Global Economic Intersection
Advertisement
  • Home
  • Economics
  • Finance
  • Politics
  • Investments
    • Invest in Amazon $250
  • Cryptocurrency
    • Best Bitcoin Accounts
    • Bitcoin Robot
      • Quantum AI
      • Bitcoin Era
      • Bitcoin Aussie System
      • Bitcoin Profit
      • Bitcoin Code
      • eKrona Cryptocurrency
      • Bitcoin Up
      • Bitcoin Prime
      • Yuan Pay Group
      • Immediate Profit
      • BitQH
      • Bitcoin Loophole
      • Crypto Boom
      • Bitcoin Treasure
      • Bitcoin Lucro
      • Bitcoin System
      • Oil Profit
      • The News Spy
      • Bitcoin Buyer
      • Bitcoin Inform
      • Immediate Edge
      • Bitcoin Evolution
      • Cryptohopper
      • Ethereum Trader
      • BitQL
      • Quantum Code
      • Bitcoin Revolution
      • British Trade Platform
      • British Bitcoin Profit
    • Bitcoin Reddit
    • Celebrities
      • Dr. Chris Brown Bitcoin
      • Teeka Tiwari Bitcoin
      • Russell Brand Bitcoin
      • Holly Willoughby Bitcoin
No Result
View All Result
  • Home
  • Economics
  • Finance
  • Politics
  • Investments
    • Invest in Amazon $250
  • Cryptocurrency
    • Best Bitcoin Accounts
    • Bitcoin Robot
      • Quantum AI
      • Bitcoin Era
      • Bitcoin Aussie System
      • Bitcoin Profit
      • Bitcoin Code
      • eKrona Cryptocurrency
      • Bitcoin Up
      • Bitcoin Prime
      • Yuan Pay Group
      • Immediate Profit
      • BitQH
      • Bitcoin Loophole
      • Crypto Boom
      • Bitcoin Treasure
      • Bitcoin Lucro
      • Bitcoin System
      • Oil Profit
      • The News Spy
      • Bitcoin Buyer
      • Bitcoin Inform
      • Immediate Edge
      • Bitcoin Evolution
      • Cryptohopper
      • Ethereum Trader
      • BitQL
      • Quantum Code
      • Bitcoin Revolution
      • British Trade Platform
      • British Bitcoin Profit
    • Bitcoin Reddit
    • Celebrities
      • Dr. Chris Brown Bitcoin
      • Teeka Tiwari Bitcoin
      • Russell Brand Bitcoin
      • Holly Willoughby Bitcoin
No Result
View All Result
Global Economic Intersection
No Result
View All Result

Xinyuan Real Estate: What to Look for Going Forward

admin by admin
February 24, 2015
in Uncategorized
0
0
SHARES
7
VIEWS
Share on FacebookShare on Twitter

by Elliott Morss, Morss Global Finance

Introduction

Xinyuan (XIN) is a real estate company listed on the New York Stock Exchange, has gotten far more attention than warranted by size because of its high “Yahoo Finance-type valuations.” And because XIN gets an “F” for public relations among NYSE-listed companies, there have been numerous articles written (Zhang, Morss, Garcia, Ramos since its last quarterly report speculating about or asserting what the future holds.

On Friday, February 27th, more will be learned when XIN reports its results for the last quarter of 2014. Equally important, it will send its 6-K numbers to the SEC. The point of this article is to highlight what we need to look for. I will follow up with another piece on what has been learned once the data is reported.

Troubling News

XIN followers are fully aware of the somewhat worrisome news reported with little commentary by the company. There was decline in real estate in China resulting from government policies. There was also the resignation of a couple of Board members and the replacement of several senior executives. But most important was the liquidation of the private equity company TPG’s convertible notes. XIN agreed to buy them back for $86 million. At the time, I speculated that:

TPG was targeting on some high return deal with XIN. Once it saw it was going to take more time than they anticipated, TPG wanted to get out. It could immediately redeem its convertible notes with a small profit and did.TPG has held off redeeming its stock because of the capital losses involved (they bought in on August 26, 2013 when XIN’s price was $5.54). Unfortunately, this all-too-likely further liquidation will overhang the market until it occurs.

XIN indicated the liquidation took place because it found the financial agreements required by these converts too restrictive. At the time, I did not believe XIN. I thought it was trying to put a positive spin on what was really bad news for the company. However, in light of XIN’s borrowing spree to purchase more properties over the last few months, the XIN explanation sounds increasingly probable.

Key Things to Look For Going Forward

a. Inventory and Sales

Real estate involves borrowing money to buy land and building properties. Profits depend on selling for more than the cost of the land and properties built. Profit growth depends on holding costs down and increasing the property/building inventory.

Data from XIN’s latest 6-K are presented in Table 1. At that time, sales of $2.2 billion covered 68.7% project costs. That meant it would take an additional $3.2 billion to cover all project costs. The table also gives an estimate of the total sales value of the total inventory – $4.8 billion. If these prices hold up, that would leave a profit of $1.6 billion for the company.

Table 1. – XIN Properties (Gross Floor Area) and Sales

Source: XIN’s latest SEC filing

How significant would $1.6 billion be to XIN? Very. At the end of September 2014, XIN had long term debt of $861 million. A $1.6 billion profit could wipe out that debt and leave $739 million for the company.

On Friday, we should get an update on this information.

b. Prices

A slowdown in Chinese real estate could be reflected in slower sales and/or lower prices. Table 2 gives gross floor area (GFA) and average selling price per m2 (ASP) for XIN’s active properties as reported in its latest 6-K. Government real estate restrictions started in the 2nd quarter of 2014. It is notable that for a number of XIN’s properties (shown in bold), selling prices actually increased. And the average selling price for all properties increased from 8.2RMB to 10.2RMB.

Table 2. – XIN’s Active Properties and Sales

Source: XIN’s latest SEC filing

One might ask whether XIN has enough in the pipeline to be ready for a real estate rebound. The answer is yes. In addition to the 1.5 million square meters of GFA available at the end of the 3rd quarter, it had an additional 1 million square meters of GFA coming available in late 2014. In addition, Zhang has just reported that XIN spent $177 million in December to purchase four land parcels in Zhengzhou.

We will get an update on these numbers as well on Friday.

The Chinese Real Estate Market

Many investors have a US frame of reference on real estate. So when they here “downturn”, they imaging a slowdown across the board. It is important to impress just how different the Chinese market is from the US.

Evidence for this can be seen in Table 3 where the population and GDP growth of cities where XIN is investing is presented. Population and GDP growth are the drivers of real estate demand and there is nothing in the West that is comparable to what is happening in China.

Table 3. – Growth in XIN’s Cities

Source: CITY POPULATION and XIN’s latest SEC filing, op. cit.

Just look at the numbers in the far right column: no country in the developed world has annual population growth rates like these. And wherever we are in the Chinese real estate cycle, a lot more housing will be needed.

Dividend and Stock Buy Backs

In 6 months ending in June 2014, XIN paid out 36% of profits in dividends. This is a big chunk for a company so eager to get more financing for real estate. With recent profit declines, I would not be surprised to hear it announce a cut in dividends this Friday. And stock buybacks? I would not be surprised to hear a suspension announced. XIN wants to raise as much as it can to invest in real estate. And it has amply demonstrated it is not in the business to make its stock holders feel good.

Previous Post

February 2015 Chemical Activity Barometer Declines – Blamed on the Weather

Next Post

Early Headlines: Greece is Late, Banks Being Crooks Again and More

Related Posts

Web3 Company To Run Super Bowl Ad For NFT Game As Crypto Is Ignored
Business

Web3 Company To Run Super Bowl Ad For NFT Game As Crypto Is Ignored

by John Wanguba
February 8, 2023
Google Introduces ChatGPT Rival Bard, AI Search Plans Accelerate In Battle With Microsoft
Business

Google Introduces ChatGPT Rival Bard, AI Search Plans Accelerate In Battle With Microsoft

by John Wanguba
February 8, 2023
BP Earns Record Profit In 2022, Slows Shift From Oil
Business

BP Earns Record Profit In 2022, Slows Shift From Oil

by John Wanguba
February 8, 2023
How To Mine Bitcoin At Home
Econ Intersect News

How To Mine Bitcoin At Home

by John Wanguba
February 7, 2023
Adani's Market Losses Exceeded $100B As Crisis Shockwaves Extended
Business

Adani’s Market Losses Exceeded $100B As Crisis Shockwaves Extended

by John Wanguba
February 7, 2023
Next Post

Early Headlines: Greece is Late, Banks Being Crooks Again and More

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Browse by Category

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized

Browse by Tags

adoption altcoins banking banks Binance Bitcoin Bitcoin adoption Bitcoin market Bitcoin mining blockchain BTC business China crypto crypto adoption cryptocurrency crypto exchange crypto market crypto regulation decentralized finance DeFi Elon Musk ETH Ethereum Europe finance FTX inflation investment market analysis markets Metaverse mining NFT nonfungible tokens oil market price analysis recession regulation Russia technology Tesla the UK the US Twitter

Archives

  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • August 2010
  • August 2009

Categories

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized
Global Economic Intersection

After nearly 11 years of 24/7/365 operation, Global Economic Intersection co-founders Steven Hansen and John Lounsbury are retiring. The new owner, a global media company in London, is in the process of completing the set-up of Global Economic Intersection files in their system and publishing platform. The official website ownership transfer took place on 24 August.

Categories

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized

Recent Posts

  • Web3 Company To Run Super Bowl Ad For NFT Game As Crypto Is Ignored
  • Google Introduces ChatGPT Rival Bard, AI Search Plans Accelerate In Battle With Microsoft
  • BP Earns Record Profit In 2022, Slows Shift From Oil

© Copyright 2021 EconIntersect - Economic news, analysis and opinion.

No Result
View All Result
  • Home
  • Contact Us
  • Bitcoin Robot
    • Bitcoin Profit
    • Bitcoin Code
    • Quantum AI
    • eKrona Cryptocurrency
    • Bitcoin Up
    • Bitcoin Prime
    • Yuan Pay Group
    • Immediate Profit
    • BitIQ
    • Bitcoin Loophole
    • Crypto Boom
    • Bitcoin Era
    • Bitcoin Treasure
    • Bitcoin Lucro
    • Bitcoin System
    • Oil Profit
    • The News Spy
    • British Bitcoin Profit
    • Bitcoin Trader
  • Bitcoin Reddit

© Copyright 2021 EconIntersect - Economic news, analysis and opinion.

en English
ar Arabicbg Bulgarianda Danishnl Dutchen Englishfi Finnishfr Frenchde Germanel Greekit Italianja Japaneselv Latvianno Norwegianpl Polishpt Portuguesero Romanianes Spanishsv Swedish