E-House China Enterprise (02048) and Alibaba (09988) jointly announced the launch of a property transaction platform under Tmall and shared details of their latest strategies.
With a more generous commission payout to brokers as well as empowerment through the Alibaba tie-up, Goldman Sachs sees potential upside to Fangyou's (E-House's brand) GTV (gross transaction value) in 2021 and onwards, and believes management may consider revising up its 2021 GTV target for Fangyou (currently Rmb300bn) in the near term.
As E-House now charges 3% of commission revenue (as a service fee) from the previous 10% (as the platform commission split) from brokers, the research house sees potential margin dilution in the near term.
In the meantime, Goldman expects Fangyou to remain profitable, as rapid property sales growth and potential higher commission bonuses (if projects are sold at a faster rate than targeted via an enhanced network effect) offset fixed costs.
Goldman reiterated its "buy" rating on E-House with a target price of HK$14.8.
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