FAST NEWS: KE Holdings’ profit rises on strong performance for new businesses

The Latest: Residential real estate broker KE Holdings Inc. (BEKE.US; 2423.HK) on Monday reported its revenue rose 19.9% year-on-year to 23.4 billion yuan ($3.26 billion) in the second quarter, while its non-GAAP profit rose 13.9% to 2.69 billion yuan.

Looking Up: Revenue from the company’s new home transaction services declined, but that was offset by higher revenue from its four other businesses, namely existing home transaction services, home renovation and furnishing, home rental services and emerging businesses.

Take Note: The company’s cost of revenues rose by 19.2% to 16.9 billion yuan as a result of a 7.9% increase in commission and compensation costs due to an increase in its agent headcount, as well large increases in home renovation and home rental services costs by 50.2% and 138.2% respectively.

Digging Deeper: Declining transactions in China’s property market have sent many debt-ridden developers to the brink of bankruptcy, also affecting service companies that depend on such transactions for their revenue. As operator of one of China’s largest property brokers, known for its green Lianjia shops, KE Holdings has also suffered in the resulting slowdown. To cope with the downturn, the company has expanded its business scope to include home renovation and rental services, which has helped to offset some of the revenue losses from its core business. As its situation stabilizes, KE’s management announced an increase in the size of its existing share repurchase program from $2 billion to $3 billion.

Market Reaction: KE Holdings Hong Kong shares jumped on Tuesday, closing up 7.3% at HK$38.45 by the midday break. The stock now trades near the lower end of its 52-week range.

Translation by A. Au

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