E-House: A Bet Against China’s Housing Downturn

Anyone who doubts that China’s property slowdown is real need look no further than the latest quarterly results from real estate services firm E-House (NYSE: EJ) (results announcement). Revenue was up by 7 percent due to strength from non-brokerage services, but brokerage revenue actually fell 9 percent and operating profit tumbled by more than 30 percent. Interestingly, the company guided to first-quarter revenue growth of about 15 percent, without providing any reason for the pickup amid all the sector uncertainty. Given that admittedly small bright spot in an otherwise gloomy landscape, coupled with a recent share sell-off that has left its valuation well below that of more service-oriented rivals Soufun (NYSE: SFUN) and E-House subsidiary China Real Estate Investment Corp (Nasdaq: CRIC), E-House itself could look like a nice buy at the moment while the market waits for more clarity on the future of Chinese real estate.

VERDICT: E-House looks like a nice short-term buy vs rivals based on valuation, guardedly positive outlook, and recent sell-off