"Xinyuan Real Estate Co., Ltd. (“Xinyuan”) (NYSE: XIN) is a developer of large scale, high quality residential real estate projects aimed at providing middle-income consumers with a comfortable and convenient community lifestyle." -- Middle income people are hurting right now, or if i may say so, the real estate frenzy has affected their spend.
Two points i wanted to make were -
One, why are you buying XIN, except the fact that they are trading at low multiples?
Two - if you want to play chinese real estate, play it on a second derivative level. By that i mean, invest in a company such as XYL which is a play on Chinese real estate in addition to other things. You don;t have to invest in XYL, but you get what i am trying to say? Point being, when there is so much turmoil in that market, why do you want direct exposure when you can indirectly participate in the real estate industry there via firms that provide services to real estate industry? XIN is buying land from the govt. and then developing property. thats a long cash cycle and with demand potentially declining, they might not get enough return on their investment.
I am also intrigued about the sudden increase of their cash balance almost 10 fold from 2010 to 2011. In addition, i don;t know how they recognize revenues.
also "Our business requires access to substantial financing. Our failure to obtain adequate financing in a timely manner could severely adversely (1) restrict our ability to complete existing projects, expand our business, or repay our debts and (2) affect our financial performance and consition" --- Although monetary policy has eased, but credit has been tight in china.
"We provide guarantees for the mortgage loans of our customers which expose us to risks of default by our customers." - do you know the credits of their customers?
My point is - risk maybe much higher than the reward and you maybe investing at the peak of the cycle.
If i were to play china, then there is a huge demand in grid technology and nat. gas technology. if you invest in those sectors, you will have some very serious winners over long term.
Hope it helps and thanks for your questions. |
