I’m looking for thoughts on investing in XIN relative to CHLN. The latter just reported a strong Q4 with YOY revenue growth of 28%. Their new focus on lower end housing (Ankang project) lowered their ASP but they claim they can maintain gross margins, so I think this is a promising new direction for the company. They also have pre-sales commencing on two new projects in Q1-13, a strong longer term pipeline of new projects and are operating in Xi’an, a healthy overall real estate market (40% GFA increase over Q4-11). They’ve beat expectations for 4th consecutive quarters (e.g., provided no indication of the Q$ results during the last conference call). Since they are essentially reporting after Q1-13 is over, I expect them to beat guidance again for a 30% YOY growth in revenue.
I own both stocks now. Keeping XIN is a no-brainer. Relative to XIN, CHLN has net debt (36% of total capital), doesn’t pay a dividend and no one seems to know about them (not one analyst on the conference call). Their share prices (loosely) tracked each other for the last five years with the notable exception that XIN outperformed over the last 6 months by a whopping 40% - even with CHLN's gain today. Q/Q comparisons won’t look good due to the Q4 commercial sales which will not be matched but, as I stated above, Y/Y will be fine. Am I overlooking other upsides or downsides?
On another note, HGSH continues to defy gravity and logic. I sold it for a healthy gain months ago – and have been kicking myself ever since. However, now I wouldn’t touch this with a 10-foot pole.
The somewhat mangled CHLN transcript is now available on Seeking Alpha if you are interested.