A New Real Estate Bull Market

Robert Hsu, May 26, 2009

In this Issue:

The Leading Chinese Residential Brokerage

When I was in China last month, I visited China's leading real estate services company. This company has been a long-time holding in China Strategy, but the company had been lagging in the current financial crisis. So I was interested to see how the company was faring in 2009.

What I discovered led me to put this real estate company back as a buy – I told my China Strategy subscribers to load up!

Here's why: This company is on track to beat analysts recommendations during the second quarter, as its business has picked up significantly this year. There are four things, in particular, that led me to believe this company is on track to benefit greatly from China's rebounding housing market:

Higher Real Estate Sales Volume -- With increased bank lending in the U.S., lower real estate prices have subsequently enticed Chinese to buy. As a result, this company's March sales volume was up nearly 100% from last year.
A Growing Information Service/Consulting Business -- This segment is the company's newest and highest margin business, making up 32% of revenue last year. This business is expected to grow 20% to 30% this year with little competition.
Higher Market Share -- Developers are lowering prices to speed up sales, which benefits this company greatly since its profits rely heaving on growing transaction volume, not sale prices.
Underestimated Earnings -- The Street is missing out on the sharply higher real estate volume in China right now, so analysts' estimates for the second quarter are low. But if this company's business continues as it is now, we should see its second-quarter earnings blow analysts' estimates out of the water.

Given these improving fundamentals, this company's business is on track to benefit from the turnaround in China's real estate market. In fact, the company's shares have already rallied sharply this year -- up 73%! To learn how you can start profiting today, join China Strategy.

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