BEKE: The New Economy Era
A Tencent-backed Real Estate Service Provider
From BEKE’s Nov 19 2020 Prospectus, BEKE describes itself as a company that combines Lianjia, China’s leading real estate brokerage brand with more than 18 years of history, and Beike, China’s leading integrated online and offline platform for housing transactions and services with two years of history.
From the Prospectus, we can see that BEKE is the No. 1 online real estate transaction service platform in China, with gross transaction volume in 2019 is RMB2.1 trillion, which is about 20% of the RMB10.5 trillion total addressable market. If you are interested to invest to real estate related stock, BEKE is your top choice as it is the market leader in revolutionizing the real estate market in China.
What’s BEKE Business Model?
BEKE has introduced the Agent Cooperation Network, or ACN, as the operating system underpinning our infrastructure, to redefine relationships among industry participants with proprietary technology platform built on powerful data insights and applications.
I like BEKE for 1 main reason that it is the pioneer in developing industry infrastructure and promoting digitalization and standardization across data, transaction process and service quality.
From a layman’s language, it takes a Commission Cut of Captured GTV through 3 main ways:
- Brokering of transactions within its inhouse real estate brokerage brand;
- Co-brokering along with principal agents from other partnering brands;
- Facilitating matchmaking process between two or more parties with no direct involvement by BEKE.
Competitive Advantage coupled with Increasing Market Share
With robust platform with significant network effects, BEKE has developed a “Housing Dictionary” which has a 90+% authentic rate in all property listing, providing a superior transaction experience for all brokers and housing customers. According to a study in the prospectus, the Housing Dictionary was cited as the single largest repository of housing details in China. Data will be the most important digital asset in the next decade, I believe that BEKE is able to manage all the data together with the wide network of agents to bring more value to the company shareholders.
China Growing Real Estate Market
The GTV of the market in China is expected to grow at a robust 6.6% CAGR rate through 2024, with an estimated market size of CNY 30.7BN in 2024E. The GTV of Homes Sold and Leased through Brokerage Services market is also expected to grow at 12.7% by 2024 driven by increasing brokerage services penetration rate.
Conclusion
I like BEKE for that its Business Model that it has fundamentally changed the industry through its business and operational model — a moat irreplicable by existing competitors, unscalable for new players. BEKE’s technological edge through its proprietary ACN, SaaS system and AI applications captures the brokers (who may or may not be conducting transactions online), at the same time making everyone to be more efficient, by soliciting their services on a more consistent basis.
It is trading around 70+ USD, recently breakout the resistance which I expected to have a bullish uptrend in 2021 considering the whole China economy is recovering very well. BEKE’s next few quarters are expected to turn into profit and show astonishing growth.
