BofA Merrill Lynch maintains soufun buy rating to 54 USD

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Beijing time September 13 afternoon news, BofA Merrill Lynch today released a study to maintain the SouFun (nyse:sfun) stock "buy" rating, and the target share price raised to 54 U.S. dollars.

The following is the full report:

According to the China National Bureau of Statistics, the total value and floor space of housing sales has risen by 36% and 24% in the year to date, still at a high level, even if the base of July 2012 and August is already very tall. In August this year, the total amount of social financing reached 1.57 trillion yuan, higher than the July of 809 billion yuan, the total amount of circulating social financing growth rate is still maintained at about 21%. We believe that stable housing sales figures and a relaxed credit environment will further boost the expectations of developers and real estate intermediaries, prompting them to invest more in the media.

As a result, we will soufun 2013 and 2014 revenue forecasts by 4% and 11% respectively. However, the benefits of operations will be offset by an increase in research and development spending, so we keep the profit margin forecast unchanged and increase earnings forecasts for 2013 and 2014 by 4% and 11% respectively. Based on the DCF valuation method, we have a target price of 54 US dollars, equivalent to 14 times times earnings per share in 2014.

In the third quarter, SouFun launched a new product called "Bridal chamber" to make use of its extensive property intermediary network to sell the house. 1 months after its launch, the new product was well received by developers and real estate agents, especially in second-tier cities where the second-hand housing market was relatively small. We believe that if good implementation, in the process of soufun into the non-front-line city, this new product will become a good addition to the business card search. The execution risk includes the conflict of interest between the SouFun internal new house business and the second-hand housing business.