Southhill Partners'  Instablog

China Real Estate Information Corp (CRIC) is the largest provider of real estate information and consulting services in China in terms of market share. It is a subsidiary of E-House (EJ), a leading real estate services company in China. The ipo offers 18M shares at the price of $12 and started trading on NASDAQ today under the symbol "CRIC".

Upon the completion of this offering, CRIC will acquire the online real estate business operated by SINA (SINA), a leading online media company in China. Post IPO, the public owns 14.48% of the company, while E-house (EJ) still holds a majority of 50.04%, SINA 33.35%, and the rest by a minority holder.

The company has two pieces of business: Real Estate Information and Consulting Services and the Real Estate Advertising Services. 

CRIC owns a very valuable and unique piece of asset: the CRIC database system, the largest database with detailed information and transaction data on China’s real estate sector including land and residential, office and commercial buildings. As of Q2 2009, it has detailed data on over 38,200 developments or buildings and over 24,200 parcels of land for development in 56 cities throughout China. CRIC has experienced significant growth in revenue since it was commerciallized and offered to external subscription in July 2006. Before that E-house only used it internally.    

For the first half of 2009, CRIC and LeJu, SINA's online real estate business, combined generated revenue and income of $46M and $18M respectively, at a high net margin of 39%.

With the IPO and the merger, there are several potentials in the future: 

The merger of CRIC and LeJu is expected to create significant synergy.

The fresh capital from IPO has the potential to drive faster growth. The company plans to use the proceeds for investments in the information and operational systems, expansion of sales and marketing efforts and general corporate purposes, including possible acquisitions of complementary businesses in the future.

One major concern on CRIC is the highly concentrated client base: Evergrande alone accounted for over 50% of the revenue in 2008. The top three developer clients accounted for 56.6%, 15.6% and 10.3% respectively in 2008. The top client, Evergrande still accounted for 46.9% of the revenue in the first half of 2009, while no other clients accounted for more than 10%. Further diversification of client base certainly will be great news for investors.

It is also worth noting that the CEO of E-house (EJ) will become the CEO of CRIC, while remaining as chairman of the board of E-House (EJ). This clearly demonstrates management's determination to grow the business of CRIC post IPO.

Disclosure: long SINA, no position in CRIC, EJ