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Xinyuan Real Estate Co., Ltd. Message Board

  • Ok...So, I have now initiated a long position in XIN. The rationale being:
    a) Pristine balance sheet,
    b) Strong revenue and earnings growth
    c) Long-term favorable macro-outlook for China and other emerging economies..
    IMHO, the equity markets are fairly valued. If you are like me (lagging the broader indices in YTD returns), then you need a blockbuster investment to come back on par.
    Now, after much thought, I have realized that the "coming back to par" event does not have to happen by 12/31/2013...It may happen in 2014, 2015 or anytime after that. So, keeping that in mind,XIN is a relatively under-valued stock.
    Could this hit $3 in the near-term - very possible. For the longs, If it is attractive at $6. it is definitely attractive at $3. For the shorts, if it was worth shorting all the way from $14 to $2, it may well be worth shorting at $6.
    But the fundamentals have only improved. After taking dilution into account, $110MM in 2013E earnings (as per mgt) dividued by fthe fully-diluted pro forma share count of 90 mm shares, leads to $1.20 in earnings. A 10x multiple would lead to $12 - that is the fair "exit" value. This obv assumes that all the capital raised does not yield incremental earnings power.
    I would not value this off book value. Unlike financial stocks, there is no mark-to-market and unless one is actively looking to buy real-estate, the fair-market value (which is often based on the last sale/purchase transaction) is the max that anyone would pay for the particular asset. And as we have seen in 2008/2009, the real-estate market can go South very quickly.
    The issue of fraud is out of question. A firm like TPG would not invest unless they scrubbed the books and operations with a fine comb.

    Patience is key and ultimately, the stock will trade at its fair market value.

    Why TPG invested in XIN:

    The question we should be asking is : Why TPG invested in Chinese RE? Clearly, they believe in the long-term favorable outlook.

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XIN
2.85+0.02(+0.71%)1:34 PMEDT