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Xinyuan Real Estate Co., Ltd. Message Board

  • growth.value growth.value Oct 1, 2012 2:58 PM Flag

    Explanation to the Lukewarm Response to the Beijing Purchase

    I just looked at the auction information of XIN's Beijing land acquisition. According to cnstock, XIN paid 41% premium over the base auction price. There are eight other bids online with the highest price of RMB 758 million. Therefore, XIN's final purchase price is about 36% higher than the second highest bid, reflecting XIN is desperate to get that land.

    People familiar with Chinese RE industry may know 41% premium is not something extraordinary. There are lands purchased by 100% premium out there, especially during 2009. However, this determined purchase made by XIN signaled a major strategy reversal. XIN used to only have 2nd and 3nd tier city presence, and now it presents in 1st tier cities of both China and the US. It is certainly a risky move, given the current industry trend is to expand to 3rd and 4th tier cities in China. I am not saying the strategy is wrong. The chairman is far more an export than me in terms of RE developing. I am just saying if things go wrong, XIN may have to write down these real estate purchases, as they did for the Qunshan project.

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    • This is just one man's opinion, but the news for XIN has been coming so fast and furious lately, that I've officially fallen behind in my due diligence coverage.

      Given the amount of stuff to digest, it might take the market a while to catch up, especially given XIN's woefully thin analyst coverage.

      I see a lot of posters I respect on this thread, so let me ask you guys, has XIN's buying spree turned folks more bullish? Have any of my fellow all cash-ers been turned into buyers?

      • 1 Reply to hmmm26
      • Hmmm, on the strategic side, I actually become more bearish on XIN. Although XIN makes it a little more visible to American investors after these two PRs, these two projects do not fundamentally clear people's concern with this company's future earnings.

        People know me know that I like using competition analysis to determine the value of a stock. I never rely too much on balance sheet to value a company because balance sheet is more appropriated to use in a liquidation scenario. No to mention balance sheet is subject to accounting manipulations. Balance sheet is just a good supplement to know the company.

        From competition analysis point of view, XIN abandoned its 2nd and 3rd tier cities strategy, and started to focus on 1st tier cities in China and the US, making XIN's future even more uncertain. Generally, XIN, as a new comer to these new markets, will face longer learning curve, higher competition, less synergy with existing strategy, etc. If real estate price for these properties do not go as high as XIN expects, XIN will face lower profitability. On the other hand, if real estate price does go up substantially higher, XIN's bold moves may be paid off.

        Overall, XIN is strategically taking more risks. Some may like its action while the others may dislike it.

    • The district isn't great and the price is not right. As a development-only project it kind of sucks. It makes sense from a marquee perspective. It is easier to sell a company standing with hard hats on-site than in the board room pointing at renderings. It is a short-term earnings downturn with a great long-term. Good job company.

      • 1 Reply to caseysxyz
      • Your reasoning does not make sense. Do you think that Vanke bid along with Xin just to put a "marquee" in Beijing or some other obscure reason? or Xin spending more than 1 billion CNY just to put some "hard hats on site"?

        The investment makes business sense. Look at the current price in the area and take into account that Xin's land is right at a subway station and so will enjoy some premium. This will be a very profitable project. Beyond now, Daxing is a growth area with "new city" planned, industrial base growing, and a new airport down south. Not a bad move by the management.

    • Look at how confusing the news I got:


      作者: 来源:新华网 2012-09-30 11:15:09





    • What you have said is false. Xin and Vanke bid up to the maximum price allowed by the government, then they bid another twenty rounds for total area of the government subsidized renting units. Do not speculate too much and better yet, do not speculate on false information.

    • response may be as much technical as anything & Blue Ridge selling.

      Thanks for finding the details on the land auction - Did XIN pay that much more or was XIN's the highest priced piece of land - with 8 pieces of land sold?

      If someone is a native Chinese speaker & looks at the auction description (you may be one?) please post any other comments here.

      thx in advance.

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