trumanburbank

Three Compelling Chinese Stocks

CHLN:
Love the company and the stock; thanks for the analysis (updating your analysis of a couple of years ago, which was also very good, if a little ahead-of-its-time in relation to stock price).

Correction/question related to sales prices per sq. meter in Xi'an: you state that
"Assuming Puhua achieves net income of 25% sales this would translate to net income, for CHLN alone, in the region of $100 million over the 4-year life of the project. These figures are arrived at by using sales price per sq metre of $850 – being recent sales price per sq metre achieved by CHLN. In reality Puhua is a very upscale project, is situated directly on the Ba river front and it should command selling prices a great deal higher than just $850 per sq metre, or $80 per sq feet."

Although it's possible that CHLN will achieve such prices in Puhua, the company recently quoted 4,955 RMB per sq meter in other projects for Q2, which translates into about $658/sq meter, not $850. This relatively modest housing cost in Xi'an is actually a significant positive for this company. Property prices in Xi'an have never experienced the bubble or crash seen in the coastal cities. Xi'an is much more affordable and has experienced steady, sustainable growth in sales generally and $ per sq meter. In addition, Xi'an is not overbuilt -- living space per capita is well below most other large cities, leading to substantial pent-up demand among Xi'an's large upper-middle class population (CHLN's typical target customer up to now).

Keep the generally excellent articles coming. Thanks.