COME TO BEIKE...
KE Holdings (
BEKE), or "Beike,"
Current Price
$17.08
Beike stock could become a long-term winner.
KE Holdings owns two major businesses:
Lianjia and Beike. Lianjia is a real estate agent that helps homeowners rent or sell their properties and customers find their dream homes. Think of it as "the
Redfin of China." Beike is the platform that helps match customers to estate agents (including Lianjia). Think of this as "the
Zillow of China."
Beike has become an ever more dominant player in the Chinese real estate industry. Today, it has 394,000 active agents,
267 million homes in its database, 40,500 stores, and roughly
37 million mobile monthly active users (MAU) using its Beike platform.
More importantly, Beike enables a large share of all
real estate transactions in China.
In the fourth quarter of 2022, the gross transaction value (GTV) of all Chinese existing and new home sales was around 3.1 trillion yuan ($450 billion). Out of this, Beike accounted for 647 billion yuan ($94 billion) or 21%.
With its dominant position, Beike benefits from a virtual cycle of growing customers, agents, and property listings. After all, customers will go to the platform with the most property listings, while agents will go to where customers are. Thus, there are good reasons to expect Beike to grow its market share over time.
But that's not all. Beike can also leverage the leading position of its Beike platform to expand into adjacent sectors.
52wk Range
$9.09 - $21.08
Gross Margin
26.16%
Beike is quietly expanding this new vertical
Last year, Beike
acquired Shengdu Home Renovation, doubling its investment in the up-and-coming home renovation and furnishing industry.
Such a move was necessary as the
Chinese property market faces headwinds, evident in Beike's 2022 performance -- GTV of existing and new home transactions fell by 23% and 42%, respectively. Moreover, as the Chinese population becomes wealthier, they will naturally spend more on improving their homes, which will benefit the home renovation and furnishing sector.
By acquiring Shendu, the leader in this industry, the tech company could shorten its learning curve while gaining various cost and revenue synergies. For instance, it could leverage its user base and reputation to help Shendu grow faster while removing cost duplication from the combined entity.
While it's still early, Shendu's acquisition has already led to a massive surge in home renovation revenue from
197 million yuan in 2021 to 5 billion yuan ($0.7 billion) in 2022. Over time, Beike could leverage its own experience in building a real estate platform -- and combine that with the understanding gained from operating Shendu -- to launch a home renovation and furnishing platform.
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If successful, this latest move will open up an entirely new (and growing) revenue stream for the company.
