China's E-House Holdings Limited (NYSE:EJ), is a residential real estate service company, which was incorporated on August 27, 2004. Through its subsidiaries, the company is principally engaged in providing real estate agency and brokerage services in both primary and secondary chinese real estate markets while covering the consulting and information services side of the business.
E-House's principal focus consists in its real estate brokerage services, comprising three metropolitan areas within China, including Shanghai, Wuhan, and Hangzhou, as well as in Hong Kong and Macau.
In its Primary Services, E-House develops a signature identity and brand that are distinctive to a project, establishing long-term awareness of that particular project among prospective purchasers.
In relation to the Secondary Market, E-House engages in listing and brokerage services including both sales and rentals with the main Shanghai, Wuhan and Hangzhou areas as primary targets. As of March 31 of 2007, E-House had 75 stores in Shanghai, 17 stores in Wuhan and 16 stores in Hangzhou.
Its third business aspect, Real estate consulting and information services, includes tailored applications to meet the needs of developer clients at various stages of the project development and sales process. The consulting services is divided into land acquisition consulting and property development consulting.
Worth noting here is the fact of E-House offering an enhanced service by its real estate information database and analysis system called CRIC (China Real Estate Information Circle system). System provides up-to-date and in-depth information covering residential and commercial real estate properties in all regions in China. This has proven to be a very effective tool, among other things for E-House - against competition in the industry, which by the way remains strong and continually challenged by Century 21 and Coldwell Banker. However, E-House holds at current levels a leading position based on its rapid growth and its unparalleled geographic coverage. On September 25th, E-House was recognized as China's leading real estate consulting and agency service company.
I think a major focal point when analyzing China's real estate industry, has to remain on the urban aspect of it. Urbanization rate is a major indicator representing a country's modernization level. There is no disputing at this point in my opinion, to China's embracing the capitalistic approach in its economy thus pushing country's direction into a more modernized, accessible and resourceful economy. During the second quarter of fiscal '07 the GDP in China rose at an astounding 11.9%. Without doubt, the real estate industry is expected to benefit from such growth.
In the past decade, China's cities expanded at an average rate of 10% annually. From 1978 to 2004, China's urbanization rate rose from 17.9% to 41.8% and its urban population increased from 170 million to 540 million. By the middle of this century, the country's urbanization rate will rise to 75% or so in order to support its overall modernization process, placing the improvement of housing construction and human settlements development at the top of the government's agenda.
Based on these facts and including supply and demand model, in that of the price level moving toward the point that equalizes quantities supplied and demanded, without considering here, E-House's leading industry status ; this company seems uniquely positioned to benefit from the industry's present boom and the long-term projected growth.
E- House's market cap stands at $1.14 billion. Its peg is only 0.75 suggesting stocks poised for price appreciation. Profit margins have come in at 34.42%. Operating margins posted at almost 50%. Revenues, $82.36 million for a Net income of $23.68 million. Current ratio 2.47.
On August 22 - E-House reported second quarter earnings - Total revenues were $24.0 million for the second quarter of fiscal '07, an increase of 147% from $9.7 million for the same quarter in fiscal '06. For the first half of 2007, total revenues were $40.0 million, an increase of 193% from $13.7 million for the same period in 2006. Company's CEO reiterated the fact of being very "pleased with the strong growth company experienced for second quarter and first half of 2007".
Most stocks in the real estate industry have seen steadily growing revenue over the past few years. This stock has done much better than most of its peers. Its revenues have grown very rapidly. Growth estimates for next fiscal '08 are projected at 39.2%.
Since its initial public offering EJ has fared extremely well. The chart has had its share of volatility but all in line with market decline, I might add - over the subprime debacle. At this point it is important is to note, that the trend currently is certainly going in the right direction with the outlook for rest of fiscal 2007 remaining positive.
Stock should realize a $28-$30 price levels short-mid term.