Morgan Stanley maintains Fang rating

Beijing Time August 7 Evening News, Morgan Stanley today released a study to maintain the SouFun (nyse:sfun) stock "overweight" rating.

The following is a report group:

SouFun reported stable second-quarter results, with diluted earnings of $0.15 trillion per share, above analysts ' average estimated $0.13 trillion. However, the company has cut its full-year revenue forecast by 7%, thanks to the weak performance of its listed business and its electricity business.

Performance exceeded expectations

Total revenue rose 17% to $168.2 million, above our estimated $161.5 million trillion, but slightly below analysts ' average of $168.5 million trillion. Operating margins fell 4% per cent year-on-year to about 49%, 400 points higher than our expectations. Net profit rose 23% to $68.2 million. Fully diluted earnings per share of 0.15 U.S. dollars, better than our estimated 0.14 U.S. dollars, as well as the average analyst estimated 0.13 dollars.

Downward trend of revenue reduction

SouFun the 2014 revenue outlook to 727 million to $739 million, with a year-on-year growth rate of 14% to 16% (down from 22.5% to 25% earlier, which is in line with our projected 15%). This is mainly attributable to the low growth rate of the listed services and the business of the electricity trader. 2013, the growth rate of the listed services business revenue has reached 122%, the contribution to SouFun total revenue reached 25%. The annual growth rate of the electric business revenue is 84%, accounting for 30% of the total revenue.

Online marketing business performance is stable, listing services and electric business performance weak

In the second quarter, online marketing revenue rose 26% to 74.3 million dollars, accounting for 44% of total revenue. The listing service revenue grew 8.5% to 41.7 million US dollars, accounting for 25% of total revenue and growth below 57% per cent in the first quarter. This is mainly caused by the growth of second-hand housing market slowdown, as well as SouFun June cut the price of the listing services for real estate agents. Business revenue grew 8% to 48.6 million US dollars, accounting for 29% of total revenue, and a growth rate of less than 12% per cent in the first quarter.

Weak margins in the near term

SouFun's second-quarter operating margin grew 8% per cent on a month-on-month basis due to favorable seasonal factors, but fell 4% to 49% year-on-year. This is mainly due to operational efficiency issues, as well as greater investment related to new business and brand promotion. Because of the high base in 2013, we expect a weak profit margin for soufun in the short term due to a slowdown in revenue growth and an increase in investment.

Cash dividend

SouFun announced that it would issue a cash dividend of $1 per share (5 shares of ads equivalent to 1 common shares), which would be equivalent to a 2% dividend yield at current stock prices. The payment of cash dividends will be made on August 29, with the shareholder registration date of August 18. (D-Gold)