BofA Merrill Lynch maintains SouFun bid rating of 54 USD

In the early hours of September 13, Beijing time, BofA Merrill Lynch today released a study to keep SouFun's stock rating at Nyse:sfun, while raising its target price from $46 to $54.

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

The real estate market continues to maintain a strong momentum of growth; raise target prices to 54 dollars

-both industry and macroeconomic data are solid; the target price is up to $54:

According to data released by the China National Bureau of Statistics, although the foundation of July 2012 and August is already very high, the value of housing sales and total floor area have increased by 36% and 24% respectively, at a higher level, so far this year. In August, total social financing increased from RMB 809 billion to RMB 1.57 trillion in July, and the year-on-year growth rate of total unpaid social financing remained close to 21%. We believe that the strong performance of housing sales figures and the ease of credit conditions will increase the expectations of developers and second-hand house intermediaries, thereby increasing media-related spending.

With this in place, we will increase sales forecasts for fiscal year 2013 and fiscal 2013 by 4% and 11% per cent respectively, SouFun. We expect the growth in research and development spending to offset SouFun's operating leverage, thus keeping its profit margin expectations unchanged, but raising its earnings per share in fiscal 2013 and fiscal 2014 by 4% and 11% respectively. Based on the cash flow discount method, we will raise the SouFun target price to 54 US dollars. Compared to our forecast for the 2014 fiscal year SouFun earnings per share, it has a P/e ratio of 14 times times.

-New House 4.0 initial feedback is good:

SouFun unveiled a new product, known as 4.0, designed to sell homes in the third quarter using its extensive network of second-hand housing intermediaries. One months after the launch of the new product, developers and level two real estate agencies have made positive feedback, especially in second-hand housing intermediary agencies. We believe that if the implementation of good words, then this new product will be lost soufun VIP card business to form a complementary role, thus infiltrating into the lower level of the urban market. The implementation risk includes the conflict of interest between the new Estate business unit and the Second-hand House business unit.

-Investment Theme:

We are bullish on SouFun's long-term growth potential, industry leadership and healthy cash flow. We believe that the industry's long-term growth potential is higher than the real estate industry, mainly because traditional advertising is being replaced by online advertising, and SouFun is infiltrating more third-tier cities.

-Target Price:

The 54 dollar target we set for SouFun is based on a 4 dollar net cash per share, a 11.2% discount rate and a 3% final growth rate. We also anticipate that the soufun will distribute a dividend of USD 1 per share of US depository receipts for 2013 years.

-Target price risk:

1 The growth rate of the VIP card business may be slowing down 2) The former investor may sell the stock (IPO) and 3 The audit question related uncertainty.