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5. Financial Projections 5.1. Five Year Market Forecast
There are several institutions or corporations conducting their own research about the market volume of different aspects in real estate market and numbers sometimes differ. Also because the development of Chinese real estate brokerage is still in its infancy, there is no existing formula for calculating market volume in every aspect of real estate market.
Considering the product and service offerings designed and the target customers, there are several important market figures for market volume projection that we include when determining the market size on our own:
1. 2012 Trading volume of residential house trading in Beijing
The figure below indicates the volume of residential house trading was 143,630 cases in Beijing in year 2012. Though the annual number of trading cases is rises and falls each year and the trend isn’t stable, it is widely believe that the trend in residential property trading will rise because of the maturation of city development plans that will limit land supply for constructing new housing. Also, the 2012 sales amount of residential property is estimated to be 330.8 billion CNY.
Figure 26: 2007~2012 Annual Trading Volume of Residential Property and Newly-Constructed Housing in Beijing
Data Source: Zhang Yong, Zhao Qingxiang, Wang Xia (2013) An Analysis of the SXtatus Quo in 2012 and Trend in 2013 of China’s Real Estate Intermediary Services Industry
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2. Web advertisement expenditure of real estate
According to figures published by iResearch institute, the real estate advertisement expense on websites is estimated to be CNY 101,360,000 in Beijing from 2010 Q1 to 2011 Q2. So the annual web advertisement can infer CNY 6,7570,000.
Figure 27: 2010 Q1~ 2011Q2 Top 10 City or Province of Advertising Expenditure in Real Estate Websites
Data source: iReasearch (Aug. 2011) 2011 Q2 Chinese real estate website advertising report, P.8 3. Annual investment figures of commercial buildings in Beijing.
According to the Beijing Municipal Bureau of Statistics report, the 2012 annual investment in commercial property (商业经营用房) is CNY 27.59 billion, a 7% decrease from 2011, and investment in office building (写字楼) is CNY 38.48 billion, a 5.8% increase from 201120. Though the annual trend of commercialized buildings (商品房) investment rises and falls, it is widely believed that the trend will continue upward along with the city development.
4. Professionals work in real estate brokerage industry.
Though in official reports there are only 47,668 licensed real estate agents and 50,000 brokerages all over China in year 2012, it is widely believed that more than 1 million people work in real estate brokerage industry and most of them are in four major cities, which are
20 Data source: 2012 年 北 京 市 房 地 产 市 场 运 行 情 况 , Beijing Municipal Bureau of Statistics, 2013/01/22 published, http://www.bjstats.gov.cn/sjjd/jjxs/201301/t20130121_242365.htm
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Beijing, Shanghai, Shenzhen and GangZhou. Including other professionals working in real estate industry, such as lawyers, scriveners, financial planners and certified public accounts (CPA), total number of professional workers in Beijing real estate business can currently be estimated at about 100,000.
5. Existing users of real estate e-commerce website.
The research shows that in year 2012 the average monthly user of the real estate e-commerce websites is estimated to be 2.74 million people, 1.8% of real estate websites users.
Figure 28: Monthly User of Real Estate E-Commerce Websites in Year 2012 Data source: iReasearch (2012/3/5) iReaserach China E-Commerce in Real Estate Report 2012, P.16
Other figures estimated by Beijing Mobile Realty Inc., for calculating market volume are:
The Legal and financial counseling fee on real estate investment is estimated to be from 0.05% to 0.2%, depending on the property, and advisors are willing to pay referees around 0.2% of their commission.
Home buyers and sellers are willing to pay from 0.5% to 2.0%21, depend on the property value, of sales amount to brokers for property trading and agents are willing
21 The real estate trading commission can’t be higher than 2% of total sales amount and can be share by home buyer and seller, according to the notification “关于降低本市住宅买卖经纪服务收费标准的通 知, 京发改[2011]1468 号” published by Beijing Municipal Commission of Development and Reform in Aug. 24th 2011.
Data source: http://www.bjpc.gov.cn/zcfg10/201109/t1623454.htm
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to pay referees a certain percentage of their commission to accelerate sales.
In summary, the market volume for each product designed can be listed below:
Figure 29: Market Size Assumption for the Next Five Years
5.2. Revenue Drivers and Cost Drivers
There are five major revenue drivers: 1) advertisement income from real estate developers or other business entities, 2) annual membership fee from real estate professional, 3) monthly advertisement-posting fee from property sellers 4) monthly membership fee from property buyers, 5) referral commission from counseling service sold 6) sales commission from co-selling cases
The cost drivers are from three major aspects: 1) IT investment including software design and enhancement cost, hardware equipment, IDC storage fee and 15M internet bandwidth fee, 2) premium and professional human resource cost including professional staff, sales force and customer service representatives (CSR). 3) Other expense including office rent.
Since the company emphasizes its professional and personalized services to customers, the major cost driver is human resource cost, which is similar to the incumbents’ cost structure.
Key Assumptions \ Projection(Unit: 10,000CNY)
(Annual growth rate: 8%) Market Volume Market Volume Market Volume Market Volume Market Volume Web Commercial of Residential house
(Unit: per head) 100,000 Willing to pay 200 for annual membership 2,000.00 2,332.80 2,519.42 2,720.96
2,938.64
C: Seller Membership
Residential house (存量房) Title Close
(Unit: per case) 143,630 1. Potential seller is twice than actual sales
2. Willing to pay 250 for posting a list & premium info. 7,181.50 8,376.50 9,046.60 9,770.35
10,551.98
D: Buyers Membership
Residential house (存量房) Title Close
(Unit: per case) 143,630 1. Potential buyer is twice than actual sales
2. Willing to pay 120 for premium info & services 3,447.12 4,020.72 4,342.37 4,689.77 5,064.95
1. Beijing real-estate market will continued to grow with annual growth rate (same for all figures below) 2. The web advertisement of commercial property &
office building is 1% of annual investment 3. The % of Ad. Expenditure is unchanged for the next 5 years
2012 Market Data
Year 1 Year 2 Year 3 Year 4 Year 5
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Detail revenue forecast and human resource cost can be found in the figures below.
Sales forecasted
Salary Expenditure Forecasted
Quarterly headcount Plan in Five Year
Market share Income Market shareIncome Market share Income Market share Income Market share Income
Web Commercial of Residential house 1.00% 36.00 2.50% 197.00 3.50% 298.00 4.50% 298.00 5.50% 298.00 Ad. Of Commercial property 0.50% 6.00 1.50% 48.00 2.50% 87.00 3.50% 131.00 4.50% 182.00 Ad of office building 0.50% 12.00 1.50% 67.00 2.50% 121.00 3.50% 183.00 4.50% 254.00 B: Professional
Memenbership Fee Licienced Real-Estate Biz Professional 3.00% 45.00 5.00% 117.00 7.00% 176.00 9.00% 245.00 11.00% 323.00 C: Seller Membership feeResidential house (存量房) 1.50% 81.00 3.00% 251.00 4.50% 407.00 5.50% 537.00 7.00% 739.00
D: Buyers
Product Type Area of Business in Beijing Year 1
Annual headcount Growth Rate: 25%Social benefit rate: 43%
Annual salary growth rate: 8% (Unit: CNY)
Headcount Total Cost Headcount Total Cost Headcount Total Cost Headcount Total Cost
Year 1 6 794,594 11 1,070,269 5 370,656 22 2,235,519
Adminitrative Tech & Support Sales & Marketing
Headcount Plan Year 4 5
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5.3. Presentation of the Financial Forecast
The following summarizes five years income statement, balance sheet, cash flow statement and key financial information. The detail figures of each year financial forecast can be found in Appendix A.
Selected Key Financial Ratios
5 Years Summarized Income Statements
Selected Ratio \ Year 1 2 3 4 5
Total Asset Turnover 1.32 1.95 1.18 0.82 0.70
Return on Sales (ROS) 20.86% 19.94% 21.61%
Return on Asset (ROA) 24.66% 16.33% 15.09%
Return on Equity (ROE) 103.03% 59.26%
8%Projected Annual Growth Rate
( Unit: 10,000 CNY, except per share data) Year 1 Year 2 Year 3 Year 4 Year 5
Revenue
Advertisement (Product A) 54.00 197.00 506.00 612.00 734.00
Professional Memenbership fee (Product B) 30.00 117.00 176.00 245.00 323.00
Sellers Memenbership fee (Product C) 54.00 251.00 407.00 537.00 739.00
Buyers Memenbership fee (Product D) 24.00 10.00 195.00 258.00 355.00
Case Referral Commission (Product X) 4.00 10.00 16.00 24.00 31.00
Sale Referral Commission (Product Y) 6.00 12.00 21.00 34.00 46.00
Subtotal of Revenue 172.00 597.00 1,321.00 1,710.00 2,228.00 Cost of Domestic Sales
Depreciation of Computer HW & SW 10.32 12.38 14.86 17.83 21.40
IDC storage and internet Fee 175.20 190.08 190.88 191.68 192.48
Technical support staff salaries 107.03 164.29 210.42 322.76 456.12
Subtotal of Cost of Domestic Sales 292.55 366.75 416.16 532.27 670.00
Sales Tax (17%) 29.26 101.48 224.56 290.72 378.76
Gross Margin (149.81) 128.77 680.28 887.01 1,179.24
Opertion and Management Expense
Sales Related Staff Salary 37.07 79.44 127.82 219.36 291.36
Sales & Marketing Expense (1% of sales) 1.72 5.97 13.21 17.10 22.28 Transaction Insurance fee (0.02% ot quaterly sales) 0.34 1.19 2.64 3.42 4.46
Administrative Staff Salary 79.46 103.67 131.92 151.28 172.92
Office Rent 24.00 24.00 24.00 24.00 24.00
Office MISC Expense (1% of sales) 1.72 5.97 13.21 17.10 22.28
Subtotal of Operation and Management Expense 144.31 220.24 312.80 432.26 537.30 Earning Before Interest and Tax (EBIT) (294.12) (91.47) 367.48 454.75 641.94
Interest (8% annual) 0.00 0.00 0.00 0.00 0.00
Earning Before Tax (EBT) (294.12) (91.47) 367.48 454.75 641.94
Provision for income taxes (25% of EBT) 0.00 0.00 91.87 113.69 160.49
Net Income (294.12) (91.47) 275.61 341.06 481.45
First Year By QuarterSecond Year By QuarterThrid Year By QuarterForth Year By QuarterFifth Year By Quarter
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5 Years Selected Balance Sheet Items
5 Years Cash Flow Statement
(Unit: 10,000 CNY, except per share data) Openning Year 1 Year 2 Year 3 Year 4 Year 5 ASSETS
Cash and cash equivalents 28.40 42.24 198.33 934.47 1,882.10 2,957.04
Accounts receivable (Product A) 0.00 27.00 49.25 126.50 153.00 183.50
Cash in banks 20.00 20.00 20.00 20.00 20.00 20.00
Total Current Asset 48.40 89.24 267.58 1,080.97 2,055.10 3,160.54
Fixed Assets 51.60 51.60 61.92 74.30 89.16 106.99
Accumulated depreciation and amortization 0.00 (10.32) (22.70) (37.56) (55.40) (76.79)
Net Fixed Assets 51.60 41.28 39.22 36.74 33.76 30.20
Total Assets 100.00 130.52 306.80 1,117.70 2,088.86 3,190.74
LIABILITIES
Revenue received in advance (Product B) 0.00 45.00 29.00 44.00 61.25 80.75
Revenue received in advance (Product C&D) 0.00 13.00 21.75 50.17 66.25 91.17
Accrued interest payable 0.00 0.00 0.00 0.00 0.00 0.00
Income taxes payable 0.00 0.00 0.00 91.88 113.68 160.48
Temporary Receipts (Product X- full service fee) 0.00 16.67 41.67 66.67 100.00 129.17 Temporary Receipts (Product Y-0.5% downpayment) 0.00 250.00 500.00 875.00 1,416.67 1,916.67
Total current liabilities 0.00 324.67 592.42 1,127.72 1,757.85 2,378.24
Long-term loan liabilities 0.00 0.00 0.00 0.00 0.00 0.00
Total Liabilities 0.00 324.67 592.42 1,127.72 1,757.85 2,378.24
EQUITIES
Shareholders' equity 100.00 100.00 100.00 100.00 100.00 100.00
Retained earnings-unappropriated 0.00 (294.15) (385.62) (110.01) 231.01 712.50
Total shareholders equity 100.00 (194.15) (285.62) (10.01) 331.01 812.50
Total liabilities and shareholders equity 100.00 130.52 306.80 1,117.70 2,088.86 3,190.74
( Unit: 10,000 CNY, except per share data) Year1 Year 2 Year 3 Year 4 Year 5
1.Operating Activities, cash flows provided by or used in:
Net Income (294.15) (91.47) 275.61 341.03 481.48
Depreciation and Amortization 10.32 12.38 14.86 17.83 21.40
Decr/(Incr) in Account Receivable (Prod. A) (27.00) (22.25) (77.25) (26.50) (30.50) Incr/(Decr) in Revenue received in advance (Prod. B) 45.00 (16.00) 15.00 17.25 (72.25) Incr/(Decr) in Revenue received in advance (Prod. C&D) 13.00 8.75 28.42 16.08 24.92
Incr/(Decr) in Temporary Receipts (Prod. X) 16.67 25.00 25.00 33.33 29.17
Incr/(Decr) in Temporary Receipts (Prod. Y) 250.00 250.00 375.00 541.67 500.00
Incr/(Decr) in Income Tax payable 0.00 0.00 91.88 21.80 46.80
Net cash flow from operating activities 13.84 166.41 748.52 962.49 1,001.02 2.Investing Activities, cash flows provided by or used in:
Decr/(Incr) in Property and equipment expenditures 0.00 (10.32) (12.38) (14.86) (17.83)
Cash used for investing activities 0.00 (10.32) (12.38) (14.86) (17.83)
3.Financing Activities, cash flows provided by or used in:
Incr/(Decr) in Long-term Loan liabilities 0.00 0.00 0.00 0.00 0.00
Incr/(Decr) in Accured Interest Payable 0.00 0.00 0.00 0.00 0.00
Net cash flow from financing activities 0.00 0.00 0.00 0.00 0.00
Net Cash Flow 13.84 156.09 736.14 947.63 983.19
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國立 政 治 大 學