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Xinyuan Real Estate Co., Ltd. Message Board

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  • caseysxyz caseysxyz Sep 18, 2012 8:32 PM Flag

    If Blue Ridge Is The Excuse, Then You've Got a Worse Problem

    I am old school. I do not think short shops add any value to the process. I have a hard time differentiating them from pumps and dumps. They do occasionally, albeit quire rarely, get it wrong and take out some companies down that should not be. In those cases, they hurt not only investor but also the innocent employees. The only benefit is enriching themselves and occasionally hurting innocents. I am the guy at the back of the theater that stands up and cheers at the end of Michael Douglas’ “Greed is Good Speech” but I see only one-way good in a short shop. I think the world could do with less people motivated as such.

    I do not think like a short shop. With that said, it occurs to me, even with a low market cap, XIN would look like low hanging fruit. When I have to choose between working a short time for a guaranteed small profit and working a long time for an iffy big profit, I am inclined to the former. As I said, I do not like thinking about these people at all so my ideas may be way off.

    You can put this one to rest. Shoot the person an e-mail, you get anything other than a straight “No, we did not look at”, I think they are not in play and the risk goes down on XIN.

    2. Dividend stuff.

    We are not going to agree on dividends. Indulge me with one more idea on dividend before I suggest we move on to other subjects.

    Therefore, we understand what we are disagreeing on let us look at some numbers. Consider a position of 100,000 shares at an average cost $ 2.50 with a yield of 6.4 %. Now the stock price doubles and we liquidate half our shares. Ignoring taxes, our cost is now $ 0 and we get $ 8,000 a year as long as the company pays a dividend. Next, to have a money-printing machine in the spare bedroom, can you think of a better deal?

    It is best to make sure the micro and macro issues get analysis separately.

    I have been both a CEO and CFO. I think CFO is infinitely more difficult job. Every move is watched and any misstep will be noted publically. Perhaps, I am inversely inclined to CFOs as opposed to short shops but I do not have the same feelings about Tom. I think he is going a solid job.

    5. Getting to the Target P/E.

    Touché, councilor, just do not accuses me of perjuring myself when I am lying.

    There are Chinese real estate developers on Hong Kong that trade at reasonably comparable valuations. There might be other reasons for it but from my chair, the regulatory environment is more secure than the United State. Wow, think about that statement. I never thought I would read it, let alone type it. We are supposed to be the go-to investor country and financial market. Are you listening SEC?

    Thanks, I missed CHLN. My gut reaction is its valuation is deeply discounted too, just not as much as XIN. Therefore, I believe they are part of the US curse but I have not done enough research on CHLN to argue it ably. I will put them on the list but as they are not paying a dividend, it might be awhile.

    6. Why on Earth?

    There is a very simple reason to do the transaction. The company’s functional currency is RMB and the transactional currency is USD. The company has to bridge that gap. Having the WFOE borrow the money bridges the gap. You could do the deal in the afternoon with the lawyer in the boardroom and the banker on the cell. It is just kind of an untidy way of doing things and looks bad.

    I would have to go back and look at the disclosure history. It is possible the company did not think we would ever see this transaction. It is not clear to everyone that this level of minutiae is required disclosure for a VIE (cough cough) I mean FIE. (I do not recall that conversation, Senator). It is an evolving area. Therefore, the transaction might have been contemplated under a different set of requirements.
    It is still a loose-goosie transaction I would like to understand.

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    • 1. Short Sellers. I can totally dig your viewpoint; I especially like your comment on the employees of wrongly accused fraud companies. I'd never thought about them before.

      I take an alternative view on short sellers, though. They're scuzzy, sure. They're self motivated, no question. But they're also often right. My view is that if the SEC is unwilling or unable to properly do its job and protect investors from companies with fraud, then it's better to have someone, anyone, out doing fraud patrol, even if they are kind of slimeballs. The easiest way to put the short seller boutiques out of business would be for the companies to stop being fraudulent.

      Still, I think we've managed to arrive at one of those few times when message board posting truly pays off: we both hold views that are reasonable, rational and well considered. Go, us!

      2. Dividends.

      You can always depend on me to support efforts to quantify things, so I again cheer this section. I think our main difference here is how we're calculating "dividend yield". You're using the much more intelligent approach of calculating the yield using your own average purchase price; whereas I was used the much more common (on a BB, anyway) approach of using the current share price. FWIW, I share your view that only your kind of dividend yield should be used by investors; it's just that in my experience, almost none of them do that.

      On the money printing machine thing, we completely agree. Our only difference here is with regard to the risk level we assign to the assumptions supporting the permanent eight grand a year scenario (company's ability to pay in future, company's willingness to renew divvy, share price risk from the $5 mark).

      5. Our Increasingly Misnumbered Section.

      First, I should race in to say that I didn't in ANY way mean to recommend CHLN as an investment; only as a stock to put in your "XIN's Peers" portfolio for comparison purposes. I have a bright line rule against buying RM's (one day later, and I'm an "RM" pro!), but even if I didn't, I just can't see any possible way to view CHLN as a better investment option than XIN (and probably many more of their shared peers). CHLN's one and only redeeming quality is the fact that it happens to be a second US listed, Chinese RE development co.

      Yeah, that is pretty mindblowing on the "HK might be better able to regulate than the SEC" point.

      6. Sounds Good. I don't think it's a burning priority or anything, but if you ever do decide you want to look into that stuff and you need research help, just let me now. I'm at your service.

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