Dec. 20 (NBD) -- The stock of Chinese real estate property management firm Poly Property Development Co., Ltd. (06049.HK) soared by 29.2 percent to close at 45.35 Hong Kong dollars (5.8 U.S. dollars) on the company's debut in the Hong Kong stock market Thursday, and slightly dropped by 0.77 percent to 45 Hong Kong dollars on Friday. 

The strong debut performance gave the company a market cap of over 24 billion Hong Kong dollars and made the firm the third largest property management provider listed in Hong Kong following Country Garden Services Holdings Co., Ltd. (06098.HK) and A-Living Services Co., Ltd. (03319.HK).

Photo/Shetuwang

Founded in 1996, Poly Property Development is wholly owned by Poly Developments and Holdings which focuses on business of real estate development and operation. According to a statement from Poly Property Development on Wednesday, the offering price was set at 35.1 Hong Kong dollars and the company issued about 133 million H-shares to raise around 4.579 billion Hong Kong dollars.

Since 2018, the Hong Kong stock exchange has been seeing a number of Chinese property management firms seeking to raise funds in the market. As of December 20 of 2019, eight companies in the field completed initial public offering in the Hong Kong bourse this year.

Behind the trend lies the property companies' demand to further collect capitals.

National Business Daily noticed that among all 19 China-listed property management firms, 17 are backed by property companies. Spinning off the property management units for listing has been a strategy for property giants to diversify their financing channels. It seems property management subsidiaries are emerging as new growth engine for property companies.

Poly Property Development, for instance, reaped revenue of 4.2 billion yuan (599.8 million U.S. dollars) in 2018, representing a CAGR (compound annual growth rate) of 28.4 percent from 2016 to 2018, and its profit surged with a CAGR of up to 50.1 percent during the three years to reach 336.1 million yuan last year.

Industry insiders held the property management sector have huge market potential despite a growth slowdown of China's property industry.

Total revenue of property management firms in the country rose from 2014 to 2018 at a compound annual growth rate of 6.9 percent and the rate is expected to stand at 4.6 percent in 2019-2021, statistics from property research organization China Index Academy shows.

Most of property management stocks in the A- and H-share market have benefited from this, with six doubling in prices this year. Notably, half of newly listed property management shares in the HK bourse in 2019 jumped by over 20 percent on the first day of trading.

Despite the rosy prospect, property management firms are still encountering a series of challenges. Taking Poly Property Development for example, the company mentioned that it faces upward pressures of increase in labour and sub-contracting costs from various aspects including increasing minimum wages and head count, as well as time needed for cost-saving measures to take effect.

Email: lansuying@nbd.com.cn