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Xinyuan Real Estate Co., Ltd. Message Board

  • connor.jin connor.jin Nov 13, 2012 10:09 PM Flag

    EPS estimates in the next 3 Q's

    We all know that the Company's sellable inventory will decrease, and for Q4, accoding to the recent guidance, revenue will be in $150m-$160, and net income is expected to be in the range of US$17 to US$20 million, or an EPS between $0.23 and $0.27. I have done my calculation seperately, and will provide some estimates as follows.

    Since the revenue in the upcoming quarters will mostly rely on the inventory, we should first keep in mind that the current unsold GFA is about 605,000 square meters. If the company continues to sell at the same pace as in Q3 when 170,070 square meters were sold (for a revenue of $226m) , it will take longer than 3.5 quarters to sell out the current inventory (for total revenue of about $800m) at the current selling price.

    1) Q4, 2012

    The Q3 contract sales already felt the effect of decreasing inventory. As a result, the quarter's revenue had an about 11% drop from Q3, 2011. I expect Q4 will see a similar drop in revenue compared to that of Q4, 2011, which had $199m. I might be a little too optimistic to say that Q4, 2012 revenue will hit $180m, as compared to the guidance of $150m-$160m provided by the company. But certainly it is possible, as we all know that the management were always conservative in providing outlook in the past. After all, the current unsold inventory can bring us a total revenue of about $800m at the currently selling price. I would not be suprised if the company books $180m in the current quarter.

    My estimates: revenue=$175m, EPS=$0.32

    2) Q1, 2013

    The earning of Q1 of each year is mostly affected by the seasonals, as there is the Chinese New Year holidays in either January or February. Although in this quarter, the revenue is less affected by the decreasing inventory, I would still apply the same discount from the revenue one year ago. In Q1, 2012, the revenue was $172.6m.

    My estimates: revenue=$155m, EPS=$0.26

    3) Q2, 2013

    If, during the previous two quarters, the company was only able to get the total revenue of $330m, then by Q2, the company should still have the majority of current inventory ready for sale. Plus, by then the pre-sales of Zhengzhou Century East A will have already started, and thus the new revenue streams will come in. I expect this quarter to the turning point of growth, although Y-to-Y growth might be still limited. For this reason, I will just say this quarter will approximately equal Q2, 2012.

    My estimates: revenue=$253m, EPS=$0.42

    4) Q3, 2013 and later

    By this quarter, I expect an explosive growth of the company. Four more projects (in Zhengzhou, Suzhou, Xuzhou, Beijing) will be on pre-sales. Plus, with the effect of the golden-September silver-October for sales, i would not be surprised to see $1 EPS per quarter by then.

    POSITIVE SURPRISES:

    My above estimates did not take into consideration several potentials for positive surprise.

    1) The outlook does not consider any projects in Irvine, Reno, or NYC. The company may resale the Irvine/Reno units, and book some profits. The NYC project is still in its early stage though, and thus not much for earnings yet.

    2) Stock repurchase will reduce the number of shares. The $20m program, mostly not spent, will reduce the share count by 5 to 6 million shares, at today's PPS. This will translate into nearly 10% gain in the EPS metric.

    3) Housing price in China may go up or down, but I would say it is more likely have a positive impact on the revenue and EPS during the coming quarters.

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