Note 26(a) Note 26(b) Note 26(c)
At 1 January 2021 — 25,000 16,087 6,268 — 1,779 49,134 — 49,134
Profit for the period —————108,702 108,702 649 109,351
Other comprehensive loss
for the period:
Exchange differences
on translation of
financial statements ———— (2)— (2) — (2)
Total comprehensive
income/(loss) for the
period ———— (2)108,702 108,700 649 109,349
Transfer to merger
reserve — 1,630 — (1,630) — — — — —
Deemed distribution for
acquisition of
subsidiaries under
common control
(note 26(a)) — (21,484) ————(21,484) — (21,484)
Issuance of ordinary
shares (note 25) 66,947 (66,947) ————— ——
Capital contribution from
non-controlling
shareholders ———————5,100 5,100
Contribution from the
immediate holding
company — — 3,395———3,395 — 3,395
At 30 September 2021 66,947 (61,801) 19,482 4,638 (2) 110,481 139,745 5,749 145,494
* These reserve accounts comprised the reserves of RMB79,655,000, RMB107,831,000, RMB49,134,000 and
RMB72,798,000 in the consolidated statements of financial position as at 31 December 2018, 2019 and 2020
and 30 September 2021, respectively.
APPENDIX I ACCOUNTANTS’ REPORT
– I-11 –
CONSOLIDATED STATEMENTS OF CASH FLOWS
Section II
Notes
Year ended 31 December
Nine months ended
30 September
2018 2019 2020 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
CASH FLOWS FROM OPERATING
ACTIVITIES
Profit before tax 26,362 33,410 107,525 74,560 153,235
Adjustments for:
Finance costs 7 10,165 70,280 64,186 51,021 33,537
Bank interest income 5 (1,243) (864) (1,313) (958) (2,085)
Loan interest income 5 (9,864) (69,991) (63,750) (50,803) (32,408)
Fair value loss on investment
properties 6 1,860 2,870 1,050 584 1,131
Impairment losses/(write-back
of impairment losses) of
trade receivables 6 1,773 (841) 372 (156) 1,013
Impairment losses/(write-back
of impairment losses) of
other receivables 6 1,877 884 (196) (420) 553
Loss on disposal of items of
property, plant and equipment, net 6 96 — 17 10 502
Depreciation of property, plant
and equipment 6 2,314 3,401 5,369 3,851 6,710
Amortisation of intangible assets 6 85 235 1,795 1,536 2,102
Depreciation of right-of-use assets 6 1,083 2,134 3,750 2,105 6,550
Equity-settled share option expenses 29 1,012 3,758 3,631 2,724 1,311
Management’s remuneration borne by
the immediate holding company 29 2,156 1,794 2,365 1,479 2,084
37,676 47,070 124,801 85,533 174,235
(Increase)/decrease in inventories (221) 907 294 244 155
Increase in trade receivables (12,176) (65,649) (48,794) (69,668) (248,837)
Increase in prepayments, other
receivables and other assets (146,459) (101,336) (89,000) (153,675) (14,892)
Increase in restricted cash — — — — (1,278)
Increase in trade payables 30,045 7,758 21,381 31,601 38,701
Increase in contract liabilities 21,690 48,769 59,474 40,095 52,601
Increase in other payables
and accruals 53,833 85,387 92,087 89,016 98,870
Cash generated from/(used in)
operations (15,612) 22,906 160,243 23,146 99,555
Interest received 1,243 864 1,313 958 2,085
Income tax paid (5,456) (7,866) (25,310) (18,621) (63,102)
Net cash flows (used in)/from
operating activities (19,825) 15,904 136,246 5,483 38,538
APPENDIX I ACCOUNTANTS’ REPORT
– I-12 –
Section II
Note
Year ended 31 December
Nine months ended
30 September
2018 2019 2020 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
CASH FLOWS FROM INVESTING
ACTIVITIES
Loan interest income received 13,012 69,630 63,484 48,017 28,719
Purchase of items of property, plant
and equipment (7,078) (11,958) (23,857) (13,071) (11,293)
Purchase of items of intangible assets (61) (7,014) (3,111) (329) (1,272)
Proceeds from disposal of items of
property, plant and equipment 172 208 — 3 76
Proceeds from disposal of
intangible assets — 9 29 — —
Cash advances made to
related parties (1,460,000) — — — —
Repayment from related parties 119,000 126,003 134,005 65,998 1,080,992
Net cash flows from/(used in)
investing activities (1,334,955) 176,878 170,550 100,618 1,097,222
CASH FLOWS FROM FINANCING
ACTIVITIES
New interest-bearing borrowings 1,460,000 — — — —
Repayment of interest-bearing
borrowings (119,000) (126,003) (134,005) (65,998) (1,080,992)
Principal portion of lease payments 27(b) (1,507) (1,777) (3,166) (2,449) (6,115)
Interest paid (13,313) (69,919) (63,920) (48,393) (30,544)
Capital injection by the
then shareholder — — 10,000 750 —
Capital contribution from
non-controlling shareholders — — — — 5,100
Acquisition of subsidiaries under
common control — — — — (19,858)
Net cash flows from/(used in)
financing activities 1,326,180 (197,699) (191,091) (116,090) (1,132,409)
NET (DECREASE)/INCREASE IN
CASH AND CASH
EQUIVALENTS (28,600) (4,917) 115,705 (9,989) 3,351
Cash and cash equivalents at
beginning of the year/period 188,630 160,030 155,113 155,113 270,818
CASH AND CASH EQUIVALENTS
AT END OF YEAR/PERIOD 160,030 155,113 270,818 145,124 274,169
ANALYSIS OF CASH AND CASH
EQUIVALENTS
Cash and bank balances as stated in
the consolidated statements of
financial position and statements of
cash flows 160,030 155,113 270,818 145,124 274,169
APPENDIX I ACCOUNTANTS’ REPORT
– I-13 –
STATEMENTS OF FINANCIAL POSITION OF THE COMPANY
Section II
As at
31 December
As at
30 September
Notes 2020 2021
RMB’000 RMB’000
NON-CURRENT ASSET
Investment in a subsidiary 1 — 68,476
Total non-current asset — 68,476
CURRENT ASSETS
Other assets 33 —* 3,850
Total current assets —* 3,850
CURRENT LIABILITIES
Other payables and accruals 33 — 17,574
Total current liabilities — 17,574
NET CURRENT LIABILITIES —* (13,724)
Net assets —* 54,752
EQUITY
Share capital 25 —* 66,947
Reserves 26 —* (12,195)
Total equity —* 54,752
* The amount is less than RMB1,000.
APPENDIX I ACCOUNTANTS’ REPORT
– I-14 –
II NOTES TO THE HISTORICAL FINANCIAL INFORMATION
1. CORPORATE INFORMATION
Jinmao Property Services Co., Limited (the “Company”, formerly known as Hanmao Limited and Jinmao
Property Development Co., Limited) is a limited liability company incorporated in Hong Kong on 14 September
2020. The registered office of the Company is located at Rooms 4702-03, 47/F, Office Tower, Convention Plaza, 1
Harbour Road, Wanchai, Hong Kong.
The Company is an investment holding company. During the Relevant Periods, the Company’s subsidiaries
were involved in the provision of property management services in the People’s Republic of China (the “PRC”).
The immediate holding company of the Company is China Jinmao Holdings Group Limited (“China Jinmao
Group”), a company incorporated in Hong Kong and its shares are listed on the Stock Exchange. In the opinion of
the Company’s directors, the ultimate holding company of the Company is Sinochem Group Co., Ltd. (“Sinochem
Group”), a company established in the PRC and is a state-owned enterprise under the supervision of the State-owned
Assets Supervision and Administration Commission in the PRC.
The Company and its subsidiaries now comprising the Group underwent the Reorganization as set out in the
paragraph headed “Reorganization” in the section headed “History, Reorganization and Corporate Structure” in the
prospectus. Apart from the Reorganization, the Company has not commenced any business or operation since its
incorporation.
Certain commercial property management services are also operated by the business units of certain
subsidiaries of China Jinmao Group not comprising the Group (the “Commercial Business Units”). These
Commercial Business Units did not exist as a legal or statutory entity. As at 31 March 2021, the commercial property
management business of the Commercial Business Units had been transferred to the Group (the “Business Transfer”).
The financial information contained in this prospectus does not constitute the Company’s statutory annual
financial statements for any of the financial years ended 31 December 2018, 2019 and 2020. Further information
required to be disclosed in accordance with section 436 of the Hong Kong Companies Ordinance is as follows:
The Company was incorporated on 14 September 2020 and has not prepared and presented any statutory
financial statements since incorporation. Consequently, the Company’s auditor has not reported on any statutory
financial statements and none have been delivered to the Registrar of Companies.
As at the date of this report, the Company had direct and indirect interests in its subsidiaries, all of which are
private limited liability companies, the particulars of which are set out below:
Name Notes
Place and date of
registration and
place of operations
Registered share
capital
Percentage of
equity
attributable to
the Company
Principal activitiesDirect Indirect
Sinochem Jinmao Property
Management (Beijing)
Co., Ltd. (“Sinochem Jinmao”)
#^
(1) PRC/Mainland China
16 January 2007
RMB5,000,000 100 — Property management
Jinmao (Shanghai) Property
Management Co., Ltd.
#
(2) PRC/Mainland China
18 September 1995
RMB6,630,000 — 100 Property management
Nanjing Ninggao International
Property Consultancy
Co., Ltd.
#
(3) PRC/Mainland China
23 April 2004
RMB5,000,000 — 100 Property management
Chuangmao Technology (Beijing)
Co., Ltd.
#
(4) PRC/Mainland China
14 February 2020
RMB10,000,000 — 100 Technology
development and
services
Yuelin (Hangzhou) Real Estate
Agents Co., Ltd.
#
(4) PRC/Mainland China
29 July 2020
RMB1,000,000 — 100 Real estate brokerage
service
APPENDIX I ACCOUNTANTS’ REPORT
– I-15 –
Name Notes
Place and date of
registration and
place of operations
Registered share
capital
Percentage of
equity
attributable to
the Company
Principal activitiesDirect Indirect
Jiashan Jiamao City Public
Resources Management
Co., Ltd.
#
(5) PRC/Mainland China
9 February 2021
RMB5,000,000 — 49* Property management
and city operation
services
Huimao Building Technology
(Beijing) Co., Ltd.
#
(5) PRC/Mainland China
5 March 2021
RMB20,000,000 — 100 Smart community
management
Maotong Property Management
(Shanghai) Co., Ltd.
#
(5) PRC/Mainland China
8 March 2021
RMB2,000,000 — 100 Property management
Zhoushan Dongda Jinmao Urban
Property Services Co., Ltd.
#
(5) PRC/Mainland China
19 July 2021
RMB5,000,000 — 49* Property management
and city operation
services
Zhejiang Zhonglan Xinmao Park
Management Co., Ltd.
#
(5) PRC/Mainland China
19 August 2021
RMB10,000,000 — 51 Property management
and city operation
services
Beijing Zijin Xinmao Property
Services Co., Ltd.
#
(5) PRC/Mainland China
30 September 2021
RMB1,000,000 — 51 Property management
Guangdong Tumao Commercial
Property Operation Co., Ltd.
#
(5) PRC/Mainland China
6 December 2021
RMB5,000,000 — 70 Property management
Nanjing Xinmao Asset Management
Co., Ltd.
#
(5) PRC/Mainland China
13 December 2021
RMB5,000,000 — 90 Property management
and city operation
services
#
The English names of all group companies registered in the PRC represent the best efforts made by the
directors of the Company to translate the Chinese names of these companies as they do not have official
English names.
^
This entity is registered as a wholly-foreign-owned enterprise under the PRC law.
*
The Group controls the board of directors of these entities by virtue of its power to cast the majority of votes
at the meetings of the respective board. The rights of shareholders’ meeting are all delegated to the meetings
of the board except for certain protective rights, and therefore the Group has the power to exercise control over
the entities’ operating and financing activities.
(1) The statutory financial statements of this entity prepared in accordance with PRC accounting principles and
regulations for the year ended 31 December 2018 have been audited by Ruihua Certified Public Accountants
LLP and those for the years ended 31 December 2019 and 2020 have been audited by Baker Tilly China
Certified Public Accountants LLP.
(2) The statutory financial statements of this entity prepared in accordance with PRC accounting principles and
regulations for the years ended 31 December 2018 and 2019 have been audited by Ernst & Young Hua Ming
LLP, and those for the year ended 31 December 2020 have been audited by Zhonghua Certified Public
Accountants LLP.
(3) The statutory financial statements of this entity prepared in accordance with PRC accounting principles and
regulations for the year ended 31 December 2018 have been audited by Baker Tilly China Certified Public
Accountants LLP, and those for the years ended 31 December 2019 and 2020 have been audited by RSM China
Certified Public Accountants LLP.
(4) The statutory financial statements of these entities prepared in accordance with PRC accounting principles and
regulations for the year ended 31 December 2020 have been audited by Baker Tilly China Certified Public
Accountants LLP.
(5) These entities were established in 2021 and have not appointed an auditor to issue statutory financial
statements for the periods from their dates of incorporation to 30 September 2021.
APPENDIX I ACCOUNTANTS’ REPORT
– I-16 –
2.1 BASIS OF PRESENTATION
Pursuant to the Reorganization, as more fully explained in the paragraph headed “Reorganization” in the
section headed “History, Reorganization and Corporate Structure” in the prospectus, the Company became the
holding company of the companies now comprising the Group on 25 May 2021. The companies now comprising the
Group and the Commercial Business Units were under the common control of China Jinmao Group before and after
the Reorganization. Accordingly, for the purpose of this report, the Historical Financial Information has been
prepared by applying the principles of merger accounting as if the Reorganization and the Business Transfer had been
completed at the beginning of the Relevant Periods.
The consolidated statements of profit or loss, statements of comprehensive income, statements of changes in
equity and statements of cash flows of the Group for the Relevant Periods and the unaudited financial information
of the Group for the nine months ended 30 September 2020 include the results and cash flows of all companies now
comprising the Group and the Commercial Business Units from the earliest date presented or since the date when the
subsidiaries and the Commercial Business Units first came under the common control of China Jinmao Group, where
this is a shorter period. The consolidated statements of financial position of the Group as at 31 December 2018, 2019
and 2020 and 30 September 2021 have been prepared to present the assets and liabilities of the subsidiaries and the
Commercial Business Units using the existing book values from China Jinmao Group’s perspective. No adjustments
are made to reflect fair values, or recognise any new assets or liabilities as a result of the Reorganization and the
Business Transfer.
All intra-group transactions and balances have been eliminated on consolidation.
2.2 BASIS OF PREPARATION
The Historical Financial Information has been prepared in accordance with Hong Kong Financial Reporting
Standards (“HKFRSs”, which include all Hong Kong Financial Reporting Standards, Hong Kong Accounting
Standards (“HKASs”) and Interpretations) issued by the HKICPA and accounting principles generally accepted in
Hong Kong. All HKFRSs effective for the accounting period commencing from 1 January 2021 and amendments to
HKFRS 16 Covid-19-Related Rent Concessions beyond 30 June 2021, together with the relevant transitional
provisions, have been early adopted by the Group in the preparation of the Historical Financial Information
throughout the Relevant Periods and the period covered by the Interim Comparative Financial Information.
The Historical Financial Information has been prepared under the historical cost convention, except for
investment properties which have been measured at fair value.
2.3 ISSUED BUT NOT YET EFFECTIVE HKFRSs
The Group has not applied the following new and revised HKFRSs, that have been issued but are not yet
effective, in the Historical Financial Information.
Amendments to HKFRS 3 Reference to the Conceptual Framework
1
Amendments to HKFRS 10 and
HKAS 28 (2011)
Sale or Contribution of Assets between an Investor
and its Associate or Joint Venture
3
HKFRS 17 Insurance Contracts
2
Amendments to HKFRS 17 Insurance Contracts
2, 5
Amendments to HKAS 1 Classification of Liabilities as Current or
Non-current
2, 4
Amendments to HKAS 1 Disclosure of Accounting Policies
2
Amendments to HKAS 8 Definition of Accounting Estimates
2
Amendments to HKAS 12 Deferred Tax related to Assets and Liabilities arising
from a Single Transaction
2
Amendments to HKAS 16 Property, Plant and Equipment: Proceeds before
Intended Use
1
Amendments to HKAS 37 Onerous Contracts — Cost of Fulfilling a Contract
1
Annual Improvements to HKFRSs
2018 — 2020
Amendments to HKFRS 1, HKFRS 9, Illustrative
Examples accompanying HKFRS 16, and
HKAS 41
1
1
Effective for annual periods beginning on or after 1 January 2022
APPENDIX I ACCOUNTANTS’ REPORT
– I-17 –
2
Effective for annual periods beginning on or after 1 January 2023
3
No mandatory effective date yet determined but available for adoption
4
As a consequence of the amendments to HKAS 1, Hong Kong Interpretation 5 Presentation of Financial
Statements — Classification by the Borrower of a Term Loan that Contains a Repayment on Demand
Clause was revised in October 2020 to align the corresponding wording with no change in conclusion
5
As a consequence of the amendments to HKFRS 17 issued in October 2020, HKFRS 4 was amended to
extend the temporary exemption that permits insurers to apply HKAS 39 rather than HKFRS 9 for
annual periods beginning before 1 January 2023
The Group is in the process of making an assessment of the impact of these new and revised HKFRSs upon
initial application. So far, the Group considers that, these new and revised HKFRSs are unlikely to have a significant
impact on the Group’s results of operations and financial position.
2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in preparation of the Historical Financial Information are set out
below. These policies have been consistently applied to all the years/periods presented.
Subsidiaries
A subsidiary is an entity (including a structured entity) directly or indirectly, controlled by the Company.
Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with
the investee and has the ability to affect those returns through its power over the investee (i.e., existing rights that
give the Group the current ability to direct the relevant activities of the investee).
When the Company has, directly or indirectly, less than a majority of the voting or similar rights of an investee,
the Group considers all relevant facts and circumstances in assessing whether it has power over an investee,
including:
(a) the contractual arrangement with the other vote holders of the investee;
(b) rights arising from other contractual arrangements; and
(c) the Group’s voting rights and potential voting rights.
The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control described above. A change in the ownership interest of a
subsidiary, without a loss of control, is accounted for as an equity transaction. The results of subsidiaries are included
in the Company’s profit or loss to the extent of dividends received and receivable. The Company’s investments in
subsidiaries that are not classified as held for sale in accordance with HKFRS 5 Non-current Assets Held for Sale and
Discontinued Operations are stated at cost less any impairment losses.
Fair value measurement
The Group measures its investment properties at the end of each reporting period. Fair value is the price that
would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset
or transfer the liability takes place either in the principal market for the asset or liability, or in the absence of a
principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous
market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions
that market participants would use when pricing the asset or liability, assuming that market participants act in their
economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate
economic benefits by using the asset in its highest and best use or by selling it to another market participant that
would use the asset in its highest and best use.
APPENDIX I ACCOUNTANTS’ REPORT
– I-18 –
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data
are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of
unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial information are
categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant
to the fair value measurement as a whole:
Level 1 — based on quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2 — based on valuation techniques for which the lowest level input that is significant to the fair value
measurement is observable, either directly or indirectly
Level 3 — based on valuation techniques for which the lowest level input that is significant to the fair value
measurement is unobservable
For assets and liabilities that are recognised in the financial information on a recurring basis, the Group
determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation (based on
the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
Impairment of non-financial assets
Where an indication of impairment exists, or when annual impairment testing for an asset is required (other
than inventories, deferred tax assets, financial assets and investment properties), the asset’s recoverable amount is
estimated. An asset’s recoverable amount is the higher of the asset’s or cash-generating unit’s value in use and its fair
value less costs of disposal, and is determined for an individual asset, unless the asset does not generate cash inflows
that are largely independent of those from other assets or groups of assets, in which case the recoverable amount is
determined for the cash-generating unit to which the asset belongs.
An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. In
assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of money and the risks specific to the asset. An
impairment loss is charged to profit or loss in the period in which it arises in those expense categories consistent with
the function of the impaired asset.
An assessment is made at the end of each reporting period as to whether there is an indication that previously
recognised impairment losses may no longer exist or may have decreased. If such an indication exists, the recoverable
amount is estimated. A previously recognised impairment loss of an asset other than goodwill is reversed only if there
has been a change in the estimates used to determine the recoverable amount of that asset, but not to an amount higher
than the carrying amount that would have been determined (net of any depreciation/amortisation) had no impairment
loss been recognised for the asset in prior years. A reversal of such an impairment loss is credited to profit or loss
in the period in which it arises, unless the asset is carried at a revalued amount, in which case the reversal of the
impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset.
Related parties
A party is considered to be related to the Group if:
(a) the party is a person or a close member of that person’s family and that person
(i) has control or joint control over the Group;
(ii) has significant influence over the Group; or
(iii) is a member of the key management personnel of the Group or of a parent of the Group;
or
(b) the party is an entity where any of the following conditions applies:
(i) the entity and the Group are members of the same group;
APPENDIX I ACCOUNTANTS’ REPORT
– I-19 –
(ii) one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow
subsidiary of the other entity);
(iii) the entity and the Group are joint ventures of the same third party;
(iv) one entity is a joint venture of a third entity and the other entity is an associate of the third entity;
(v) the entity is a post-employment benefit plan for the benefit of employees of either the Group or
an entity related to the Group;
(vi) the entity is controlled or jointly controlled by a person identified in (a);
(vii) a person identified in (a)(i) has significant influence over the entity or is a member of the key
management personnel of the entity (or of a parent of the entity); and
(viii) the entity, or any member of a group of which it is a part, provides key management personnel
services to the Group or to the parent of the Group.
Property, plant and equipment and depreciation
Items of property, plant and equipment are stated at cost less accumulated depreciation and any impairment
losses. The cost of an item of property, plant and equipment comprises its purchase price and any directly attributable
costs of bringing the asset to its working condition and location for its intended use.
Expenditure incurred after items of property, plant and equipment have been put into operation, such as repairs
and maintenance, is normally charged to profit or loss in the period in which it is incurred. In situations where the
recognition criteria are satisfied, the expenditure for a major inspection is capitalised in the carrying amount of the
asset as a replacement. Where significant parts of property, plant and equipment are required to be replaced at
intervals, the Group recognises such parts as individual assets with specific useful lives and depreciates them
accordingly.
Depreciation is calculated on a straight-line basis to write off the cost of each item of property, plant and
equipment to its residual value over its estimated useful life. The principal annual rates used for this purpose are as
follows:
Plant and machinery 9% to 33%
Leasehold improvements 20% to 50%
Furniture, fixtures and office equipment 9% to 20%
Motor vehicles 18% to 25%
Where parts of an item of property, plant and equipment have different useful lives, the cost of that item is
allocated on a reasonable basis among the parts and each part is depreciated separately. Residual values, useful lives
and the depreciation method are reviewed, and adjusted if appropriate, at least at each financial year/period end.
An item of property, plant and equipment including any significant part initially recognised is derecognised
upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on disposal
or retirement recognised in profit or loss in the year/period the asset is derecognised is the difference between the
net sales proceeds and the carrying amount of the relevant asset.
Investment properties
Investment properties are interests in land and buildings (including the leasehold property held as a
right-of-use asset which would otherwise meet the definition of an investment property) held to earn rental income
and/or for capital appreciation, rather than for use in the production or supply of goods or services or for
administrative purposes; or for sale in the ordinary course of business. Such properties are measured initially at cost,
including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value, which
reflects market conditions at the end of the reporting period.
Gains or losses arising from changes in the fair values of investment properties are included in profit or loss
in the year/period in which they arise.
APPENDIX I ACCOUNTANTS’ REPORT
– I-20 –
Any gains or losses on the retirement or disposal of an investment property are recognised in profit or loss in
the year/period of the retirement or disposal.
Intangible assets (other than goodwill)
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets
acquired in a business combination is the fair value at the date of acquisition. The useful lives of intangible assets
are assessed to be either finite or indefinite. Intangible assets with finite lives are subsequently amortised over the
useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be
impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are
reviewed at least at each financial year/period end.
Software is stated at cost less any impairment loss and is amortised on the straight-line basis over its estimated
life of 3 to 5 years.
Leases
The Group assesses at contract inception whether a contract is, or contains, a lease. A contract is, or contains,
a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for
consideration.
Group as a lessee
The Group applies a single recognition and measurement approach for all leases, except for short-term leases
and leases of low-value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets
representing the right to use the underlying assets. At inception or on reassessment of a contract that contains a lease
component and non-lease component(s), the Group adopts the practical expedient not to separate non-lease
component(s) and to account for the lease component and the associated non-lease component(s) (e.g., property
management services for leases of properties) as a single lease component.
(a) Right-of-use assets
Right-of-use assets are recognised at the commencement date of the lease (that is the date the underlying
asset is available for use). Right-of-use assets (relate to the office properties and staff quarters) are measured
at cost, less any accumulated depreciation and any impairment losses, and adjusted for any remeasurement of
lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct
costs incurred, and lease payments made at or before the commencement date less any lease incentives
received. Where applicable, the cost of a right-of-use asset also includes an estimate of costs to dismantle and
remove the underlying asset or to restore the underlying asset or the site on which it is located. Right-of-use
assets are depreciated and amortised on a straight-line basis over the shorter of the lease terms and the
estimated useful lives of the assets as follows:
Office properties and staff quarters 1.5 to 5 years
If ownership of the leased asset transfers to the Group by the end of the lease term or the cost reflects
the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.
(b) Lease liabilities
Lease liabilities are recognised at the commencement date of the lease at the present value of lease
payments to be made over the lease term. The lease payments include fixed payments (including in-substance
fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate,
and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise
price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for
terminating a lease, if the lease term reflects the Group exercising the option to terminate the lease. The
variable lease payments that do not depend on an index or a rate are recognised as an expense in the period
in which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the
lease commencement date because the interest rate implicit in the lease is not readily determinable. After the
commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced
for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a
modification, a change in future lease payments arising from a change in an index or rate, a change in the lease
term, a change in the in-substance fixed lease payments or a change in assessment to purchase the underlying
asset.
APPENDIX I ACCOUNTANTS’ REPORT
– I-21 –
(c) Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases of buildings and
equipments (that is those leases that have a lease term of 12 months or less from the commencement date and
do not contain a purchase option). When the Group enters into a lease in respect of a low-value asset, the Group
decides whether to capitalise the lease on a lease-by-lease basis. Lease payments on short-term leases and
leases of low-value assets are recognised as an expense on a straight-line basis over the lease term.
Group as a lessor
When the Group acts as a lessor, it classifies at lease inception (or when there is a lease modification) each
of its leases as either an operating lease or a finance lease.
Leases in which the Group does not transfer substantially all the risks and rewards incidental to ownership of
an asset are classified as operating leases. When a contract contains lease and non-lease components, the Group
allocates the consideration in the contract to each component on a relative stand-alone selling price basis. Rental
income is accounted for on a straight-line basis over the lease terms and is included in revenue in profit or loss due
to its operating nature. Initial direct costs incurred in negotiating and arranging an operating lease are added to the
carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent
rents are recognised as revenue in the period in which they are earned.
Leases that transfer substantially all the risks and rewards incidental to ownership of an underlying asset to
the lessee, are accounted for as finance leases.
When the Group is an intermediate lessor, a sublease is classified as a finance lease or operating lease with
reference to the right-of-use asset arising from the head lease. If the head lease is a short-term lease to which the
Group applies the on-balance sheet recognition exemption, the Group classifies the sublease as an operating lease.
Investments and other financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value
through other comprehensive income (“OCI”), and fair value through profit or loss.
The classification of financial assets at initial recognition depends on the financial asset’s contractual cash
flow characteristics and the Group’s business model for managing them. With the exception of trade receivables that
do not contain a significant financing component or for which the Group has applied the practical expedient of not
adjusting the effect of a significant financing component, the Group initially measures a financial asset at its fair
value, plus in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables
that do not contain a significant financing component or for which the Group has applied the practical expedient are
measured at the transaction price determined under HKFRS 15 in accordance with the policies set out for “Revenue
recognition” below.
In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs
to give rise to cash flows that are solely payments of principal and interest (“SPPI”) on the principal amount
outstanding. Financial assets with cash flows that are not SPPI are classified and measured at fair value through profit
or loss, irrespective of the business model.
The Group’s business model for managing financial assets refers to how it manages its financial assets in order
to generate cash flows. The business model determines whether cash flows will result from collecting contractual
cash flows, selling the financial assets, or both. Financial assets classified and measured at amortised cost are held
within a business model with the objective to hold financial assets in order to collect contractual cash flows, while
financial assets classified and measured at fair value through other comprehensive income are held within a business
model with the objective of both holding to collect contractual cash flows and selling. Financial assets which are not
held within the aforementioned business models are classified and measured at fair value through profit or loss.
All regular way purchases and sales of financial assets are recognised on the trade date, that is, the date that
the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial
assets that require delivery of assets within the period generally established by regulation or convention in the
marketplace.
APPENDIX I ACCOUNTANTS’ REPORT
– I-22 –
Subsequent measurement
The subsequent measurement of financial assets depends on their classification as follows:
Financial assets at amortised cost (debt instruments)
Financial assets at amortised cost are subsequently measured using the effective interest method and are
subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised,
modified or impaired.
Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets)
is primarily derecognised (i.e., removed from the Group’s consolidated statement of financial position) when:
• the rights to receive cash flows from the asset have expired; or
• the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation
to pay the received cash flows in full without material delay to a third party under a “pass-through”
arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset,
or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset,
but has transferred control of the asset.
When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through
arrangement, it evaluates if and to what extent it has retained the risk and rewards of ownership of the asset. When
it has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of
the asset, the Group continues to recognise the transferred asset to the extent of the Group’s continuing involvement.
In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are
measured on a basis that reflects the rights and obligations that the Group has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower
of the original carrying amount of the asset and the maximum amount of consideration that the Group could be
required to repay.
Impairment of financial assets
The Group recognises an allowance for expected credit losses (“ECLs”) for all debt instruments not held at fair
value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance
with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the
original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or
other credit enhancements that are integral to the contractual terms.
General approach
ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase
in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are
possible within the next 12 months (a 12-month ECL). For those credit exposures for which there has been a
significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over
the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).
At each reporting date, the Group assesses whether the credit risk on a financial instrument has increased
significantly since initial recognition. When making the assessment, the Group compares the risk of a default
occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial
instrument as at the date of initial recognition and considers reasonable and supportable information that is available
without undue cost or effort, including historical and forward-looking information.
In certain cases, the Group may consider a financial asset to be in default when internal or external information
indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account
any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation
of recovering the contractual cash flows.
APPENDIX I ACCOUNTANTS’ REPORT
– I-23 –
Financial assets at amortised cost are subject to impairment under the general approach and they are classified
within the following stages for measurement of ECLs except for trade receivables which apply the simplified
approach as detailed below.
Stage 1 — Financial instruments for which credit risk has not increased significantly since initial recognition
and for which the loss allowance is measured at an amount equal to 12-month ECLs
Stage 2 — Financial instruments for which credit risk has increased significantly since initial recognition but
that are not credit-impaired financial assets and for which the loss allowance is measured at an
amount equal to lifetime ECLs
Stage 3 — Financial assets that are credit-impaired at the reporting date (but that are not purchased or
originated credit-impaired) and for which the loss allowance is measured at an amount equal to
lifetime ECLs
Simplified approach
For trade receivables that do not contain a significant financing component or when the Group applies the
practical expedient of not adjusting the effect of a significant financing component, the Group applies the simplified
approach in calculating ECLs. Under the simplified approach, the Group does not track changes in credit risk, but
instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a
provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific
to the debtors and the economic environment.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as loans and borrowings or payables, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and
payables, net of directly attributable transaction costs.
The Group’s financial liabilities include trade payables, other payables and accruals, lease liabilities and
interest-bearing borrowings.
Subsequent measurement
The subsequent measurement of financial liabilities depends on their classification as follows:
Financial liabilities at amortised cost
After initial recognition, financial liabilities at amortised cost are subsequently measured at amortised cost,
using the effective interest rate method unless the effect of discounting would be immaterial, in which case they are
stated at cost. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through
the effective interest rate amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs
that are an integral part of the effective interest rate. The effective interest rate amortisation is included in finance
costs in profit or loss.
Derecognition of financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged or cancelled, or
expires.
When an existing financial liability is replaced by another from the same lender on substantially different
terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as
a derecognition of the original liability and a recognition of a new liability, and the difference between the respective
carrying amounts is recognised in profit or loss.
APPENDIX I ACCOUNTANTS’ REPORT
– I-24 –
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial
position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to
settle on a net basis, or to realise the assets and settle the liabilities simultaneously.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined on the first-in, first-out
basis. Net realisable value is based on the estimated selling prices less any estimated costs to be incurred to
completion and disposal.
Cash and cash equivalents
For the purpose of the consolidated statement of cash flows, cash and cash equivalents comprise cash on hand
and demand deposits, and short term highly liquid investments that are readily convertible into known amounts of
cash, are subject to an insignificant risk of changes in value, and have a short maturity of generally within three
months when acquired, less bank overdrafts which are repayable on demand and form an integral part of the Group’s
cash management.
For the purpose of the consolidated statements of financial position, cash and cash equivalents comprise cash
on hand and at banks, including term deposits, and assets similar in nature to cash, which are not restricted as to use.
Provisions
A provision is recognised when a present obligation (legal or constructive) has arisen as a result of a past event
and it is probable that a future outflow of resources will be required to settle the obligation, provided that a reliable
estimate can be made of the amount of the obligation.
When the effect of discounting is material, the amount recognised for a provision is the present value at the
end of each of the Relevant Periods of the future expenditures expected to be required to settle the obligation. The
increase in the discounted present value amount arising from the passage of time is included in finance costs in profit
or loss.
Income tax
Income tax comprises current and deferred tax. Income tax relating to items recognised outside profit or loss
is recognised outside profit or loss, either in other comprehensive income or directly in equity.
Current tax assets and liabilities for the current and prior year are measured at the amount expected to be
recovered from or paid to the taxation authorities, based on tax rates and tax laws that have been enacted or
substantively enacted by the end of each of the Relevant Periods, taking into consideration interpretations and
practices prevailing in the countries in which the Group operates.
Deferred tax is provided, using the liability method, on all temporary differences at the end of the reporting
period between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognised for all taxable temporary differences, except:
• when the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in
a transaction that is not a business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; and
• in respect of taxable temporary differences associated with investments in subsidiaries, when the timing
of the reversal of the temporary differences can be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences, the carryforward of unused tax
credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit
will be available against which the deductible temporary differences, the carryforward of unused tax credits and
unused tax losses can be utilised, except:
• when the deferred tax asset relating to the deductible temporary differences arises from the initial
recognition of an asset or liability in a transaction that is not a business combination and, at the time
of the transaction, affects neither the accounting profit nor taxable profit or loss; and
APPENDIX I ACCOUNTANTS’ REPORT
– I-25 –
• in respect of deductible temporary differences associated with investments in subsidiaries, deferred tax
assets are only recognised to the extent that it is probable that the temporary differences will reverse in
the foreseeable future and taxable profit will be available against which the temporary differences can
be utilised.
The carrying amount of deferred tax assets is reviewed at the end of each of the Relevant Periods and reduced
to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the
deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at the end of each of the Relevant
Periods and are recognised to the extent that it has become probable that sufficient taxable profit will be available
to allow all or part of the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when
the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively
enacted by the end of each of the Relevant Periods.
Deferred tax assets and deferred tax liabilities are offset if and only if the Group has a legally enforceable right
to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to
income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which
intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities
simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected
to be settled or recovered.
Government grants
Government grants are recognised at their fair value where there is reasonable assurance that the grant will be
received and all attaching conditions will be complied with. When the grant relates to an expense item, it is
recognised as income on a systematic basis over the periods that the costs, for which it is intended to compensate,
are expensed.
Revenue recognition
Revenue from contracts with customers
The Group provides property management services, value-added services to non-property owners and
community value-added services to property developers, property owners or tenants, property owners’ associations
or residents. Revenue from contracts with customers is recognised when control of goods or services is transferred
to the customers at an amount that reflects the consideration to which the Group expects to be entitled in exchange
for those goods or services.
When the consideration in a contract includes a variable amount, the amount of consideration is estimated to
which the Group will be entitled in exchange for transferring the goods or services to the customer. The variable
consideration is estimated at contract inception and constrained until it is highly probable that a significant revenue
reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the
variable consideration is subsequently resolved.
When the contract contains a financing component which provides the customer with a significant benefit of
financing the transfer of goods or services to the customer for more than one year, revenue is measured at the present
value of the amount receivable, discounted using the discount rate that would be reflected in a separate financing
transaction between the Group and the customer at contract inception. When the contract contains a financing
component which provides the Group with a significant financial benefit for more than one year, revenue recognised
under the contract includes the interest expense accreted on the contract liability under the effective interest method.
For a contract where the period between the payment by the customer and the transfer of the promised goods or
services is one year or less, the transaction price is not adjusted for the effects of a significant financing component,
using the practical expedient in HKFRS 15.
(i) Property management services mainly includes security, cleaning, greening, repair and maintenance and
file management services to owners or tenants of properties. For property management services, the
Group bills a fixed amount for services provided on a monthly basis and recognises as revenue in the
amount to which the Group has a right to invoice and that corresponds directly with the value of
performance completed. The Group recognises the service fee received or receivable as its revenue over
time in the period in which the customer simultaneously receives and consumes the benefits provided
by the services performed by the Group.
APPENDIX I ACCOUNTANTS’ REPORT
– I-26 –
(ii) Value-added services to non-property owners mainly include (a) sales assistance services, mainly
including pre-sale preparation, marketing, cleaning, security and maintenance services at property sales
venues and display units; (b) consultancy services, including preliminary planning and design services,
construction consultancy services, pre-delivery services prior to delivery of properties to end buyers
(mainly clearing, cleaning, assistance at property delivery venues (“Start-up Services”), and property
inspection services and follow-up with rectification services (“Inspection and Follow-up Services”)),
post-delivery services (mainly repair and maintenance), and other consultancy services (mainly sales
agency services with respect to newly developed properties and carpark spaces). The Group agrees the
price for each service with the customers upfront and issues the monthly or quarterly bill to the
customers which varies based on the actual level of service completed. Revenue from sales assistance
services, construction consultancy services, Start-up Services and post-delivery services is recognised
over time, in the amount to which the Group has a right to invoice, because the customer simultaneously
receives and consumes the benefits provided by the Group. Revenue from preliminary planning and
design consultancy services, Inspection and Follow-up Services and sales agency services is recognised
at the point in time when the services are rendered and accepted by the property developers.
(iii) Community value-added services mainly include community space operation services, community
living services (mainly housekeeping, cleaning, retail and catering services), real estate agency services
with respect to secondary sale or rental transactions of properties, and platform services for interior
decoration. Revenue from community space operation services and community living services are
recognised when the related services are rendered. Revenue from catering services is recognised at the
point in time when control of the food and beverages is transferred to the customers, generally on the
acceptance of the food and beverages. Revenue from real estate agency services and platform services
for interior decoration is recognised at the point in time when the services are rendered and accepted
by the customers.
For property management services income from properties managed on a lump sum basis, where the Group acts
as principal and is primarily responsible for providing the property management services to the property owners, the
Group recognises the fee received or receivable from property owners as its revenue and all related property
management costs as its cost of services. For property management services income from properties managed on a
commission basis, the Group recognises the revenue, which is calculated by a certain percentage of the total property
management fee received or receivable from the properties units on behalf of the property owners, for arranging and
monitoring the services as provided by other suppliers to the property owners.
Revenue from other sources
Rental income is recognised on a time proportion basis over the lease terms. Variable lease payments that do
not depend on an index or a rate are recognised as income in the accounting period in which they are incurred.
Other income
Interest income is recognised on an accrual basis using the effective interest method by applying the rate that
exactly discounts the estimated future cash receipts through the expected life of the financial instrument or a shorter
period, when appropriate, to the net carrying amount of the financial asset.
Contract liabilities
A contract liability is recognised when a payment is received or a payment is due (whichever is earlier) from
a customer before the Group transfers the related goods or services. Contract liabilities are recognised as revenue
when the Group performs under the contract (i.e., transfers control of the related goods or services to the customer).
Employee benefits
Pension scheme
The employees of the Group’s subsidiaries which operate in Mainland China are required to participate in a
central pension scheme operated by the local municipal governments. These subsidiaries are required to contribute
a certain portion of their payroll to the central pension scheme. The contributions are charged to profit or loss as they
become payable in accordance with the rules of the central pension scheme.
APPENDIX I ACCOUNTANTS’ REPORT
– I-27 –
Borrowing costs
Borrowing costs are expensed in the period in which they are incurred. Borrowing costs consist of interest and
other costs that an entity incurs in connection with the borrowing of funds.
Dividends
Final dividends are recognised as a liability when they are approved by the shareholders of the Company in
a general meeting.
Interim dividends are simultaneously proposed and declared, because the Company’s memorandum and
articles of association grant the directors the authority to declare interim dividends. Consequently, interim dividends
are recognised immediately as a liability when they are proposed and declared.
Foreign currencies
The Historical Financial Information is presented in RMB, while the Company’s functional currency is Hong
Kong dollar. Each entity in the Group determines its own functional currency and items included in the financial
information of each entity are measured using that functional currency. Foreign currency transactions recorded by the
entities in the Group are initially recorded using their respective functional currency rates prevailing at the dates of
the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the functional
currency rates of exchange ruling at the end of each of the financial periods. Differences arising on settlement or
translation of monetary items are recognised in profit or loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the
exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency
are translated using the exchange rates at the date when the fair value was measured. The gain or loss arising on
translation of a non-monetary item measured at fair value is treated in line with the recognition of the gain or loss
on change in fair value of the item (i.e., translation difference on the item whose fair value gain or loss is recognised
in other comprehensive income or profit or loss is also recognised in other comprehensive income or profit or loss,
respectively).
In determining the exchange rate on initial recognition of the related asset, expense or income on the
derecognition of a non-monetary asset or non-monetary liability relating to an advance consideration, the date of
initial transaction is the date on which the Group initially recognises the non-monetary asset or non-monetary liability
arising from the advance consideration. If there are multiple payments or receipts in advance, the Group determines
the transaction date for each payment or receipt of the advance consideration.
As at the end of the reporting period, the assets and liabilities of the Company and any foreign operations are
translated into RMB at the exchange rates prevailing at the end of each of the reporting periods and the profit or loss
of the Company is translated into RMB at the dates of the transactions. The resulting exchange differences are
recognised in other comprehensive income and accumulated in the exchange reserve. On disposal of a foreign
operation, the component of other comprehensive income relating to that particular foreign operation is recognised
in profit or loss.
For the purpose of the consolidated statement of cash flows, the cash flows of the Company and any foreign
operations are translated into RMB at the exchange rates ruling at the dates of the cash flows. Frequently recurring
cash flows of the Company which arise throughout the year/period are translated into RMB at the weighted average
exchange rates for the year/period.
APPENDIX I ACCOUNTANTS’ REPORT
– I-28 –
3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES
The preparation of the Group’s financial information requires management to make judgements, estimates and
assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and their accompanying
disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could
result in outcomes that could require a material adjustment to the carrying amounts of the assets or liabilities affected
in the future.
Estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the
reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year, are described below.
Provision for expected credit losses (“ECLs”) on trade receivables and other receivables
The Group uses a provision matrix to calculate ECLs for trade receivables and other receivables. The provision
rates are based on days past due for groupings of various customer segments that have similar loss patterns (i.e. by
service type, customer type and rating).
The provision matrix is initially based on the Group’s historical observed default rates. The Group will
calibrate the matrix to adjust the historical credit loss experience with forward-looking information. For instance, if
forecast economic conditions are expected to deteriorate over the next year which can lead to an increased number
of defaults in the property development sector, the historical default rates are adjusted. At each reporting date, the
historical observed default rates are updated and changes in the forward-looking estimates are analysed.
The assessment of the correlation among historical observed default rates, forecast economic conditions and
ECLs is a significant estimate. The amount of ECLs is sensitive to changes in circumstances and forecast economic
conditions. The Group’s historical credit loss experience and forecast of economic conditions may also not be
representative of a customer’s actual default in the future. The information about the ECLs on the Group’s trade
receivables and other receivables is disclosed in notes 19 and 20 to the Historical Financial Information.
Impairment of non-financial assets
The Group assesses whether there are any indicators of impairment for all non-financial assets (including the
right-of-use assets) at the end of each reporting period. An impairment exists when the carrying value of an asset or
a cash-generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and
its value in use. The calculation of the fair value less costs of disposal is based on available data from binding sales
transactions in an arm’s length transaction of similar assets or observable market prices less incremental costs for
disposing of the asset. When value in use calculations are undertaken, management must estimate the expected future
cash flows from the asset or cash-generating unit and choose a suitable discount rate in order to calculate the present
value of those cash flows.
Leases — Estimating the incremental borrowing rate
The Group cannot readily determine the interest rate implicit in a lease, and therefore, it uses an incremental
borrowing rate (“IBR”) to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay
to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value
to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Group “would have
to pay”, which requires estimation when no observable rates are available (such as for subsidiaries that do not enter
into financing transactions) or when it needs to be adjusted to reflect the terms and conditions of the lease (for
example, when leases are not in the subsidiary’s functional currency). The Group estimates the IBR using observable
inputs (such as market interest rates) when available and is required to make certain entity-specific estimates (such
as the subsidiary’s stand-alone credit rating).
APPENDIX I ACCOUNTANTS’ REPORT
– I-29 –
Estimation of fair value of investment properties
In the absence of current prices in an active market for similar leased properties, the Group considers
information from discounted cash flow projections based on reliable estimates of future cash flows, supported by the
terms of any existing lease and other contracts and (when possible) by external evidence such as current market rents
for similar properties in the same location and condition, and using discount rates that reflect current market
assessments of the uncertainty in the amount and timing of the cash flows.
The carrying amounts of investment properties at 31 December 2018, 2019 and 2020 and 30 September 2021
were RMB14,510,000, RMB11,640,000, RMB10,590,000 and RMB9,459,000, respectively. Further details,
including the key assumptions used for the fair value measurement, are given in note 14 to the Historical Financial
Information.
Useful lives of property, plant and equipment
The Group’s management determines the estimated useful lives. This estimate is based on the historical
experience of the actual useful lives of property, plant and equipment of similar nature and functions. Management
will increase the depreciation charge where useful lives are less than previously estimated lives, or will write off or
write down technically obsolete or non-strategic assets that have been abandoned or sold. Periodic review could result
in a change of depreciable lives and therefore depreciation charge in the future periods.
Recognition of deferred tax liabilities for withholding taxes
Deferred tax liabilities are recognised for withholding tax levied on dividends declared to foreign investors
from the foreign investment enterprise established in Mainland China. Significant management judgement is required
to determine the amount of deferred tax liabilities that can be recognised, based upon the likely dividends declared.
Further details are contained in note 17 to the Historical Financial Information.
4. OPERATING SEGMENT INFORMATION
The Group is principally engaged in the provision of property management services, value-added services to
non-property owners, community value-added services. Information reported to the Group’s chief operating decision
maker, for the purpose of resource allocation and performance assessment, focuses on the operating results of the
Group as a whole as the Group’s resources are integrated and no discrete operating segment information is available.
Accordingly, no operating segment information is presented.
Geographical information
The Group’s revenue from customers is derived solely from its operations and services rendered in Mainland
China, and the non-current assets of the Group are located in Mainland China.
Information about major customers
For the years ended 31 December 2018, 2019 and 2020, and the nine months ended 30 September 2020 and
2021, RMB187,665,000, RMB204,608,000, RMB260,668,000, RMB181,613,000 and RMB343,655,000 of revenue
were derived from the ultimate holding company and the fellow subsidiaries. Other than the revenue from the
ultimate holding company and the fellow subsidiaries, no revenue derived from sales to a single customer or a group
of customers under common control accounted for 10% or more of the Group’s revenue for each of the Relevant
Periods and the nine months ended 30 September 2020.
APPENDIX I ACCOUNTANTS’ REPORT
– I-30 –
5. REVENUE, OTHER INCOME AND GAINS
An analysis of revenue is as follows:
Year ended 31 December
Nine months ended
30 September
2018 2019 2020 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Revenue from contracts with
customers 570,675 782,592 940,323 662,973 1,044,614
Revenue from other sources
Gross rental income from
investment properties
operating leases:
Fixed lease payments 3,828 5,731 3,887 2,349 4,071
574,503 788,323 944,210 665,322 1,048,685
Revenue from contracts with customers
(a) Disaggregated revenue information
Year ended 31 December
Nine months ended
30 September
2018 2019 2020 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Types of services
Property management services 335,117 462,277 567,481 409,498 578,238
Value-added services to
non-property owners 178,613 250,838 294,401 198,982 371,624
Community value-added
services 56,945 69,477 78,441 54,493 94,752
Total revenue from contracts
with customers 570,675 782,592 940,323 662,973 1,044,614
Timing of revenue recognition
Revenue from contracts with
customers recognised
over time 544,606 753,782 909,473 640,323 950,679
Revenue from contracts with
customers recognised at a
point in time 26,069 28,810 30,850 22,650 93,935
Total 570,675 782,592 940,323 662,973 1,044,614
APPENDIX I ACCOUNTANTS’ REPORT
– I-31 –
Contract liabilities
The Group recognised the following revenue-related contract liabilities:
As at 31 December
As at
30 September
2018 2019 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000
Third parties 94,142 130,589 183,829 232,270
Related parties
(note 29) 4,006 16,328 22,562 26,722
Contract liabilities 98,148 146,917 206,391 258,992
Contract liabilities of the Group mainly arise from the advance payments received from customers for
services yet to be provided. The increase in contract liabilities as at 31 December 2018, 2019 and 2020 and
30 September 2021 was mainly due to the increase in short term advances received from customers in relation
to the provision of property management services at the end of that year/period.
The following table shows the revenue recognised during the Relevant Periods and the nine months
ended 30 September 2020 related to contract liabilities carried forward:
Year ended 31 December
Nine months ended
30 September
2018 2019 2020 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Revenue recognised that was
included in the contract
liability balance at the
beginning of the
year/period: 76,458 98,148 146,917 143,175 201,979
(b) Performance obligations
Information about the Group’s performance obligations is summarised below:
For residential property management services and non-residential property management services, the
Group recognises revenue in the amount that equals to the rights to invoices which corresponds directly with
the value to the customers of the Group’s performance to date. The Group has elected the practical expedient
of not to disclose the remaining performance obligations for these types of contracts because the performance
obligation is part of a contract that has an original expected duration of one year or less, and there was
unsatisfied performance obligation at the end of the respective periods.
An analysis of other income and gains is as follows:
Year ended 31 December
Nine months ended
30 September
2018 2019 2020 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Other income and gains
Bank interest income 1,243 864 1,313 958 2,085
Loan interest income 9,864 69,991 63,750 50,803 32,408
Tax incentives on value-added
tax — 1,913 5,458 3,828 4,583
Government grants 465 1,647 3,364 2,669 1,503
Others 174 297 1,023 372 469
11,746 74,712 74,908 58,630 41,048
APPENDIX I ACCOUNTANTS’ REPORT
– I-32 –
6. PROFIT BEFORE TAX
The Group’s profit before tax is arrived at after charging/(crediting):
Section II
Notes
Year ended
31 December
Nine months
ended 30 September
2018 2019 2020 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Cost of services provided 459,469 636,800 709,421 501,521 737,790
Depreciation of property,
plant and equipment 13 2,314 3,401 5,369 3,851 6,710
Depreciation of
right-of-use assets 15 1,083 2,134 3,750 2,105 6,550
Amortisation of
intangible assets 16 85 235 1,795 1,536 2,102
Listing expenses ————12,519
Auditors’ remuneration 113 129 137 120 150
Fair value loss on
investment properties* 14 1,860 2,870 1,050 584 1,131
Loss on disposal of items
of property, plant and
equipment, net* 96 — 17 10 502
Penalties*^ —
#
1 15 14 3,053
Employee benefit expense
(excluding directors’ and
chief executive’s
remuneration (note 8)):
Wages and salaries 192,202 268,001 308,755 230,216 284,231
Pension scheme
contributions 18,473 23,398 5,323 4,802 24,306
Equity-settled share
option expense 917 3,306 3,185 2,495 1,059
211,592 294,705 317,263 237,513 309,596
Impairment losses/(write-
back of impairment
losses) of financial
assets*:
— Trade receivables 19 1,773 (841) 372 (156) 1,013
— Other receivables 20 1,877 884 (196) (420) 553
Rental expense
Short-term leases and
low-value leases 15(b) 4,266 6,327 8,473 6,376 6,885
* These items are included in “Other expenses, net” in the consolidated statements of profit or loss.
^ The penalties for the period ended 30 September 2021 is the fine charged by relevant local government
authorities for unauthorised mark-up of electricity fee charged to the tenants and property owners of the
Group.
# The amount is less than RMB1,000.
APPENDIX I ACCOUNTANTS’ REPORT
– I-33 –
7. FINANCE COSTS
An analysis of finance costs is as follows:
Year ended
31 December
Nine months ended
30 September
2018 2019 2020 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Interest on other
borrowings 9,864 69,991 63,750 50,803 32,841
Interest on lease liabilities
(note 15(b)) 301 289 436 218 696
10,165 70,280 64,186 51,021 33,537
8. DIRECTORS’ AND CHIEF EXECUTIVE’S REMUNERATION
The first director of the Company was Mr. Li Congrui, who was appointed on 14 September 2020 and resigned
with effect from 26 August 2021.
Subsequent to the end of the Relevant Periods, Mr. Xie Wei was appointed as an executive director and the
chief executive officer of the Company on 26 August 2021 and Ms. Zhou Liye was appointed as an executive director
of the Company on 26 August 2021.
During the Relevant Periods, Mr. Xie Wei received remuneration from China Jinmao Group for his
appointment as the senior management of China Jinmao Group. The remuneration received by him and borne by the
Group during the Relevant Periods and the nine months ended 30 September 2020 is set out below.
Directors’ remuneration for the Relevant Periods and the nine months ended 30 September 2020 is as follows:
Year ended
31 December
Nine months ended
30 September
2018 2019 2020 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Fees:
Directors —————
Other emoluments:
Salaries, allowances
and benefits in kind 894 895 902 664 1,257
Performance related
bonuses 1,234 873 1,444 803 1,386
Equity-settled share
option expense* 95 452 446 229 252
Pension scheme
contributions 28 26 19 12 37
2,251 2,246 2,811 1,708 2,932
* During the years ended 31 December 2016 and 31 December 2019, Mr. Xie Wei was granted share
options, in respect of his services to the Group and China Jinmao Group, under the share option scheme
of China Jinmao Group. The fair value of such options, which has been recognised in profit or loss over
the vesting period, was determined as at the date of grant and the amount included in the Historical
Financial Information for the Relevant Periods and the nine months ended 30 September 2020 is
included in the above directors’ and chief executive’s remuneration disclosures.
APPENDIX I ACCOUNTANTS’ REPORT
– I-34 –
(a) Independent non-executive directors
Subsequent to the end of the Relevant Periods, Dr. Chen Jieping, Dr. Han Jian and Mr. Sincere Wong were
appointed as independent non-executive directors of the Company on listing date, respectively. There was no
emolument payable to the independent non-executive directors during the Relevant Periods and the nine months
ended 30 September 2020.
(b) Executive directors
Year ended 31 December 2018
Salaries,
allowances
and benefits
in kind
Performance
related
bonuses
Equity-settled
share option
expense
Pension
scheme
contributions
Total
remuneration
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Executive directors:
Mr. Xie Wei (note) 894 1,234 95 28 2,251
Ms. Zhou Liye (note) —————
Mr. Li Congrui (note) —————
894 1,234 95 28 2,251
Year ended 31 December 2019
Salaries,
allowances
and benefits
in kind
Performance
related
bonuses
Equity-settled
share option
expense
Pension
scheme
contributions
Total
remuneration
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Executive directors:
Mr. Xie Wei (note) 895 873 452 26 2,246
Ms. Zhou Liye (note) —————
Mr. Li Congrui (note) —————
895 873 452 26 2,246
Year ended 31 December 2020
Salaries,
allowances
and benefits
in kind
Performance
related
bonuses
Equity-settled
share option
expense
Pension
scheme
contributions
Total
remuneration
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Executive directors:
Mr. Xie Wei (note) 902 1,444 446 19 2,811
Ms. Zhou Liye (note) —————
Mr. Li Congrui (note) —————
902 1,444 446 19 2,811
APPENDIX I ACCOUNTANTS’ REPORT
– I-35 –
Nine months ended 30 September 2020 (Unaudited)
Salaries,
allowances
and benefits
in kind
Performance
related
bonuses
Equity-settled
share option
expense
Pension
scheme
contributions
Total
remuneration
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Executive directors:
Mr. Xie Wei (note) 664 803 229 12 1,708
Ms. Zhou Liye (note) —————
Mr. Li Congrui (note) —————
664 803 229 12 1,708
Nine months ended 30 September 2021
Salaries,
allowances
and benefits
in kind
Performance
related
bonuses
Equity-settled
share option
expense
Pension
scheme
contributions
Total
remuneration
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Executive directors:
Mr. Xie Wei (note) 678 1,386 189 20 2,273
Ms. Zhou Liye (note) 579 — 63 17 659
Mr. Li Congrui (note) —————
1,257 1,386 252 37 2,932
Note: Certain emoluments of Mr. Xie Wei were paid by China Jinmao Group and recorded in profit or loss of
the Group in relation to his services rendered to the Group for the Relevant Periods and the nine months
ended 30 September 2020. The emoluments of Ms. Zhou Liye during the three years ended 31 December
2018, 2019 and 2020 were borne by China Jinmao Group as she did not provide services to the Group
during the said period. The emoluments of Mr. Li Congrui were borne by China Jinmao Group as he did
not provide services to the Group during the Relevant Periods and the nine months ended 30 September
2020.
(c) Non-executive directors
Subsequent to the end of the Relevant Periods, Mr. Jiang Nan, Ms. He Yamin and Ms. Qiao Xiaojie were
appointed as non-executive directors of the Company on 26 August 2021. There was no emolument payable to the
non-executive directors during the Relevant Periods and the nine months ended 30 September 2020.
No directors waived any emoluments during the Relevant Periods and the nine months ended 30 September
2020.
APPENDIX I ACCOUNTANTS’ REPORT
– I-36 –
9. FIVE HIGHEST PAID EMPLOYEES
The five highest paid employees during the Relevant Periods and the nine months ended 30 September 2020
included one director, details of whose remuneration are set out in note 8 above. Details of the remuneration for the
Relevant Periods and the nine months ended 30 September 2020 of the remaining four highest paid employees who
are neither a director nor chief executive of the Company are as follows:
Year ended
31 December
Nine months ended
30 September
2018 2019 2020 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Salaries, allowances and
benefits in kind 2,779 2,819 2,847 2,213 2,282
Performance related
bonuses 2,069 2,221 2,383 2,104 3,074
Equity-settled share
option expense* 306 1,567 1,556 690 379
Pension scheme
contributions 214 204 82 79 159
5,368 6,811 6,868 5,086 5,894
The number of non-director and non-chief executive highest paid employees whose remuneration fell within
the following bands is as follows:
Year ended
31 December
Nine months ended
30 September
2018 2019 2020 2020 2021
(Unaudited)
HK$1,000,001 to
HK$1,500,000 2 — — 2 2
HK$1,500,001 to
HK$2,000,000 1222—
HK$2,000,001 to
HK$2,500,000 1 2 2 — 2
44444
During the Relevant Periods and the nine months ended 30 September 2020, no highest paid employees waived
or agreed to waive any remuneration.
* During the years ended 31 December 2016 and 31 December 2019, share options were granted to certain
non-director and non-chief executive highest paid employees in respect of their services to the Group,
under the share option scheme of China Jinmao Group. The fair value of such options, which has been
recognised in profit or loss over the vesting period, was determined as at the date of grant and the
amount included in the Historical Financial Information for the Relevant Periods is included in the
above non-director and non-chief executive highest paid employees’ remuneration disclosures.
10. INCOME TAX
The Group is subject to income tax on an entity basis on profits arising in or derived from the tax jurisdictions
in which members of the Group are domiciled and operate. The Company is not liable for income tax as it did not
generate any assessable profits arising in Hong Kong during the Relevant Periods and the nine months ended 30
September 2020.
APPENDIX I ACCOUNTANTS’ REPORT
– I-37 –
The income tax provision of the Group in respect of its operation in Mainland China was calculated at the tax
rate of 25% on the assessable profits for the Relevant Periods and the nine months ended 30 September 2020, if
applicable, based on the existing legislation, interpretations and practice in respect thereof.
Year ended
31 December
Nine months ended
30 September
2018 2019 2020 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Current 9,917 11,408 31,384 21,142 45,693
Deferred (note 17) (1,042) (622) (983) 89 (1,809)
Total tax charge for the
year/period 8,875 10,786 30,401 21,231 43,884
A reconciliation of the tax expense applicable to profit before tax at the statutory rate for the jurisdictions in
which the Company’s subsidiaries are domiciled to the income tax expense at the effective income tax rate is as
follows:
Year ended
31 December
Nine months ended
30 September
2018 2019 2020 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Profit before tax 26,362 33,410 107,525 74,560 153,235
Tax at the statutory tax
rate (25%) 6,591 8,353 26,881 18,640 38,309
Adjustments in respect of
current tax of previous
year/period ––––(201)
Expenses not deductible
for tax 1,815 2,213 2,625 1,108 5,734
Tax losses not recognised 469 220 895 1,483 42
Tax charge for the
year/period 8,875 10,786 30,401 21,231 43,884
11. DIVIDENDS
(a) Dividends paid or declared by the Company
No dividends have been paid or declared by the Company since its date of incorporation.
(b) Dividends paid or declared by the subsidiaries of the Company to their then shareholders
On 31 July 2020, Sinochem Jinmao declared dividends with an aggregated amount of RMB78,675,000 to its
then shareholders, China Jinmao Group and Beijing Chemsunny Property Co., Ltd. which is a wholly-owned
subsidiary of China Jinmao Group.
On 30 November 2020, Sinochem Jinmao declared dividends with an aggregated amount of RMB44,982,000
to its then shareholders, China Jinmao Group and Beijing Chemsunny Property Co., Ltd. which is a wholly-owned
subsidiary of China Jinmao Group.
APPENDIX I ACCOUNTANTS’ REPORT
– I-38 –
On 30 November 2020, Jinmao (Shanghai) Property Management Co., Ltd. declared dividend in the amount
of RMB28,160,000 to its then shareholder, China Jin Mao Group Co., Ltd., which is a wholly-owned subsidiary of
China Jinmao Group.
The dividends declared by the subsidiaries of the Company to their then shareholders have not been paid as
at 30 September 2021.
12. EARNINGS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT
Earnings per share information is not presented as its inclusion, for the purpose of this Historical Financial
Information, is not considered meaningful due to the basis of presentation of the results of the Group for the Relevant
Periods and the nine months ended 30 September 2020 as disclosed in note 2.1 to the Historical Financial
Information.
13. PROPERTY, PLANT AND EQUIPMENT
Plant and
machinery
Leasehold
improvements
Furniture,
fixtures and
office
equipment
Motor
vehicles Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
31 December 2018
At 1 January 2018:
Cost 4,459 144 11,557 837 16,997
Accumulated
depreciation (2,682) (29) (6,374) (678) (9,763)
Net carrying amount 1,777 115 5,183 159 7,234
At 1 January 2018, net
of accumulated
depreciation 1,777 115 5,183 159 7,234
Additions 501 2,544 3,215 4 6,264
Disposals (72) — (196) — (268)
Depreciation provided
during the year (388) (277) (1,636) (13) (2,314)
At 31 December 2018,
net of accumulated
depreciation 1,818 2,382 6,566 150 10,916
At 31 December 2018:
Cost 4,254 2,688 13,733 840 21,515
Accumulated
depreciation (2,436) (306) (7,167) (690) (10,599)
Net carrying amount 1,818 2,382 6,566 150 10,916
APPENDIX I ACCOUNTANTS’ REPORT
– I-39 –
Plant and
machinery
Leasehold
improvements
Furniture,
fixtures and
office
equipment
Motor
vehicles Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
31 December 2019
At 1 January 2019
Cost 4,254 2,688 13,733 840 21,515
Accumulated
depreciation (2,436) (306) (7,167) (690) (10,599)
Net carrying amount 1,818 2,382 6,566 150 10,916
At 1 January 2019, net
of accumulated
depreciation 1,818 2,382 6,566 150 10,916
Additions 1,565 3,146 5,838 33 10,582
Disposals (45) — (163) — (208)
Depreciation provided
during the year (408) (883) (2,096) (14) (3,401)
At 31 December 2019,
net of accumulated
depreciation 2,930 4,645 10,145 169 17,889
At 31 December 2019:
Cost 5,361 5,834 18,852 873 30,920
Accumulated
depreciation (2,431) (1,189) (8,707) (704) (13,031)
Net carrying amount 2,930 4,645 10,145 169 17,889
APPENDIX I ACCOUNTANTS’ REPORT
– I-40 –
Plant and
machinery
Leasehold
improvements
Furniture,
fixtures and
office
equipment
Motor
vehicles Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
31 December 2020
At 1 January 2020:
Cost 5,361 5,834 18,852 873 30,920
Accumulated
depreciation (2,431) (1,189) (8,707) (704) (13,031)
Net carrying amount 2,930 4,645 10,145 169 17,889
At 1 January 2020, net
of accumulated
depreciation 2,930 4,645 10,145 169 17,889
Additions 7,490 3,306 10,198 118 21,112
Disposals — — (17) — (17)
Depreciation provided
during the year (548) (1,439) (3,353) (29) (5,369)
At 31 December 2020,
net of accumulated
depreciation 9,872 6,512 16,973 258 33,615
At 31 December 2020:
Cost 12,849 9,140 28,988 991 51,968
Accumulated
depreciation (2,977) (2,628) (12,015) (733) (18,353)
Net carrying amount 9,872 6,512 16,973 258 33,615
APPENDIX I ACCOUNTANTS’ REPORT
– I-41 –
Plant and
machinery
Leasehold
improvements
Furniture,
fixtures and
office
equipment
Motor
vehicles Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
30 September 2021
At 1 January 2021
Cost 12,849 9,140 28,988 991 51,968
Accumulated
depreciation (2,977) (2,628) (12,015) (733) (18,353)
Net carrying amount 9,872 6,512 16,973 258 33,615
At 1 January 2021, net
of accumulated
depreciation 9,872 6,512 16,973 258 33,615
Additions 572 7,398 3,868 80 11,918
Disposals (19) (412) (118) (29) (578)
Depreciation provided
during the period (1,353) (1,843) (3,427) (87) (6,710)
At 30 September 2021,
net of accumulated
depreciation 9,072 11,655 17,296 222 38,245
At 30 September 2021:
Cost 13,259 15,462 32,236 1,037 61,994
Accumulated
depreciation (4,187) (3,807) (14,940) (815) (23,749)
Net carrying amount 9,072 11,655 17,296 222 38,245
APPENDIX I ACCOUNTANTS’ REPORT
– I-42 –
14. INVESTMENT PROPERTIES
Leased properties
RMB’000
At 1 January 2018 16,370
Loss on changes in fair value of investment properties (note 6) (1,860)
At 31 December 2018 14,510
At 1 January 2019 14,510
Loss on changes in fair value of investment properties (note 6) (2,870)
At 31 December 2019 11,640
At 1 January 2020 11,640
Loss on changes in fair value of investment properties (note 6) (1,050)
At 31 December 2020 10,590
At 1 January 2021 10,590
Loss on changes in fair value of investment properties (note 6) (1,131)
At 30 September 2021 9,459
(a) Valuation processes of the Group
The Group’s investment properties are carpark spaces situated in Mainland China. The Group measures its
investment properties at fair value. The fair value of the Group’s investment properties as at the end of each of the
Relevant Periods has been determined on the basis of valuation carried out by Beijing Zhuoxindahua Appraisal Co.,
Ltd., an independent and professionally qualified valuer.
(b) Valuation techniques
The valuation methodology adopted in valuation is the discounted cash flow method.
Under the discounted cash flow method, fair value is estimated using assumptions regarding the benefits and
liabilities of ownership over the asset’s life including an exit or terminal value. This method involves the projection
of a series of cash flows on a property interest. A market-derived discount rate is applied to the projected cash flow
in order to establish the present value of the income stream associated with the asset. The exit yield is normally
separately determined and differs from the discount rate.
The duration of the cash flows and the specific timing of inflows and outflows are determined by events such
as rent reviews, lease renewal and related reletting, redevelopment or refurbishment. The appropriate duration is
driven by market behaviour that is a characteristic of the class of property. The periodic cash flow is estimated as
gross income less vacancy, non-recoverable expenses, collection losses, lease incentives, maintenance costs, agent
and commission costs and other operating and management expenses. The series of periodic net operating income,
along with an estimate of the terminal value anticipated at the end of the projection period, is then discounted.
A significant increase (decrease) in the estimated rental value and the market rent growth rate per annum in
isolation would result in a significant increase (decrease) in the fair value of the investment properties. A significant
increase (decrease) in the discount rate in isolation would result in a significant decrease (increase) in the fair value
of the investment properties. Generally, a change in the assumption made for the estimated rental value is
accompanied by a directionally similar change in the rental growth per annum and the discount rate.
APPENDIX I ACCOUNTANTS’ REPORT
– I-43 –
(c) Information about fair value measurements using significant unobservable inputs (Level 3)
As at 31 December
As at
30 September
2018 2019 2020 2021
Estimated rental value
(RMB per square metre per
annum) 3,828 5,731 3,647 4,071
Rental growth per annum 7% 50% (36%) 12%
Discount rate 6.0% 6.5% 6.4% 6.4%
(d) During the Relevant Periods, there were no transfers of fair value measurements between Level 1 and Level
2 and no transfers into or out of Level 3.
15. LEASES
The Group as a lessee
The Group has lease contracts for various items of office properties and staff quarters and other equipment
used in its operations. Leases of office properties and staff quarters generally have lease terms between 1 and 5 years.
Other equipment generally has lease terms of 12 months or less and/or is individually of low value. Generally, the
Group is restricted from assigning and subleasing the leased assets outside the Group.
(a) Right-of-use assets and lease liabilities
The carrying amounts of the Group’s right-of-use assets and lease liabilities and the movements during
the Relevant Periods are as follows:
Right-of-use assets Lease liabilities
Office properties and staff quarters
RMB’000 RMB’000
At 1 January 2018 2,190 6,602
New leases 819 730
Depreciation charge (1,083) —
Accretion of interest recognised
during the year — 301
Payments — (1,808)
At 31 December 2018 1,926 5,825
At 1 January 2019 1,926 5,825
New leases 2,641 1,415
Depreciation charge (2,134) —
Accretion of interest recognised
during the year — 289
Payments — (2,066)
At 31 December 2019 2,433 5,463
APPENDIX I ACCOUNTANTS’ REPORT
– I-44 –
Right-of-use assets Lease liabilities
Office properties and staff quarters
RMB’000 RMB’000
At 1 January 2020 2,433 5,463
New leases 17,287 15,499
Depreciation charge (3,750) —
Accretion of interest recognised
during the year — 436
Payments — (3,602)
At 31 December 2020 15,970 17,796
At 1 January 2021 15,970 17,796
New leases 15,562 14,771
Depreciation charge (6,550) —
Accretion of interest recognised
during the period — 696
Payments — (6,811)
At 30 September 2021 24,982 26,452
As at 31 December
As at
30 September
2018 2019 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000
Lease liabilities analysed into:
Current portion 1,547 2,063 5,572 10,713
Non-current portion 4,278 3,400 12,224 15,739
Total 5,825 5,463 17,796 26,452
(b) The amounts recognised in profit or loss in relation to leases are as follows:
Year ended 31 December
Nine months ended
30 September
2018 2019 2020 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Interest on lease
liabilities 301 289 436 218 696
Depreciation charge
of right-of-use
assets (note 6) 1,083 2,134 3,750 2,105 6,550
Expense relating to
short-term leases
and leases of
low-value assets
(note 6) 4,266 6,327 8,473 6,376 6,885
Total amount
recognised in
profit or loss 5,650 8,750 12,659 8,699 14,131
(c) The total cash outflow for leases is disclosed in note 27(c) to the Historical Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
– I-45 –
The Group as a lessor
The Group leases its investment properties (note 14) consisting of car park spaces in Mainland China under
operating lease arrangements. The terms of the leases generally also require the tenants to provide for periodic rent
adjustments according to the then prevailing market conditions. Rental income recognised by the Group during the
years ended 31 December 2018, 2019 and 2020 and the nine months ended 30 September 2020 and 2021 was
RMB3,828,000, RMB5,731,000, RMB3,887,000, RMB2,349,000 and RMB4,071,000, respectively, details of which
are included in note 5 to the Historical Financial Information.
16. INTANGIBLE ASSETS
Computer
software
RMB’000
31 December 2018
At 1 January 2018
Cost 631
Accumulated amortisation (408)
Net carrying amount 223
Cost at 1 January 2018, net of accumulated amortisation 223
Additions 54
Amortisation provided during the year (note 6) (85)
At 31 December 2018 192
At 31 December 2018
Cost 685
Accumulated amortisation (493)
Net carrying amount 192
31 December 2019
At 1 January 2019
Cost 685
Accumulated amortisation (493)
Net carrying amount 192
Cost at 1 January 2019, net of accumulated amortisation 192
Additions 6,207
Disposals (9)
Amortisation provided during the year (note 6) (235)
At 31 December 2019 6,155
At 31 December 2019
Cost 6,877
Accumulated amortisation (722)
Net carrying amount 6,155
APPENDIX I ACCOUNTANTS’ REPORT
– I-46 –
Computer
software
RMB’000
31 December 2020
At 1 January 2020
Cost 6,877
Accumulated amortisation (722)
Net carrying amount 6,155
Cost at 1 January 2020, net of accumulated amortisation 6,155
Additions 2,753
Disposals (29)
Amortisation provided during the year (note 6) (1,795)
At 31 December 2020 7,084
At 31 December 2020
Cost 9,594
Accumulated amortisation (2,510)
Net carrying amount 7,084
30 September 2021
At 1 January 2021
Cost 9,594
Accumulated amortisation (2,510)
Net carrying amount 7,084
Cost at 1 January 2021, net of accumulated amortisation 7,084
Additions 1,126
Amortisation provided during the period (note 6) (2,102)
At 30 September 2021 6,108
At 30 September 2021
Cost 10,720
Accumulated amortisation (4,612)
Net carrying amount 6,108
APPENDIX I ACCOUNTANTS’ REPORT
– I-47 –
17. DEFERRED TAX ASSETS AND LIABILITIES
The movements in deferred tax liabilities and assets are as follows:
Deferred tax liabilities
Revaluation of
investment
properties
Right-of-use
assets Total
RMB’000 RMB’000 RMB’000
At 1 January 2018 4,093 484 4,577
Deferred tax credited to profit or loss
during the year (465) (137) (602)
At 31 December 2018 and 1 January 2019 3,628 347 3,975
Deferred tax (credited)/charged to profit or loss
during the year (718) 54 (664)
At 31 December 2019 and 1 January 2020 2,910 401 3,311
Deferred tax (credited)/charged to profit or loss
during the year (263) 2,921 2,658
At 31 December 2020 and 1 January 2021 2,647 3,322 5,969
Deferred tax (credited)/charged to profit or loss
during the period (282) 2,016 1,734
At 30 September 2021 2,365 5,338 7,703
Deferred tax assets
Allowance for
impairment of
receivables
Unrealised
profit from
intra group
transactions
Lease
liabilities Total
RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2018 883 — 1,651 2,534
Deferred tax credited/(charged) to profit or
loss during the year 683 — (243) 440
At 31 December 2018 and 1 January 2019 1,566 — 1,408 2,974
Deferred tax credited/(charged) to profit or
loss during the year 11 — (53) (42)
At 31 December 2019 and 1 January 2020 1,577 — 1,355 2,932
Deferred tax credited to profit or loss during
the year 44 576 3,021 3,641
At 31 December 2020 and 1 January 2021 1,621 576 4,376 6,573
Deferred tax credited to profit or loss during
the period 63 1,329 2,151 3,543
At 30 September 2021 1,684 1,905 6,527 10,116
APPENDIX I ACCOUNTANTS’ REPORT
– I-48 –
For presentation purposes, certain deferred tax assets and liabilities have been offset in the statements
of financial position. The following is an analysis of the deferred tax balances of the Group for financial
reporting purposes:
As at
31 December
As at
30 September
2018 2019 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000
Net deferred tax assets recognised in
the consolidated statements of
financial position 1,578 1,607 2,457 4,085
Net deferred tax liabilities
recognised in the consolidated
statements of financial position (2,579) (1,986) (1,853) (1,672)
Net deferred tax (liabilities)/assets (1,001) (379) 604 2,413
Pursuant to the PRC Corporate Income Tax Law, a 10% withholding tax is levied on dividends declared
to foreign investors from the foreign investment enterprises established in Mainland China. The requirement
is effective from 1 January 2008 and applies to earnings after 31 December 2007. A lower withholding tax rate
may be applied if there is a tax treaty between Mainland China and the jurisdiction of the foreign investors.
For the Group, the applicable rate is 10%. The Group is therefore liable for withholding taxes on dividends
distributed by those subsidiaries established in Mainland China in respect of earnings generated from 1 January
2008.
At 31 December 2018, 2019 and 2020 and 30 September 2021, no deferred tax has been recognised for
withholding taxes that would be payable on the unremitted earnings that are subject to withholding taxes of
the Group’s subsidiaries established in Mainland China. In the opinion of the directors of the Company, the
Group’s fund will be retained in Mainland China for the expansion of the Group’s operation, so it is not
probable that these subsidiaries will distribute such earnings in the foreseeable future. The aggregate amounts
of temporary differences associated with investments in subsidiaries in Mainland China for which deferred tax
liabilities have not been recognised totalled approximately RMB57,140,000, RMB82,108,000, RMB7,775,000
and RMB126,395,000 as at 31 December 2018, 2019 and 2020 and 30 September 2021, respectively.
18. INVENTORIES
As at
31 December
As at
30 September
2018 2019 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000
Consumables and spare parts 5,895 5,072 4,801 4,735
General merchandise 505 421 398 309
Total 6,400 5,493 5,199 5,044
APPENDIX I ACCOUNTANTS’ REPORT
– I-49 –
19. TRADE RECEIVABLES
As at
31 December
As at
30 September
2018 2019 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000
Related parties (note 29) 61,495 97,630 129,148 286,762
Third parties 31,396 60,910 78,186 169,409
Trade receivables 92,891 158,540 207,334 456,171
Less: allowance for impairment of
trade receivables (4,090) (3,249) (3,621) (4,634)
88,801 155,291 203,713 451,537
Trade receivables mainly represent receivables from property management services and other related services
to property developers. For trade receivables from property management services, the Group charges property
management fees on a monthly or quarterly basis and the payment is generally due upon the issuance of demand
notes. For trade receivables from other services to property developers, the Group’s trading terms with its customers
are mainly on credit and the credit period is generally 90 to 180 days. The Group seeks to maintain strict control over
its outstanding receivables. Overdue balances are reviewed regularly by management. Other than trade balances due
from Sinochem Group and its subsidiaries, the Group’s trade receivables relate to a large number of diversified
customers, there is no significant concentration of credit risk. The Group does not hold any collateral or other credit
enhancements over its trade receivable balances. Trade receivables are non-interest-bearing.
The amounts due from the related parties are repayable on credit terms similar to those offered to other major
customers of the Group.
An ageing analysis of the trade receivable as at the end of each of the Relevant Periods, based on the invoice
date and net of loss allowance, is as follows:
As at
31 December
As at
30 September
2018 2019 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000
Within 1 year 79,175 143,978 172,392 413,394
1 to 2 years 6,162 6,227 26,192 25,366
2 to 3 years 1,982 2,237 2,667 8,102
Over 3 years 1,482 2,849 2,462 4,675
88,801 155,291 203,713 451,537
The movements in provision for impairment of trade receivables are as follows:
31 December 30 September
2018 2019 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000
At beginning of the year/period 3,168 4,090 3,249 3,621
Impairment losses recognised/(write-
back of impairment losses) (note
6) 1,773 (841) 372 1,013
Amount written off as uncollectible (851) — — —
At end of the year/period 4,090 3,249 3,621 4,634
APPENDIX I ACCOUNTANTS’ REPORT
– I-50 –
As at the end of each of the Relevant Periods, all trade receivables were denominated in RMB, and the fair
values of trade receivables approximated to their carrying amounts.
An impairment analysis is performed at each reporting date using a provision matrix to measure expected
credit losses. The provision rates are based on days past due for groupings of various customer segments with similar
loss patterns (i.e., by customer type). The calculation reflects the probability-weighted outcome, the time value of
money and reasonable and supportable information that is available at the reporting date about past events, current
conditions and forecasts of future economic conditions.
Set out below is the information about the credit risk exposure on the Group’s trade receivables using a
provision matrix:
Third parties – past due
Related
parties Total
Less than
1 year
1to2
years
2to3
years
Over 3
years
At 31 December 2018
Expected credit loss rate 4.25% 16.50% 45.67% 79.93% — 4.40%
Gross carrying amount 22,848 4,600 2,319 1,629 61,495 92,891
Expected credit losses (970) (759) (1,059) (1,302) — (4,090)
At 31 December 2019
Expected credit loss rate 0.69% 6.96% 16.99% 69.75% — 2.05%
Gross carrying amount 47,685 8,116 2,289 2,820 97,630 158,540
Expected credit losses (328) (565) (389) (1,967) — (3,249)
At 31 December 2020
Expected credit loss rate 1.61% 2.42% 9.21% 87.74% — 1.75%
Gross carrying amount 45,226 26,269 4,603 2,088 129,148 207,334
Expected credit losses (730) (635) (424) (1,832) — (3,621)
At 30 September 2021
Expected credit loss rate 1.01% 5.88% 11.40% 38.81% — 1.02%
Gross carrying amount 138,233 21,818 6,104 3,254 286,762 456,171
Expected credit losses (1,393) (1,282) (696) (1,263) — (4,634)
The expected credit loss of trade receivables from related parties was immaterial considering there were no
recent history of default and no significant credit risks of the related parties of the Group.
20. PREPAYMENTS, OTHER RECEIVABLES AND OTHER ASSETS
As at
31 December
As at
30 September
2018 2019 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000
Current
Amounts due from related parties
(note 29) 282,855 466,190 569,813 406,238
Deposits of ABS arrangement (note) 99,169 2,228 5,837 –
Prepayments 19,206 18,111 19,410 14,398
Deposits 10,840 11,748 8,040 13,816
Advances to employees 1,109 3,285 4,265 5,192
Other receivables 18,980 18,718 14,966 30,263
Payments on behalf of
residents/tenants 8,967 26,042 23,415 43,204
Others 262 – – 4,754
441,388 546,322 645,746 517,865
Impairment allowance (862) (1,746) (1,550) (2,103)
440,526 544,576 644,196 515,762
APPENDIX I ACCOUNTANTS’ REPORT
– I-51 –
As at
31 December
As at
30 September
2018 2019 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000
Non-current
Amounts due from related parties
(note 29) 1,215,000 1,080,997 936,992 —
Other assets 623 5,025 4,601 3,374
1,215,623 1,086,022 941,593 3,374
Note: The amount represented the deposits placed by the Group for the purpose of the ABS arrangement as
further defined and disclosed in note 24 to the Historical Financial Information.
The Group has assessed that the credit risk of the financial assets included in the above balances excluding
payments on behalf of residents/tenants has not increased significantly since initial recognition and measured the
impairment based on 12-month expected credit loss. The Group considers the historical loss rate and adjusts for
forward looking macro economic data in calculating the expected credit loss rate. As at 31 December 2018, 2019 and
2020 and 30 September 2021, the Group estimated that the expected loss rate and the loss allowance for these
receivables are minimal under the 12-month expected loss method.
Payments on behalf of residents/tenants represent the current accounts with the residents/tenants of
communities/properties managed by the Group. The movements in provision for impairment of payments on behalf
of residents/tenants are as follows:
As at
31 December
As at
30 September
2018 2019 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000
At beginning of the year/period 418 862 1,746 1,550
Impairment losses recognised in
profit or loss/(write-back of
impairment losses) (note 6) 1,877 884 (196) 553
Amount written off as uncollectible (1,433) — — —
At end of the year/period 862 1,746 1,550 2,103
Expected credit losses are estimated by applying a loss rate approach with reference to the days past due for
groupings of parties with similar loss patterns. The loss rate is adjusted to reflect the current conditions and forecasts
of future economic conditions, as appropriate.
The following table provides information about the exposure to credit risk and ECLs for payments on behalf
of residents/tenants which are assessed collectively based on an estimated average credit loss rate as at 31 December
2018, 2019 and 2020 and 30 September 2021.
31 December 2018 31 December 2019 31 December 2020 30 September 2021
Category
Average
loss rate
Gross
carrying
amount
Impairment
loss
allowance
Average
loss rate
Gross
carrying
amount
Impairment
loss
allowance
Average
loss rate
Gross
carrying
amount
Impairment
Loss
allowance
Average
loss rate
Gross
carrying
amount
Impairment
loss
allowance
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Credit-impaired 9.61% 8,967 862 6.70% 26,042 1,746 6.62% 23,415 1,550 4.87% 43,204 2,103
APPENDIX I ACCOUNTANTS’ REPORT
– I-52 –
21. CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
As at 31 December
As at
30 September
2018 2019 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000
Cash and bank balances 160,030 155,113 270,818 275,447
Less: Restricted cash — — — (1,278)
Cash and cash equivalents 160,030 155,113 270,818 274,169
Cash and bank balances
denominated in RMB 160,030 155,113 270,818 275,447
The RMB is not freely convertible into other currencies, however, under Mainland China’s Foreign Exchange
Control Regulations and Administration of Settlement, Sale and Payment of Foreign Exchange Regulations, the
Group is permitted to exchange RMB for other currencies through banks authorised to conduct foreign exchange
business.
Cash at banks earns interest at floating rates based on daily bank deposit rates. The bank balances are deposited
with creditworthy banks with no recent history of default.
Restricted cash represented cash at bank frozen for performance guarantee deposits and pre-litigation
preservation of property.
Included in the Group’s cash and cash equivalents are bank balances of RMB70,033,000, RMB53,587,000,
RMB120,490,000 and RMB55,056,000 as at 31 December 2018, 2019 and 2020 and 30 September 2021, respectively,
placed with Sinochem Group Finance Co., Ltd. (“Sinochem Finance”), which is a subsidiary of Sinochem Group and
a financial institution approved by the People’s Bank of China. The interest rates on these deposits ranged from
0.35% to 1.90% per annum. Further details of the interest income attributable to the deposits placed with Sinochem
Finance are set out in note 29 to the Historical Financial Information.
22. TRADE PAYABLES
As at
31 December
As at
30 September
2018 2019 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000
Trade payables
— Related parties (note 29) 1,294 700 687 586
— Third parties 81,603 89,955 111,349 150,151
82,897 90,655 112,036 150,737
APPENDIX I ACCOUNTANTS’ REPORT
– I-53 –
An ageing analysis of the Group’s trade payables at the end of each of the Relevant Periods, based on the
invoice date, is as follows:
As at
31 December
As at
30 September
2018 2019 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000
Within 1 year 76,107 84,227 107,183 142,620
1 to 2 years 5,650 4,202 1,459 4,877
2 to 3 years 156 1,247 1,665 1,044
More than 3 years 984 979 1,729 2,196
82,897 90,655 112,036 150,737
Trade payables are unsecured, interest-free and normally settled within 90 days.
23. OTHER PAYABLES AND ACCRUALS
As at
31 December
As at
30 September
2018 2019 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000
Current
Amounts due to related parties
(note 29) 115,768 151,480 231,567 246,599
Receipts on behalf of
residents/tenants 86,520 121,354 132,938 135,644
Deposits and temporary receipts 34,148 40,549 48,259 66,245
Payroll and welfare payables 27,465 27,926 30,021 43,066
Other tax payables 11,362 17,237 23,283 37,535
Other payables 42,016 43,163 54,573 92,624
317,279 401,709 520,641 621,713
Non-current
Dividend payables (note 29) — — 123,657 123,657
Dividend payable of RMB28,160,000 included in amounts due to related parties in the current liabilities as at
31 December 2020 and 30 September 2021 represents the dividend declared by Jinmao (Shanghai) Property
Management Co., Ltd. to its then shareholder, China Jin Mao Group Co., Ltd., which is a wholly-owned subsidiary
of China Jinmao Group.
Dividend payables of RMB123,657,000 included in the non-current other payables as at 31 December 2020 and
30 September 2021 represents the dividends declared by Sinochem Jinmao to its then shareholders, China Jinmao
Group of RMB105,108,000 and Beijing Chemsunny Property Co., Ltd. of RMB18,549,000 which is a wholly-owned
subsidiary of China Jinmao Group.
The other payables are unsecured and interest-free. Except for the balance of dividend payables included in
non-current other payables which is scheduled to be settled after 1 January 2023 according to the resolutions of the
board of directors of Sinochem Jinmao on 31 July 2020 and 30 November 2020, other payables and accruals will be
settled within one year.
The dividend payable to China Jinmao Group was settled in January 2022 and the management of the Company
expects the dividend payable to Beijing Chemsunny Property Co., Ltd. will be settled by the end of 2022.
APPENDIX I ACCOUNTANTS’ REPORT
– I-54 –
24. INTEREST-BEARING BORROWINGS
As at
31 December
As at
30 September
2018 2019 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000
Current
Current portion of long term loans
from third parties 126,000 134,000 144,000 —
Non-current
Loans from third parties 1,215,000 1,080,997 936,992 —
1,341,000 1,214,997 1,080,992 —
As at
31 December
As at
30 September
2018 2019 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000
Analysed into:
Loans repayable:
Within one year or on demand 126,000 134,000 144,000 —
In the second year 134,000 144,000 153,000 —
In the third to fifth years,
inclusive 459,000 488,000 517,000 —
Beyond five years 622,000 448,997 266,992 —
1,341,000 1,214,997 1,080,992 —
The interest-bearing borrowings of the Group represent the asset-backed securities arrangement (“ABS”) of the
Group to transfer the right of receipt of the management fees, including the future management fees receivables, from
certain properties managed by the Group, which are denominated in RMB, and bear interest at annual rates of 4.88%
to 5.50%. Under the ABS arrangement, the Group is still exposed to default risks of the management fee receivables
after the transfer, and accordingly, it continued to recognise the full carrying amounts of the management fee
receivables. The ABS arrangement is accounted for as borrowings of the Group, and these other borrowings are due
and repayable by several tranches before 15 July 2027 and can be early repaid before the expected due date at the
option of the Group at certain predetermined prices in certain specific periods prior to the maturity date of each
tranche. On 15 July 2021, the Group early repaid all the remaining borrowings under the ABS arrangement.
25. SHARE CAPITAL
As at
31 December
2020
As at
30 September
2021
RMB’000 RMB’000
Issued and fully paid:
31 December 2020: 1 ordinary share;
30 September 2021: 2 ordinary shares —* 66,947
* The amount is less than RMB1,000.
APPENDIX I ACCOUNTANTS’ REPORT
– I-55 –
A summary of movements in the Company’s share capital is as follows:
Number of
shares in issue
Share
capital
RMB’000
On 14 September 2020 (the date of incorporation) — —
New issue (Note (a)) 1—*
At 31 December 2020 and 1 January 2021 1 —*
New issue (Note (b)) 1 66,947
At 30 September 2021 2 66,947
* The amount is less than RMB1,000.
Notes:
(a) The Company was incorporated on 14 September 2020 and one ordinary share of HK$1.00 was issued
on the same date to China Jinmao Group.
(b) On 13 April 2021, one ordinary share was further issued as fully paid to China Jinmao Group, in return
for China Jinmao Group’s 85% equity interest in Sinochem Jinmao into the Company, and the issued
share capital of the Company was increased to RMB66,947,000.
26. RESERVES
The amounts of the Group’s reserves and the movements therein for the Relevant Periods are presented in the
consolidated statements of changes in equity.
(a) Merger reserve
The merger reserve of the Group represents the difference between the aggregate of the paid-up share capital
of the subsidiaries now comprising the Group and the consideration paid by the Group for the business combination
under common control.
“Deemed distribution for acquisition of subsidiaries under common control” was arising from acquisitions of
certain subsidiaries (“Acquirees”) under common control. During the period ended 30 September 2021, the Group
acquired (a) 15% equity interests in Sinochem Jinmao Property Management (Beijing) Co., Ltd. from Beijing
Chemsunny Property Co., Ltd., a wholly-owned subsidiary of China Jinmao Group, at a consideration of
RMB1,630,000; (b) 100% equity interests in Jinmao (Shanghai) Property Management Co., Ltd. from China Jin Mao
Group Co., Ltd., a wholly-owned subsidiary of China Jinmao Group, at a consideration of RMB7,890,000; and (c)
15% and 85% equity interests in Chuangmao Technology (Beijing) Co., Ltd. from Beijing Chuangmao Future
Information Services Center (Limited Partnership) and Jinmao Huichuang Enterprise Management (Tianjin)
Partnership (Limited Partnership), which are both non-wholly-owned subsidiaries of China Jinmao Group,
respectively, at a total consideration of RMB11,964,000. The total consideration of RMB21,484,000 paid or payable
for the above transactions was regarded as a deemed distribution to the then equity holders of the Acquirees. Further
details of the transactions are included in the Reorganization as set out in the paragraph headed “Reorganization” in
the section headed “History, Reorganization and Corporate Structure” in the prospectus.
APPENDIX I ACCOUNTANTS’ REPORT
– I-56 –
(b) Other reserve
The other reserve of the Group represents the contributions from China Jinmao Group for equity-settled share
option expenses related to the share options granted by China Jinmao Group to certain employees of the Group and
of China Jinmao Group who worked for the Group and for remuneration of a director of the Company settled by a
subsidiary of China Jinmao Group for his service rendered to the Group.
(c) PRC statutory surplus reserve
In accordance with the PRC Company Law and the articles of association of the Company’s subsidiaries
established in the PRC, the Group is required to appropriate 10% of its net profit after tax, as determined under the
Chinese Accounting Standards, to the statutory surplus funds until the reserve balance reaches 50% of its registered
capital. Subject to certain restrictions set out in the relevant PRC regulations and in the articles of association of these
subsidiaries, the statutory surplus funds may be used either to offset losses, or to be converted to increase the share
capital of the subsidiaries provided that the balance after such conversion is not less than 25% of the registered capital
of them. The reserve cannot be used for purposes other than those for which it is created and is not distributable as
cash dividends.
(d) A summary of movements of the Company’s reserves during the Relevant Periods are as follows:
Exchange
reserve
Accumulated
losses Total
RMB’000 RMB’000 RMB’000
At 14 September 2020 (date of incorporation) — — —
Total comprehensive loss for the period —* —* —*
At 31 December 2020 and 1 January 2021 —* —* —*
Total comprehensive loss for the period (2) (12,193) (12,195)
At 30 September 2021 (2) (12,193) (12,195)
* The amount is less than RMB1,000.
27. NOTES TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS
(a) Major non-cash transactions
During the years ended 31 December 2018, 2019 and 2020 and the nine months ended 30 September 2021, the
Group had non-cash additions to right-of-use assets of approximately RMB730,000, RMB1,415,000,
RMB15,499,000 and RMB14,771,000, respectively, and non-cash additions to lease liabilities of approximately
RMB730,000, RMB1,415,000, RMB15,499,000 and RMB14,771,000, respectively, in respect of lease arrangements
for buildings.
APPENDIX I ACCOUNTANTS’ REPORT
– I-57 –
(b) Changes in liabilities arising from financing activities
The reconciliation of liabilities arising from financing activities is as follows:
Interest-bearing
borrowings Lease liabilities
RMB’000 RMB’000
At 1 January 2018 — 6,602
Changes from financing cash flows 1,341,000 (1,507)
New leases — 730
Interest expense — 301
Interest paid classified as financing cash flows — (301)
At 31 December 2018 and 1 January 2019 1,341,000 5,825
Changes from financing cash flows (126,003) (1,777)
New leases — 1,415
Interest expense — 289
Interest paid classified as financing cash flows — (289)
At 31 December 2019 and 1 January 2020 1,214,997 5,463
Changes from financing cash flows (134,005) (3,166)
New leases — 15,499
Interest expense — 436
Interest paid classified as financing cash flows — (436)
At 31 December 2020 and 1 January 2021 1,080,992 17,796
Changes from financing cash flows (1,080,992) (6,115)
New leases — 14,771
Interest expense — 696
Interest paid classified as financing cash flows — (696)
At 30 September 2021 — 26,452
(c) Total cash outflow for leases
The total cash outflow for leases included in the statements of cash flows is as follows:
Year ended
31 December
Nine months
ended
30 September
2018 2019 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000
Within operating activities 2,362 7,105 9,413 6,188
Within financing activities 1,808 2,066 3,602 6,811
Total 4,170 9,171 13,015 12,999
(d) During the years ended 31 December 2018, 2019 and 2020, and the nine months ended 30 September 2020 and
2021, the Group had recorded non-cash expenses of RMB1,012,000, RMB3,758,000, RMB3,631,000,
RMB2,724,000 and RMB1,311,000 in respect of management’s and staffs’ services to the Group under the
share option scheme of China Jinmao Group and management’s remuneration of RMB2,156,000,
RMB1,794,000, RMB2,365,000, RMB1,479,000 and RMB2,084,000 borne by the immediate holding company
of the Company.
APPENDIX I ACCOUNTANTS’ REPORT
– I-58 –
28. COMMITMENTS
At the end of each of the Relevant Periods, the Group did not have any material capital commitment and
Group, as a leasee, had no lease contracts that have not yet commenced as at the end of each of the Relevant Periods.
29. RELATED PARTY TRANSACTIONS
(1) Transactions with related parties
In addition to the transactions detailed elsewhere in the Historical Financial Information, the Group had the
following transactions with related parties during the Relevant Periods and the nine months ended 30 September
2020:
(a) Property management service income, lease expenses, information technology expenses, equity-settled
share option expenses, management’s remuneration borne by the immediate holding company and
interest income.
Year ended
31 December
Nine months ended
30 September
2018 2019 2020 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Property management
service income:
Other subsidiaries of
China Jinmao Group* 60,727 48,555 54,837 45,301 62,406
Joint ventures of
China Jinmao Group 1,726 6,721 6,169 3,083 5,664
Associates of
China Jinmao Group 776 664 1,119 895 5,519
Other subsidiaries of
Sinochem Group** 30,708 28,821 34,586 24,296 27,751
Other joint ventures of
Sinochem Group
#
519 5,154 5,335 4,009 3,847
Other associates of
Sinochem Group
#
564 594 565 425 422
95,020 90,509 102,611 78,009 105,609
Value-added service income
to non-property owners:
China Jinmao Group and
its other subsidiaries* 75,838 99,455 142,712 91,824 233,121
Joint ventures of China
Jinmao Group 50,905 88,704 68,564 47,692 71,035
Associates of China
Jinmao Group 37,714 43,789 66,850 49,903 49,073
Other subsidiaries of
Sinochem Group** — 262 1,484 1,377 440
164,457 232,210 279,610 190,796 353,669
APPENDIX I ACCOUNTANTS’ REPORT
– I-59 –
Year ended
31 December
Nine months ended
30 September
2018 2019 2020 2020 2021
Notes RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Community value-added
services income:
Other subsidiaries of
China Jinmao Group* 18,764 25,946 25,249 17,476 18,739
Joint ventures of
China Jinmao Group 2 1,026 1,443 842 3,365
Associates of
China Jinmao Group 141 — 71 — 1,222
Other subsidiaries of
Sinochem Group** 1,628 1,569 1,800 1,339 1,198
Other joint ventures of
Sinochem Group
#
22211
Other associates of
Sinochem Group
#
33332
20,540 28,546 28,568 19,661 24,527
Lease expenses:
Other subsidiaries of
China Jinmao Group* 1,675 1,675 2,528 1,256 5,573
Information technology
expenses:
Other subsidiaries of
China Jinmao Group* 871 1,122 1,767 1,325 4,162
Other subsidiaries of
Sinochem Group** 691 295 761 571 —
1,562 1,417 2,528 1,896 4,162
Equity-settled share
option expenses:
China Jinmao Group (i) 1,012 3,758 3,631 2,724 1,311
Management’s
remuneration borne by
the immediate holding
company:
China Jinmao Group (ii) 2,156 1,794 2,365 1,479 2,084
Interest income:
Other subsidiaries of
China Jinmao Group* (iii) 9,864 69,991 63,750 50,803 32,408
Sinochem Finance (iv) 49 74 173 129 161
9,913 70,065 63,923 50,932 32,569
APPENDIX I ACCOUNTANTS’ REPORT
– I-60 –
Notes:
* Other subsidiaries of China Jinmao Group are entities that are controlled by China Jinmao Group
Co., Ltd., excluding the Group.
** Other subsidiaries of Sinochem Group are entities that are controlled by Sinochem Group Co.,
Ltd., excluding China Jinmao Group and its subsidiaries.
#
Other joint ventures and associates of Sinochem Group are joint ventures and associates of
Sinochem Group, excluding the joint ventures and associates of China Jinmao Group.
(i) In prior years, certain management of the Group and Mr. Xie Wei, who was appointed as an
executive director and the chief executive officer of the Company subsequent to the end of the
Relevant Periods, were granted share options, in respect of their services to the Group and China
Jinmao Group, under the share option scheme of China Jinmao Group. Ms. Zhou Liye, who was
appointed as an executive director and the chief financial officer of the Company subsequent to
the end of Relevant Periods, was granted share options in respect of her services to China Jinmao
Group, under the share option scheme of China Jinmao Group. She joined the Group in May 2021
and the related equity-settled share option expenses were borne by the Group since then. The fair
value of such options, which has been recognised in profit or loss of the Group over the vesting
period, was determined as at the date of grant.
(ii) Certain emoluments of certain management of the Group and Mr. Xie Wei, were paid by China
Jinmao Group and recorded in profit or loss of the Group in relation to their services rendered
to the Group for the Relevant Periods and the nine months ended 30 September 2020.
(iii) Interest income from other subsidiaries of China Jinmao Group was determined at rates of 4.88%
to 5.50% per annum.
(iv) Interest income from Sinochem Finance was at the rates of 0.35% to 1.90% per annum.
(v) The pricing for other transactions above were determined in accordance with the terms mutually
agreed by the contracting parties.
(b) During the Relevant Periods and the nine months ended 30 September 2020, the Group was entitled to
use some trademarks of China Jinmao Group for free.
APPENDIX I ACCOUNTANTS’ REPORT
– I-61 –
(2) Outstanding balances with related parties
As at
31 December
As at
30 September
2018 2019 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000
Prepayments and receivables from
related parties
Trade receivables
Other subsidiaries of
Sinochem Group** 794 1,159 1,615 3,232
Joint ventures of Sinochem
Group
#
———91
Associates of Sinochem Group
#
48———
China Jinmao Group and its other
subsidiaries* 44,038 68,108 89,154 218,700
Joint ventures of
China Jinmao Group 12,771 19,825 25,275 44,469
Associates of
China Jinmao Group 3,844 8,538 13,104 20,270
61,495 97,630 129,148 286,762
Prepayments and other receivables
Other subsidiaries of
Sinochem Group** 110 5 638 7,988
Joint ventures of Sinochem Group — — — 80
Associates of Sinochem Group — — — 17
Other subsidiaries of
China Jinmao Group* 1,497,322 1,546,759 1,505,744 393,905
Joint ventures of
China Jinmao Group 423 423 423 252
Associates of China Jinmao Group — — — 3,996
1,497,855 1,547,187 1,506,805 406,238
Cash and cash equivalents
Deposits placed with Sinochem
Finance (note 21) 70,033 53,587 120,490 55,056
APPENDIX I ACCOUNTANTS’ REPORT
– I-62 –
As at
31 December
As at
30 September
2018 2019 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000
Payables to related parties
Trade payables
Other subsidiaries of
Sinochem Group** 337 232 109 70
Other subsidiaries of
China Jinmao Group* 957 468 578 516
1,294 700 687 586
Other payables
Other subsidiaries of
Sinochem Group** 2,066 2,607 4,391 14,475
Joint ventures of Sinochem
Group
#
———82
Associates of
Sinochem Group
#
445 663 809 329
China Jinmao Group and its other
subsidiaries* 112,996 148,203 349,616 346,568
Joint ventures of China Jinmao
Group 261 7 348 6,102
Associates of China Jinmao Group — — 60 2,700
115,768 151,480 355,224 370,256
Lease liabilities
Other subsidiaries of
China Jinmao Group* 5,184 4,888 15,632 23,398
Contract liabilities
Other subsidiaries of
Sinochem Group** 679 381 407 2,687
Joint ventures of Sinochem
Group
#
———65
Associates of Sinochem Group
#
— 1 — 140
Other subsidiaries of China
Jinmao Group* 2,081 12,816 15,491 14,571
Joint ventures of
China Jinmao Group 756 1,904 4,347 5,197
Associates of
China Jinmao Group 490 1,226 2,317 4,062
4,006 16,328 22,562 26,722
The Group’s outstanding balances of trade receivables, trade payables, prepayments, lease liabilities and
contract liabilities with related parties and deposits placed with Sinochem Finance are trade in nature. The
outstanding balances of other receivables and other payables with related parties are non-trade in nature, and these
balances are unsecured, interest-free and has no fixed terms of repayment. The directors of the Company represent
that the non-trade balances with related parties of the Group as at 30 September 2021 will be settled before the
completion of the proposed listing of the shares of the Company on the Stock Exchange, except for the balances due
to certain non-wholly-owned subsidiaries of China Jinmao Group and its joint ventures and associates of
RMB16,053,000 which represents the collection of car park rental income by the Group on their behalf.
APPENDIX I ACCOUNTANTS’ REPORT
– I-63 –
(3) Compensation of key management personnel of the Group
Year ended
31 December
Nine months ended
30 September
2018 2019 2020 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Salaries, allowances and benefits
in kind 4,105 4,317 4,288 3,201 4,350
Pension scheme contributions 299 280 127 114 261
Performance related bonuses 3,664 3,346 4,164 3,167 4,661
Equity-settled share option expense 502 2,274 2,238 1,148 1,010
8,570 10,217 10,817 7,630 10,282
Further details of directors’ and the chief executive’s emoluments are included in note 8 to the Historical
Financial Information.
(4) Transactions and balances with other state-owned entities
The Group is indirectly controlled by the PRC government and operates in an economic environment
predominated by entities directly or indirectly owned or controlled by the government through its agencies, affiliates
or other organisations (collectively “State-owned Entities” (“SOEs”)). During the Relevant Periods, the Group had
transactions with other SOEs to provide property management services. The directors of the Company consider that
these transactions with other SOEs are activities conducted in the ordinary course of business and that the dealings
of the Group have not been significantly or unduly affected by the fact that the Group and the other SOEs are
ultimately controlled or owned by the PRC government. The Group has also established pricing policies for its
products and services and such pricing policies do not depend on whether or not the customers are SOEs.
30. FINANCIAL INSTRUMENTS BY CATEGORY
The carrying amounts of each of the categories of financial instruments as at the end of each of the Relevant
Periods are as follows:
As at
31 December
As at
30 September
2018 2019 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000
Financial assets — Financial assets
at amortised cost
Trade receivables 88,801 155,291 203,713 451,537
Financial assets included in
prepayments, other receivables
and other assets 1,634,881 1,604,803 1,557,118 489,442
Restricted cash — — — 1,278
Cash and cash equivalents 160,030 155,113 270,818 274,169
1,883,712 1,915,207 2,031,649 1,216,426
APPENDIX I ACCOUNTANTS’ REPORT
– I-64 –
As at
31 December
As at
30 September
2018 2019 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000
Financial liabilities — Financial
liabilities at amortised cost
Trade payables 82,897 90,655 112,036 150,737
Interest-bearing borrowings 1,341,000 1,214,997 1,080,992 —
Lease liabilities 5,825 5,463 17,796 26,452
Financial liabilities included in other
payables and accruals 278,452 356,546 590,994 664,769
1,708,174 1,667,661 1,801,818 841,958
31. FAIR VALUE AND FAIR VALUE HIERARCHY OF FINANCIAL INSTRUMENTS
Management has assessed that the fair values of cash and cash equivalents, restricted cash, trade receivables,
financial assets included in current portion of prepayments, other receivables and other assets, trade payables, current
portion of interest-bearing borrowings, and financial liabilities included in current portion of other payables and
accrual, approximate to their carrying amounts largely due to the short term maturities of these instruments.
The fair values of the non-current portion of interest-bearing borrowings, financial assets included in other
receivables and other assets and financial liabilities included in other payables, have been calculated by discounting
the expected future cash flows using rates currently available for instruments with similar terms, credit risk and
remaining maturities. The resulting fair value amounts of these assets and liabilities are closed to their carrying
amounts as at the end of each of the Relevant Periods.
Fair value hierarchy
The Group did not hold any financial assets and liabilities measured at fair value as at 31 December 2018, 2019
and 2020 and 30 September 2021.
32. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s principal financial instruments comprise cash and cash equivalents, restricted cash, trade and
other receivables, trade and other payables, which arise directly from its operations. The Group has other financial
liabilities such as interest-bearing borrowings. The main purpose of these financial instruments is to raise finance for
the Group’s operations.
The main risks arising from the Group’s financial instruments credit risk, liquidity risk, interest rate risk and
foreign currency risk. The Group’s overall risk management programme focuses on minimising potential adverse
effects of these risks, with a material impact, on the Group’s financial performance. The board of directors of the
Company reviews and agrees policies for managing each of these risks and they are summarised below.
(a) Credit risk
The Group is exposed to credit risk in relation to its trade receivables, other receivables, cash and cash
equivalents and restricted cash.
The Group expects that there is no significant credit risk associated with cash and cash equivalents and
restricted cash since they are substantially deposited at state-owned banks, other medium or large-sized listed banks
and other financial institutions in Mainland China. Management does not expect that there will be any significant
losses from non-performance by these banks.
The Group expects that the credit risk associated with trade receivables and other receivables due from related
parties is low, since the related parties have strong capacity to meet contractual cash flow obligations in the near term.
Thus, no impairment provision was recognised during the Relevant Periods for the trade receivables and other
receivables due from related parties.
APPENDIX I ACCOUNTANTS’ REPORT
– I-65 –
The Group trades only with recognised and creditworthy third parties. Concentrations of credit risk are
managed by analysis by customer/counterparty. There are no significant concentrations of credit risk from third
parties as the customer bases of the Group’s trade receivables and other receivables are widely dispersed. In addition,
receivable balances are monitored on an ongoing basis.
Maximum exposure and year/period-end staging as at 31 December 2018, 2019 and 2020 and
30 September 2021
The tables below show the credit quality and the maximum exposure to credit risk based on the Group’s
credit policy, which is mainly based on past due information unless other information is available without
undue cost or effort, and year/period-end staging classification as at 31 December 2018, 2019 and 2020 and
30 September 2021. The amounts presented are gross carrying amounts for financial assets.
As at 31 December 2018
12-month
ECLs Lifetime ECLs
Stage 1 Stage 2 Stage 3
Simplified
approach Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Trade receivables* — — — 92,891 92,891
Financial assets
included in
prepayments,
other receivables
and other assets
— Normal** 1,626,776 — — — 1,626,776
— Doubtful** — 8,967 — — 8,967
Cash and cash
equivalents
— Not yet past
due 160,030———160,030
1,786,806 8,967 — 92,891 1,888,664
As at 31 December 2019
12-month
ECLs Lifetime ECLs
Stage 1 Stage 2 Stage 3
Simplified
approach Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Trade receivables* — — — 158,540 158,540
Financial assets
included in
prepayments,
other receivables
and other assets
— Normal** 1,580,507 — — — 1,580,507
— Doubtful** — 26,042 — — 26,042
Cash and cash
equivalents
— Not yet past
due 155,113———155,113
1,735,620 26,042 — 158,540 1,920,202
APPENDIX I ACCOUNTANTS’ REPORT
– I-66 –
As at 31 December 2020
12-month
ECLs Lifetime ECLs
Stage 1 Stage 2 Stage 3
Simplified
approach Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Trade receivables* — — — 207,334 207,334
Financial assets
included in
prepayments,
other receivables
and other assets
— Normal** 1,535,253 — — — 1,535,253
— Doubtful** — 23,415 — — 23,415
Cash and cash
equivalents
— Not yet past
due 270,818———270,818
1,806,071 23,415 — 207,334 2,036,820
As at 30 September 2021
12-month
ECLs Lifetime ECLs
Stage 1 Stage 2 Stage 3
Simplified
approach Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Trade receivables* — — — 456,171 456,171
Financial assets
included in
prepayments,
other receivables
and other assets
— Normal** 448,341———448,341
— Doubtful** — 43,204 — — 43,204
Restricted cash
— Not yet past
due 1,278———1,278
Cash and cash
equivalents
— Not yet past
due 274,169———274,169
723,788 43,204 — 456,171 1,223,163
* For trade receivables to which the Group applies the simplified approach for impairment,
information based on the provision matrix is disclosed in note 19 to the Historical Financial
Information.
** The credit quality of the financial assets included in prepayments, other receivables and other
assets is considered to be “normal” when they are not past due and there is no information
indicating that the financial assets had a significant increase in credit risk since initial
recognition. Otherwise, the credit quality of the financial assets is considered to be “doubtful”.
APPENDIX I ACCOUNTANTS’ REPORT
– I-67 –
(b) Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting financial obligations due
to shortage of funds. The Group’s exposure to liquidity risk arises primarily from mismatches of the maturities
of financial assets and liabilities. The Group’s objective is to maintain a balance between continuity of funding
to finance its working capital needs as well as capital expenditure in respect of this management projects, and
flexibility through the use of stand-by credit facilities.
The table below analyses the maturity profile of the Group’s financial liabilities as at the end of each
of the Relevant Periods, which is based on contractual undiscounted payments.
As at 31 December 2018
Within
1 year or
on demand 1 to 5 years Over 5 years Total
RMB’000 RMB’000 RMB’000 RMB’000
Trade payables 82,897 — — 82,897
Interest-bearing borrowings 178,503 795,063 687,500 1,661,066
Lease liabilities 1,790 4,033 859 6,682
Financial liabilities included
in other payables and
accruals 278,452 — — 278,452
541,642 799,096 688,359 2,029,097
As at 31 December 2019
Within 1
year or on
demand 1 to 5 years Over 5 years Total
RMB’000 RMB’000 RMB’000 RMB’000
Trade payables 90,655 — — 90,655
Interest-bearing borrowings 194,931 803,907 483,725 1,482,563
Lease liabilities 2,284 3,666 172 6,122
Financial liabilities included
in other payables and
accruals 356,546 — — 356,546
644,416 807,573 483,897 1,935,886
APPENDIX I ACCOUNTANTS’ REPORT
– I-68 –
As at 31 December 2020
Within 1
year or on
demand 1 to 5 years Over 5 years Total
RMB’000 RMB’000 RMB’000 RMB’000
Trade payables 112,036 — — 112,036
Interest-bearing borrowings 198,312 809,055 280,261 1,287,628
Lease liabilities 6,690 12,752 — 19,442
Financial liabilities included
in other payables and
accruals 467,337 123,657 — 590,994
784,375 945,464 280,261 2,010,100
As at 30 September 2021
Within 1
year or on
demand 1 to 5 years Over 5 years Total
RMB’000 RMB’000 RMB’000 RMB’000
Trade payables 150,737 — — 150,737
Lease liabilities 8,956 21,306 — 30,262
Financial liabilities included
in other payables and
accruals 541,112 123,657 — 664,769
700,805 144,963 — 845,768
(c) Interest rate risk and foreign currency risk
The Group is not exposed to material interest rate risk as the Group has no long term debt obligations
with a floating interest rate.
The Group is not exposed to material foreign currency risk as its business is principally conducted in
Mainland China and all the transactions are denominated in RMB.
(d) Capital management
The Group’s primary objectives for managing capital are to safeguard the Group’s ability to continue
as a going concern and to maintain healthy capital ratio in order to support its business and maximise
shareholders’ value.
The Group manages its capital structure and makes adjustments to it in light of changes in economic
conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the
Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No
change was made in the objectives, policies or processes for managing capital during the Relevant Periods.
APPENDIX I ACCOUNTANTS’ REPORT
– I-69 –
The Group monitors capital using a current ratio, which is total current assets divided by total current
liabilities, and a liabilities to assets ratio, which is total liabilities divided by total assets. The current ratios
and liabilities to assets ratios at the end of each of the Relevant Periods are as follows:
As at
31 December
As at
30 September
2018 2019 2020 2021
RMB’000 RMB’000 RMB’000 RMB’000
Total current assets 695,757 860,473 1,123,926 1,247,790
Total current liabilities 638,990 792,005 1,011,375 1,047,481
Total assets 1,940,502 1,986,219 2,135,235 1,334,043
Total liabilities 1,860,847 1,878,388 2,086,101 1,188,549
Current ratio 1.09 1.09 1.11 1.19
Liabilities to assets ratio 0.96 0.95 0.98 0.89
33. NOTES TO THE STATEMENTS OF FINANCIAL POSITION OF THE COMPANY
(a) Investment in a subsidiary
On 25 May 2021, the Company completed acquisition of 100% interest in Sinochem Jinmao from China
Jinmao Group and Beijing Chemsunny Property Co., Ltd. The purchase consideration for the acquisition was settled
by way of the issuance of one ordinary share of the Company to China Jinmao Group for 85% equity interest in
Sinochem Jinmao and cash of RMB1,630,000 to Beijing Chemsunny Property Co., Ltd. for the 15% of equity interest
in Sinochem Jinmao. Further details of the transaction are included in the Reorganization as set out in the paragraph
headed “Reorganization” in the section headed “History, Reorganization and Corporate Structure” in the prospectus.
(b) Other assets
As at
31 December
2020
As at
30 September
2021
RMB’000 RMB’000
Due from the immediate holding company (note) —* —*
Capitalised listing expenses — 3,850
—* 3,850
* The amount is less than RMB1,000.
Note: the amount due from the immediate holding company of HK$1 bears interest at a rate of 10% per annum
for the period from 14 September 2020 (date of incorporation) to 31 December 2020, and 4% per annum
for the nine months ended 30 September 2021.
APPENDIX I ACCOUNTANTS’ REPORT
– I-70 –
(c) Other payables and accruals
As at
31 December
2020
As at
30 September
2021
RMB’000 RMB’000
Accrued listing expenses — 15,402
Due to China Jinmao Group — 542
Due to a fellow subsidiary — 1,630
— 17,574
The outstanding balances of due to China Jinmao Group and due to a fellow subsidiary included in other
payables of the Company are non-trade in nature, and these balances are unsecured, interest-free and repayable on
demand. The directors of the Company represent that the Company’s non-trade balances with related parties as at 30
September 2021 will be settled before the completion of the proposed listing of the shares of the Company on the
Stock Exchange.
34. EVENT AFTER THE REPORTING PERIODS
On 26 January 2022, China Jinmao Group made a capital injection of HK$125,000,000 (equivalent to
RMB101,538,000) to the Company, and the share capital of the Company was increased by the same amount without
allotment and issuance of any new shares.
35. SUBSEQUENT FINANCIAL STATEMENTS
No audited financial statements have been prepared by the Company, the Group or any of the companies now
comprising the Group in respect of any period subsequent to 30 September 2021.
APPENDIX I ACCOUNTANTS’ REPORT
– I-71 –
The following information does not form part of the Accountants’ Report prepared by
Ernst & Young, Certified Public Accountants, Hong Kong, the reporting accountants of the
Company, as set forth in Appendix I to this prospectus, and is included herein for information
only.
The unaudited pro forma financial information should be read in conjunction with the
section headed “Financial Information” in this prospectus and the Accountants’ Report set
forth in Appendix I to the prospectus.
A. UNAUDITED PRO FORMA ADJUSTED CONSOLIDATED NET TANGIBLE
ASSETS
The following statement of unaudited pro forma adjusted consolidated net tangible assets
attributable to the owners of the parent has been prepared in accordance with rule 4.29 of the
Listing Rules and with reference to Accounting Guideline 7 Preparation of Pro Forma
Financial Information for Inclusion in Investment Circulars issued by the Hong Kong Institute
of Certified Public Accountants for illustration purpose only, and is set out below to illustrate
the effect of the Global Offering on the consolidated net tangible assets attributable to the
owners of the parent as at 30 September 2021 as if the Global Offering had taken place on 30
September 2021.
The unaudited pro forma adjusted consolidated net tangible assets attributable to the
owners of the parent has been prepared for illustrative purposes only and because of its
hypothetical nature, it may not give a true picture of the consolidated net tangible assets of the
Group attributable to the owners of the parent had the Global Offering been completed as at
30 September 2021 or any future date. It is prepared based on the consolidated net tangible
assets attributable to the owners of the parent as at 30 September 2021 as set out in the
Accountants’ Report as set out in Appendix I to the prospectus, and adjusted as described
below.
Consolidated
net tangible
assets
attributable to
owners of the
parent as at
30 September
2021
Estimated
net proceeds
from the
Global Offering
Unaudited pro
forma adjusted
consolidated net
tangible assets
attributable to
owners of
the parent
Unaudited pro forma
adjusted consolidated
net tangible assets
attributable to owners of
the parent per Share
RMB’000 RMB’000 RMB’000 RMB HK$
(Note 1) (Notes 2, 4) (Note 3) (Note 4)
Based on an
Offer Price of
HK$7.52
per Share 133,637 580,439 714,076 0.79 0.97
Based on an
Offer Price of
HK$8.14
per Share 133,637 630,350 763,987 0.85 1.04
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-1 –
Notes:
(1) The consolidated net tangible assets attributable to owners of the parent as at 30 September 2021 is
extracted from the Accountants’ Report set out in Appendix I to this prospectus, which is based on the
audited consolidated net assets attributable to owners of the parent of RMB139,745,000 after deducting
the intangible assets of RMB6,108,000 as at 30 September 2021.
(2) The estimated net proceeds from the Global Offering are based on the Offer Price of HK$7.52 per Share
or HK$8.14 per Share, after deduction of the underwriting fees and other related expenses payable by
the Group and does not take into account of any shares which may be issued upon the exercise of the
Offer Size Adjustment Option and the Over-allotment Option.
(3) The unaudited pro forma adjusted consolidated net tangible assets attributable to owners of the parent
per Share is arrived at after the adjustments referred to in the preceding paragraphs and on the basis that
901,411,500 Shares in issue immediately upon the completion of the Bonus Issue and the Global
Offering, assuming that the Bonus Issue and the Global Offering has been completed on 30 September
2021 for the purpose of the pro forma financial information, and does not take into account of any shares
which may be issued upon the exercise of the Offer Size Adjustment Option and the Over-allotment
Option.
(4) For the purpose of this unaudited pro forma adjusted consolidated net tangible assets, the estimated net
proceeds from the Global Offering are converted from Hong Kong dollars into Renminbi (“RMB”) at
an exchange rate of HK$1.00 to RMB0.8134 and the unaudited pro forma adjusted consolidated net
tangible assets attributable to owners of the parent per Share is converted from RMB to Hong Kong
dollars at the same exchange rate. No representation is made that Renminbi amounts have been, could
have been or may be converted to Hong Kong dollars, or vice versa, at that rate.
(5) No adjustment has been made to reflect any trading result or other transactions of the Group entered into
subsequent to 30 September 2021.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-2 –
B. REPORT ON THE UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following is the text of a report, prepared for the purpose of incorporation in this
prospectus, received from the reporting accountants, Ernst & Young, Certified Public
Accountants, Hong Kong, in respect of the unaudited pro forma financial information.
Ernst & Young
27/F, One Taikoo Place
979 King’s Road
Quarry Bay, Hong Kong
INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE
COMPILATION OF PRO FORMA FINANCIAL INFORMATION
To the Directors of Jinmao Property Services Co., Limited
We have completed our assurance engagement to report on the compilation of pro forma
financial information of Jinmao Property Services Co., Limited (the “Company”) and its
subsidiaries (hereinafter collectively referred to as the “Group”) by the directors of the
Company (the “Directors”) for illustrative purposes only. The pro forma financial information
consists of the pro forma consolidated net tangible assets as at 30 September 2021, and related
notes as set out on pages II-1 and II-2 of the prospectus dated 25 February 2022 issued by the
Company (the “Pro Forma Financial Information”). The applicable criteria on the basis of
which the Directors have compiled the Pro Forma Financial Information are described on pages
II-1 and II-2 to the prospectus.
The Pro Forma Financial Information has been compiled by the Directors to illustrate the
impact of the global offering of shares of the Company on the Group’s financial position as at
30 September 2021 as if the transaction had taken place at 30 September 2021. As part of this
process, information about the Group’s financial position has been extracted by the Directors
from the Group’s financial statements for the period ended 30 September 2021, on which an
accountants’ report has been published.
Directors’ responsibility for the Pro Forma Financial Information
The Directors are responsible for compiling the Pro Forma Financial Information in
accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting
Guideline (“AG”) 7 Preparation of Pro Forma Financial Information for Inclusion in
Investment Circulars issued by the Hong Kong Institute of Certified Public Accountants (the
“HKICPA”).
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-3 –
Our independence and quality control
We have complied with the independence and other ethical requirements of the Code of
Ethics for Professional Accountants issued by the HKICPA, which is founded on fundamental
principles of integrity, objectivity, professional competence and due care, confidentiality and
professional behavior.
Our firm applies Hong Kong Standard on Quality Control 1 Quality Control for Firms
that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related
Services Engagements, and accordingly maintains a comprehensive system of quality control
including documented policies and procedures regarding compliance with ethical requirements,
professional standards and applicable legal and regulatory requirements.
Reporting accountants’ responsibilities
Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the
Listing Rules, on the Pro Forma Financial Information and to report our opinion to you. We do
not accept any responsibility for any reports previously given by us on any financial
information used in the compilation of the Pro Forma Financial Information beyond that owed
to those to whom those reports were addressed by us at the dates of their issue.
We conducted our engagement in accordance with Hong Kong Standard on Assurance
Engagements 3420 Assurance Engagements to Report on the Compilation of Pro Forma
Financial Information Included in a Prospectus issued by the HKICPA. This standard requires
that the reporting accountants plan and perform procedures to obtain reasonable assurance
about whether the Directors have compiled the Pro Forma Financial Information in accordance
with paragraph 4.29 of the Listing Rules and with reference to AG 7 issued by the HKICPA.
For purposes of this engagement, we are not responsible for updating or reissuing any
reports or opinions on any historical financial information used in compiling the Pro Forma
Financial Information, nor have we, in the course of this engagement, performed an audit or
review of the financial information used in compiling the Pro Forma Financial Information.
The purpose of the Pro Forma Financial Information included in the prospectus is solely
to illustrate the impact of the global offering of shares of the Company on unadjusted financial
information of the Group as if the transaction had been undertaken at an earlier date selected
for purposes of the illustration. Accordingly, we do not provide any assurance that the actual
outcome of the transaction would have been as presented.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-4 –
A reasonable assurance engagement to report on whether the Pro Forma Financial
Information has been properly compiled on the basis of the applicable criteria involves
performing procedures to assess whether the applicable criteria used by the Directors in the
compilation of the Pro Forma Financial Information provide a reasonable basis for presenting
the significant effects directly attributable to the transaction, and to obtain sufficient
appropriate evidence about whether:
• the related pro forma adjustments give appropriate effect to those criteria; and
• the Pro Forma Financial Information reflects the proper application of those
adjustments to the unadjusted financial information.
The procedures selected depend on the reporting accountants’ judgment, having regard to
the reporting accountants’ understanding of the nature of the Group, the transaction in respect
of which the Pro Forma Financial Information has been compiled, and other relevant
engagement circumstances.
The engagement also involves evaluating the overall presentation of the Pro Forma
Financial Information.
We believe that the evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Opinion
In our opinion:
(a) the Pro Forma Financial Information has been properly compiled on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purpose of the Pro Forma Financial
Information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.
Ernst & Young
Certified Public Accountants
Hong Kong
25 February 2022
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-5 –
The estimated consolidated profit attributable to owners of our Company for the year
ended 31 December 2021 is set out in the paragraph headed “Profit estimate for the year ended
31 December 2021” under the section headed “Summary” in this prospectus.
A. BASES
Our Directors have prepared the estimate of the consolidated profit attributable to owners
of our Company for the year ended 31 December 2021 (the “Profit Estimate”) on the basis of
(i) the audited consolidated results of our Group for the nine months ended 30 September 2021;
and (ii) the unaudited consolidated results of our Group for the three months ended 31
December 2021 based on the management accounts of our Group.
The Profit Estimate has been prepared on the basis of the accounting policies consistent
in all material respects with those currently adopted by our Group as summarised in the
Accountants’ Report as set out in Appendix I to this prospectus.
B. PROFIT ESTIMATE FOR THE YEAR ENDED 31 DECEMBER 2021
On the basis set out in Appendix III to this prospectus, and in the absence of unforeseen
circumstances, we estimate that our unaudited consolidated profit attributable to owners of our
Company for the year ended 31 December 2021 is as follows:
Estimated consolidated profit attributable
to owners of our Company
Not less than
RMB170.0 million
APPENDIX III PROFIT ESTIMATE
– III-1 –
C. LETTER FROM THE REPORTING ACCOUNTANTS
The following is the text of a letter, prepared for the inclusion in this prospectus, received
from our Company’s reporting accountants, Ernst & Young, Certified Public Accountants,
Hong Kong, in connection with the estimate of the consolidated profit attributable to owners
of our Company for the year ended 31 December 2021.
Ernst & Young
27/F, One Taikoo Place
979 King’s Road
Quarry Bay, Hong Kong
25 February 2022
The Board of Directors
Jinmao Property Services Co., Limited
China International Capital Corporation Hong Kong Securities Limited
HSBC Corporate Finance (Hong Kong) Limited
Dear Sirs,
Jinmao Property Services Co., Limited (“the Company”)
Profit estimate for year ended 31 December 2021
We refer to the estimate of the consolidated profit attributable to equity holders of the
Company for the year ended 31 December 2021 (“the Profit Estimate”) set forth in the section
headed “Summary” in the prospectus of the Company dated 25 February 2022 (“the
Prospectus”).
Directors’ responsibilities
The Profit Estimate has been prepared by the directors of the Company based on the
audited consolidated results of the Company and its subsidiaries (collectively referred to as
“the Group”) for the nine months ended 30 September 2021 and the unaudited consolidated
results based on the management accounts of the Group for the three months ended 31
December 2021.
The Company’s directors are solely responsible for the Profit Estimate.
Our independence and quality control
We have complied with the independence and other ethical requirements of the Code of
Ethics for Professional Accountants issued by the Hong Kong Institute of Certified Public
Accountants (“HKICPA”), which is founded on fundamental principles of integrity, objectivity,
professional competence and due care, confidentiality and professional behavior.
APPENDIX III PROFIT ESTIMATE
– III-2 –
Our firm applies Hong Kong Standard on Quality Control 1 Quality Control for Firms
that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related
Services Engagements, and accordingly maintains a comprehensive system of quality control
including documented policies and procedures regarding compliance with ethical requirements,
professional standards and applicable legal and regulatory requirements.
Reporting accountants’ responsibilities
Our responsibility is to express an opinion on the accounting policies and calculations of
the Profit Estimate based on our procedures.
We conducted our engagement in accordance with Hong Kong Standard on Investment
Circular Reporting Engagements 500 Reporting on Profit Forecasts, Statements of Sufficiency
of Working Capital and Statements of Indebtedness and with reference to Hong Kong Standard
on Assurance Engagements 3000 (Revised) Assurance Engagements Other Than Audits or
Reviews of Historical Financial Information issued by the HKICPA. Those standards require
that we plan and perform our work to obtain reasonable assurance as to whether, so far as the
accounting policies and calculations are concerned, the Company’s directors have properly
compiled the Profit Estimate in accordance with the bases adopted by the directors and as to
whether the Profit Estimate is presented on a basis consistent in all material respects with the
accounting policies normally adopted by the Group. Our work is substantially less in scope
than an audit conducted in accordance with Hong Kong Standards on Auditing issued by the
HKICPA. Accordingly, we do not express an audit opinion.
Opinion
In our opinion, so far as the accounting policies and calculations are concerned, the Profit
Estimate has been properly compiled in accordance with the bases adopted by the directors as
set out in Appendix III of the Prospectus and is presented on a basis consistent in all material
respects with the accounting policies normally adopted by the Group as set out in our
accountants’ report dated 25 February 2022, the text of which is set out in Appendix I of the
Prospectus.
Yours faithfully,
Ernst & Young
Certified Public Accountants
Hong Kong
APPENDIX III PROFIT ESTIMATE
– III-3 –
D. LETTER FROM THE JOINT SPONSORS ON PROFIT ESTIMATE
China International Capital Corporation
Hong Kong Securities Limited
HSBC Corporate Finance (Hong Kong)
Limited
29/F, One International Finance Centre
1 Harbour View Street
Central, Hong Kong
1 Queen’s Road Central
Hong Kong
(in alphabetical order)
The Board of Directors
Jinmao Property Services Co., Limited
February 25, 2022
Dear Sirs,
We refer to the estimate of the consolidated profits attributable to the owners of Jinmao
Property Services Co., Limited (the “Company”, together with its subsidiaries, collectively
referred to as the “Group”) for the year ended December 31, 2021 (the “Profit Estimate”), for
which the directors of the Company (the “Directors”) are solely responsible, as set forth in the
section headed “Summary – Profit Estimate For The Year Ended December 31, 2021” in the
prospectus of the Company dated February 25, 2022 (the “Prospectus”).
The Profit Estimate has been prepared by the Directors based on (i) the audited
consolidated results of the Group for the nine months ended September 30, 2021; and (ii) the
unaudited consolidated results of the Group for the three months ended December 31, 2021
based on the management accounts of the Group.
We have discussed with you the basis and assumptions made by the Directors as set out
in Appendix III to the Prospectus, upon which the Profit Estimate has been made. We have also
considered the letter dated February 25, 2022 addressed to you and us from the Company’s
reporting accountants, Ernst & Young, regarding the accounting policies and calculations upon
which the Profit Estimate has been made.
On the basis of the information comprising the Profit Estimate and on the basis of the
accounting policies and calculations adopted by you and reviewed by Ernst & Young, we are
of the opinion that the Profit Estimate, for which you as the Directors are solely responsible,
has been made after due and careful enquiry.
Yours faithfully,
For and on behalf of
China International Capital Corporation
Hong Kong Securities Limited
Shu Gao
Executive Director
For and on behalf of
HSBC Corporate Finance (Hong Kong)
Limited
Ivan So
Managing Director
APPENDIX III PROFIT ESTIMATE
– III-4 –
This Appendix contains a summary of the articles of association of our Company
(the “Articles”). As the information set out below is in summary form, it does not contain
all of the information that may be important to potential investors. As stated in the section
headed “Appendix VI − Documents delivered to the Registrar of Companies and
available for Inspection” in this prospectus, a copy of the Articles is available for
inspection.
The Articles were adopted by our sole Shareholder on February 18, 2022 and will
become effective on the Listing Date. The following is a summary of certain provisions
of the Articles. The powers conferred or permitted by the Articles are subject to the
provisions of the Companies Ordinance, the Companies (Winding Up and Miscellaneous
Provisions) Ordinance and other ordinances, subsidiary legislation and the Listing Rules.
ALTERATION OF CAPITAL
Our Company may from time to time by ordinary resolution alter its share capital in any
one or more of the ways set out in section 170 of the Companies Ordinance, including but not
limited to:
(a) increasing its share capital by allotting and issuing new shares in accordance with
the Companies Ordinance;
(b) increasing its share capital without allotting and issuing new shares, if the funds or
other assets for the increase are provided by the members of our Company;
(c) capitalising its profits, with or without allotting and issuing new shares;
(d) allotting and issuing bonus shares with or without increasing its share capital;
(e) converting all or any of its share into a larger or smaller number of shares;
(f) cancelling shares:
(i) that, at the date of the passing of the resolution for cancellation, have not been
taken or agreed to be taken by any person; or
(ii) that have been forfeited; or
(g) dividing its shares into several classes and attaching thereto respectively any rights,
(including preferred, deferred, qualified or other special rights or privileges) or
conditions or restrictions, provided always that where our Company issues shares
which do not carry voting rights, the words “non-voting” shall appear in the
designation of such shares and where the equity capital includes shares with
different voting rights, the designation of each class of shares, other than those with
the most favourable voting rights, must include the words “restricted voting” or
“limited voting” or other warning language as may be required by the Listing Rules.
Subject to the provisions of the Companies Ordinance and the Articles, our Company may
by special resolution reduce our share capital in any way.
APPENDIX IV SUMMARY OF ARTICLES OF ASSOCIATION
– IV-1 –
PURCHASE OF OWN SHARES AND WARRANTS
Our Company may exercise any powers conferred or permitted by the Companies
Ordinance or any other ordinance from time to time to purchase our own shares of any class
in the capital of the Company (including any redeemable shares) or to give directly or
indirectly by means of a loan, guarantee, the provision of security or otherwise, financial
assistance for the purpose of or in connection with a purchase made or to be made by any
person of any share in our Company. Should our Company purchase our own shares, neither
our Company nor the Directors shall be required to select the shares to be acquired rateably or
in any other particular manner as between the holders of shares of the same class or as between
them and the holders of shares of any other class or in accordance with the rights as to
dividends or capital conferred by any class of shares provided that any such purchase or other
acquisition or financial assistance shall only be made or given in accordance with any relevant
rules or regulations issued by the Stock Exchange or the SFC from time to time in force.
In the case of purchases of redeemable shares, purchases not made through the market or
by tender shall be limited to a maximum price and if purchases are by tender, tenders shall be
available to all shareholders holding redeemable shares of the Company alike.
“Shares” referred to above include shares, warrants and any other securities carrying a
right to subscribe for or purchase shares of our Company which are issued from time to time
by our Company.
VARIATION OF RIGHTS
Subject to the provisions of the Companies Ordinance, if at any time the capital of our
Company is divided into different classes of shares, the rights attached to any class (unless
otherwise provided by the terms of issue of the shares of that class) may be varied or abrogated,
either with the consent in writing of holders representing at least seventy-five per cent. of the
total voting rights of holders of shares in that class or with the sanction of a special resolution
passed at a separate general meeting of the holders of the shares of that class, and may be so
varied or abrogated either whilst our Company is a going concern or during or in contemplation
of a winding up.
To every such separate meeting the provisions of the Articles relating to general meetings
shall mutatis mutandis apply, except that:
(a) the necessary quorum at such meeting (other than an adjourned meeting) shall be
two persons present in person or by proxy holding at least one-third of the total
voting rights of holders of the shares in that class;
(b) at any adjourned meeting the necessary quorum shall be one person present in
person or by proxy holding any shares in that class; and
(c) any holder of shares in that class whether present in person or by proxy may demand
a poll.
APPENDIX IV SUMMARY OF ARTICLES OF ASSOCIATION
– IV-2 –
TRANSFER OF SHARES
The instrument of transfer of any share shall be in writing and in any usual form or in any
other form which the Board may approve. The transferor shall be deemed to remain the holder
of the share concerned until the name of the transferee is entered in the register of members
in respect of the shares. Shares of different classes shall not be comprised in the same
instrument of transfer.
The Board may, in its absolute discretion, refuse to register the transfer of a share which
is not fully paid or on which our Company has a lien. The Board may also refuse to register
a transfer of a share unless:
(a) the instrument of transfer is in respect of only one class of share and is properly
stamped;
(b) in the case of a transfer to joint holders, the number of joint holders to whom the
share is to be transferred does not exceed four;
(c) subject to the Companies Ordinance, the instrument of transfer is lodged with our
Company accompanied by the certificate for the shares to be transferred and such
other evidence (if any) as the Board may reasonably require to prove the title of the
intending transferor or his right to transfer the shares; and
(d) the instrument of transfer is accompanied by payment of such fee, not exceeding the
maximum amount prescribed by the Stock Exchange from time to time, as the Board
may from time to time require.
If the Board refuse to register a transfer of a share, it shall within two months after the
date on which the instrument of transfer was lodged with our Company send to the transferor
and transferee notice of the refusal. Upon request by the transferor or transferee, the Board
must, within twenty-eight days after receiving such request, (a) send to the transferor or
transferee (as the case may be) a statement of the reasons for the refusal or (b) register the
transfer.
GENERAL MEETINGS
The Board shall convene and our Company shall hold annual general meetings in
accordance with the requirements of the Companies Ordinance. Subject to such requirements,
the Board shall determine the date, time and place at which each annual general meeting shall
be held. General meetings include other meetings of members which are not annual general
meetings.
The Board may convene a general meeting whenever it thinks fit. General meetings shall
also be convened by the Board on the requisition of members pursuant to the provisions of the
Companies Ordinance.
APPENDIX IV SUMMARY OF ARTICLES OF ASSOCIATION
– IV-3 –
NOTICE OF GENERAL MEETINGS
Subject to section 578 of the Companies Ordinance, an annual general meeting shall be
called by notice in writing of at least twenty-one clear days (or such longer period as may be
required by the Listing Rules), and every other general meeting shall be called by notice in
writing of at least fourteen clear days (or such longer period as may be required by the Listing
Rules), and such notice shall be given in the manner mentioned in the Articles to all members,
Directors and auditors.
The notice shall specify the place, the date and the time of meeting and the general nature
of such business to be dealt with at the meeting. If the meeting is to be held in two or more
places, the notice of meeting shall specify the principal place of the meeting and the other place
of the meeting.
The Board shall comply with the Companies Ordinance and the Listing Rules regarding
the giving and the circulation, on the requisition of members, of notices of resolutions and of
statements with respect to matters relating to any resolution to be proposed or business to be
dealt with at any general meeting of our Company. Every notice of meeting shall also state with
reasonable prominence that a member entitled to attend and vote at the meeting may appoint
one or more proxies to attend and vote instead of him and that a proxy need not also be a
member.
The accidental omission to give such notice of a general meeting or (in cases where
instruments of proxy are sent out with the notice) the accidental omission to send an instrument
of proxy to, or the non-receipt of either or both by, any person entitled to receive such notice
shall not invalidate any resolution passed or proceeding had at that meeting.
Subject to compliance with any provisions of the Companies Ordinance, notwithstanding
that a meeting of our Company is convened by shorter notice than that specified in the Articles,
it shall be deemed to have been duly convened if it is so agreed:
(a) in the case of an annual general meeting, by all the members entitled to attend and
vote at the meeting; and
(b) in the case of any other general meeting, by a majority in number of the members
having a right to attend and vote at the meeting, being a majority together
representing at least ninety-five per cent. of the total voting rights at the meeting of
all the members.
APPENDIX IV SUMMARY OF ARTICLES OF ASSOCIATION
– IV-4 –
VOTING AT GENERAL MEETINGS
Subject to the Listing Rules, any vote of shareholders at a general meeting shall be taken
by poll except where the chairman, in good faith, decides to allow a resolution which relates
purely to a procedural or administrative matter to be voted on by a show of hands. On any
resolution where a vote is not required under the Companies Ordinance, the Listing Rules, the
Articles or such other laws or regulations as applicable to our Company, if any, to be held on
a poll, a poll may be demanded before or on the declaration of the result of the show of hands:
(a) by the chairman of the meeting; or
(b) by at least five members present in person or by proxy having the right to vote at
the meeting; or
(c) by a member or members present in person or by proxy representing in aggregate at
least five per cent. of the total voting rights of all the members having the right to
attend and vote at the meeting.
Subject to the Articles and the Companies Ordinance and to any special rights or
restrictions as to voting for the time being attached to any shares of our Company:
(a) on a show of hands, every member who is present in person or by proxy shall have
one vote; and
(b) on a poll, every member who is present in person or by proxy shall have one vote
for every share of which he is the holder.
Where any shareholder is, under the Listing Rules, required to abstain from voting on any
particular resolution or restricted to voting only for or only against any particular resolution,
any votes cast by or on behalf of such shareholder in contravention of such requirement or
restriction shall not be counted.
Any corporation which is a member of our Company may, by resolution of its directors
or other governing body, authorise such person to act as its representative at any general
meeting or meeting of the holders of shares of any class of our Company, and the person so
authorised shall be entitled to exercise the same powers on behalf of the corporation which he
represents as that corporation could exercise as if it were an individual member.
Where a member is a recognised clearing house (within the meaning of the SFO) or its
nominee, it may authorise any person or persons as it thinks fit to act as its proxy (or proxies)
or representative (or representatives) at any general meeting of our Company or any separate
meeting of any class of members of our Company provided that, if more than one person is so
authorised, the instrument of proxy or authorisation must specify the number and class of
shares in respect of which each such person is so authorised. Notwithstanding anything
APPENDIX IV SUMMARY OF ARTICLES OF ASSOCIATION
– IV-5 –
contained in the Articles, each person so authorised, and any instrument of proxy or
authorisation signed by any officer of the recognised clearing house, shall be deemed to have
been duly authorised without further evidence of the facts. The person so authorised will be
entitled to exercise the same rights and powers on behalf of the recognised clearing house (or
its nominee) as if such person was the registered holder of the shares of our Company held by
that recognised clearing house (or its nominee), including the right to vote individually on a
show of hands or on a poll and to demand or concur in demanding a poll.
APPOINTMENT, ROTATION AND REMOVAL OF DIRECTORS
Subject to the Articles, our Company may by ordinary resolution appoint any person to
be a Director, either to fill a casual vacancy or as an additional Director. No person (other than
a Director retiring in accordance with the Articles) shall be so appointed or re-appointed a
Director at any general meeting unless:
(a) he is recommended by the Board; or
(b) he is nominated by notice in writing by a member (other than the person to be
proposed) entitled to attend and vote at the meeting, and such notice of nomination
shall be given to the Company Secretary at the office of our Company during a
period of not less than seven days, commencing no earlier than the day after the
dispatch of the notice of such meeting and ending no later than seven days prior to
the date fixed for such meeting (or a longer period as may be determined and
announced by the Board from time to time) and the notice of nomination shall be
accompanied by a notice signed by the proposed candidate indicating his willingness
to be appointed or re-appointed.
Without prejudice to the power of our Company in general meeting in accordance with
any of the provisions of the Articles to appoint any person to be a Director, the Board may, at
any time, and from time to time, appoint any person to be a Director, either to fill a casual
vacancy or by way of addition to their number. Any Director so appointed by the Board shall
hold office only until the first annual general meeting of our Company after his appointment,
and shall then be eligible for re-appointment.
At the annual general meeting in each year, one-third of the Directors for the time being
(or, if their number is not a multiple of three, the number nearest to but greater than one-third)
shall retire from office. Subject to the provisions of the Companies Ordinance and of the
Articles and until otherwise determined by our Company by ordinary resolution, the Directors
to retire in every year shall be the Directors who have been longest in office since their last
election or appointment. As between Directors of equal seniority, the Directors to retire shall
be selected from among them by lot. Every Director, including those appointed for a specific
term, shall subject to retirement at least once every three years.
APPENDIX IV SUMMARY OF ARTICLES OF ASSOCIATION
– IV-6 –
Notwithstanding the Articles or any agreements entered into between our Company and
the Directors may provide otherwise, a Director shall vacate his office even before the
expiration of his term:
(a) if he ceases to be a Director by virtue of any provision of the Companies Ordinance
or the Companies (Winding up and Miscellaneous Provisions) Ordinance or he
becomes prohibited by law or court order from being a Director; or
(b) if he becomes bankrupt or a receiving order is made against him or he makes any
arrangement or composition with his creditors generally; or
(c) if he is, or may be, suffering from mental disorder and an order is made by a court
claiming jurisdiction in that behalf (whether in Hong Kong or elsewhere) in matters
concerning mental disorder for his detention or for the appointment of a receiver,
curator bonis or other person by whatever name called to exercise powers with
respect to his property or affairs; or
(d) if for more than six consecutive months both he and any alternate director appointed
by him are absent, without special leave of absence from the Board, from meetings
of the Board held during that period, and the Board resolves that his office be
vacated; or
(e) if he gives to our Company notice of his wish to resign, in which event he shall
vacate office on the delivery of that notice to our Company or such later time as is
specified in such notice; or
(f) if he is removed by ordinary resolution of our Company in accordance with the
Companies Ordinance or in the manner under the Articles; or
(g) if he is removed from office by notice in writing served upon him by all other
Directors; or
(h) if he is convicted of an indictable offence.
If the office of a Director is vacated for any reason, he shall cease to be a member of any
committee or sub-committee appointed by the Board.
QUALIFICATION OF DIRECTORS
A Director need not be a member of our Company.
APPENDIX IV SUMMARY OF ARTICLES OF ASSOCIATION
– IV-7 –
BORROWING POWERS
The Board may exercise all the powers of our Company to borrow money, and to
mortgage or charge the whole or any part of its undertaking, property and assets (both present
and future) and uncalled capital, or any part thereof, and (subject, to the extent applicable, to
the provisions of the Companies Ordinance) to issue debentures and other securities, whether
outright or as collateral security for any debt, liability or obligation of our Company or of any
third party.
DIRECTORS’ REMUNERATION AND EXPENSES
Each of the Directors shall be entitled to be paid by our Company such remuneration as
may be proposed by the Board and determined by our Company in general meeting. The
Directors shall also be paid out of the funds of our Company all their travelling, hotel and other
expenses reasonably and properly incurred by them in and about the discharge of their duties,
including their expenses of travelling to and from meetings of the Board, or committee
meetings, or general meetings (subject always to the provisions of any agreement between our
Company and any Director).
The Board may grant special remuneration to any Director who, being called upon, shall
perform any special or extra services to or at the request of our Company. Such special
remuneration may be made payable to such Director in addition to or in substitution for his
ordinary remuneration (if any) as a Director, and may, without prejudice to the payment of
ordinary remuneration, be made payable by a lump sum or by way of salary, commission,
participation in profits or otherwise as the Board may decide.
DIRECTORS’ INTERESTS
Subject to the Companies Ordinance, no Director or intending Director shall be
disqualified by his office from entering into any contract with our Company, either with regard
to his tenure of any office or position in the management, administration or conduct of the
business of our Company or as vendor, purchaser or otherwise, nor (subject to the interest of
the Director being duly declared) shall any contract or arrangement entered into by or on behalf
of our Company in which any Director is in any way interested, be liable to be avoided, nor
shall any Director so interested be liable to account to our Company for any benefit resulting
from the contract by reason of such Director holding that office or of the fiduciary relationship
established by his holding that office.
A Director or an entity connected with the Director who is, in any way, whether directly
or indirectly, interested in a transaction, arrangement or contract or a proposed transaction,
arrangement or contract with our Company shall, if such transaction, arrangement or contract
is significant in relation to our Company’s business and the Director’s interest or the interest
of the entity connected with the Director (as applicable) is material, declare the nature and
extent of his interest or the interest of the entity connected with the Director (as applicable) at
APPENDIX IV SUMMARY OF ARTICLES OF ASSOCIATION
– IV-8 –
the meeting of the Board at which the question of entering into the transaction, arrangement
or contract is first taken into consideration or in any other case by notice in writing and sent
to other Directors, or by general notice sent to the Board or our Company, in each case in
accordance with the Companies Ordinance and the Articles and any requirements prescribed by
the Company for the declarations of interests of Directors in force from time to time.
A Director shall not vote (or be counted in the quorum at a meeting) in respect of any
resolution concerning his own appointment (including fixing or varying its terms), or the
termination of his own appointment, as the holder of any office or place of profit with our
Company or any other company in which our Company is interested but, where proposals are
under consideration concerning the appointment (including fixing or varying its terms), or the
termination of the appointment, of two or more Directors to offices or places of profit with our
Company or any other company in which our Company is interested, those proposals may be
divided and a separate resolution may be put in relation to each Director and in that case each
of the Directors concerned (if not otherwise debarred from voting under the Articles) shall be
entitled to vote (and be counted in the quorum) in respect of each resolution unless it concerns
his own appointment or the termination of his own appointment.
Subject to the Listing Rules and save as otherwise provided by the Articles, a Director
shall also not vote (or be counted in the quorum at a meeting) in relation to any resolution
relating to any transaction, arrangement or contract or other proposal in which he or any of his
close associates has a material interest and, if he purports to do so, his vote shall not be counted
(nor shall he be counted in the quorum for that resolution), but this prohibition shall not apply
and a Director may vote (and be counted in the quorum) any or more of the following matters:
(a) the giving of any security or indemnity either:
(i) to the director or his close associate(s) in respect of money lent or obligations
incurred or undertaken by him or any of them at the request of or for the benefit
of our Company or any of its subsidiaries; or
(ii) to a third party in respect of a debt or obligation of our Company or any of its
subsidiaries for which the director or his close associate(s) has
himself/themselves assumed responsibility in whole or in part and whether
alone or jointly under a guarantee or indemnity or by the giving of security;
(b) any proposal concerning an offer of shares or debentures or other securities of or by
our Company or any other company which our Company may promote or be
interested in for subscription or purchase where the director or his close associate(s)
is/are or is/are to be interested as a participant in the underwriting or sub-
underwriting of the offer;
APPENDIX IV SUMMARY OF ARTICLES OF ASSOCIATION
– IV-9 –
(c) any proposal or arrangement concerning the benefit of employees of our Company
or its subsidiaries including:
(i) the adoption, modification or operation of any employees’ share scheme or any
share incentive or share option scheme under which the director or his close
associate(s) may benefit; or
(ii) the adoption, modification or operation of a pension fund or retirement, death
or disability benefits scheme which relates both to the director, his close
associate(s) and employee(s) of our Company or any of its subsidiaries and
does not provide in respect of any director, or his close associates(s), as such
any privilege or advantage not generally accorded to the class of persons to
which such scheme or fund relates; and
(d) any contract or arrangement in which the director or his close associate(s) is/are
interested in the same manner as other holders of shares or debentures or other
securities of our Company by virtue only of his/their interest in shares or debentures
or other securities of our Company.
DIVIDENDS
Subject to the provisions of the Companies Ordinance, our Company may, from time to
time, by ordinary resolution, declare a dividend to be paid to the members, according to their
respective rights and interests in the profits, and may fix the time for payment of such dividend,
but no dividend shall exceed the amount recommended by the Board.
Except insofar as the rights attaching to, or the terms of issue of, any share otherwise
provide (a) all dividends shall be declared and paid according to the amounts paid up on the
shares in respect of which the dividend is paid, but no amount paid up on a share in advance
of calls shall be treated as paid up on the share, and (b) all dividends shall be apportioned and
paid pro rata according to the amounts paid up on the shares during any portion or portions
of the period in respect of which the dividend is paid.
The Board may pay such interim dividends as appear to the Board to be justified by the
financial position of our Company and may also pay any dividend payable at a fixed rate at
intervals settled by the Board whenever the financial position of our Company, in the opinion
of the Board, justifies its payment. If at any time the share capital of our Company is divided
into different classes, the Board may resolve to pay such interim dividends in respect of those
shares in the capital of the Company which confer on the holders thereof deferred or
non-preferred rights as well as in respect of those shares which confer on the holders thereof
preferential or special rights in regard to dividend. If the Board acts in good faith, none of the
Directors shall incur any liability to the holders of shares conferring preferred rights for any
loss such holders may suffer in consequence of the payment of an interim dividend on any
shares having deferred or non-preferred rights.
APPENDIX IV SUMMARY OF ARTICLES OF ASSOCIATION
– IV-10 –
Whenever the Board or our Company in general meeting have resolved that a dividend be
paid or declared, the Board may further resolve that such dividend be satisfied wholly or in part
by the distribution of specific assets or rights of any kind and in particular of paid up shares,
debentures or warrants to subscribe securities of our Company or any other company, or in any
one or more of such ways, with or without offering any rights to members to elect to receive
such dividend in cash. Where any difficulty arises in regard to the distribution, the Board may
settle the same as they think expedient, and in particular may issue fractional certificates,
disregard fractional entitlements or round the same up or down, and may fix the value for
distribution of such specific assets or rights, or any part thereof, and may determine that cash
payments shall be made to any members upon the footing of the value so fixed in order to
adjust the rights of all parties, and may determine that fractional entitlements shall be
aggregated and sold and the benefit shall accrue to our Company rather than to the members
concerned and may vest any such specific assets or rights in trustees as may seem expedient
to the Board. The Board may appoint any person to sign any requisite instruments of transfer
and other documents on behalf of the persons entitled to the dividend, and such appointment
shall be effective.
Whenever the Board or our Company in general meeting have resolved that a dividend be
paid or declared on the share capital of our Company, the Board may further resolve: (a) that
such dividend be satisfied wholly or in part in the form of an allotment of shares credited as
fully paid, provided that the members entitled thereto will be entitled to elect to receive such
dividend (or part thereof) in cash in lieu of such allotment; (b) that the members entitled to
such dividend be entitled to elect to receive an allotment of shares credited as fully paid in lieu
of the whole or such part of the dividend as the Board may think fit.
All unclaimed dividends, interest or other sums payable may be invested or otherwise
made use of by the Board for the benefit of our Company until claimed. Any dividend
unclaimed after a period of six years from the date it became due for payment shall be forfeited
and shall revert to our Company. The payment of any unclaimed dividend, interest or other sum
payable by our Company on or in respect of any share into a separate account shall not
constitute our Company a trustee in respect of it.
INDEMNITY
Subject to the provisions of the Companies Ordinance, every Director, Company
Secretary or other officer of the Company shall be entitled to be indemnified by the Company
against all costs, charges, losses, expenses and liabilities incurred by him in the execution and
discharge of his duties or in relation thereto.
APPENDIX IV SUMMARY OF ARTICLES OF ASSOCIATION
– IV-11 –
WINDING UP
If our Company is in liquidation, the liquidator (whether voluntary or official) may, with
the sanction of a special resolution of our Company and any other sanction required by law:
(a) divide among the members in specie the whole or any part of the assets of our
Company and for that purpose, value any assets and determine how the division
shall be carried out as between the members or different classes of members; or
(b) vest the whole or any part of the assets of our Company in trustees upon such trusts
for the benefit of the members or any of them as the liquidator, with the like
sanction, shall think fit but no member shall be compelled to accept any asset upon
which there is any liability.
UNTRACEABLE SHAREHOLDERS
Without prejudice to the rights of our Company and in accordance with the Listing Rules,
our Company may cease to send any cheque or warrant or order through the post for any
dividend payable on any shares in our Company which is normally paid in that manner on those
shares if in respect of at least two consecutive dividends payable on those shares the cheques
or warrants or orders remain uncashed or after the first occasion when the cheques or warrants
or orders have been returned undelivered.
Our Company shall be entitled to sell, in such manner as the Board thinks fit, any share
of a member, or any share to which a person is entitled by transmission, if:
(a) during a period of twelve years at least three cash dividends or other distributions
have become payable in respect of the share to be sold and have been sent by our
Company in accordance with the Articles;
(b) during that period of twelve years no dividend or other distribution payable in
respect of the share has been claimed, no cheque, warrant, order or other payment
for a dividend has been cashed, no dividend sent by means of a funds transfer system
has been paid and no communication has been received by our Company from the
member or the person entitled by transmission to the share;
(c) on or after the expiry of that period of twelve years our Company has published
advertisements in at least one English language newspaper and one Chinese
language newspaper circulating in Hong Kong giving notice of its intention to sell
the share;
APPENDIX IV SUMMARY OF ARTICLES OF ASSOCIATION
– IV-12 –
(d) during the period of three months following the publication of those advertisements
or of the first of the advertisements if they are published on different dates, our
Company has not received any communication from the member or the person
entitled by transmission to the share; and
(e) our Company has given notice to the Stock Exchange of its intention to sell the
share.
To give effect to any sale, the Board may authorise some person to transfer the share to,
or as directed by, the purchaser, who shall not be bound to see to the application of the purchase
money; nor shall the title of the new holder to the share be affected by any irregularity in, or
invalidity of, the proceedings relating to the sale.
APPENDIX IV SUMMARY OF ARTICLES OF ASSOCIATION
– IV-13 –
1. FURTHER INFORMATION ABOUT OUR GROUP
(a) Incorporation of Our Company
We were incorporated in Hong Kong under the Companies Ordinance as a private
company limited by shares on September 14, 2020 under the name of Hanmao Limited (
). Our registered office is at Rm 4702-03, 47/F, Office Tower Convention Plaza, 1
Harbour Road, Wanchai, Hong Kong.
The name of our Company was changed to Jinmao Property Development Co., Ltd. (
) on June 3, 2021 and was further changed to Jinmao Property
Services Co., Limited ( ) on October 19, 2021.
As we were incorporated in Hong Kong, our corporate structure and operations are
subject to the Companies Ordinance, the Companies (Winding Up and Miscellaneous
Provisions) Ordinance and the Articles of Association. A summary of certain provisions of our
Articles of Association is set out in Appendix IV to this prospectus.
(b) Changes in the Share Capital of Our Company
As at the date of incorporation of our Company, our Company had an initial registered
share capital of HK$1 divided into one Share, which was allotted and issued as fully paid to
China Jinmao. On April 13, 2021, one Share was further allotted and issued as fully paid to
China Jinmao, in return for China Jinmao’s capital injection of 85% equity interest in Jinmao
PM into our Company, and the share capital of our Company was increased from HK$1 to
HK$10,966,720.80. On January 26, 2022, China Jinmao made a capital injection of
HK$125,000,000 to our Company, following which our share capital was further increased to
HK$135,966,720.80. Since its incorporation and up to the Latest Practicable Date, our
Company was wholly owned by China Jinmao.
Immediately following the completion of the Bonus Issue and the Global Offering but
without taking into account any Shares which may be issued upon the exercise of the Offer Size
Adjustment Option and the Over-allotment Option, 901,411,500 Shares will be issued as fully
paid or credited as fully paid.
Save as disclosed above and as mentioned in “— 1. Further Information about our Group
— (c) Written Resolutions of our Sole Shareholder passed on February 18, 2022” below, there
has been no alteration in the share capital of our Company since its incorporation.
APPENDIX V STATUTORY AND GENERAL INFORMATION
–V-1–
(c) Written Resolutions of our Sole Shareholder passed on February 18, 2022
Pursuant to the written resolutions of our Sole Shareholder passed on February 18, 2022,
among other things:
(i) the Articles of Association were approved and adopted in substitution for and to the
exclusion of the existing articles of association of our Company, conditional upon
Listing and with effect from the Listing Date;
(ii) conditional upon the conditions of the Global Offering (as set out in the section
headed “Structure of the Global Offering — Conditions of the Global Offering” in
this prospectus) being fulfilled (or, if applicable, waived):
(A) the Global Offering, the Listing, the Offer Size Adjustment Option and the
Over-allotment Option were approved and the Directors were authorized to
approve the allotment and issue of the Offer Shares and any new Shares which
are required to be issued if the Offer Size Adjustment Option and the
Over-allotment Option are exercised and to negotiate and agree the Offer Price;
(B) our Directors were authorized to allot and issue a total of 799,999,998 Shares
credited as fully paid for nil consideration to China Jinmao, being the only
holder of the Shares whose name appeared on the register of members of our
Company at the close of business on February 18, 2022 (the “Bonus Issue”),
of which 191,680,031 Shares (subject to the Distribution Adjustment) shall be
allotted and issued, at the direction of China Jinmao, to the Qualifying Jinmao
Shareholders in proportion to their shareholdings in China Jinmao pursuant to
the Distribution. The Shares to be allotted and issued pursuant to this
resolution shall rank pari passu in all respects with the then existing issued
Shares (other than the Bonus Issue) and our Directors were authorized to give
effect to the Bonus Issue (including the Distribution);
(C) a general unconditional mandate was granted to our Directors to allot, issue
and deal with any Shares or securities convertible into Shares and to make or
grant share sale plans, offers, agreements or options which would or might
require Shares to be allotted, issued or dealt with, provided that the aggregate
number of Shares so allotted, issued or dealt with or agreed to be allotted,
issued or dealt with by our Directors, otherwise than by way of rights issue or
pursuant to the exercise of any options which may be granted under any share
option scheme or by virtue of scrip dividend schemes or similar arrangements
in accordance with our Articles of Association, shall not exceed the sum of:
(1) 20% of the aggregate number of Shares in issue immediately following
the completion of the Bonus Issue and the Global Offering on the Listing
Date (excluding any Shares which may be issued pursuant to the exercise
of the Over-allotment Option); and
(2) the aggregate number of Shares repurchased under the authority referred
to in sub-paragraph (D) below; and
APPENDIX V STATUTORY AND GENERAL INFORMATION
–V-2–
(D) a general unconditional mandate was granted to our Directors to exercise all
the powers of our Company to repurchase on the Stock Exchange, or on any
other stock exchange on which our securities may be listed and which is
recognized by the SFC and the Stock Exchange, such number of Shares that
will represent up to 10% of the total number of Shares in issue immediately
following completion of the Bonus Issue and the Global Offering (excluding
any Shares which may be issued pursuant to the exercise of the Over-allotment
Option).
Each of the general mandates referred to in paragraphs (C) and (D) above will
remain in effect until the earliest of:
(A) the conclusion of our next annual general meeting unless, by ordinary
resolution passed at that meeting, the authority is renewed, either
unconditionally or subject to condition;
(B) the expiration of the period within which our next annual general meeting is
required to be held under any applicable laws of Hong Kong and the Articles
of Association; or
(C) the time when such mandate is revoked or varied by an ordinary resolution of
our Shareholders in a general meeting.
(d) Group Reorganization
The companies comprising our Group underwent the Reorganization in preparation for
the Listing. Please refer to the section headed “History, Reorganization and Corporate
Structure — Reorganization” in this prospectus for further details.
(e) Changes in the Share Capital of Our Subsidiaries
Our subsidiaries are referred to in the Accountants’ Report set out in Appendix I to this
prospectus. Save for the subsidiaries mentioned in the Accountants’ Report, we do not have any
other subsidiaries.
Save as disclosed in the section headed “History, Reorganization and Corporate
Structure” in this prospectus and the increase of registered capital of Jinmao Shanghai from
RMB5,000,000 to RMB6,630,000 on March 16, 2021, no other alterations in the share or
registered capital of each of our Company’s subsidiaries took place within the two years
immediately preceding the date of this prospectus.
(f) Repurchase by our Company of our own securities
This paragraph includes information required by the Stock Exchange to be included in
this prospectus concerning the repurchase by our Company of our own securities.
APPENDIX V STATUTORY AND GENERAL INFORMATION
–V-3–
(i) Provisions of the Listing Rules
The Listing Rules permit companies with a primary listing on the Stock Exchange
to repurchase their securities on the Stock Exchange subject to certain restrictions, the
most important of which are summarized below:
(A) Shareholders’ approval
All proposed repurchases of securities by a company with its primary listing on
the Stock Exchange, whether directly or indirectly, must be approved in
advance by an ordinary resolution of shareholders, either by way of general
mandate or by specific approval of a specific transaction.
Pursuant to the written resolutions of our sole Shareholder passed on February
18, 2022, our Directors were granted a general unconditional mandate (the
“Repurchase Mandate”) to repurchase Shares as described above in the
paragraphs headed “- 1. Further Information about our Group — (c) Written
Resolutions of our Sole Shareholder passed on February 18, 2022” in this
appendix.
(B) Source of funds
Repurchases of shares must only be funded out of funds legally permitted to be
utilized in this connection in accordance with the Articles, the Listing Rules
and the applicable laws of Hong Kong. A company may not repurchase its own
securities on the Stock Exchange for a consideration other than cash or for
settlement otherwise than in accordance with the trading rules of the Stock
Exchange from time to time.
(C) Trading restrictions
The total number of shares which a listed company is authorized to repurchase
on the Stock Exchange is such number of shares which represents up to a
maximum of 10% of the number of issued shares as at the date of the resolution
approving the repurchase. A company may not issue or announce an issue of
shares for a period of 30 days immediately following a repurchase (other than
an issue of securities pursuant to an exercise of warrants, share options or
similar instruments requiring the company to issue securities which were
outstanding prior to such repurchase) without the prior approval of the Stock
Exchange.
In addition, a listed company is prohibited from repurchasing its shares on the
Stock Exchange if the purchase price is higher by 5% or more than the average
closing market price for the five preceding trading days on which its shares
were traded on the Stock Exchange.
APPENDIX V STATUTORY AND GENERAL INFORMATION
–V-4–
The Listing Rules also prohibit a listed company from repurchasing its shares
on the Stock Exchange if the repurchase would result in the number of listed
securities which are in the hands of the public falling below the relevant
prescribed minimum percentage as required by the Stock Exchange.
A listed company is required to procure that the broker appointed by it to effect
a repurchase of shares disclose to the Stock Exchange such information with
respect to the repurchase made on behalf of the listed company as the Stock
Exchange may require.
(D) Shares to be purchased
The Listing Rules provide that the shares which are proposed to be purchased
by a company must be fully paid up.
(E) Status of repurchased securities
The listing of all repurchased shares (whether on the Stock Exchange or
otherwise) is automatically cancelled and the relevant documents of title for
those shares must be cancelled and destroyed as soon as reasonably
practicable.
(F) Suspension of repurchases
A listed company may not make any repurchase of shares on the Stock
Exchange at any time after inside information has come to its knowledge until
the information is made publicly available. In particular, during the period of
one month immediately preceding the earlier of (a) the date of the board
meeting (as such date is first notified to the Stock Exchange in accordance with
the Listing Rules) for the approval of a listed company’s results for any year,
half-year, quarterly or any other interim period (whether or not required under
the Listing Rules) and (b) the deadline for a listed company to announce its
results for any year or half-year under the Listing Rules, or quarterly or any
other interim period (whether or not required under the Listing Rules) and
ending on the date of the results announcement, the listed company may not
repurchase its securities on the Stock Exchange other than in exceptional
circumstances. In addition, the Stock Exchange reserves the right to prohibit
repurchases of shares on the Stock Exchange if a company has breached the
Listing Rules.
APPENDIX V STATUTORY AND GENERAL INFORMATION
–V-5–
(G) Reporting requirements
Repurchases of shares on the Stock Exchange or otherwise must be reported to
the Stock Exchange not later than 30 minutes before the earlier of the
commencement of the morning trading session or any pre-opening session
(Hong Kong time) on the following Business Day. In addition, the company’s
annual report is required to disclose details regarding repurchases of shares
made during the year, including the monthly breakdown of the number of
shares repurchased, purchase price per share or the highest and lowest price
paid for all such repurchases, where relevant, and the aggregate price paid for
such purchases. The directors’ report shall contain reference to the purchases
made during the year and the reasons for making such purchases.
(H) Core connected persons
A listed company is prohibited from knowingly repurchasing shares on the
Stock Exchange from a core connected person, and a core connected person is
prohibited from knowingly selling his shares to the company.
(ii) Exercise of the Repurchase Mandate
Exercise in full of the Repurchase Mandate, on the basis of 901,411,500 Shares in
issue immediately following the completion of the Bonus Issue and the Global Offering
(assuming the Offer Size Adjustment Option and the Over-allotment Option are not
exercised), could accordingly result in up to 90,141,150 Shares being repurchased by us
during the period in which the Repurchase Mandate remains in force.
(iii) General information relevant to the Repurchase Mandate
(A) Our Directors believe that it is in the best interests of us and our Shareholders
for our Directors to have a general authority from the Shareholders to enable
our Company to repurchase Shares in the market. Repurchases of shares will
only be made when our Directors believe that such repurchases will benefit us
and our Shareholders. Such repurchases may, depending on market conditions
and funding arrangements at the time, lead to an enhancement of our net asset
value per Share and/or our earnings per Share.
(B) There might be a material adverse impact on our working capital or gearing
position (as compared with the position disclosed in our most recent published
audited accounts) in the event that the Repurchase Mandate is exercised in full.
However, our Directors do not propose to exercise the Repurchase Mandate to
such extent as would, in the circumstances, have a material adverse effect on
our working capital requirements or the gearing levels, which in the opinion of
our Directors are from time to time appropriate for us.
APPENDIX V STATUTORY AND GENERAL INFORMATION
–V-6–
(C) None of our Directors or, to the best of their knowledge having made all
reasonable enquiries, any of their respective close associates has any present
intention to sell any Shares to us or our subsidiaries if the Repurchase Mandate
is exercised.
(D) Our Directors have undertaken to the Stock Exchange that, so far as the same
may be applicable, they will exercise the Repurchase Mandate only in
accordance with the Listing Rules and the applicable laws of Hong Kong.
(E) If as a result of a repurchase of Shares, a Shareholder’s proportionate interest
in the voting rights of our Company increases, such increase will be treated as
an acquisition for the purposes of the Takeovers Code. Accordingly, a
Shareholder (or a group of Shareholders acting in concert, as defined in the
Takeovers Code) could obtain or consolidate control of our Company and
become obliged to make a mandatory offer in accordance with Rule 26 of the
Takeovers Code. Save as aforesaid, our Directors are not aware of any
consequences that would arise under the Takeovers Code as a result of any
repurchases pursuant to the Repurchase Mandate.
(F) No core connected person of our Company has notified us that he has a present
intention to sell Shares to us, or has undertaken not to do so, if the Repurchase
Mandate is exercised.
2. FURTHER INFORMATION ABOUT OUR BUSINESS
(a) Summary of Material Contracts
The following contracts (not being contracts entered into in the ordinary course of
business) were entered into by our Company or its subsidiaries within the two years preceding
the date of this prospectus and are or may be material:
(i) the business reorganization framework agreement dated March 25, 2021 entered into
between Jinmao Commercial Real Estate (Shanghai) Company Limited (
( ) )(“Commercial Company”) and Sinochem Jinmao Property
Management (Beijing) Co., Ltd ( ( ) )(“Jinmao
PM”), pursuant to which Commercial Company agreed to transfer the commercial
property management business (including without limitation all relevant personnel,
contracts with suppliers, equipment and other resources) to Jinmao PM;
APPENDIX V STATUTORY AND GENERAL INFORMATION
–V-7–
(ii) the equity transfer agreement dated April 12, 2021 entered into between Beijing
Chemsunny Property Co., Ltd. ( )(“Beijing Chemsunny”)
and Hanmao Limited ( ) (currently known as Jinmao Property Services
Co., Limited ( )) (our “Company”), pursuant to
which Beijing Chemsunny agreed to sell, and our Company agreed to acquire 15%
of the equity interest in Sinochem Jinmao Property Management (Beijing) Co., Ltd
( ( ) ) at a consideration of RMB1,629,585;
(iii) the equity transfer agreement dated April 13, 2021 entered into between China
Jinmao Holdings Group Limited (“China Jinmao”) and Hanmao Limited (currently
known as Jinmao Property Services Co., Limited (our “Company”)), pursuant to
which China Jinmao agreed to sell, and our Company agreed to acquire 85% of the
equity interest in Sinochem Jinmao Property Management (Beijing) Company
Limited, in return of which our Company agreed to allot and issue one share of our
Company to China Jinmao;
(iv) the equity transfer agreement dated April 19, 2021 entered into between Nanjing
International Group Company Limited ( )(“Nanjing
International”) and Sinochem Jinmao Property Management (Beijing) Co., Ltd (
( ) )(“Jinmao PM”), pursuant to which Nanjing
International agreed to sell, and Jinmao PM agreed to acquire the entire equity
interest in Nanjing Ninggao International Property Consultancy Co., Ltd. (
) at nil consideration;
(v) the equity transfer agreement dated April 22, 2021 entered into between China Jin
Mao Group Co., Ltd. ( ( ) )(“China Jin Mao Group Co”) and
Sinochem Jinmao Property Management (Beijing) Co., Ltd ( (
) )(“Jinmao PM”), pursuant to which China Jin Mao Group Co agreed
to sell, and Jinmao PM agreed to acquire the entire equity interest in Jinmao
(Shanghai) Property Management Co., Ltd. ( ( ) )ata
consideration of RMB7,889,787.06;
(vi) the equity transfer agreement dated April 28, 2021 entered into between Beijing
Chuangmao Future Information Service Center (Limited Partnership) (
( )(“Beijing Chuangmao ”) and Sinochem Jinmao
Property Management (Beijing) Co., Ltd ( ( ) )
(“Jinmao PM”), pursuant to which Beijing Chuangmao agreed to sell, and Jinmao
PM agreed to acquire 15% equity interest in Chuangmao Technology (Beijing) Co.,
Ltd. ( ( )
) at a consideration of RMB1,794,570;
APPENDIX V STATUTORY AND GENERAL INFORMATION
–V-8–
(vii) the equity transfer agreement dated April 30, 2021 entered into between Jinmao
Huichuang Enterprise Management (Tianjin) Partnership (Limited Partnership) (
( ) ( )) (“Jinmao Huichuang”) and Sinochem
Jinmao Property Management (Beijing) Co., Ltd ( ( )
)(“Jinmao PM”), pursuant to which Jinmao Huichuang agreed to sell, and
Jinmao PM agreed to acquire 85% equity interest in Chuangmao Technology
(Beijing) Co., Ltd. ( ( ) ) at a consideration of
RMB10,169,230;
(viii)
the cornerstone investment agreement dated February 23, 2022 and entered into
among our Company, Keltic Investment (HK) Limited, China International Capital
Corporation Hong Kong Securities Limited ( ),
HSBC Corporate Finance (Hong Kong) Limited, The Hongkong and Shanghai
Banking Corporation Limited ( ) and CLSA Limited (
), details of which are included in the section headed “Our
Cornerstone Investors” in this prospectus;
(ix) the cornerstone investment agreement dated February 23, 2022 and entered into
among our Company, Canny Elevator Co., Ltd ( ), China
International Capital Corporation Hong Kong Securities Limited (
), HSBC Corporate Finance (Hong Kong) Limited, The Hongkong
and Shanghai Banking Corporation Limited ( ) and
Essence International Securities (Hong Kong) Limited ( ( )
), details of which are included in the section headed “Our Cornerstone Investors”
in this prospectus;
(x) the cornerstone investment agreement dated February 23, 2022 and entered into
among our Company, Guangdong Keshun Investment Holding Co., Ltd (
), China International Capital Corporation Hong Kong Securities
Limited ( ), HSBC Corporate Finance (Hong Kong)
Limited, The Hongkong and Shanghai Banking Corporation Limited (
) and CLSA Limited ( ), details of which are
included in the section headed “Our Cornerstone Investors” in this prospectus;
(xi) the cornerstone investment agreement dated February 23, 2022 and entered into
among our Company, Fuhui Capital Investment Limited, China International Capital
Corporation Hong Kong Securities Limited, HSBC Corporate Finance (Hong Kong)
Limited, The Hongkong and Shanghai Banking Corporation Limited and CLSA
Limited, details of which are included in the section headed “Our Cornerstone
Investors” in this prospectus;
APPENDIX V STATUTORY AND GENERAL INFORMATION
–V-9–
(xii) the cornerstone investment agreement dated February 23, 2022 and entered into
among our Company, Qian He Capital Management Co Ltd — Qian He Capital
Global Selection of Private-Equity Investment Fund ( –
), China International Capital Corporation Hong Kong Securities Limited,
HSBC Corporate Finance (Hong Kong) Limited and The Hongkong and Shanghai
Banking Corporation Limited, details of which are included in the section headed
“Our Cornerstone Investors” in this prospectus;
(xiii)
the Deed of Non-competition; and
(xiv)
the Hong Kong Underwriting Agreement.
(b) Intellectual Property Rights of the Group
(i) Domain Names
As of the Latest Practicable Date, we have registered the following domain names
which we consider to be or may be material to our business:
Domain Name Registered Owner
Date of
Registration Expiry Date
cmaotech.com Chuangmao
Technology
August 20, 2020 August 20, 2022
jinmaowy.com Jinmao PM March 18, 2014 March 18, 2025
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-10 –
(ii) Trademarks
As of the Latest Practicable Date, we have registered the following trademarks
which we consider to be or may be material to our business:
Trademark
Place of
Registration Registered Owner Class(es) Registration No. Validity Period
The PRC Jinmao PM 36 31187910 March 7, 2019 —
March 6, 2029
The PRC Jinmao PM 16 31187869 March 14, 2019 —
March 13, 2029
The PRC Jinmao PM 43 31187457 April 28, 2019 —
April 27, 2029
The PRC Jinmao PM 41 31187447 April 28, 2019 —
April 27, 2029
The PRC Jinmao PM 39 31186685 March 7, 2019 —
March 6, 2029
The PRC Jinmao PM 35 31186589 May 7, 2019 —
May 6, 2029
The PRC Jinmao PM 45 31182793 May 7, 2019 —
May 6, 2029
The PRC Jinmao PM 37 31182728 May 7, 2019 —
May 6, 2029
The PRC Jinmao PM 39 31178735 March 7, 2019 —
March 6, 2029
The PRC Jinmao PM 36 31178574 May 7, 2019 —
May 6, 2029
The PRC Jinmao PM 45 31178468 March 7, 2019 —
March 6, 2029
The PRC Jinmao PM 44 31178444 May 7, 2019 —
May 6, 2029
The PRC Jinmao PM 44 31177668 March 7, 2019 —
March 6, 2029
The PRC Jinmao PM 43 31177660 May 7, 2019 —
May 6, 2029
The PRC Jinmao PM 45 31175017 May 7, 2019 —
May 6, 2029
The PRC Jinmao PM 37 31173359 March 7, 2019 —
March 6, 2029
The PRC Jinmao PM 35 31173327 August 7, 2019 —
August 6, 2029
The PRC Jinmao PM 35 31173326 June 21, 2019 —
June 20, 2029
APPENDIX V STATUTORY AND GENERAL INFORMATION
–V-11–
Trademark
Place of
Registration Registered Owner Class(es) Registration No. Validity Period
The PRC Jinmao PM 16 31173319 March 7, 2019 —
March 6, 2029
The PRC Jinmao PM 41 31171720 March 7, 2019 —
March 6, 2029
The PRC Jinmao PM 37 31168811 September 7, 2019 —
September 6, 2029
The PRC Jinmao PM 39 31167270 May 21, 2019 —
May 20, 2029
The PRC Jinmao PM 36 31164242 July 21, 2019 —
July 20, 2029
The PRC Jinmao PM 42 31158528 August 21, 2019 —
August 20, 2029
The PRC Jinmao PM 40 31158506 July 14, 2019 —
July 13, 2029
The PRC Jinmao PM 11 31158472 July 21, 2019 —
July 20, 2029
The PRC Jinmao PM 42 31154270 August 21, 2019 —
August 20, 2029
The PRC Jinmao PM 11 31154203 April 28, 2019 —
April 27, 2029
The PRC Jinmao PM 40 31148673 July 14, 2019 —
July 13, 2029
The PRC Jinmao PM 9 31145645 May 7, 2019 —
May 6, 2029
The PRC Jinmao PM 42 31142110 July 14, 2019 —
July 13, 2029
The PRC Jinmao PM 38 31135458 July 28, 2019 —
July 27, 2029
The PRC Jinmao PM 40 31133351 April 28, 2019 —
April 27, 2029
The PRC Jinmao PM 38 31133345 April 28, 2019 —
April 27, 2029
The PRC Jinmao PM 9 31133281 August 21, 2019 —
August 20, 2029
The PRC Jinmao PM 45 18309161 February 21, 2017 —
February 20, 2027
The PRC Jinmao PM 44 18309052 February 21, 2017 —
February 20, 2027
The PRC Jinmao PM 43 18308973 February 21, 2017 —
February 20, 2027
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-12 –
Trademark
Place of
Registration Registered Owner Class(es) Registration No. Validity Period
The PRC Jinmao PM 41 18308760 February 21, 2017 —
February 20, 2027
The PRC Jinmao PM 39 18307111 February 21, 2017 —
February 20, 2027
The PRC Jinmao PM 36 18306887 February 21, 2017 —
February 20, 2027
The PRC Jinmao PM 37 18306792 December 21, 2016
— December 20,
2026
The PRC Jinmao PM 35 18306562 February 21, 2017 —
February 20, 2027
The PRC Chuangmao
Technology
37 49444447 June 14, 2021 —
June 13, 2031
The PRC Chuangmao
Technology
19 49444407 August 28, 2021 —
August 27, 2031
The PRC Chuangmao
Technology
11 49438022 October 7, 2021 —
October 6, 2031
As of the Latest Practicable Date, we have applied for the registration of the
following trademarks which we consider to be or may be material to our business:
Trademark
Place of
Application Applicant Class(es) Application No. Date of Application
The PRC Chuangmao
Technology
41 49438022 September 2, 2020
The PRC Chuangmao
Technology
39 49438022 September 2, 2020
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-13 –
As of the Latest Practicable Date, we have been licensed by Shanghai Jinmao
Investment with the rights to use the following trademarks which we consider to be or
may be material to our business:
Trademark
Place of
Registration
Registered
Owner Class(es) Registration No. Validity Period
Hong Kong Shanghai
Jinmao
Investment
35, 36,
37, 42,
43
303446226 June 18, 2015 — July 17, 2025
The PRC Shanghai
Jinmao
Investment
36
36
37
38
39
40
40
41
41
42
43
44
45
25306044
25306044A
25319887A
25317758
25306852
25315717
25315717A
25310853
25310853A
25305338
25314552
25314919
25314938
October 7, 2019 — October 6, 2029
October 14, 2018 — October 13, 2028
August 28, 2018 — August 27, 2028
July 7, 2018 — July 6, 2028
June 28, 2019 — June 27, 2029
February 14, 2019 — February 13, 2029
August 28, 2018 — August 27, 2028
February 14, 2019 — February 13, 2029
August 28, 2018 — August 27, 2028
July 21, 2019 — July 20, 2029
June 14, 2019 — June 13, 2029
February 14, 2019 — February 13, 2029
October 14, 2018 — October 13, 2028
The PRC Shanghai
Jinmao
Investment
36
36
37
39
39
40
41
41
42
42
43
43
44
45
45
4886500
29817271
4886519
4886518
29828111
4886517
4886516
29833260
4886515
29818892
4886514
29823702
4886513
4886512
29812319
May 14, 2009 — May 13, 2029
May 28, 2019 — May 27, 2029
May 14, 2009 — May 13, 2029
March 7, 2009 — March 6, 2029
February 7, 2019 — February 6, 2029
May 7, 2009 — May 6, 2029
April 28, 2009 — April 27, 2029
February 7, 2019 — February 6, 2029
April 28, 2009 — April 27, 2029
April 14, 2019 — April 13, 2029
May 14, 2009 — May 13, 2029
April 28, 2019 — April 27, 2029
May 14, 2009 — May 13, 2029
May 7, 2009 — May 6, 2029
February 28, 2020 — February 27, 2030
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-14 –
Trademark
Place of
Registration
Registered
Owner Class(es) Registration No. Validity Period
The PRC Shanghai
Jinmao
Investment
6
8
9
16
21
35
36
37
38
39
40
41
43
44
45
22344643
22344613
22344778
22345195
22345426
22345659A
22345946
22346081A
22346209
22346430
22346606
22346801
22346961
22346897
22347254
January 28, 2018 — January 27, 2028
January 28, 2018 — January 27, 2028
January 28, 2018 — January 27, 2028
January 28, 2018 — January 27, 2028
January 28, 2018 — January 27, 2028
February 28, 2018 — February 27, 2028
January 28, 2018 — January 27, 2028
February 28, 2018 — February 27, 2028
April 7, 2018 — April 6, 2028
April 7, 2018 — April 6, 2028
April 7, 2018 — April 6, 2028
January 28, 2018 — January 27, 2028
January 28, 2018 — January 27, 2028
January 28, 2018 — January 27, 2028
January 28, 2018 — January 27, 2028
(iii) Patents
As of the Latest Practicable Date, we have registered the following patents which we
consider to be or may be material to our business:
Patent
Place of
Registration Patent holder Patent No. Date of Application
A kind of general output
control device for the
Internet of Things (
)
The PRC Jinmao PM 2020227882980 November 27, 2020
A kind of flooding sensor for
the Internet of Things (
)
The PRC Jinmao PM 2020227978305 November 27, 2020
Sensor base
( )
The PRC Jinmao PM 2020303818193 July 15, 2020
Controller (IBA Host)
( (IBA ))
The PRC Jinmao PM 2020303818263 July 15, 2020
A kind of wireless
temperature and humidity
collector (
)
The PRC Jinmao PM 2019214858054 September 6, 2019
A kind of wireless pressure
collector (
)
The PRC Jinmao PM 2019214858425 September 6, 2019
A kind of Internet-of-things-
based controller (
)
The PRC Jinmao PM 2019214858603 September 6, 2019
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-15 –
As of the Latest Practicable Date, we have applied for the registration of the
following patents which we consider to be or may be material to our business:
Patent
Place of
Application Applicant
Application
Number Date of Application
A kind of elevator operation
safety management system
(
)
The PRC Jinmao PM 2020112646161 November 14, 2020
A kind of NB-IoT shared
communication device
( NB-IoT )
The PRC Jinmao PM 2020227978409 November 27, 2020
A kind of 4G shared
communication device for
the Internet of Things (
4G )
The PRC Jinmao PM 2020227883432 November 27, 2020
A kind of elevator upward
and downward movement
trajectory modeling method
(
)
The PRC Jinmao PM 202110304299X March 23, 2021
(iv) Copyright
As of the Latest Practicable Date, we have registered the following copyright which
we consider to be or may be material to our business:
Copyright
Place of
Registration
Registered
Proprietor Registration No.
Date of
Completion
Sensor Aging Performance
Testing Software V1.0
(
V1.0)
The PRC Jinmao PM 2021SR0135750 August 6, 2020
Jinmao Property Equipment
and Facility Monitoring
System (IBA) V1.0 (
(IBA)V1.0)
The PRC Jinmao PM 2020SR0066447 October 30, 2019
Jinmao Intelligent
Communication Module
Embedded Software V1.0
(
V1.0)
The PRC Jinmao PM 2019SR1364743 June 30, 2019
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-16 –
Copyright
Place of
Registration
Registered
Proprietor Registration No.
Date of
Completion
Home ( ) V0.9.0 The PRC Jinmao PM 2019SRE004389 January 16, 2019
Jin Xiaomao ( ) V1.0.9 The PRC Jinmao PM 2020SRE001090 January 6, 2020
MAO Butler ios1.0.0 (MAO
ios1.0.0)
The PRC Chuangmao
Technology
2020SRE017405 August 20, 2020
MAO Butler Android 1.0.0
(MAO 1.0.0)
The PRC Chuangmao
Technology
2020SRE017338 August 20, 2020
MAO Boss ios1.0.4 (MAO
ios1.0.4)
The PRC Chuangmao
Technology
2020SRE017324 August 20, 2020
MAO Boss android 1.0.4
(MAO 1.0.4)
The PRC Chuangmao
Technology
2020SRE017392 August 20, 2020
Come Home 1.2.0 ( 1.2.0) The PRC Chuangmao
Technology
2020SRE007265 March 13, 2020
Come Home ios1.3.4 (
ios1.3.4)
The PRC Chuangmao
Technology
2020SRE017412 August 20, 2020
Digital management back-end
V1.0 (
V1.0)
The PRC Chuangmao
Technology
2020SRE017443 August 20, 2020
XiaoKui eStack ios1.0.1 (
e ios1.0.1)
The PRC Chuangmao
Technology
2020SRE017483 August 20, 2020
XiaoKui eStack Android 1.0.1
( e 1.0.1)
The PRC Chuangmao
Technology
2020SRE017372 August 20, 2020
Office building access
management system V1.0
( V1.0)
The PRC Chuangmao
Technology
2020SRE017524 August 20, 2020
Learning platform
management back-end V1.0
( V1.0)
The PRC Chuangmao
Technology
2020SRE017371 August 20, 2020
Yuelin Life V1.0 (
V1.0)
The PRC Chuangmao
Technology
2020SRE017525 August 20, 2020
Yuelin Life app V1.0 (
V1.0)
The PRC Chuangmao
Technology
2020SRE017358 August 20, 2020
Rental and Sales System V1.0
( V1.0)
The PRC Chuangmao
Technology
2020SRE017389 August 20, 2020
Save as aforesaid, as of the Latest Practicable Date, there were no other trade or
service marks, patents, other intellectual or industrial property rights, which are or may
be material in relation to our Group’s business.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-17 –
3. FURTHER INFORMATION ABOUT OUR DIRECTORS AND SUBSTANTIAL
SHAREHOLDERS
(a) Disclosure of Interests
(i) Interests and short positions of our Directors and the chief executives of our
Company in the share capital of our Company or our associated corporations
following completion of the Bonus Issue, the Distribution and the Global Offering.
Immediately following completion of the Bonus Issue, the Distribution and the
Global Offering and assuming the Offer Size Adjustment Option and the Over-
allotment Option are not exercised, the interests and short positions of each of our
Directors and chief executives of our Company in the shares, underlying shares and
debentures of our Company or any of our associated corporations (within the
meaning of Part XV of the SFO), which, once the Shares are listed on the Stock
Exchange, will have to be notified to our Company and the Stock Exchange pursuant
to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions
which he/she is taken or deemed to have under such provisions of the SFO), or will
be required pursuant to Section 352 of the SFO, to be entered in the register referred
to therein, or will be required to be notified to our Company and the Stock Exchange
pursuant to the Model Code for Securities Transactions by Directors of Listed
Issuers contained in the Listing Rules, will be as follows:
Interests in our Company
Name of Director/
chief executive of
our Company
Capacity/
Nature of
Interest
Number of
Shares held
Approximate %
shareholding
interest in our
Company
Jiang Nan Beneficial owner 122,356 0.014%
Interests in our associated corporations
Name of
Director/chief
executive of our
Company
Name of
associated
corporation
Capacity/Nature
of Interest
Number of
shares held in
the associated
corporation
Number of
underlying
shares held in
the associated
corporation
(1)
Approximate %
shareholding
interest in the
associated
corporation
(2)
Jiang Nan China Jinmao Beneficial owner 3,600,000
(Long position)
4,500,000
(Long position)
0.064%
Xie Wei China Jinmao Beneficial owner – 3,500,000
(Long position)
0.028%
Zhou Liye China Jinmao Beneficial owner – 2,118,000
(Long position)
0.017%
He Yamin China Jinmao Beneficial owner – 2,868,000
(Long position)
0.023%
Qiao Xiaojie China Jinmao Beneficial owner – 2,000,000
(Long position)
0.016%
Notes:
1. This refers to underlying shares covered by share options granted pursuant to the share option
scheme of China Jinmao, such options being unlisted physically settled equity derivatives.
2. This represents the percentage of the aggregate long positions in the shares and underlying shares
to the total issued share capital of China Jinmao as at the Latest Practicable Date.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-18 –
Save as disclosed above in this section, none of our Directors or chief executives of
our Company has any interest or short position in the shares, underlying shares or
debentures of our Company or any of its associated corporation (within the meaning
of the SFO) which will have to be notified to our Company and the Stock Exchange
pursuant to Divisions 7 and 8 of Part XV of the SFO or which will be required,
pursuant to section 352 of the SFO, to be entered in the register referred to therein,
or which will be required to be notified to our Company and the Stock Exchange
pursuant to the Model Code for Securities Transactions by Directors of Listed
Issuers once the Shares are listed.
(ii) Interests and short positions of the substantial shareholders of any member of our
Group
Information, so far as is known to our Directors and chief executives, on the persons
(not being a Director or chief executive of our Company) who will, immediately
following the completion of the Bonus Issue, the Distribution and the Global
Offering, have or be deemed to have an interest or short position in the Shares and
underlying shares of our Company which would fall to be disclosed to our Company
under the provisions of Divisions 2 and 3 of Part XV of the SFO or who is, directly
or indirectly, interested in 10% or more of the issued voting shares of any member
of our Group is set out in the section headed “Substantial Shareholders” in this
prospectus.
(b) Directors’ Appointment Letters
Each of our Directors has entered into a letter of appointment with our Company on
February 18, 2022. The term of appointment shall be for an initial period of three years from
the Listing Date for each of the independent non-executive Directors and three years from the
respective dates of appointment for each of the other Directors, subject to the provision of
retirement and rotation of Directors under the Articles of Association.
Pursuant to the terms of the letter of appointment entered into between each Director (on
the one part) and our Company (on the other part), (i) the annual director’s fees payable by our
Company to each of the independent non-executive Directors are HK$200,000, and (ii) no
director’s fees are payable to the other Directors. The Directors’ fees will be payable from the
Listing Date, and are subject to increase or reduction as shall be determined or approved by the
Board and/or the Shareholders. Each of the Directors is entitled to reimbursement from our
Company for all necessary and reasonable out-of-pocket expenses properly incurred in
connection with the performance and discharge of his/her duties under his/her letter of
appointment.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-19 –
(c) Directors’ remuneration
For the year ended December 31, 2020, the aggregate amount of the remuneration paid
and benefits in kind granted to the Directors by our Group was approximately RMB2.81
million.
Under the arrangements currently in place, the estimated aggregate amount that our
Directors will be entitled to receive in the form of remuneration and benefits in kind from any
member of our Group for the year ending December 31, 2021 is approximately RMB4.5 million
(excluding any discretionary bonuses payable to our Directors).
(d) Disclaimers
Save as disclosed in this prospectus:
(i) none of the Directors nor any of the persons listed in the section headed “— 4. Other
Information — (e) Qualification and Consent of Experts” below is interested,
directly or indirectly, in the promotion of, or in any assets which have been, within
the two years immediately preceding the issue of this prospectus, acquired or
disposed of by or leased to, any member of the Group, or are proposed to be acquired
or disposed of by or leased to any member of the Group;
(ii) none of the Directors is materially interested in any contract or arrangement
subsisting at the date of this prospectus which is significant in relation to the
business of the Group;
(iii) none of our Directors has or is proposed to have a service contract with any member
of our Group other than contracts expiring or determinable by the employer within
one year without the payment of compensation (other than statutory compensation);
(iv) none of our Directors are interested in any business apart from the Group’s business
which competes or is likely to compete, directly or indirectly, with the business of
the Group; and
(v) so far as is known to our Directors, none of our Directors, their respective close
associates, or Shareholders (which to the knowledge of our Directors are interested
in more than 5% of the issued share capital of our Company), has any interest in our
Company’s five largest customers and five largest suppliers.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-20 –
4. OTHER INFORMATION
(a) Estate Duty
Our Directors have been advised that no material liability for estate duty is likely to fall
upon any member of our Group.
(b) Litigation
As of the Latest Practicable Date, no member of the Group was engaged in any litigation,
arbitration or claim of material importance, and no litigation, arbitration or claim of material
importance was known to the Directors to be pending or threatened by or against the Group,
that would have a material adverse effect on its business, finance condition or results of
operations.
(c) Joint Sponsors
The Joint Sponsors have made an application on our behalf to the Stock Exchange for the
listing of, and permission to deal in, the Shares in issue and the Shares to be issued as
mentioned in this prospectus (including the additional Shares which may be issued pursuant to
the exercise of the Offer Size Adjustment Option and the Over-allotment Option). All necessary
arrangements have been made to enable such Shares to be admitted into CCASS for clearing
and settlement.
Each of the Joint Sponsors satisfies the independence criteria applicable to sponsors set
out in Rule 3A.07 of the Listing Rules.
The Joint Sponsors will receive an aggregate of RMB3,834,000 for acting as the sponsors
for the Listing.
(d) No Material Adverse Change
Our Directors confirm that there has been no material adverse change in the financial or
trading position or prospects of the Group since September 30, 2021 (being the date to which
the latest audited consolidated financial statements of the Group were prepared).
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-21 –
(e) Qualification and Consent of Experts
The following are the qualifications of the experts who have given opinions or advice
which are contained in this prospectus:
Name Qualification
China International Capital
Corporation Hong Kong
Securities Limited
Licensed to conduct Type 1 (dealing in securities),
Type 2 (dealing in futures contract), Type 4
(advising on securities), Type 5 (advising on
futures contracts) and Type 6 (advising on
corporate finance) of regulated activities under
the SFO
HSBC Corporate Finance (Hong
Kong) Limited
Licensed to conduct Type 6 (advising on corporate
finance) of regulated activities under the SFO
Tian Yuan Law Firm PRC legal adviser
Ernst & Young Certified public accountants and registered public
interest entity auditor
China Index Academy Independent industry consultant
Each of the experts named above has given and has not withdrawn its written consent to
the issue of this prospectus with the inclusion of copies of its report and/or letter and/or
summary of opinions (as the case may be) and references to its name included herein in the
form and context in which it respectively appears.
As of the Latest Practicable Date, none of the experts named above has any shareholding
interest in our Company or any of our subsidiaries or the right (whether legally enforceable or
not) to subscribe for or to nominate persons to subscribe for securities in our Company or any
of our subsidiaries.
(f) Promoter
Our Company has no promoter for the purpose of the Listing Rules. Within the two years
immediately preceding the date of this prospectus, no cash, securities or other benefit has been
paid, allotted or given nor are any proposed to be paid, allotted or given to any promoters in
connection with the Global Offering and the related transactions described in this prospectus.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-22 –
(g) Taxation of holders of Shares
The sale, purchase and transfer of Shares registered with our Hong Kong branch register
of members will be subject to Hong Kong stamp duty. The current rate charged on each of the
purchaser and seller is 0.13% of the consideration of or, if higher, of the fair value of the Shares
being sold or transferred. Profits from dealings in the Shares arising in or derived from Hong
Kong may also be subject to Hong Kong profits tax. The Revenue (Abolition of Estate Duty)
Ordinance 2005 came into effect on February 11, 2006 in Hong Kong. No Hong Kong estate
duty is payable and no estate duty clearance papers are needed for a grant of representation in
respect of holders of Shares whose death occurs on or after February 11, 2006.
Intending holders of the Shares are recommended to consult their professional advisors
if they are in any doubt as to the taxation implications of subscribing for, purchasing, holding
or disposing of or dealing in the Shares. It is emphasized that none of our Company, our
Directors or parties involved in the Global Offering accepts responsibility for any tax effect on,
or liabilities of, holders of Shares resulting from their subscription for, purchase, holding or
disposal of or dealing in Shares or exercise of any rights attaching to them.
(h) Preliminary Expenses
We have not incurred any material preliminary expenses.
(i) Binding Effect
This prospectus shall have the effect, if an application is made in pursuance of this
prospectus, of rendering all persons concerned bound by all of the provisions (other than the
penal provisions) of Sections 44A and 44B of the Companies (Winding Up and Miscellaneous
Provisions) Ordinance insofar as applicable.
(j) Bilingual Prospectus
The English language and Chinese language versions of this prospectus are being
published separately, in reliance upon the exemption provided by section 4 of the Companies
(Exemption of Companies and Prospectuses from Compliance with Provisions) Notice
(Chapter 32L of the Laws of Hong Kong). In case of any discrepancies between the English
language version and Chinese language version of this prospectus, the English language
version shall prevail.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-23 –
(k) Miscellaneous
(i) Save as disclosed in this prospectus, within the two years immediately preceding the
date of this prospectus:
(A) neither we nor any of our subsidiaries has issued or agreed to issue any share
or loan capital fully or partly paid up either for cash or for a consideration
other than cash;
(B) no commission, discounts, brokerages or other special terms have been granted
in connection with the issue or sale of any shares or loan capital of any member
of the Group, and no Directors, promoters or experts named in the part headed
“— 4. Other Information — (e) Qualification and Consent of Experts” received
any such payment or benefit;
(C) no commission has been paid or payable (except commission to
sub-underwriters) to any persons for subscribing, agreeing to subscribe,
procuring subscription or agreeing to procure subscription of any shares or
debentures of our Company.
(ii) Our Directors confirm that, save as disclosed in this prospectus:
(A) no founder, management or deferred shares of our Company or any of our
subsidiaries have been issued or agreed to be issued;
(B) there has not been any interruption in the business of our Group which may
have or have had a material adverse effect on the financial position of our
Group in the 12 months immediately preceding the date of this prospectus;
(C) there are no bank overdrafts or other similar indebtedness by our Company or
any member of our Group;
(D) there are no hire purchase commitments, guarantees or other material
contingent liabilities of our Company or any member of our Group;
(E) no share or loan capital of our Company or any of our subsidiaries is under
option or is agreed conditionally or unconditionally to be put under option;
(F) there is no arrangement under which future dividends are waived or agreed to
be waived; and
(G) our Group has no outstanding convertible debt securities or debentures.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-24 –
(iii) There are no other stock exchange on which any part of the equity or debt securities
of our Company is listed or dealt in or on which listing or permission to deal is being
or is proposed to be sought.
(iv) Our register of members will be maintained by our Hong Kong Share Registrar.
Unless the Directors otherwise agree, all transfers and other documents of title of
Shares must be lodged for registration with and registered by our Hong Kong Share
Registrar. All necessary arrangements have been made enabling our Shares to be
admitted into CCASS for clearing and settlement.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-25 –
DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES
The documents attached to the copy of this prospectus and delivered to the Registrar of
Companies in Hong Kong for registration were, among other documents, a copy of the GREEN
Application Form, the written consents referred to in the section headed “Statutory and General
Information — 4. Other Information — (e) Qualification and Consent of Experts” in Appendix
V to this prospectus, and copies of the material contracts referred to in the section headed
“Statutory and General Information — 2. Further Information about our Business — (a)
Summary of Material Contracts” in Appendix V to this prospectus.
DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the following documents will be on display on the website of the Stock
Exchange at www. hkexnews.hk and our website at www.jinmaowy.com during a period of 14
days from the date of this prospectus:
(a) the Articles of Association of our Company;
(b) the Accountants’ Report from Ernst & Young, the text of which is set out in
Appendix I to this prospectus;
(c) the audited consolidated financial statements of our Group for the three years ended
December 31, 2018, 2019 and 2020 and the nine months ended September 30, 2021;
(d) the report on the unaudited pro forma financial information of our Group from Ernst
& Young, the text of which is set out in Appendix II to this prospectus;
(e) the letters from Ernst & Young and the Joint Sponsors relating to the profit estimate,
the texts of which are set out in Appendix III to this prospectus;
(f) the material contracts referred to in the section headed “Statutory and General
Information — 2. Further Information about our Business — (a) Summary of
Material Contracts” in Appendix V to this prospectus;
(g) the written consents referred to in the section headed “Statutory and General
Information — 4. Other Information — (e) Qualification and Consent of Experts” in
Appendix V to this prospectus;
(h) the letters of appointment entered into between our Group and each of the Directors
referred to in the section headed “Statutory and General Information — 3. Further
Information About our Directors and Substantial Shareholders — (b) Directors’
Appointment Letters” in Appendix V to this prospectus;
APPENDIX VI DOCUMENTS TO BE DELIVERED TO THE REGISTRAR OF
COMPANIES AND AVAILABLE FOR INSPECTION
– VI-1 –
(i) the industry report issued by China Index Academy, our independent industry
consultant, a summary of which is set forth in the section headed “Industry
Overview”; and
(j) the PRC legal opinions issued by Tian Yuan Law Firm, our PRC Legal Adviser on
the laws of the PRC, in respect of certain aspects of our Group and property interests
of our Group in the PRC.
APPENDIX VI DOCUMENTS TO BE DELIVERED TO THE REGISTRAR OF
COMPANIES AND AVAILABLE FOR INSPECTION
– VI-2 –
Global Offering
Stock Code：00816
