I was surprised to see this morning that Blueridge sold ALL of their 11 million remaining shares in Q3. One problem gone, but what is needed to move this up now? The argument that the last earnings call was "bad" is not really sufficient to explain why this trades at 1/3 of book value and at a fraction of cash. Stocks reach their lows 6-9 month ahead of the bottom of a business cycle, so that would have coincided with the January lows provided Q3/4 were the weakest. The company actually showed foresight, and I am impressed with the performance of the CEO who depleted inventory in light of a RE downturn and is now building up for the next cycle. Also, the argument that accounting is shady makes no sense, because the company purchased land, has clean audits by Ernst & Young, was IPO ed by Merril Lynch, and percent completion accounting method is commonly used in the RE industry including by several US homebuilders.
In my opinion two events are needed now:
i) The stocks needs appropriate analyst coverage (Morgan Stanley, BOA, etc.), and
ii) The Shanghai stock market needs to recover from its 2 year long decline.
XIN just needs to hire whoever pumped HGSH; a Chinese real estate developer up 600% on no news, now with a PE ratio of 31. Maybe that's a reason why XIN is so cheap; they don't resort to shady boiler room tactics.
You weren't here then Hmmm but I warned the board, that you need to worry if JAG began selling which I thought they would, because you 'do not flip' on the divy when your major shareholder owns 18% of the shares. Of course everyone thought I didn't know what I was talking about, nor
would they acknowledge the fact even if they remembered, lol.
1. It's also important to note that Blue Ridge was finished selling its shares by September 30th, a process begun back in 2Q, so it's unlikely their reason for selling was any particular quarter's performance.
2. Heh, on your analyst coverage thing, that's definitely a problem, but XIN should set its sights lower than the big boys. I would expect shareholders would be content if XIN could sign up 5 also-ran banks for analyst coverage.
3. The Shanghai market performance is immaterial in explaining why XIN prices at such a massive discount to other Chinese real estate development companies (1.5 P/E vs an average of 4 to 6 P/E's).
If XIN just worked on its shortfallings vis a vis these other companies, its price could triple without any improvement on any other metric.
hmmm---I think the Shanghai stock market is UBER important to the share price of XIN. They have had three years of sub par performance and if I am not correct they are down over this period something over 25% while the US market this past year has been rallying. The govt is in a REAL PICKEL. They have their foot on the throat of housing and this is where a good chunk of their growth is from. I wish someone could name 10 Chinese stocks out of the hundreds that are listed that are doing well. I would bet 75% of the listed Chinese stocks are under 5 bucks.
I would also bet that many are quote unquote UNDERVALUED as much as XIN seems to be. XIN's valuation is very tied to the Shanghai market. Not only is there a FRAUD possibility overhang but there is a GOVERNMENT WITH THEIR FOOT ON THE THROAT OF HOUSING overhang. And the Shanghai market is largely underperforming because of the developers. I don't see them taking their foot off for a good while. I know their local governments get their income from housing taxes, etc., and they will soon be in revolt about this. So again, the govt is in a pickel. I have no idea what they are going to do but I think you gotta short China at this point. At least if there is a pop in the chinese indexes.
How else does the PROC get out of this mess? Anyone with any ideas? Maybe the new leadership will have some options, but from what I have read, there are even more STAID that the other cronies that just left office.
Even though things will be slow next quarter and maybe 2 more quarters, thereafter, that does not translate to a poor stock price. It would be a much different situation if XIN overbuilt and demand dropped and buildings weren't selling. That's not the case at all. It would be a different story if management overpaid for homes and had to sell them for a loss. That's not the either. It would be a much different story if projects were financed with debt that would be tough to repay - not the case here. While the share price has come down, it doesn't make sense to be at this level. Since XIN is a micro-cap stock, it's share price can be heavily influenced by one or two large shareholders (such as BR and Federated), but now these two known risks are off the table. XIN will eventually find footing and start climbing. I'm not willing to try and time the market, because this stock always has the potential to move and move quickly.