China Stock #1 China Life Insurance (LFC)
The largest Chinese financial stock traded in the U.S. market is China Life Insurance Company (NYSE: LFC). The company is a multi-faceted financial. It has three distinct subsidiaries involved in asset management, life insurance and property insurance businesses.
LFC is not too far off its 52-week low of about $53 due to the flattish profit picture in 2010, when net income rose 2.3% to 33.6 billion yuan. The shares trade at 16 times forward earnings and 3.4 times book value, which is a good valuation metric for a financial with a leading position in a market with 1.3 billion potential customers.
China Stock #2 China Real Estate Information Corp. (CRIC)
On the real estate side of things, China Real Estate Information Corporation (NASDAQ: CRIC) is a leading provider of real estate information, consulting and online services in China. But the fast-growing company picked a terrible time to list in the U.S. market in late 2009 — with PBOC tightening right around the corner. Still, the operational performance certainly shows the potential of this business.
Total revenues for 2010 increased 82% year-over-year to $174.2 million, from $95.7 million for the full year of 2009. And revenues last year also included $66.9 million, attributable to online services, while full-year 2009 revenues included $13.8 million in fourth-quarter revenues from online services. Revenues from the core real estate information and consulting services were $107.3 million, an increase of 31% compared to the full-year 2009.
The shares were very expensive when they came to market in 2009, which is why we saw a gradual decline despite the good numbers. They are not cheap now, trading at seven times sales and 46 times earnings, but they are certainly much cheaper than other plays capitalizing on China’s rapidly developing online commerce sector. I think that as the market feels the end of the PBOC tightening, CRIC shares will respond favorably.
China Stock #3 E-House (EJ)
If CRIC is posting rapid growth at too high a multiple for your tastes, consider its parent, E-House China Holdings Limited (NYSE: EJ), which is also publicly traded in the United States. This is a real estate services company dealing in primary agency services, secondary brokerage, information and consulting, advertising, online services and investment fund management. So, if there is an end to the monetary tightening from the PBOC, EJ will inevitably feel it.
E-House sold 11.9 million square meters of new properties for the full-year 2010, an increase of 8% from 2009. Total value of new properties sold was $15.8 billion, a 22% pop from 2009. And total revenues were $356.5 million for an increase of 19% from 2009, including $66.8 million contributed by CRIC’s online activities.
The company used the jitters in 2010 to consolidate its leading position and build relationships with top developers. At 11 times forward earnings and 1.1 times book, I think plenty of pessimism is already priced into the shares.