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Xinyuan Real Estate Co., Ltd. Message Board

  • stan.ackman stan.ackman May 9, 2012 5:03 PM Flag

    Potential Projects in the US

    It seems Xinyuan gets pretty serious about potential projects in the US. They mentioned it in both the news release and the conference call. How does everybody think about it? Have any other Chinese developers started to evaluate the US opportunities? There are quite a few Chinese developers with much stronger resources to do projects in the US. Their large scales definitely will give them more edges. I just wonder what edge Xinyuan has in terms of the US project.

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    • They have nothing in terms of US projects. My guess is that is why Tom Gurnee is going to be in the US for a few weeks.

      I am mixed on the whole thing. I think it would be more costly for them to expand to the US when there is so much in Asia they can do for cheaper.

      However, if they were in the US it would give them more credibility with investors.

      In any case the P/E should not be 2.3 with what they have, are doing, and the potential.

      • 1 Reply to jeffreybul23
      • "I think it would be more costly for them to expand to the US when there is so much in Asia they can do for cheaper."

        Margins are what matter. It may cost more in the U.S., but if they can charge more, then it may not matter. What matters is the profit per dollar invested.

        "However, if they were in the US it would give them more credibility with investors."

        Bingo! This may be the main reason behind this move. It would be far easier for many people to accept that XIN is a real company if they built apartment or condo that someone you know lives in or that you drive by on the way to work. If you could see their work or talk to someone in English that owns their product, then it is more difficult to doubt that they are real and the huge discount in the share price evaporates even faster.

        Look at valuations for some US home builders:

        KBH is losing money rapidly (negative P/E) and has a 1.57 P/B.

        DHI has a 41 P/E and a 1.95 P/B.

        PHM loses money (negative P/E) and has a 1.91 P/B.

        LEN has a 68 P/E and a 1.94 P/B.

        If XIN were valued comparably it would easily be an $18 stock. That would give it about a 13 P/E and a 2 P/B. Compared to the relatively sad state of US home builders, that is a cheap price.

 
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