SouFun Holdings Limited
) has entered into strategic cooperation agreements with Shenzhen
World Union Properties Consultancy Co., Ltd. and Hopefluent Group
Holdings Limited, the leading new home agency companies in China.
Shares of the leading real estate Chinese Internet portal jumped 6%
to close at $10.07 yesterday, following the announcement.
This arrangement brings together three prominent players, with one
online and two offline entities collaborating to not only serve
China's growing new home and resale market but to also give a boost
to the platform.
SouFun - World Union Strategic Cooperation
World Union, a Chinese agency company, operating for over two
decades, plans marketing programs and related consultancy services
for property sales. China Real Estate Index System ranks World
Union #1 among the top 50 real estate agencies in China.
Apart from other activities, the two companies will jointly work on
advertising, e-commerce, listing service, new home agency and
consultancy. The companies might also partner in Internet and real
estate financing businesses. Additionally, SouFun will also have a
10% stake in World Union following a private placement for new
The agreement involves a total cash consideration of $120 million.
The transaction will see the light of day upon approvals from World
Union's shareholders and the China Securities Regulatory
SouFun - Hopefluent Strategic Cooperation
Hopefluent provides services spanning from planning of marketing
programs and related consultancy services to handling of property
sales and mortgage arrangements. It is predominantly engaged in
real estate agent business of the primary and secondary property
markets in China.
China Real Estate Index System ranks Hopefluent at #3 on the list
of the top 50 Chinese real estate agency companies.
Per the agreement, the two companies will come together for
advertising, e-commerce, listing service, new home and resale
agency, consultancy and property management, among other work. The
entities intend to form a joint venture in Internet and real estate
financing businesses mainly to cushion Hopefluent's core new home
agency business. Here also, SouFun will own a 17% stake in
Hopefluent following a private placement for new shares.
This agreement involves a total cash consideration of $91 million.
The transaction will culminate upon approvals from Hopefluent's
shareholders and the Hong Kong Stock Exchange.
Rationale of the Strategic Cooperation Agreement
Collaborating with World Union and Hopefluent will help SouFun,
which provides online information regarding real estate development
in China, to be more conversant with real estate transactions.
World Union and Hopefluent, on the other hand will benefit from
enhanced operations as these would integrate their operations with
an online platform.
The Chinese real estate market has lately been experiencing a
slowdown. As per China Index Academy, an independent property
research organization owned by SouFun, housing prices in 100 cities
declined 0.5% sequentially in June, worse than the 0.32% sequential
decline in May (the first price downturn in 23 months).
As per SouFun's data, transactions across major cities witnessed
a 19% year-over-year downturn in the first half of 2014. New home
transactions in Beijing and Shanghai also experienced a sharp
downfall of 48.6% and 32.8%, respectively.
As per the Global Economic Data, the Chinese GDP is forecast to
decline over the next decade. Nonetheless, it will be better than
global GDP and top the chart among the emerging economies. It seems
that the slowdown is a strategic initiative to drive growth by
luring consumption spending, which is a more sustainable way out
than other macro factors.
China being the most populated nation with the world's second
biggest economy, will always see demand building up for properties.
In March, China announced its goal to reach a 60% urbanization rate
by 2020, implying another 882 million people move into cities from
rural areas. Hence, through this collaboration, wherein three
premier entities join forces, buyers will be better served and the
real estate market will see more opportunities to gain momentum.
Zacks Rank and Other Stocks
SouFun presently carries a Zacks Rank #3 (Hold). Better-ranked
business service providers include
Avis Budget Group, Inc
ExamWorks Group, Inc
Iron Mountain Inc.
). While Avis Budget and ExamWorks sport a Zacks Rank #1 (Strong
Buy), Iron Mountain carries a Zacks Rank #2 (Buy).
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