Guo Xin Service makes IPO bid into frigid market for new property plays

Despite Hong Kong’s hot market for new listings, the management company from China’s struggling real estate sector would represent the first new property IPO in several years

Key Takeaways:

• Guo Xin Service has filed to list in Hong Kong, reporting its profits improved steadily over the last three years
• The property manager’s profit fell in the first half of the year due to an accident-related compensation payout

Bai Xin Ru

You know the IPO market is hot when even the wallflowers start to consider new listings.

Hong Kong’s best market for new IPOs in years has finally attracted a company from China’s embattled real estate sector, which has become an investor pariah as the market’s ongoing downturn shows no signs of easing. China Guo Xin Service Holding Ltd., which provides property management services in South China’s Guangdong and Hunan provinces, is hoping investors will look past that beleaguered state, with an eye to a brighter future, with its recently filed prospectus laying the groundwork for a Hong Kong IPO.

Founded in 2006 by Chairman Liang Zanwen, Guo Xin provides property management, brokerage, and value-added services to its controlling shareholder, real estate developer Guo Xin Holdings. Headquartered in the Guangdong city of Foshan, it ranks fourth locally in terms of market share, yet holds only a modest 0.08% share of the management and agency services markets for the Greater Bay Area, used to describe the Pearl River Delta area surrounding Hong Kong, Macao and Guangzhou. That just barely places it in the top 40 companies for the region.

Controlling shareholder Guo Xin Holdings was established by Liang in 1995, and is primarily engaged in property development within Guangdong province.

Growing property management market

Growing numbers of city dwellers with China’s rapid urbanization, combined with rising incomes for average people, have spurred strong demand for new homes in the last three decades, boosting associated demand for property management services. This momentum is most pronounced in the Greater Bay Area, one of China’s wealthiest regions, where demand for such services is growing faster than the sector’s national average. The region’s property-management market grew from 180.7 billion yuan ($25.4 billion) in 2019 to 455.6 billion yuan last year, representing 20.3% annual growth, or nearly double the 11.6% rate for China’s broader property management industry.

While China’s real estate sector is stuck in deep freeze, sending most developers into the red, the situation for property managers like Guo Xin Service is better due to the recurring nature of their revenues. That has helped Guo Xin Service remain profitable, with its net income rising steadily from 20.18 million yuan in 2022 to 37.33 million yuan last year. A compensation payout tied to a traffic accident drastically inflated the company’s other expenses by 659% during the first half of 2025, leading to a 25.4% year-over-year profit decline to 9.78 million yuan for the latest period.

The company operates three main divisions: property management, brokerage services and value-added services. Property management was the biggest profit spinner, generating a gross profit of 13.2 million yuan in the first half of this year. Brokerage services contributed 11.31 million yuan in gross profits, while value-added services provided another 5.14 million yuan.

As of June, the company managed 42 properties with 5.4 million square meters of gross floor area in both residential and non-residential developments. Of its 13.2 million yuan first-half gross profit, residential properties accounted for 58% of the total, while the remaining 42% came from non-residential. The company’s parent contributed 68.3% of its property management revenue, in a situation commonly seen among most big companies from a sector where they depend heavily on their parents for business.

Parent dependency

If Guo Xin Service relies heavily on its parent for its property management services, it’s even more dependent when it comes to brokerage services. Its work in that area mainly covers property-agency services for primary-market residential developments, with a focus on residential units and parking spaces. All of the company’s brokerage revenue came from transactions involving properties developed by its parent, including ones in the Jun Yu Hai Cheng and Jun Yu Hai An developments. During the period, it received appointments for three additional projects under development by its parent.

Despite such strong support, headwinds still persist due to weakness in China’s overall property market. Existing home prices in China’s top 100 cities slipped another 0.7% month-on-month in September to an average of 13,381 yuan per square meter — marking the 41st straight monthly decline, according to the China Index Academy. What’s more, third-quarter prices fell 2.3% sequentially, accelerating by 0.14 percentage points from the second-quarter decline, showing the protracted downturn is unlikely to ease anytime soon.

The national and local governments have rolled out policy-easing moves to try to help the market, including Guangzhou’s recent removal of all home-purchase restrictions alongside Shenzhen’s easing for both buyers and loan approvals. But none of those steps seem to be having much effect yet. Global real estate consultancy Cushman & Wakefield now forecasts that residential prices could retreat up to 5% in the Greater Bay Area for all of 2025.

Weakly valued

The Chinese property market’s woes aren’t just pressuring the sector’s finances, but are also weighing on valuations of property management firm stocks, even as the companies remain profitable. Industry bellwether China Overseas Property (2669.HK) is a case in point. Its net profit increased 4.3% year-over-year to 770 million yuan in the first half of this year, and it declared a special dividend of HK$0.01 per share to celebrate the 10th anniversary of its listing. But investors remained unexcited about its stock, which currently trades at price-to-earnings (P/E) ratio of just 9.4 times, based on its forecast 2025 profit. That marks a huge drop from historical ratios that at one time exceeded 30 times. The company’s stock slumped 8% in the third quarter, massively underperforming the Hang Seng Index’s 11.6% rally.

Country Garden Services (6098.HK), once a Hang Seng Index constituent, posted gloomier results, reporting its first-half net profit shrank 30.8% year-over-year to 997 million yuan. Investors weren’t impressed with that number, nor were they thrilled by the omission of an interim dividend from the company, leaving the stock trading at a forward P/E ratio of just 8.9 times. The company’s stock logged a modest 0.8% stock gain in the third quarter, though that was still well behind the broader market.

With no signs of near-term improvement for China’s property market, investor enthusiasm for property management plays has completely cooled. That’s certainly not a plus for Guo Xin Service, which is also less appealing for its regional status. Benchmarked against leading peers now trading below 10 times expected earnings, Guo Xin Service’s shares are almost certain to trade at an even lower multiple. That could translate to scant upside potential for short-term speculation, even in the current hot IPO market.

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