J.P. Morgan maintains a neutral rating of 10 dollars for house search

Beijing time August 5 afternoon news, JPMorgan released a study today to maintain a "neutral" rating of SouFun (nyse:sfun) shares, as well as a 10 dollar target share price.

The following is the full report:

We expect SouFun's second-quarter revenue to be $171 million, non-US GAAP earnings per share of $0.16, and year-on-year growth in revenue and earnings per share down to 19% and 12% respectively. This was mainly due to unfavourable market conditions that led SouFun to cut prices for listed services in June this year. We currently expect the SouFun to be 154 million U.S. dollars a year from 2014, down 5% per cent year-on-year, down 7% from our previous forecasts. However, the impact of 2014 listing Service revenues will be offset by strong marketing and power-business revenues, as a result of: 1 per cent of sales growth resulting from the fall in take rate ratios, and 2 of China's key cities buying policies to relax. We maintain a "neutral" rating on SouFun stocks for the SouFun 2014 and 2015 profit forecasts.

The second half of 2014 is expected to rebound strong business revenue

We anticipate that, due to the market environment and competition, the second quarter, soufun business take rate will further decline to 55% to 60%. The drop in this ratio will drive more sales growth. Since the end of the second quarter, more and more cities relaxed the purchase policy, so we expect that SouFun business transactions will rebound in the second half. SouFun business revenue will be affected in the fourth quarter, we will 2014 electric business revenue forecast from 211 million U.S. dollars to 223 million U.S. dollars.

2014 revenue and profit outlook likely to be cut

In our view, the SouFun is likely to cut its 2014 revenue growth forecast to 15% to 20%, as the listing Service is weak – a forecast above 20% per cent earlier. And since the listing is a high-margin business, soufun Management will tend to be cautious about profitability. Despite weak revenue forecasts, SouFun is likely to maintain current levels of marketing spending. Despite recent improvements in the property market sentiment, it will still be months before real estate developers increase their advertising budgets.

Key issues that deserve attention

(1) When and how to achieve full commercialization of the SouFun listing business; 2 with the new real estate intermediary and the development of the glorious cooperation of the joint prosperity, as well as strategies to produce synergies.

Maintain a "neutral" rating and a 10 dollar target share price

Our target share price is based on the expected 0.9 US dollar share earnings per share of ads in 2015, the annual composite growth rate of 15% for each share of ads in 2015-2017, and 0.7 times times the increase in market share (PEG). Our target share price is equivalent to 11 times times the 2015 forward earnings ratio. (D-Gold)