Shares of Fang Holdings Ltd. (SFUN, Financial) – China's leading real estate internet portal headquartered in Beijing – have been downtrending since the company released its first-quarter figures.
Fang Holdings is trading at $3.38, down 28 cents or minus 7.65% since June 20 when the company reported a fully diluted loss of 2 cents per American Depositary Share (ADS) or a net loss attributable to Fang shareholders of $10.5 million. Both are non-GAAP measures. The company missed analysts’ expectations on first-quarter earnings by 1 cent since they forecasted that Fang would have reported a loss of 1 cent as shown in the picture below.
Source: Yahoo Finance
The difference between actual EPS and forecasted EPS generated a negative surprise of 100%. First-quarter bottom line represents a significant improvement from the figure of the comparable quarter of fiscal 2016 when Fang closed the quarter with a fully diluted loss of 23 cents per ADS, a non-GAAP measure.
For the first quarter of 2017, the fully diluted loss per American Depositary Share – according to the U.S. GAAP – was 3 cents that, multiplied by a weighted average number of ADS outstanding of approximately 441.823 million, gives a net loss attributable to the shareholders of Fang of about $12 million.
Analysts produced their expectations on Fang Holdings' first-quarter earnings on the basis of revenue forecasted to come in at $124.71 million on average, ranging between a low of $77.81 million and a high of $164.3 million. But Fang Holdings missed the average analysts’ expectation on first-quarter revenue by $10.74 million because China's leading real estate internet portal closed the quarter reporting revenue of $109.8 million, which represents a 46.3% decrease on a year-over-year basis. This worsening in the company’s total revenue was the result of a sharp decline in the revenue that came from the e-commerce services segment that usually accounts for 35% to 38% of Fang Holdings’ total revenue.
The company says Fang Holdings “is undergoing adjustments to its transformations and is returning to open-platform strategy. Before these changes are finalized, the company will see a decrease in its top-line revenue.”
Let’s have a quick look at the sales figures of each of the company's service-offering segments at the end of the first quarter and compare them to the same quarter of one year ago:
- E-commerce services revenue went down 69.5% to $39.9 million.
- Marketing services revenue went down 10.2% to $27.3 million.
- Listing services was the only growing segment during the quarter with a 41.4% increase year over year to $34 million.
- Value-added services declined 25.9% to $6.3 million.
- Internet financial services decreased sharply by 78.9% to $2.2 million.
The company says that “net cash used in operating activities was $11.0 million in the first quarter of 2017 compared to cash flow used in operating activities of $67.2 million in the same period of 2016.”
According to the first-quarter report, the company has now about $542.6 million in cash on hand and securities, or $1.23 per share. The current ratio (MRQ) is 1.11 versus an industry average of 4.52.
The total debt amounted to $571.83 million as of the first quarter, which is shared as follows: 35.15% in short-term debt, 13.14% in long-term debt and the remaining 51.71% in bonds. The total debt-equity (mrq) ratio is 117.67 toward an industry average of 76.60.
The company has a market capitalization of $1.49 billion, the price-earnings (P/E) ratio is -9.34, the price-book (P/B) ratio is 3.06 and the price-sales (P/S) ratio is 1.63.
Analysts set a forward P/E ratio of 16.90 that multiplied by an average EPS of 9 cents, as forecasted for full-year 2017, gives us a value of $1.521 per share. Therefore, the stock may look overvalued by the market at the moment.
Analysts paint a positive outlook about Fang Holdings forecasting a 122.20% growth from 2017 to 2018 and a 266% growth per annum for the next five years.
The analysts’ average target price per share is $3.93, and the recommendation rating is 2.8 out of 5. This means that analysts see a 16.27% upside in the current market valuation, but the consensus is holding shares of this company.
During the first quarter, Chris Davis increased its position in Fang Holdings by 17.26% to a total volume of 20,435,842 shares held.
Disclosure: I have no positions in Fang Holdings.
