Maintain an overweight rating on a house-search stock

JPMorgan released a study today to maintain an "overweight" rating on Nyse:sfun shares and cut its target share price from $19.60 to $17.00.

The following is the full report:

Although the first quarter's total revenue was in line with expectations, the company's business performance was poor due to the weak sales of new homes. In our view, this weakness in financial performance is largely a reflection of low market fees for electricity dealers, while the growth of electricity quotient volumes remains strong (JPMorgan estimates about 40% in the first quarter). Strong trading volume growth suggests that, despite poor market conditions, house searches are taking a share from the offline intermediary. We still have a good view of the electricity dealers ' business which started from 2015, this is due to: 1 The rebound of the charge, 2 the growth of market share. We maintain the "overweight" rating of the house-search stock.

Three major business performance in the first quarter is different

The first quarter revenue for the house was 121 million dollars, consistent with our expectations. Electricity business revenue is 19% lower than we expected, and sales and listing services are growing better than expected.

The strategy of electric business to change sales at low price

The key reason for the weak business revenue is that the house has lowered the cost of the house-search card and increased the expenditure on marketing activities. We estimate that in the first quarter, the volume of home-search business increased by about 40% Year-on-year. We believe that the 2014 house search will continue this strategy, so that the real estate in the market to obtain a higher market share.

Growth of staff expected to be maintained throughout 2014

To boost sales, the house continued to increase the number of employees in the first quarter (an increase of 1600 in the year), most of them sales and operating staff. We believe that such a move will boost revenue growth when the overall market situation improves. House Search the management expects this to take two quarters of the time.

Maintain an "overweight" rating and cut its December 2014 target share price from $19.6 to $17

Due to greater environmental impact than expected, we will be searching for homes in 2014 and 2015 per share earnings forecasts were cut by 10% and 11% respectively. Our target share price is based on the 2015 non-US General accounting standards for ads per share earnings are expected to 1.04 U.S. dollars, 2015-2017 per share of ads shares earnings of the annual composite growth rate of 18%, the city surplus growth ratio (PEG) 0.9 times times. Our target share price is equivalent to 16 times times the 2015 forward earnings ratio.