Leju Holdings Limited

LEJU Details

Leju Holdings Limited (NYSE: LEJU) is China's leading e-commerce and online media platform for the real estate and home furnishing markets, providing real estate e-commerce, online advertising, and online listing services. In addition, LEJU manages SINA Corporation's real estate and home furnishing websites and has a vital collaboration with Tencent Holdings Limited, a Chinese global technology conglomerate holding company. As of September 15, 2021, LEJU has 136.80 million American Depository Shares (ADS) listed and outstanding, with each ADS representing one ordinary share.

Change in Board of Directors: LEJU stated on August 31, 2021, that Mr. Minyi Zhang had been appointed as the new director to replace Ms. Chen, starting August 31, 2021. He was the General Manager of Tencent Marketing Solution's Vertical Sales & Operation Department and was in charge of the department's overall strategy and growth.

H1FY21 Results: The company reported a 7.64% increase in total net revenues to USD 301.09 million during H1FY21 (ended June 30, 2021) compared to USD 279.72 million during H1FY20, primarily due to an increase in the number of discount coupons redeemed and the demand for secondary real estate brokers. However, LEJU incurred a net loss of USD 46.89 million during H1FY21 vs. a net income of USD 1.93 million during H1FY20, owing to the provisioning of bad debts. As of June 30, 2021, the company's cash and cash equivalents amounted to USD 321.88 million, with no outstanding debt.

Key Risks: The Chinese authorities' recent crackdown on its US-listed businesses and the consequent possibility of stricter rules could dent its operations. This is after the passage of a bill in the US that could lead to the delisting of some Chinese companies from the country's exchanges (in case the US authorities cannot satisfactorily audit the company for three consecutive years). These constitute significant political and regulatory risks for the firm. 

Furthermore, a substantial fraction of LEJU's revenue originates from crucial Chinese cities like Beijing, Hainan, Guangzhou, and Ningbo. As a result, if the real estate market or online advertising in any of these regions experiences a setback, demand for LEJU's services may fall substantially, thereby impacting the company's financial condition.

Outlook: LEJU indicated in its H1FY21 press release that revenue for H2FY21 is expected to range between USD 300 million and USD 310 million, almost at par with the revenue generated in H1FY21.

Valuation Methodology: Price/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

LEJU Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: LEJU's share price fell 62.62% in the past six months and is currently trading at the lower end of the 52-week range of USD 1.10 to USD 3.97. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 27.91. We have valued the stock using the Price/Sales-based relative valuation methodology and arrived at a target price of USD 1.43. Considering the significant correction in the stock price in the past six months, the increasing demand for digital services, strong balance sheet, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 1.17, down 3.70% as of September 15, 2021, 12:40 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.