T.h.capital Maintain SouFun hold rating

Beijing time August 7 Morning News, the U.S. investment company T.h.capital released a study today, SouFun (Nyse:sfun) 's stock rating maintained in the "holding" (Hold) unchanged.

The following is a summary of the contents of the report:

Expected second-quarter results to be at least as expected; policy could remain stable in fiscal year 2013; maintain a "hold" rating

In the past one months, SouFun's share price has risen sharply by about 39%. We believe that, in addition to the likely performance of the quarterly results, the main reason for the rise in SouFun shares is that the recent policy on China's property market is likely to remain stable. SouFun will report its second-quarter results in the 2013 fiscal year before the opening of the U.S. stock market in the eastern time of August 8 (Beijing time 8th), with earnings calls at 8 O ' 20 O'Clock (Beijing time 8th).

We believe that SouFun's second-quarter results were at least in line with Wall Street analysts ' average expectations or exceeded expectations, as the business performance of E-commerce may be better than expected. But we are still worried about the rise in housing prices, a risk factor for real estate companies that could trigger government intervention. Based on this, we maintain the SouFun stock rating in "hold" unchanged.

A policy that may remain stable in fiscal year 2013 is good for share prices: There is a strong link between soufun share prices and Beijing's housing market policy. Recently, the government has issued a positive message. The Politburo's Standing Committee held a recent economic meeting, and members considered that "a long-term mechanism for stable and healthy development of the real estate industry should be established to promote the steady growth of real estate investment". Therefore, we believe that China's real estate policy should not have a major change. But what we cannot be sure of is whether the government will introduce new policies if house prices continue to rise.

The second-quarter results are expected to be at least as likely as Wall Street analysts ' average expectations or slightly more than expected: Based on our data, we think we may have been somewhat conservative in our expectations of SouFun's second-quarter results. We believe that SouFun's second-quarter results were at least 117.44 million dollars, or slightly more than expected, from Wall Street analysts ' average expectations. In SouFun's two main business, we think that its e-commerce business growth rate will be far higher than marketing services.

In terms of SouFun marketing services, based on our data, in the second quarter, the average floor sales price increased by 16%, but in 15 large cities, the total sales area fell 9% Year-on-year, including Beijing, Shanghai, Guangzhou, Shenzhen, Hangzhou, Chongqing, Wuhan, Changsha, Nanjing, no interest, Ningbo, Suzhou, Nanchang, Tianjin and Xiamen, these cities accounted for 80% of the total revenue of SouFun. In these cities, Beijing, Shanghai, Guangzhou and Shenzhen, the first-tier cities in the total floor sales rose 7.9%, in the total soufun revenue accounted for about 50%. From these figures, we believe that SouFun marketing services may not show significant year-on-year growth.

As far as SouFun E-commerce services are concerned, we believe this is a new, trade-based business model that may continue to be welcomed by developers and house buyers. Based on this, we expect the business to continue to grow in the future. Therefore, we believe that SouFun's business income in the second quarter may be better than our expected $30 million trillion. In addition, we believe that the per-share earnings that are not in accordance with U.S. general accounting standards may match or slightly better than the average Wall Street analyst's expected 0.54 dollars.

Valuation: The soufun yield is 12.9 times times based on expectations of $2.64 for SouFun earnings per share (not in accordance with US GAAP) for the 2013 fiscal year. Although the stock looks undervalued, the uncertainty associated with current policies prompts us to maintain its "hold" rating unchanged.