E-House China Holdings (EJ) is cashing in on China’s super hot housing market as fourth quarter revenue is expected to jump more than 160%. The stock has attractive valuations. E-House is trading at just 11.6x forward earnings.
Company Description
E-House offers a range of services to the Chinese real estate industry including acting as the primary sales agent, the secondary broker, consulting, advertising and investment management. E-House has an extensive geographic coverage, operating in more than 30 cities across China through a network of 3500 real estate professionals.
The company’s proprietary real estate information database and analysis system, called “CRIC” was merged with SINA Corporation’s online real estate business and spun-off in an IPO on the NASDAQ in October 2009 (under the ticker CRIC.)
E-House remained the majority shareholder of CRIC following the IPO, with a 50.04% stake. SINA became the second largest shareholder, with 33.35% of shares outstanding.
Third Quarter Revenue Soared 119%
On Nov 17, E-House reported its third quarter results which easily surprised on the Zacks Consensus estimate by 38.71%. Earnings per share rose 220% to 43 cents from 13 cents in the third quarter of 2008. Analysts had been looking for just 31 cents.
Revenue skyrocketed to $86.2 million from $39.3 million in the year ago period. The largest segment, the primary real estate agency service, grew revenue by 195% to $59.4 million from $20.1 million in the third quarter of 2008.
Total gross floor area (GFA) climbed 235% to 3.3 million square meters from 1.0 million square meters. Value of new properties sold grew by 314% to $4.3 billion from $1 billion a year ago.
As China’s growth accelerated in 2009, so did E-House’s.
“For the whole year of 2009, we expect to achieve more than 10 million square meters of new properties sold, which will set an industry record and further solidify our industry leadership position,” said Mr. Xin Zhou, E-House’s executive chairman.
Zacks Consensus Estimates Jump
E-House expects revenue in the fourth quarter to rise between 164% to 172% compared to 2008 to $103 million to $106 million. Given the huge year over year revenue increases and continuing success at beating estimates in the third quarter, it is not surprising that the Zacks Consensus Estimates have been jumping the last 2 months.
The fourth quarter Zacks Consensus is up 34.4% to 43 cents from 32 cents in the last 2 months.
The full-year Zacks Consensus jumped 21.9% to $1.17 from 96 cents in the last 60 days. Analysts expect earnings growth of 153.26% over 2008.
It’s more of the same for 2010. The 2010 Zacks Consensus climbed 18.85% to $1.45 per share in the last 60 days.
Of course, the company’s projections anticipate continued stimulus from the Chinese government and a robust Chinese economy. Recently, the government has indicated that it is tightening lending requirements on real estate to prevent a possible bubble from developing. It’s too early to know the impact of this tightening but Zacks estimates are staying elevated, for now.
E-House is scheduled to report fourth quarter results on Mar 11.
Value Fundamentals
E-House is a Zacks #1 Rank (strong buy) stock. It has a price-to-book ratio of 2.91. E-House also has a solid 1-year return on equity (ROE) of 15.65%.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service.
