Tuesday, Credit Suisse upgraded E-House China Holdings Limited (EJ) shares to Outperform with a price target of $17.42.
Analyst Cheng noted that year-to-date average transaction volume for major cities in China grew 77% year-over-year, leading him to believe that the property market bottomed out in 2008 and is trending towards a recovery. This is also evidenced by stable property prices and developer interest in buying land.
The analyst forecasts E-House's GFA sold will grow 75% in 2009 or 7.2 million square meter on 15-17 million square meter available for sale this year. Given E-House's historical sell-through rate of 60-70%, the analyst believes his forecasts are reasonable. Its consultancy business grew 46% year-over-year in first quarter of 2009, and is on track to grow at least 30% in fiscal 2009, after a 480% rise in fiscal 2008.
The analyst's price target of US$17.42 employs a SOTP valuation of 20x P/E (vs historical average of 21x) for its non-cash fiscal 2009 P/E and US$3.18 net cash per share. The analyst believes this is justified as he forecasts E-House's earnings to see a CAGR of 29.4% over 2009-2011.
Currently, EJ is down $0.52 or 3.32% and trading at $15.15.
For comments and feedback: editorial@rttnews.com