SouFun eyes IPO in HK or U.S. next year

SouFun, China's top real estate website, is eyeing an initial public offering next year in Hong Kong or the United States if the global economy recovers, Chairman Vincent Mo said on Wednesday.

He said SouFun would prefer to list in China, where its client base is concentrated, but the country's strict regulatory approval process stood in the way.

"Hong Kong and the United States are our two main choices, and the third is mainland China," Mo told the Reuters Global Real Estate Summit.

Australia's largest telephone firm, Telstra Corp Ltd (TLS.AX), holds a 51 percent stake in the property portal. Other shareholders include the U.S. venture capital heavyweight IDG and Mo himself.

"If I have to give a timing, I think it will more probably be next year," Mo, who is also SouFun's chief executive, said.

SouFun is aiming for profit growth of 50 percent in 2009, but Mo said this might prove to be a conservative target. "Everyone is cautious with their estimates this year because visibility is low," he said. "It could turn out better."

Profits grew 88 percent to over $50 million in 2008, the fourth consecutive year in which they have almost doubled.

The company gets 95 percent of its revenues from online property advertising, where its major rivals include Sina Corp (SINA.O) and Sohu.com (SOHU.O).

SouFun has about 60 percent of the Chinese market, which will be worth between 1.5 billion and 1.8 billion yuan this year, up from an estimated 1.2 billion to 1.5 billion yuan in 2008, Mo said.

SouFun would not like to miss any bolt-on acquisition opportunities, although Mo said he did not see many good targets.

"We're searching worldwide, especially during the current financial crisis," he said.

EXPANSION

Mo said the main purpose of its planned IPO was to improve corporate governance as the company is generating enough profit to fund continued organic growth.

SouFun covers 105 Chinese cities. It mainly offers online services, including research reports, related to sales of new and existing residential property, home rentals and furnishing.

"We believe internet penetration in these services is still at an early stage and there is enough room for growth," Mo said.

He said the company would step up efforts this year to offer its services to clients in Hong Kong and to expand into other segments of the Chinese property market, such as the office, retail, hotel and factory space sectors.

China's residential property market, which faltered in late 2007, has shown some signs of a recovery, with prices and deals rebounding in major cities such as Beijing, Shanghai and Shenzhen.

That, against the backdrop of fast credit growth, has made some experts worry that a fresh asset bubble may be forming.

Mo acknowledged that plentiful liquidity is one reason for the recent rise in home prices. However, pent-up demand and strong purchasing power were also helping to drive up the market.

"I don't think there is already a bubble," Mo said.

However, if China keeps pumping up liquidity and economic growth falters, bubbles will inflate, he warned.