Hong Kong Stock Market Review: KE acquires land again
Under BEKE, Beihaojia acquired land in Chengdu for over 1 billion RMB, but the market reacted poorly, believing that the company as a real estate intermediary should not be heavily asset-oriented. BEKE plans to focus on a light-asset model, starting with heavy-asset projects to demonstrate its national real estate big data and channel advantages. Despite doubts in the market about its governance and growth strategies, BEKE has performed well in terms of returning value to shareholders, with its buyback plan increased to $3 billion and sufficient cash to support its stock price
Following the Xi'an project in July, BEKE's subsidiary BEHAOJIA once again acquired land, winning the title of the new land king in Chengdu with over 1 billion RMB.
The market is clearly not very satisfied with this, as a real estate agency like the company unexpectedly acquired land, not only making its assets heavier, but perhaps also overestimating its capabilities, especially when the real estate market has not yet stabilized.
According to BEKE, the future of BEHAOJIA's business will still focus on a light-asset model, but will first undertake a few heavy-asset projects. This is probably to prove the advantage of their national real estate big data and channels. If they successfully set the benchmark, they may become a full-service provider to real estate developers in the future, which would truly be a light-asset model.
When BEKE entered the home decoration market years ago, it was also based on a similar logic, extending the industry chain to find new growth curves. At that time, many people were skeptical, but now it has become the business with the greatest growth potential, contributing a profit margin of 31% in the first half of the year.
Since the company already covers first-hand, second-hand, rental, and decoration businesses, further exploring new businesses is also a normal business practice, always expanding within their core business.
According to the company, there are currently 2-3 projects in preparation, with investment sizes of less than 1 billion RMB, and they will be carried out through joint ventures rather than full ownership, with relatively limited trial and error costs.
Of course, the business model has changed, and it cannot be said to be the right thing, especially in the absence of the founder. The market is more concerned about the governance of the current two bosses, whether they are overly pursuing growth.
However, BEKE has performed well in terms of returning value to shareholders. They previously increased their buyback plan from $2 billion to $3 billion, repurchasing over 3% of shares in the first half of this year, along with dividends, providing an annual return of over 6%. With over 80 billion RMB in cash, the company has enough support to sustain share repurchases. However, as the company continues to acquire land, it becomes increasingly difficult to estimate its valuation upwards