THE prospect of a billion Chinese obsessed with home ownership has Telstra again waving its chequebook at a new economy entrepreneur.

This time it's Vincent Mo, who founded the SouFun online real estate business in 1999.

He is now much richer after Telstra said yesterday it had bought 51 per cent of his SouFun Holdings for $342 million.

It's Telstra's first foray into China since its unfortunate Reach joint venture with Richard Li and Pacific Century Cyberworks in 2001.

In seven years Mr Mo's backyard business has grown into a market-dominating internet portal covering 60 Chinese cities which attracts 40 million hits per month.

According to Telstra chief Sol Trujillo, the acquisition was a great opportunity for Telstra's marketing arm, Sensis.

"We have established ourselves as the undisputed market leader in the high growth Chinese online real estate market," he said.

Sensis plans to expand Soufun's reach to 100 cities by 2008.

SouFun is rated one of the top 100 websites in the world, racking up 600 million page views a month.

As well as online real estate sales, SouFun is also number one in home furnishings.

Mr Trujillo said the investment, part funded by the sale of Australian Administration Services for $215 million, would be cash flow positive immediately and earnings per share accretive by the third year.

"We've created an opportunity to accelerate growth by leveraging Sensis' capabilities in areas such as sales effectiveness, directory advertising and content management and data collection," he said.

He said SouFun had captured an advertiser base of over 4000 sellers and developers. "This extensive community is linked by one thing - the desire to buy and sell real estate," he said.

The investment was forecast, he said, to contribute $52 million in net revenue to Telstra in financial year 2007.

The business is already cash flow positive and is expected to increase revenue by 107 per cent by December.

He said the acquisition price was based on a valuation of 22 times SouFun's 2007 calender year earnings before interest and tax, depreciation and amortisation.

"It's a valuation that sits very well against world benchmarks for high growth online market leaders," he said.

The investment is Telstra's first in China since it formed a $4 billion alliance with Hong Kong telco Pacific Century CyberWorks in 2000.

Telstra shares closed 1c higher at $3.60.