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SouFun shares jump 72.9 pct in NYSE debut

NEW YORK (Reuters) - Shares of Chinese online real estate website SouFun Holdings Ltd SFUN.N soared in their market debut on Friday as investors bet that growing interest in Internet advertising and a booming real estate sector would boost earnings.

Shares of the Beijing-based company closed at $73.50, 72.9 percent above their IPO price, in their debut on the New York Stock Exchange.

“SouFun operates one of the largest real estate portals in China,” said Morningstar IPO analyst Michael Gaiden. “It’s a wide open growth opportunity.”

Gaiden added that SouFun’s successful debut could spur interest in other IPOs and could especially help real estate website Zillow.com if it decides to move forward with an IPO.

Zillow.com is rumored to be interested in an IPO.

SouFun sells real estate-related marketing and listing services. As of June 30 it covered 106 Chinese cities, according to its prospectus.

The company has posted annual increases in its total revenue and net income attributable to shareholders in the past five years. It posted net income attributable to shareholders of $5.3 million on total revenue of $68.2 million in the six months ended June 30.

But even with its strong growth, SouFun faces stiff competition. It competes against top-ranked China Real Estate Information Corp CRIC.O, which raised $216 million in a Nasdaq IPO last October, and its IPO comes as Dangdang.com, an online retailer known as the Chinese equivalent of Amazon.com Inc AMZN.O, pursues its own U.S. listing after years of false starts.

SouFun could also be hurt by China’s efforts to cool its red-hot property sector.

Josef Schuster, founder of Chicago-based IPO research house IPOX Schuster LLC, said some of the ebullience in SouFun's share price may reflect excitement about the technology sector, buoyed by recent M&A transactions such as Hewlett-Packard Co's HPQ.N offer to buy data storage company 3PAR Inc PAR.N for $2.4 billion.

“It’s trading dynamics,” Schuster said.

Going into the IPO, SouFun was 51 percent-owned by Australian phone company Telstra TLS.AX. Telstra purchased its stake in SouFun in 2006 for $254 million. It said last month it would sell that stake to private equity firms General Atlantic and Apax Partners ahead of the IPO for more than $400 million. Both firms were existing SouFun shareholders.

SouFun on Thursday sold 2.9 million American Depositary Shares for $42.50 each, raising $124.7 million. It had planned to sell the shares for $40.50 to $42.50 each.

SouFun is the first IPO to debut in the United States since Full Circle Capital FULL.O raised $18 million and listed on the Nasdaq at the end of August. SouFun's shares are trading on the New York Stock Exchange under the symbol "SFUN."

Underwriters on the SouFun IPO were led by Deutsche Bank and Goldman Sachs.

Reporting by Clare Baldwin; Editing by Dave Zimmerman and Richard Chang

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