Century 21 China (NYSE:CTC), a provider of real estate services and franchiser of the Century 21 brand in China, is expected to go public this week.
Business Overview (from prospectus)
We are a leading comprehensive real estate services provider with the largest network of real estate sales offices in China. We are the exclusive franchisor in China for the CENTURY 21® brand, one of the world’s most recognized brands in the real estate industry. As of September 30, 2009, our CENTURY 21® China network covered 34 major cities with more than 1,000 sales offices, employed approximately 14,900 sales professionals and staff and maintained approximately 4.7 million property listings. In the first half of 2009, based on transaction volume, we ranked among the top three market leaders in over 90% of the cities in which we operate and were the market leader in more than 30% of those cities. We primarily focus on China’s fast-growing and highly fragmented secondary real estate market, which we expect to outgrow the primary market, especially in more economically prosperous cities.
Offering: 16.7 million shares at $9 - $11 per share. Net proceeds of approximately US$109.8 million will be used to fund the development of company-owned brokerage services business to enter new cities through selected strategic acquisitions to enter new cities; to fund the development of company-owned brokerage services business in existing cities by opening additional company-owned sales offices; to invest and upgrade our information and operations system.
Our net revenues increased RMB234.8 million, or 112.4%, from RMB208.9 million for the nine months ended September 30, 2008 to RMB443.7 million (US$65.0 million) for the nine months ended September 30, 2009... Our commissions and other agent related costs accounted for 55.7% and 44.6% of net revenues for the nine months ended September 30, 2008 and September 30, 2009, respectively and increased RMB81.7 million, or 70.3%, from RMB116.3 million for the nine months ended September 30, 2008 to RMB198.0 million (US$29.0 million) for the nine months ended September 30, 2009... Our operating costs accounted for 53.1% and 19.2% of net revenues for the nine months ended September 30, 2008 and September 30, 2009, respectively and decreased RMB25.7 million, or 23.2%, from RMB110.9 million for the nine months ended September 30, 2008 to RMB85.2 million (US$12.5 million) for the nine months ended September 30, 2009... As a result of the foregoing, we had a net income of RMB88.3 million (US$12.9 million) for the nine months ended September 30, 2009 as compared to a net loss of RMB99.3 million for the nine months ended September 30, 2008.
The real estate brokerage industry is highly competitive in China, particularly in the metropolitan areas in which our company-owned brokerage services businesses operate, such as Beijing, Shanghai and Shenzhen. In addition, the industry has low capital commitment requirements for small operations, lowering the barriers to entry for new participants, especially participants pursuing alternative methods of marketing real estate, such as internet-based listing services. However, significant capital commitments would be required to compete on a regional or national basis. Companies compete for brokerage business primarily on the basis of the services offered, reputation and brand recognition, personal contacts, local expertise and brokerage commission rates. We primarily compete with Centaline (China) Property Consultants Limited in the Beijing, Shanghai and Shenzhen markets for secondary market real estate brokerage business, and to a lesser extent, E-house (China) Holdings Limited (NYSE:EJ) in these cities for primary real estate brokerage business. We also compete with regional competitors in each of the regions where we own and operate sales offices.