Why a Fund Made a $47.5 Million Bet on KE Holdings Even as the Stock Sinks 13%

Company Overview - KE Holdings operates in the Chinese real estate market, utilizing a technology-driven platform that integrates online and offline housing transactions and services [5] - The company has a diversified business model that includes brokerage, property management, and ancillary services, catering to a broad customer base and multiple revenue streams [5] - KE Holdings generates revenue primarily through commissions and service fees from property transactions, brokerage services, and value-added offerings [8] Financial Performance - As of the latest report, KE Holdings has a market capitalization of $103.5 billion, with a revenue of $14.5 billion and a net income of $549 million over the trailing twelve months (TTM) [4] - In the third quarter, KE Holdings reported a revenue increase of 2.1% year over year to $3.2 billion, with net income of $105 million [9] - Existing home transactions grew by 5.8%, while rental services surged more than 45%, indicating a shift towards higher-margin, service-driven businesses [9] Investment Position - Athos Capital disclosed a new position in KE Holdings, acquiring 2.5 million shares valued at $47.5 million, making it the fund's largest position by reported value [2][3] - This new stake accounts for 29.8% of Athos Capital's 13F reportable assets under management as of September 30 [3] - The current share price of KE Holdings is $16.08, reflecting a 13% decline over the past year, contrasting with the S&P 500's 16% increase during the same period [3] Strategic Insights - The significant investment by Athos Capital suggests a belief that the current valuation of KE Holdings does not accurately reflect its earning potential [9] - KE Holdings maintains a strong balance sheet with approximately $7.8 billion in cash and short-term investments, having repurchased over $2.3 billion of stock since 2022 [10] - The company's strategy appears to focus on leveraging its transaction infrastructure to withstand housing market cycles, emphasizing the importance of scale, data, and cash flow over short-term market sentiment [10]