Fangdd Set to Innovate China's Property Market After Wall Street Conquest

In an interview with CapitalWatch, Fangdd's CEO said the company's next step is advancing its technology to further empower the real estate agents using its Saas-based business solutions.

Anthony Russo
    Nov 01, 2019 6:00 PM  PT
Fangdd Set to Innovate China's Property Market After Wall Street Conquest
author: Anthony Russo   

Fangdd Network Group Ltd. (Nasdaq: DUO) celebrated its debut on Wall Street on Friday and is set on continuing to deliver innovative technology to improve its online proptech platform.

Its next primary goal and challenge is to "maintain a high-speed development of performance" and to "bring long-term value" to users and shareholders, Fangdd's chief executive officer and founder, Yi Duan, told CapitalWatch in an interview on IPO day.

China's largest online real estate marketplace in terms of registered real estate agents and property listings raised $78 million today in a float of 6 million American depositary shares. Fangdd's market value came to approximately $1.1 billion, as reported by the Nasdaq.

Early on, shares in the Shenzhen-based company reached a peak of $14.08 per ADS, up 8%, then settled at the offering price of $13 by close of debut day.

The eight-year-old platform uses mobile internet, cloud and big data to bring innovative solutions in China's property technology sector. In its prospectus filed with the U.S. Securities and Exchange Commission, Fangdd described its platform as "agent-centric," acting as a one-stop shop for completing real estate transactions.

Jian Zhang, Fangdd's strategy and research director, told CapitalWatch in a separate interview, "Compared with the U.S. real estate market, China's market is relatively under-developed where the agents in the industry have an average age of 27, and we need to help them grow."

Fangdd had 1.07 million registered agents on the platform and 131 million property listings as of June 2019.

China's residential property market is expected to grow at a compound annual growth rate (CAGR) of 9.2% from 2018 to reach 33.4 trillion yuan by 2023, Fangdd wrote in its prospectus, citing research by market analytics firm Frost & Sullivan. Commission revenue from home sales is expected to rise at a CAGR of 22.6% to 343.6 billion yuan by 2023, the consultancy reported.

CEO Duan said that first- and second-tier cities in China continue to experience an influx of population in need of housing. He said the cities are bound to see "a large number of transactions in real estate" and added that it's a "very important sign of a healthy market."

Fangdd reported revenue of $233.7 million for the six months through June, soaring 55% year-over-year. Profit during the first half-year hit $14.2 million in contrast to a net loss of approximately $600,000 in the corresponding period of 2018. According to its prospectus, it had $77.5 million in cash and cash equivalents as of June 30.

The funds from the IPO will be used primarily for technology, according to the company. It said 40% of the proceeds will be used in research and development capabilities. The rest will go into boosting sales, marketing, branding, workforce and general corporate purposes.

"We have to invest a lot of power in technology, research and development to be able to go to the data perspective and improve the efficiency of brokers doing business," Duan told CapitalWatch.

Investor .png

(David Wei, founder of Vision Knight Capital and investor in Fangdd since 2014)

An investor in Fangdd, the chairman and founding partner of consulting-first equity fund Vision Knight Capital, David Zhe Wei, called the timing of the company's IPO "perfect" ahead of the upcoming holidays and "uncertainties." Formerly, Wei served as the CEO of e-commerce giant Alibaba Group Holding Ltd. (NYSE: BABA).

Wei told CapitalWatch after the bell-ringing ceremony on Friday, "The property industry, the property agent business has had extremely low efficiency in China as well in the rest of the world. We believe that Fangdd will be the company to improve the efficiency by leveraging its tools."

Underwriting Fangdd's IPO in New York are Morgan Stanley & Co. LLC, UBS Securities LLC, China International Capital Corp. Hong Kong Securities Ltd. and AMTD Global Markets Ltd. They may purchase up to an additional 900,000 ADSs over the next 30 days.

(Co-authored by Belinda Zhou and Anthony Russo)

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