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Danke only began operations in 2015 but it has scaled very fast. Over FY17-9M19, the number of apartments being run by the company have increased by 7.8x while its revenue too increased by 7.6x. Unfortunately, that is about the only thing to like about the company’s operations.
The company’s rental spread has been under pressure even by its own measure. If we adjust the spread to try and arrive at gross profit margin, the results aren’t very encouraging.
Furthermore, given its rapid expansion, the company is devouring capital, but it hasn’t been generating any cash flows. In addition, even though
Danke has managed to reduce its average capex per apartment unit its payback period has still been rising.
If all that wasn’t enough the tenant retention rates are low but the company remains on the hook for US$3.7bn of leases related payment over the next four to five years.
Phoenix Tree (Danke) Pre-IPO - Another WeWork - Nothing is improving apart from revenue
Phoenix Tree (Danke) is looking to raise about US$200-300m in its US IPO. Danke is a co-living accommodation provider. According to iResearch, Danke is now one of the largest co-living platforms in China. As of Sep 2019, the company had operations in 13 cities in China with 406,746 apartment units.Danke only began operations in 2015 but it has scaled very fast. Over FY17-9M19, the number of apartments being run by the company have increased by 7.8x while its revenue too increased by 7.6x. Unfortunately, that is about the only thing to like about the company’s operations.
The company’s rental spread has been under pressure even by its own measure. If we adjust the spread to try and arrive at gross profit margin, the results aren’t very encouraging.
Furthermore, given its rapid expansion, the company is devouring capital, but it hasn’t been generating any cash flows. In addition, even though
Danke has managed to reduce its average capex per apartment unit its payback period has still been rising.
If all that wasn’t enough the tenant retention rates are low but the company remains on the hook for US$3.7bn of leases related payment over the next four to five years.
Provider
Aequitas Research
Aequitas Research is a leading ECM research firm with a focus on IPOs and placements/follow-on offerings across the Asia Pacific with deal size of over USD100m.
Since 2015, we have covered 400+ IPOs and 450+ placements with a hit rate of 73% and 65%, respectively. We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic analysis.
Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis. We also provide a more quant driven analysis on placement/follow-on offerings.
Markets that we cover include:
Hong Kong,
China ADRs,
India,
Japan,
Australia, and
ASEAN.
Hong Kong,
China ADRs,
India,
Japan,
Australia, and
ASEAN.
Sumeet Singh
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