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.