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Alberto Abaterusso
Alberto Abaterusso
Articles (582) 

Fang Holdings Downtrending After Posting 1st-Quarter Figures

Company closed quarter with a loss of 2 cents and missed analysts' expectations

June 22, 2017 | About:

Shares of Fang Holdings Ltd. (NYSE:SFUN) – 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.

About the author:

Alberto Abaterusso
Alberto Abaterusso is a freelance writer based in The Netherlands. He primarily writes about gold, silver and precious metals mining stocks. His articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. Alberto holds a MBA from Università degli Studi di Bari (Italy), Aldo Moro.

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GuruFocus has detected 4 Warning Signs with Fang Holdings Ltd $SFUN.
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