Why China Housing & Land Development Should Be Trading Substantially Higher

Apr.17.13 | About: China Housing (CHLN)

I own a stock called China Housing & Land Development (NASDAQ:CHLN) which currently trades at $1.58. In my opinion the stock would be fairly valued at $14.85/ share which is 839% higher. This valuation is based off of their stellar earnings report, and what its peer China HGS Real Estate (NASDAQ:HGSH) is trading at.

China Housing & Land Development engages in the acquisition, development, management, and sale of commercial and residential real estate properties primarily in Xian, the People's Republic of China. On April 1, 2013 the company released their fourth quarter 2012 financial results. Their financial results were spectacular. It is the fourth quarter in a row that the company exceeded their guidance forecast. Total revenue in the fourth quarter of 2012 was 61.5 million which is a SEQUENTIAL increase of 112% from the 3rd quarter 2012. The revenue increase was a direct result of the ongoing improvement in the Xian housing market, the fourth quarter is seasonably their strongest quarter. This company does not only have blowout revenue, they are also PROFITABLE. Net income for the fourth quarter 2012 was $11.5 million, or 33 cents per share. The company did not provide guidance for the 2013 year, but their EPS for FY 2012 was .47 cents. This is 62% EPS growth over prior year 2011, which was .29 cents. If I apply 62% growth to the FY 2013 numbers, that would be .47 cents (62%) = .76 EPS for 2013. Using my 2013 EPS estimate of .76 cents, CHLN currently trades at a forward PE of a paltry 2.07. China Housing & Land Development has 34,954,809 shares outstanding. At a price of $1.58 its market cap is 55.2 million.


Ok now for the reason why you are reading this article, my headline. There is a similar company called China HGS Real Estate Inc . China HGS Real Estate, Inc. engages in the real estate development in the People's Republic of China. It is involved in the construction and sale of residential apartments, car parks, and commercial properties. Sound familiar? China HGS Real Estate recently released their 1st quarter 2013 financials. Their revenues for the quarter? 11 million. Earnings Per Share for 1st quarter 2013? 12 cents. China HGS Real Estate stock trades at $11.61 as I type. Their market cap? $527 million!

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Applying a similar $527 million dollar market cap to CHLN gives it a stock price of $14.85, which is 839% higher than what the stock trades at today.

I am long CHLN, because of the deep discount it trades at compared to HGSH. Plus its financials and earnings growth are better than HGSH. CHLN is an undiscovered gem, which is set to explode.

My disclaimer is to keep in mind China Housing & Land Development is a Chinese ADR, and some Chinese ADRs have had a history of trouble. All of my numbers are in USD.

Disclosure: I am long CHLN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.