NEW YORK (TheStreet) -- Shares of E-House (China) Holdings (EJ) were gaining 4% to $6.98 Tuesday after the Chinese real estate services company received a preliminary non-binding "going private" proposal from two board members.
E-House said that it received the proposal from co-chairman and CEO Xin Zhou and board member Neil Nanpeng Shen. The two board members offered to buy all shares of the company they don't currently own for $7.38 an American depositary share.
Zhou and Shen said they and their affiliates own about 26% of E-House's total outstanding shares.
E-House said it formed a special committee of five independent, disinterested directors to consider the transaction.
About 2.3 million share of E-House were traded by 10:15 a.m. Tuesday, above the company's average trading volume of about 2.2 million shares a day.
TheStreet Ratings team rates E-HOUSE CHINA HOLDINGS -ADR as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate E-HOUSE CHINA HOLDINGS -ADR (EJ) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- EJ's revenue growth trails the industry average of 19.3%. Since the same quarter one year prior, revenues slightly increased by 3.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- EJ's debt-to-equity ratio is very low at 0.17 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, EJ has a quick ratio of 2.14, which demonstrates the ability of the company to cover short-term liquidity needs.
- The gross profit margin for E-HOUSE CHINA HOLDINGS -ADR is rather high; currently it is at 60.86%. Regardless of EJ's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, EJ's net profit margin of -14.86% significantly underperformed when compared to the industry average.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Real Estate Management & Development industry and the overall market, E-HOUSE CHINA HOLDINGS -ADR's return on equity significantly trails that of both the industry average and the S&P 500.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 27.63%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 1000.00% compared to the year-earlier quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
- You can view the full analysis from the report here: EJ Ratings Report