SouFun:1Q16results preview

类型：公司研究机构：麦格理证券股份有限公司研究员：Hillman Chan,Wendy Huang 日期：2016-06-08

Event.

    We expect direct sales to grow on track from solid secondary home volumegrowth (up 18% QoQ) but net loss to widen in 1Q16 due to more rapidheadcount addition (10k+). We see a high likelihood of an A-share Wanli dealdue to quality SFUN’s assets being injected and no FX outflow involved, buttiming remains uncertain. Cut FY16 NPM from -3.9% to -9.1% to factor inweaker ad revenue and more hiring. Trim SOTP-derived TP from US$8.3 toUS$8. Retain OP on market share gain, upside in direct sales commissionrates and the A-share deal.

    Impact.

    1Q16 results on Jun 2. We forecast revenue to grow 68% YoY and decline31% QoQ to US$208mn in 1Q16, 8% above consensus, on the back of strongrevenue growth in direct sales of secondary home (up 54% QoQ) but partlyoffset by weaker ad (down 66% QoQ). We expect net loss to widen fromUS$69mn in 4Q15 to US$80mn in 1Q16, higher than consensus of US$73mnloss, due to weaker ad and direct sales headcount addition of about 10k+.

    Direct sales growing on track but profitability under pressure. Regardingthe direct sales of secondary home, SFUN continued to ramp up sales volume(up 18% QoQ) and enjoyed a higher effective commission rate (0.7% in 1Q16vs 0.55% in 4Q15), we thus model secondary home revenue to grow 54%QoQ. However, profitability remains under pressure due to net addition of10k+ direct sales staff with more hiring in secondary home but partly offset byreduction in rental and home furnishing.

    Weak advertising and stable listing. We expect ad revenue to decline morethan seasonally by 30% YoY in 1Q16 due to less demand from developersand more focus on primary home direct sales. Besides, we expect listingrevenue to rise 5% YoY in 1Q16 after YoY declines in the past six quartersdue to increase in subscribing agents and higher mobile monetization.

    Limited visibility on timeline of A-share Wanli deal. A-share Wanli will holda shareholder meeting on Jun 6 to approve asset and share swap with SFUN.

    Wanli will then submit to CSRC if passed. While regulators recently tightenedtheir grip on reverse listings into A-share, we still see a good chance for theWanli deal because SFUN’s assets are of good quality and the deal involvesno foreign exchange outflow of US$. But approval timing remains uncertain.

    Earnings and target price revision.

    Cut FY16 NPM from -3.9% to -9.1% to factor in larger 1Q16 loss from moredirect sales headcount. Trim SOTP-derived TP from US$8.3 (US$3.8 formarketing/listing/coupon, US$4 direct sales US$0.4 cash) to US$8 (US$3.4for marketing/listing/coupon, US$4.3 direct sales US$0.3 cash).

    Price catalyst.

    12-month price target: US$8.00 based on a Sum of Parts methodology.

    Catalyst: A-share deal, commissions/take rate schemes, market share gainAction and recommendation.

    Retain OP on share gain, upside in commission rates and A-share deal.