Jinmao Pushing Ahead With Property Services Unit Spin-Off; Timing and Mode Are Questionable

Despite the challenging market conditions and weak investment sentiment toward the sector currently, Jinmao is pushing ahead with the proposed spin-off of its property management unit, Jinmao Services. Based on an information update provided by the company, Jinmao plans to proceed with the spin-off via: 1) distribution in specie of Jinmao Services to existing Jinmao shareholders based on one Jinmao Services share for every 66.2 Jinmao shares; and 2) listing share sale of up to 14.4% of Jinmao Services shares to generate net proceeds of about HKD 728.9 million. The offer price for the Jinmao Services shares is in the range of HKD 7.52 and HKD 8.14 per share, translating to market capitalization in the range of HKD 6.8 billion to HKD 7.6 billion for Jinmao Services post spin-off. Of note, the share distribution in specie and in turn the spin-off are subject to the listing share sale. Nonetheless, according to the prospectus, about 90% of the share sale book building is already covered by cornerstone investors, which should imply the planned spin-off is likely to complete and first day of trading is scheduled on March 10, 2022. With Jinmao still consolidating Jinmao Services post spin-off, we fine-tune our fair value estimate to HKD 3.04 from HKD 3.08 and the proposed spin-off does not change the company’s no-moat rating. We expect the challenging market conditions to continue weighing on the company’s share price.