On September 16, E-House (China) Enterprise (02048) and Alibaba (09988) announced to establish a housing platform on Tmall, an important step of their collaboration.
They will roll out an "Estate Transaction Cooperation (ETC)" mechanism for the brokers and agents on their platform, and E-House also announced to lower the primary distribution (Fangyou) take rate to only 3% from 10-15% level now.
UBS Global Research talked to E-House CFO, and the research house thinks E-House will expand its distribution business with the support from Alibaba, but at the expense of margins.
This leads to some downside risks of UBS's near-term earnings estimates. Yet UBS remains
"buy" on E-House as it thinks E-House's GTV (gross transaction value) growth potential is stronger with healthier cash flows. There may be long term gains in profitability if Fangyou (E-House's brand) grows larger to have pricing power.
UBS's target price for E-House stays at HK$11.8.
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