China Housing & Land Captures The Hot Chinese Real Estate Market

Based in Xi'an, the capital city of the Shaanxi province in China, China Housing & Land Development, Inc. (CHLN.OB) is the largest Private developer of residential and commercial properties. China Housing has been an independent business since 1992 and became a U.S. public listed Company in 2006. The housing market has been growing quite rapidly in China over the past few years as China as a whole has been expanding greatly. CHLN has been around for a while and is also expanding its revenues and income very rapidly and are expected to continue into 2010 with huge future projects that will provide steady growth in earnings.

History: Information from Roth Capital presentation:

-Largest private residential real estate developer in Xian City, Shaanxi Province, China.
- From 1999 - 2006 sales grew from 2.4m to 54.1m in 06' with net income of over $9m in 2006.
- Average project IRR of 140%

Average living are in Xian is 157 sq ft/person. Central and Local government drivers in place to create 1.26 billion sq ft. of new development by 2020.

Current Projects:
24g: expected $8.6m profit
JunJing 1: expected $10m profit

New Projects: estimates
Yijing Yuan: $23.8m profit
Kang Canyon: $7.4m profit
Baqiao: $168.9m profit
JunJing II: $24.3m profit

The US housing market has been under major crisis so its hard to even compare this stock to the real estate industry in the US. But the growth rates for CHLN have been very significant over the companies history and are continued to increase significantly over the next few years.

CHLN reported .56 eps in 2007 and are expected to jump over 100% in earnings for full year 08 on 1.21 eps giving them a low Forward P/E of just 3.88x earnings compared to the industry average in the US of 9x earnings. Which gives CHLN a fair value against the damaged US housing industry over $9/share for 08' earnings. Though with Chinas growth and emerging market I think CHLN can be valued even farther above $9 share. 2009' estimates forecasts are 2.19 per share giving them fair value near $20 share. I wouldn't say these numbers are very accurate while comparing them to a damaged US housing market. If anything they're under what they should be, making CHLN look dirt cheap and poised for very strong growth in earnings and share price as we head into the future.

I really like the opportunity arising in this stock and the chart is bullish as well. I think its very possible that share price will breakout above $5/share in the near future and this stock starts making its way to new highs and blue skies.

Comments

[BeursAddict]

So with such a strong earnings potential, why isn't this stock at, let's say $30,-? It's just 15 times 2009 earnings per share. It's one of those stocks with an upward potential of 500%, and it might go down 50% if market conditions go bad. Do the math. Put 10 to 15 of these stocks with such upward potential in your portfolio, and even if some go the wrong way (which will happen), the upward potential of the others will compensate more then enough and on balance, you will come out on top in 3 - 5 years.