The following is a small-cap-insight column, on a company
with a market cap of $5 billion, published by Seeking Alpha.
SouFun Holdings, China’s premier online real estate marketing
firm, generates a solid ROE and is poised for long term but due to bubble fears
and lofty valuation, now is not a time to buy.
SouFun Holdings (SFUN)
operates the biggest real estate internet portal in China. Through its
principal website (www.soufun.com) the
company provides marketing, e-commerce, listing and other value-added services
to China's real estate sector. The company has around 2 million active users
and generates ~700,000 daily unique visits. Earlier in April, the California
based Glaucus Research Group, also a SA contributor, published three research
reports which advocated a short case for SouFun holdings. The research firm
gave a "strong sell" rating to SouFun's stock. However, I believe
that SouFun was not a "strong sell" then and it isn't now. Glauscus
Research has highlighted some of the company's questionable investment
decisions and the role of its Chairman and founder. However, those factors
alone did not justify a short case. The fact is that SouFun has been able to
grow its revenues and earnings in a legitimate way. Its core business,
marketing services, has struggled with modest growth but the strong numbers
from other segments have been driving its earnings.
However, what
Glaucus Research correctly pointed is that there are certain risks (political,
economic and regulatory) associated with investment in any Chinese company,
which sometimes translates into an … read full article at Seeking Alpha.
