NEW YORK (TheStreet) -- SouFun (SFUN - Get Report) stock is gaining 7.02% to $7.47 on heavy volume in afternoon trading on Friday, after the company agreed to take a controlling stake in Chongqing Wanli New Energy's public shell.
Wanli is a China-based company mainly engaged in the research, manufacture and distribution of lead storage batteries.
SouFun will maintain no less than a 70% equity stake in Wanli after the deal, according to a statement.
The acquisition will likely be conducted through an assets swap.
Wanli will spin off its non-cash assets and liabilities to a third party, while SouFun will merge certain parts of its businesses, valued around RMB 17 billion, into Wanli.
Based in Beijing, SouFun operates as a real estate Internet portal in China.
About 17.89 million shares of the company have been traded so far today, more than triple SouFun's average trading volume of about 5.19 million shares a day.
Separately, TheStreet Ratings team rates SOUFUN HLDGS LTD as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
We rate SOUFUN HLDGS LTD (SFUN) 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, reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and a generally disappointing performance in the stock itself.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 15.1%. Since the same quarter one year prior, revenues rose by 25.4%. 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.
- SFUN's debt-to-equity ratio of 0.98 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that SFUN's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.70 is high and demonstrates strong liquidity.
- SOUFUN HLDGS LTD has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, SOUFUN HLDGS LTD reported lower earnings of $0.58 versus $0.71 in the prior year. For the next year, the market is expecting a contraction of 75.7% in earnings ($0.14 versus $0.58).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet Software & Services industry. The net income has significantly decreased by 76.3% when compared to the same quarter one year ago, falling from $68.20 million to $16.17 million.
- You can view the full analysis from the report here: SFUN