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Tencent-Backed KE Holdings’ Upcoming IPO: Here’s What You Should Know

Tencent Holdings Ltd (SEHK: 700), well-known for its flagship services such as WeChat, QQ, Tencent Pay, and more, is also a successful investor in many other tech companies like Pinduoduo, JD.com, and more.

Lately, one of the company’s backed company, KE Holdings Inc, is filing for an IPO in the US. Here, I’ll look into a few aspects to help investors better understand the company.

What it does

KE Holdings operates in the real estate industry in China, owning two flagship brands under its umbrella – Beike and Lianjia.

The former is an integrated online and offline platform for housing transactions and services, which includes existing and new home sales, home rentals, home renovation, real estate financial solutions, and other services.

Lianjia, on the other hand, is China’s leading real estate brokerage brand and an integral part of the Beike platform. Founded in 2001, Lianjia’s experience and infrastructure became the bedrock that drove the creation of Beike in 2018.

Key financials

Below is a quick overview of the key numbers that investors should know about the company.

KE Holdings IPO

Source: KE Holdings’ IPO Prospectus

Industry overview and prospects

According to KE Holdings’ prospectus, China has the largest housing market in the world in terms of the gross transaction value (GTV) and the number of transactions of existing and new home sales, and home rentals in 2019.

The total existing and new home sales, and home rentals market reached RMB 22.3 trillion (US$3.2 trillion) in 2019, up from RMB 500 billion in 2000.

Going forward, this market is expected to continue to grow at a compound annual growth rate (CAGR) of 6.6% to RMB 30.7 trillion by 2024, thanks to factors like continuous urbanisation, demand for higher quality housing, and more.

KE Holdings, with its leading position – through Beike and Lianjia – will benefit positively from the industry’s growth.

Moreover, KE Holdings will also benefit from the increase in brokerage penetration in home sales (new and existing) and home rentals as more homeowners/developers choose to work with the leading brokerage platform.

To this end, as the only integrated online and offline housing transactions and services platform at scale in China, KE Holdings has the infrastructure, people (agents), and data to deliver the best service to customers.

Foolish takeaway

Overall, KE Holdings is a favourably positioned thanks to its integrated platform (Beike), and its industry-leading real estate brokerage market share through Lianjia.

Still, there are many risks that investors should consider before investing in the stock, especially since the business is still unprofitable.

There is also no guarantee that it will be profitable in the near future owing to the competitiveness of this industry.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Hong Kong contributor Lawrence Nga does not own shares in any companies mentioned.