Xinyuan Science & Technology Service (STS), the property management subsidiary of Xinyuan Real Estate, filed its 2016 Annual Report (LINK). Highlights:
The company’s NEEQ listing was approved on 3/15/17 (LINK), but the ownership structure shows that no shares are yet publicly held:
Combining Xinyuan STS year-end results with valuation ranges of Hong Kong listed competitors suggests a fair value of $39-97mm.
It would be very positive to see a public placement of Xinyuan STS shares that brings attention to the value of this asset light business with sustainable and growing revenues. Placement of Xinyuan STS shares at a premium to book value would be accretive at the parent company level while it is also repurchasing its own shares at a large discount to book value.
Xinyuan Real Estate’s 20-F filing (LINK) disclosed that the company managed 9.0mm sqm of residential units. The Xinyuan STS report discloses total area under management of about 25mm sqm which includes public spaces. Last week’s press release (LINK) mentions 50mm sqm which includes spaces managed by third parties to whom Xinyuan provides some management and consulting services. Management fees are typically charged based on residential unit size (for example, 2 RMB per sqm per month) so 9.0mm sqm area under management is probably the number that investors should focus on.