A Chinese Housing Recovery? Sort-of

Gordana Davila

October 18, 2012

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While in the US appears to be experiencing a housing recovery, news from China is that the Chinese housing sector continues to decline, however experts are recommending that investors should keep an eye on Chinese real estate services stocks.

Among them, E-House (China) Holdings Limited (NYSE: EJ), IFM Investments Limited (NYSE: CTC), SouFun Holdings Limited (NYSE: SFUN) and Syswin (NYSE: SYSW) along with Chinese real estate developer stocks Xinyuan Real Estate (NYSE: XIN), China Housing & Land Development (NASDAQ: CHLN) and China HGS Real Estate (NASDAQ: HGSH) because there is strong evidence that the Chinese real estate sector is actually beginning to stabilize.

China had implemented measures to control property prices for more than two years with new rules preventing the buying of second homes, increasing higher minimum down-payments and the introduction of property taxes in some cities with the latest data release indicating these measures have at least stabilized the market.

Investing in Chinese stocks is not for the risk adverse given the accounting scandals that have hit many a Chinese reverse merger and investors need to keep that in mind, but SmallCap Network, a provider of comprehensive research and opinions on CTC, XIN, SYSW, EJ, SFUN, HGSH and CHLN, has compiled an overview of the Chinese real estate services stocks and Chinese real estate developer stocks which they have highlighted as worth watching.

The following are Chinese real estate services stocks with US listings which SmallCap Network has put together and has written its investment advice  about. The original article can be read here.

E-House (China) Holdings Limited (NYSE: EJ). Conducting its services through China Real Estate Information Corporation (CRIC), E-House (China) Holdings Limited primary services include real estate agency services, secondary real estate brokerage services, real estate information and consulting services, real estate advertising services, real estate online services and real estate investment fund management. The last time E-House (China) Holdings Limited reported earnings, it primary agency services had big revenue increases both sequentially and year-over-year with the company noting that the China’s real estate market was showing signs of warming up thanks to pent-up demand. Hence, E-House (China) Holdings Limited expected healthy transaction volumes for the second half. On Wednesday, E-House (China) Holdings Limited fell 1.47% to $4.02 (EJ has a 52 week trading range of $3.37 to $8.95 a share) for a market cap of $474.2 million plus the stocks is down plus the stock is down 5.8% since the start of the year and down 85.5% over the past five years.

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IFM Investments Limited (NYSE: CTC). The exclusive franchisor in China for the CENTURY 21 brand, IFM Investments Limited offers company-owned brokerage services, mortgage management services and franchise services. The last time IFM Investments Limited reported earnings, it returned to profitability and the company noted improving buyer sentiment as many buyers believed the real estate market had bottomed out. Hence, secondary transaction volumes rose sequentially by 85.9% in Beijing and 61.9% in Shanghai while primary transactions grew 70.1% and 64.1% in those cities, respectively. On Wednesday, IFM Investments Limited rose 0.74% to $1.37 (CTC has a 52 week trading range of $0.87 to $2.94 a share) for a market cap of $20.33 million plus the stock is up 52.2% since the start of the year and down 95% over the past five years.

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SouFun Holdings Limited (NYSE: SFUN). The operator of a real estate Internet portal in China, SouFun Holdings Limited has real estate-related content, search services, marketing and listing coverage for over 300 cities across China plus it operates a home furnishing and improvement Website. The last time SouFun Holdings Limited reported earnings, it noted signs that the Chinese real estate market is stabilizing. Moreover, SouFun Holdings Limited raised its revenue guidance for the fiscal year of 2012 to between US$390.0 million and US$410.0 million from between US$380.0 million and US$400.0 million – a year-on-year increase of 13.4% to 19.2%. On Wednesday, SouFun Holdings Limited rose 0.11% to $17.73 (SFUN has a 52 week trading $10.87 to $20.40 a share) for a market cap of $1.40 billion plus the stock is up 21.4% since the start of the year and down 3.5% since 2010.

Chart

Syswin (NYSE: SYSW). A primary real estate service provider in China, Syswin primarily provides real estate sales agency services to property developers relating to new residential properties. In early September, Syswin received a preliminary non-binding proposal from Mr. Liangsheng Chen, CEO, President and a director of the company, to take the company private a $2.00 per American Depositary Share in cash. A special Committee has been set up to evaluate the proposal and to retain a financial advisor and legal counsel but no decision has been made just yet. On Wednesday, Syswin fell 1.07% to $1.85 and it should be noted that Syswin has a daily trading volume below 5,000 shares. Otherwise, Syswin has a 52 week trading range of $0.61 to $2.19 a share plus the stock is up 100.3% since the start of the year but down 69.7% since late 2010.

Chart

Xinyuan Real Estate (NYSE: XIN). A residential real estate developer that has operations in seven cities in China located in Sichuan Province, Anhui Province, Shandong Province, Jiangsu Province and Henan Province, Xinyuan Real Estate focuses on affordable housing for middle-income Chinese residents and builds multiple residential buildings that include multi-layer apartment buildings, sub-high-rise apartment buildings or high-rise apartment buildings. Investors should note that it was recently reported that Xinyuan Real Estate’s US arm had bought a parcel of land located at Kent Avenue and South 8th Street in the Williamsburg neighborhood of Brooklyn, New York, for $54.2 million. Otherwise and the last time Xinyuan Real Estate reported earnings, it reported record contract sales, revenue and net income and the company was looking forward to a record year. On Wednesday, Xinyuan Real Estate fell 1.10% to $2.69 (XIN has a 52 week trading range of $1.70 to $3.95 a share) for a market cap of $196.19 million plus the stock is up 53.7% since the start of the year and down 82.5% since the end of 2007.

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China Housing & Land Development (NASDAQ: CHLN). Focused on on Tier II and Tier III cities in Western China, China Housing & Land Development is involved in the acquisition, development, management and sale of commercial and residential real estate properties. The last time China Housing & Land Development reported earnings, the company noted that it believed market conditions will continue to improve and that consumers will continue to resume their property buying activity. Likewise, China Housing & Land Development is benefiting from the fact that many of its property buyers are first-time home buyers or first-time upgraders. On Wednesday, China Housing & Land Development rose 3.705 to $1.40 (CHLN has a 52 week trading range of $0.91 to $2.06 a share) for a market cap of $49.12 million plus the stock is up 405 since the start of the year but down 77.95 over the past five years.

Chart

China HGS Real Estate (NASDAQ: HGSH). Focused on selected Tier II and Tier III cities and counties, China HGS Real Estate is involved in the construction and sale of residential apartments, car parks and commercial properties. On Wednesday, China HGS Real Estate fell 2.38% to $0.410 with the daily trading average being less than 4,000 shares – meaning there is not too much information out there about the stock. China HGS Real Estate has a 52 week trading range of $0.24 to $1.18 a share plus the stock is down 39.7% since the start of the year and down 90.1% over the past five years.

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The Bottom Line. I suspect that Chinese real estate services stocks E-House (China) Holdings Limited (EJ), IFM Investments Limited (CTC), SouFun Holdings Limited (SFUN) or Syswin (SYSW) are a better bet than Chinese real estate developer stocks Xinyuan Real Estate (XIN), China Housing & Land Development (CHLN) and China HGS Real Estate (HGSH) but given that the last three seem to have a focus on Tier II and Tier III cities, I would not rule them out either.

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Acerca de Lucas Vargas:

  • Empezó en Grupo ZAP como el VP de Sales y en 2016 cuando la empresa tenía 60 empleados. Fue nombrado COO de VivaReal tomando el mando de Brian Requarth el Co-Fundador. VivaReal lanzó en Colombia y se trasladó a Brasil. En 2017 se hizo CEO del Grupo ZAP.
  • Ha trabajado en Mexico en PWC y en el Banco Santander
  • Tiene un Master de Business Administration de Harvard
  • En noviembre este año después de la fusión de OLX Brasil y Grupo ZAP fue nombrado el CEO del OLX Business Unit. Lidera la empresa junto con Andries Oudshoorn y Marcos Leite
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Simon Baker is the Founder and Executive Chairman of Online Marketplaces and Property Portal Watch. Involved with property portals for 15 years, he’s a well-recognized expert and industry consultant.
As former CEO/MD of the REA Group for 8 years, Simon led the group to its current market-leading position. When he joined REA Group in 2001, it had $4m in revenues, $6m in losses and an $8m market cap.
By 2008, the company presided over $155m in revenues, $35m in EBITDA and enjoyed a peak market cap of $1b. Simon is currently Chairman of the Mitula Group and Real Estate Investar and a serial portal founder and, investor.