Xinyuan Science & Technology Service (XSTS), the property management subsidiary of Xinyuan Real Estate, filed its 1H18 Report (LINK). Even though XSTS shares are not yet trading publicly, the NEEQ listing provides visibility into the rapid growth of Xinyuan’s recurring revenues and income from this business. 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 $70-200mm for this subsidiary.
The NEEQ (LINK) is an over-the-counter trading market in China founded in 2012 as a venue for for companies which might not have met the statistical listing requirements of the Shanghai/Shenzhen exchanges or which did not want to enter the long queue for China Securities Regulatory Commission review of Shanghai/Shenzhen IPOs. NEEQ shares surged in 2015, but values and volumes have since faded.
There may not be an opportunity for Xinyuan STS to place shares amid currently depressed market conditions, but the independent reporting related to the listing provides improved visibility into the performance and value of this rapidly growing asset-light Xinyuan business.
At the time of publication the author is a public shareholder of Xinyuan Real Estate. The author believes that information in this article may be of interest to other public shareholders. The author does not make any recommendation regarding any investment in Xinyuan and investors are encouraged to check all of the key facts cited here from NEEQ, SEC, and HKEX filings prior to making their own investment decisions.