Following last year’s slump, China’s housing market got kicking again in the spring. And so did E-House (China) Holdings (NYSE:EJ - News), one of the country’s largest residential real estate brokerage firms.

The company also operates a real estate database and consulting service.

That business is in the early stages of getting spun off as a separate, U.S.-listed company in combination with the real estate unit of Chinese Web portal Sina (NasdaqGS:SINA - News).

As buyers returned to the market, E-House’s business picked up.

In the second quarter, it sold 183% more in total square meters than in the prior year’s Q2, for a total of 1 million square meters, or 328 million square feet.

If units averaged 500 square feet, that would come to around 656,000 units. The value of new homes sold jumped 172% to $3 billion.

Good thing there’s volume and rising prices because sales commissions are much lower than in the U.S. -- under 2%. E-House commissions rose from 1.19% in the first quarter to 1.38% in the second quarter.

E-House’s revenue grew 48% to $63.5 million, and profit climbed 71% to 24 cents per American depositary receipt, or $19.3 million in net income. In 2008, profit had dropped 20% from 2007, the market peak. E-House’s management said on Aug. 12 it was one of the earliest and biggest beneficiaries in the market rebound.

With a strong pipeline from developers who’ve hired E-House to sell new units, the company forecast even greater growth in the third quarter, a 98% to 103% jump in revenue from the year-ago period to $78 million to $80 million.

The firm says it’s the exclusive sales agent for more than 40 projects across China. Many of its rivals are local or regional outfits -- or developers who opt to sell their own units.

E-House’s biggest client, analysts say, is developer Evergrande Real Estate Group, which is preparing a $1 billion public offering in Hong Kong.

The government eased lending policies late last year to get buyers back in the market after the global recession slowed China’s economy and demand for new homes.

Government actions, including a $586 billion stimulus package, worked, as did price cuts by developers. Demand spiked. And prices started rising, some say, too fast.

“Prices are definitely up, but still below the peak in many cities,” said analyst Paul Keung of Oppenheimer & Co. in a phone call from China. “We’re probably in the middle of a long secular growth trend in the sector, but it will have cycles.”

Recently, stocks of major real estate companies in China fell on concerns that banks would reduce lending. China Construction Bank said it would cut new lending by 70% to reduce the risk of bad debt.

Shares of one of E-House’s biggest customers, giant developer China Vanke, fell 5.6% Aug. 19. Earlier, China Vanke reported double-digit revenue and profit gains this year, and said it expected more new supply later in the year as the business climate improved.

E-House’s stock fell 17% Aug. 17 to near 18, the same day the overall market took a hit, erasing gains made a week earlier. It was last trading near 19.

Its shares had been as high as 36 in November 2007 and as low as 4 in late November 2008. Since March, shares have generally been rising. Despite concerns of tighter lending and other government actions to cool prices, analysts don’t see price drops coming on a widespread basis anytime soon. Analysts tracked by Thomson Reuters estimate E-House’s profit for the full year will grow 96% over last year to 88 cents per ADR, followed by 30% growth the next year.

“The pace (of China’s housing market) in the second half will continue to grow, just at a slower rate,” Keung said. “We’re going from 50% growth to 30%, not 50% to zero.”

E-House grew faster in the second quarter than the overall market, the company said in a statement.

Sell-through rates topped 70%, up from 30% to 40% in the second half of 2008. Backlog for 2010 and 2011 has doubled in recent months.

China’s fast-growing economy has spawned a rising middle class in pursuit of new homes in urban areas.

Developers often outsource sales functions to real estate services firms such as E-House, which employs more than 3,500 sales professionals.

Though it’s a leading player in and around its base in Shanghai, E-House has expanded to many other cities in China.

Between 2001 and 2008, E-House sold more than 13 million square meters (43 million square feet) of primary properties in new developments in 43 cities in China.

The firm, founded in 2000, also sells existing homes, a much smaller part of its overall business. That business took in $5.7 million of the $63.5 million in second-quarter revenue vs. $41.2 million from primary new developments.

Its real estate consulting and information services division posted $13.7 million in second-quarter revenue, up 23% from the prior year.

A key part of that division is E-House’s proprietary real estate database and analysis system, called China Real Estate Information Circle System, or CRIC for short.

In February, E-House joined with Sina to build an online real estate portal in China. E-House licenses CRIC to the new venture. Sina is the majority owner.

Their ties deepened more recently when the two agreed to merge E-House’s real estate information and consulting business and Sina’s online real estate ad business in a separate firm named CRIC.

Under terms of the proposed IPO on a U.S. exchange, E-House will be the majority shareholder and Sina the second-largest shareholder. An E-House spokesman said executives weren’t comfortable talking to the press because of the pending IPO.

Analyst Keung said of the proposed IPO: “It’s a chance to further leverage the business.” He estimates the venture will add $30 million to $40 million in revenue next year and help E-House’s bottom line.

“Two pieces are worth more than one,” he said.

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Well this is good news for those brokers working in china. And I believe everything that happen could have a reason why it is happen, God might have a plan for that. ^_^

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Interesting read.











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