Key points of investment
High quality assets have returned to A-shares, and leading real estate internet leaders have emerged. As a result of this restructuring, Soufang.com's advertising and marketing business returned to A-shares, and the new company became a scarce target in the A-share post-real estate service market, with huge room for growth. As the largest real estate media information platform in China, Souhousing Network has outstanding online traffic and brand advantages compared to other participants. Since 2014, the company has steadfastly transformed e-commerce, and epitaxial expansion is beginning to bear fruit. In 2015, SFUN.N's revenue was US$880 million, an increase of 25.7% over the previous year; e-commerce business, advertising and marketing, listing, other value-added services, and internet financial services accounted for 54%, 28%, 12%, 3% and 2%, respectively. The advertising and marketing business is a traditional business where the company has a strong competitive advantage. In the future, it will benefit from the continued recovery of China's real estate fundamentals, increased investment in new housing advertising in the context of inventory removal, and the increase in the company's market share, and contribute steadily to performance.
Raising 3 billion yuan to consolidate capital strength and enhance the company's core competitiveness. The company raised 3 billion yuan mainly in internal management platform and system upgrade projects (180 million), housing database construction projects (1.7 billion), overseas market expansion projects (507 million), mobile promotion projects (170 million), and technology research and development projects (no more than 452 million). Among them, the housing database project has invested the most. In the future, the company is expected to rely on a powerful housing database system to expand and add value in all parts of the real estate service industry chain based on big data, and continue to enhance the company's core competitiveness.
Valuation is 40 times higher, and there is still some room for market capitalization to grow. The estimated value of assets injected by search housing was 16.2 billion yuan, corresponding to the 2016 promised performance of 800 million yuan. The price-earnings ratio of the injection was 20 times. After asset restructuring and fund-raising are completed, the company's share capital will rise to 960 million shares. Based on the suspension price of 3,009 yuan, the market value of the resumption of trading is 32 billion, corresponding to the promised net profit of 800 million in 16 years. The PE valuation is 40 times, compared to comparable companies (World Union Bank 27 times in 16 years and 365 Network 38 times in 16 years). The valuation is reasonable.
Investment advice: After the restructuring, the new company became a scarce target in the blue ocean of the A-share real estate after-sales service market. The company will grow through advertising and marketing, and will continue to benefit from the recovery of China's real estate market and the expansion of entry brought about by the transformation of e-commerce. According to performance promises, the company's EPS in 2016-2018 is expected to be 0.8, 1.1, and 1.4 yuan respectively. Corresponding to the suspended stock price, PE is 40, 31, and 24 times, respectively, covering it for the first time, giving “increase in holdings”
ratings.
Risk warning: restructuring progress falls short of expectations; recovery in real estate fundamentals falls short of expectations