One Chinese property company is not only defying the market slump but also returning money to shareholders. U.S.-listed KE Holdings is “in a league of its own,” Barclays analysts said in a Wednesday report. KE, which trades under the ticker “BEKE,” runs one of the largest real estate brokerages in China for rentals and home sales. “The company has already returned more capital than they ever raised from capital markets, demonstrating management’s strong focus on shareholder returns,” the analysts said. KE on Tuesday reported about $182 million in second quarter profit, a 31% year-on-year drop, while announcing a $5 billion share buyback program — up from $3 billion previously — through the end of August 2028. “BEKE is the best property agent (both online and offline) in China, in our opinion,” the Barclays analysts said, adding that “the company has been gaining share in both existing home and new home sales in China over the last three years despite the Chinese property market facing significant challenges.” The analysts affirmed their overweight rating and price target of $25. That’s more than 40% upside from Thursday’s close. China’s real estate market, on the other hand, is still far from recovering. Investment in Chinese real estate steepened its drop with a decline of 12% for the year so far as of July . Average prices even for properties in China’s capital city have tumbled in the last two years — something once unthinkable. Chinese Premier Li Qiang earlier in August acknowledged the persistent real estate challenges and called for more support . But it’s a complex issue as apartments in China have typically been sold ahead of completion. Since the market decline in the last few years, many developers have not had the cash to finish building the homes that many households have already mortgaged. So far, policymakers have not directly splashed out support for the developers. Instead, they’ve focused on select projects and making it easier for people to buy multiple homes. In August, Beijing eased restrictions on property purchases on the outskirts of the capital city, and Shanghai followed with a similar policy. “Beijing and Shanghai have both relaxed housing market policies and it would not be surprising to see other cities follow suit,” HSBC analysts said in a report Thursday. “That said, we think the biggest policy catalyst could come from a broad scale stimulus on urban renewal with feasible budgets.” The analysts expect home sales can recover in September due to seasonal factors that suppressed transactions during the summer, but cautioned about the impact of base effects from a rise in house transactions last fall following stimulus announcements . KE’s business isn’t completely immune from the macro environment. Revenue from existing home transaction services dropped in the second quarter. Shares are down mildly year-to-date, compared with a surge of more than 50% in KraneShares CSI China Internet ETF (KWEB) . But KE’s revenue from new home transaction services and home renovation rose, by 8.6% and 13%, respectively, from a year ago. Revenue from home rentals surged by 78% from a low base. “The company started to diversify into newer businesses in 2021 and now both its home renovation business and rental business are growing rapidly, with total revenue contribution accounting for over 40% of the group total,” the Barclays analysts said. “We expect both businesses to contribute meaningful revenues and profits going forward.” —CNBC’s Michael Bloom contributed to this report.
