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Xinyuan Real Estate: The Risk Is To The Upside


  • Xinyuan reported strong top- and bottom-line results for Q4 and Full-year 2017.
  • The company has significantly grown its revenue over the last five years, and I see no signs of a slow down.
  • Xinyuan is a long-term buy at today's price.

Xinyuan Real Estate's (NYSE:NYSE:XIN) stock has taken shareholders on a roller coaster ride over the last 12 months, but let's not forget that XIN shares are still outperforming the broader market by a wide margin over this period of time.

I have had a Xinyuan position in my R.I.P. portfolio for years now and the XIN shares have been a top performer, at least lately, but I believe that there is still room for the stock to run. To be clear, while there are definitely major risks that need to be considered before investing in Xinyuan, I believe that the risk is currently to the upside.

Q4 And Full-year 2017 Results

On February 9, 2018, Xinyuan reported impressive top- and bottom-line results. The company's Q4 2017 revenue (US$729M) and adjusted EPS (US$0.47) grew by 44% and 160%, respectively, when compared to the same period of the prior year. Other highlights from the quarter include:

  • Contract sales were up 72% YoY (from US$465M to US$802M)
  • Selling, General and Admin ("SG&A") expenses as a percentage of revenue were 10.6% for Q4 2017 (up from 10.4% in Q4 2016)
  • Average selling price ("ASP") per square meter sold in China (i.e., the company's primary market) was US$1,794 for Q4 2017 compared to US$1,616 for Q4 2016

There is a lot to like about these results, especially the strong top-line growth and uptick in ASP/square meter sold, but the full-year results are even better after you consider the last three fiscal years.

$ - in millions 2017 2016 2015 Chg ('17 to '15)
Contract Sales $2,466 $1,761 $1,390 77%
Chg 51% 27%
Revenue $1,980 $1,561 $1,164 70%
Chg 30% 34%
Gross Profit $457 $358 $273 67%
Chg 7% 7%
SG&A $211 $178 $167

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This article was written by

Our President and CIO is a CPA with experience in public accounting and the financial services industry. He earned his Master of Accountancy degree in 2008 and his B.S. in Business Management in 2007. He is also a Level III CFA candidate. He has been intrigued by the market from the start. Over the years, he has learned that long-term investing is a discipline that, if followed, will help contribute to building lasting wealth. As such, most of our articles will be about the investments that we plan to hold for at least 3 to 5 years, as long as the company's story does not change. As a Seeking Alpha contributor, our main goal is to write about the companies that are key to our portfolio with the hope of promoting discussion (for or against the investment) from others within the SA community.Please visit our website for more information about W.G. Investment Research LLC.

Analyst’s Disclosure: I am/we are long XIN. 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.

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Comments (41)

Sun Myung profile picture
Q1 18 earnings coming soon.(next week or the week after) Last year +$.11 but guidance indicated a likely loss for this year. I think we may see a surprise to the up side, but I have a worse case of -$.05.
Sun Myung profile picture
2017 Annual report:


Haven't had a chance to look it over yet, but was surprised that it's release wasn't announced. It's dated 30 April
Sun Myung profile picture
Xinyuan signs agreement with Wuhan government:

Thank you, John Sheehy, for informing us that Xinyuan Science & Technology Service is listed on NEEQ already, and the company has done a good business. According to Bloomberg, Currently, the NEEQ (nickname, New Third Board, for Chinese locals) requires, "Unlike the Shanghai and Shenzhen stock exchanges, NEEQ has an investor threshold of two years’ experience in securities investing and 5 million yuan worth of securities in assets. ". I am under an impression that most of trades now are conducted as large block trade negotiated by buyers and sellers. Over time, it will probably be more open to trades of small number shares.

As an added bonus, John also posted a link on his website to the following article: "Alibaba, Baidu, JD Plot A-Share Return Via New CDR Scheme". I am a heavy investor of these companies and Tencent, it reinforced the previous reports on the same matter.
Sun Myung profile picture
Xinyuan Science & Technology Service article by John Sheehy:

WG Investment Research profile picture
I am starting to become a big fan of John Sheehy. I saw this earlier today - as always, thanks for sharing.

Sun Myung profile picture
I have been for some time. He does a great job covering XIN. I would encourage anyone with an interest in the company to follow him on his site.

Sun Myung
Sun Myung profile picture
China news article regarding Xinyuan robot assistant at Henan trade fair: (from John Sheehy)



On April 17, 2018, the 12th China Henan International Trade and Investment Fair (hereinafter referred to as the Henan Investment and Investment Fair) kicked off at Zhengzhou International Conference and Exhibition Center in Henan Province. The current CIFIT was jointly sponsored by the People's Government of Henan Province, the China Council for the Promotion of International Trade and the Chinese People's Association for Friendship with Foreign Countries. It is understood that the CIFIT has invited a total of 19,600 merchants and 321 contracted projects with a total investment of 439.9 billion yuan. The participating merchants came from 86 countries and regions around the world. The participating merchants not only had world top 500 companies and well-known corporate executives, but also had well-known foreign companies, investment and promotion agencies, and well-known chambers of commerce that had an investment intention in Henan Province. As the science and technology company of Xinyuan (China), Beijing Love Relay Technology Development Co., Ltd. (hereinafter abbreviated as: Love Relay) and China's first home smart housekeeping robot - Caobao made its debut.

Full-scene smart butler subverts the family intelligent robot industry

"Consumer demand determines market demand, market demand determines industry development trend." According to the reporter's understanding, most intelligent robots on the domestic market can only meet single or partial application scenarios and cannot meet diversified and full-scene applications. The birth of the Sic Bo robot just solved this market demand. At the scene, the reporter interviewed the relevant person in charge of the Sic Bo smart housekeeper robot. The responsible person stated that with the increasing consumer demand, the single product function can no longer meet the future market demand, but the diversified, full-scene intelligence Application is the future development trend of the industry. The emergence of smart phones, for example, subverts the traditional mobile phone industry and integrates mobile phones from a single communication function into a diversified, full-scene, integrated micro-intelligent system. The emergence of Sic Bo's smart housekeeper robot is bound to overturn the entire intelligent robot industry. The responsible person also mentioned that Shenbao smart housekeeper robot can not only control nearly 400 different types of smart appliances by voice, but also provide a wealth of “housekeeping services”. Shenbao Smart Butler Robot can provide residential property owners with services such as property announcements, reports and repairs, life payments, and sending and receiving express delivery services, allowing owners to experience smart, convenient and good living without leaving their homes. Whether it is listening to music, watching movies, playing games, or an on-line foreign teacher's course or multi-party video conference, Sic Bo's smart housekeeper robot provides smart housekeeping services to every family member anytime, anywhere.
At present, the application scenarios of Shengbao smart housekeeper robots cover a wide range of applications such as health and health, education and entertainment, smart home control, real estate services, and life services. They basically cover the needs of daily life, and are comparable to similar robot products in terms of comprehensive functionality. Than in the lead.

Sic Bo Intelligent Butler Robot

Diversified application scenarios open a new era of intelligent robot stewards
According to the reporter’s understanding, Sicbo smart housekeeper robots will also be on-line to order functions such as takeaways, voice taxis, and road conditions, and will cooperate with more third-party platforms focusing on family application scenarios to maximize the satisfaction Consumer appeal. At the scene of Henan CIFIT, the reporter also interviewed the dealers who came to the booth for consultation. Most dealers expressed that they are very optimistic about the prospects for the development of the home smart robot industry. One of the dealers said in an interview that he is a smart home fan. He was very interested in products related to the smart home industry. He first represented early-agers in intelligent robots and responded well to the initial market. Later, with the increasing acceptance and demand of smart robot products by domestic consumers, there were many different brands of early childhood education on the market. Robots have more people and less profits. At the same time, many consumers revealed to him that there are too many types of intelligent robots on the market and that the unit price of robots is too high. Many families cannot meet the needs of a single family application scenario. Buy a variety of intelligent robot products, so he always wanted to find a comprehensive intelligent robot, this time participating in the CIFIT is to take a try to participate in the mentality of mind, did not think that it was really right. The dealer also stated in the interview that it will consider the agent product after deeply understanding the product characteristics.

Onsite consultation on the booth

Before the press release, more than 30 intentional distributors in the CIFIT expressed their desire to have in-depth understanding of the products, and some dealers showed a high intention of product representation. Forward-looking market insights, excellent design concepts, advanced intelligent technologies, and good product use experience are the key to the success of the Sabot smart housekeeper robots to subvert and lead the development of the intelligent robot industry. We have reason to believe that Saipan smart housekeeper robots will Become a leader in the domestic intelligent robot industry.
About Love Relay
Beijing AiLiLi Technology Development Co., Ltd. was founded in 2015 and is a technological innovation company of NYSE-listed Xinyuan China (NYSE: XIN) Angels Investment. It is committed to transforming people through the development and deployment of artificial intelligence carriers and using scientific and technological means. Lifestyle, leading the real estate industry to take the lead in creating healthy, high-quality smart homes.
Sun Myung profile picture
This article should have been tagged to XIN:

Sun Myung profile picture
Institutional info:

Two Sigma Advisers LP increased its stake in Xinyuan Real Estate (NYSE:XIN) by 32.1% in the fourth quarter, according to the company in its most recent Form 13F filing with the Securities and Exchange Commission (SEC). The institutional investor owned 231,700 shares of the financial services provider’s stock after buying an additional 56,300 shares during the period. Two Sigma Advisers LP’s holdings in Xinyuan Real Estate were worth $1,578,000 at the end of the most recent reporting period.

A number of other hedge funds also recently added to or reduced their stakes in XIN. Vanguard Group Inc. raised its stake in Xinyuan Real Estate by 19.0% in the second quarter. Vanguard Group Inc. now owns 175,442 shares of the financial services provider’s stock worth $909,000 after buying an additional 27,964 shares in the last quarter.

New York State Common Retirement Fund bought a new position in Xinyuan Real Estate in the third quarter worth about $483,000. JPMorgan Chase & Co. raised its stake in Xinyuan Real Estate by 70.2% in the third quarter. JPMorgan Chase & Co. now owns 257,469 shares of the financial services provider’s stock worth $1,457,000 after buying an additional 106,203 shares in the last quarter.

Dimensional Fund Advisors LP bought a new position in Xinyuan Real Estate in the third quarter worth about $744,000. Finally, Jane Street Group LLC bought a new position in Xinyuan Real Estate in the third quarter worth about $115,000. 16.66% of the stock is owned by institutional investors.
WG Investment Research profile picture
Sun Myung,

Thanks for sharing the info - very much appreciated. Keep it coming!

I read the Chinese transcript of the interview, the five “side businesses” are summarized as the followings to the best I understood them,

1. Business/Start-up platform: XIN has built a small community in Zhengzhou for startups (a ecosystem for startups).
2. Contract Built – XIN is contracted as a builder in others’ projects. It appears that XIN will fund the construction itself, and gets paid as the projects sells the units. It is not clear to me how precisely XIN is getting paid.
3. Real Estate Management Platform – A platform that other can use to manage their properties.
4. Commercial Property Management – It appears that XIN also does some consulting work in this.
5. Property Management – XIN as property managers.
So what you can see above Xinyuan is getting lost. Too many balls in the air. That may all look interesting at the beginning, but it will lead to overstressed management attention, drain of capital and finally losses....
Martín Maas profile picture
It looks like property management, asset management, a real estate trading platform, described with some nice corporate wording.
Sun Myung profile picture
Interview with CEO Zhang:


In it he talks about XIN and it's 5 real estate related businesses which are:

1. Xinchuang Technology: (translated) In September 2017, Xinchuang Technology successfully unveiled Xinchuang Cambridge Technology Center and Xinchuang London Technology Center in the UK. In December 2017, Xinchuang signed an agreement with Oxford University. After the contract, Xinchuang Technology officially became a member of the Oxford Innovation Alliance. The two parties plan to conduct in-depth cooperation in the areas of biotechnology, artificial intelligence, next-generation information technology, and new materials. In March 2018, Xinchuang Science and Technology Co., Ltd. invested and built in Zhengzhou, the original passenger town, was listed as the first city-level featured town in Zhengzhou. This featured town focuses on artificial intelligence and information technology, and has introduced world top 500 companies such as IBM, Oracle, and Lenovo, and has initially built a maker ecosystem.

2. Xinyuan Assets: Under the strategic plan of building a large-scale asset management system, Xinyuan established a fund company to do projects by cooperating with trust bank funds. Under the Xinyuan brand's support, Xinyan’s assets financing and construction business has made significant progress. In only 5 or 6 months, Xinyan signed and took over 10 generations of construction projects, covering 6 cities including Henan, Guangdong, Shandong, and Heilongjiang. The scale of management and construction is approximately 3.65 million square meters, and the sales of goods are managed. The value scale is about 36.1 billion yuan. According to the plan, in 2018, Xinyan will achieve an asset scale of more than 50 billion yuan for construction and management projects, and sales revenue for agency construction will exceed 5 billion yuan. The scale of management business will exceed 300 billion yuan in the next five years.

3. Xin Ju Technology (real estate cloud platform):..... Xin Ju Technology owns ERP-SaaS cloud platform, HIO+ Internet platform, asset trading Internet platform and XIN-City smart technology platform, which can reduce costs and increase efficiency for enterprises and comprehensively solve collaborative office problems. HIO+ is a general-purpose cloud platform for the entire industry. It integrates the thinking of internal corporate management and cross-organization collaborative office support. It supports the seamless integration of professional ERP systems across the industry, unified entrance, unified interface, unified communications, unified caliber, and unified management. Segregation of information between systems, to avoid the trouble caused by multiple systems.

4. Yinghuai Business (business management company): At the end of 2017, Yinghuai Business first released the MOLIN Molecule Center product, which is targeted at service neighborhoods and service communities. The Moragh Center will define the neighborhood business status and brand series according to the nature of the surrounding population, breaking the traditional ceiling of labor costs. . In 2017, Yinghuai Commercial only spent half a year, and 20 shopping malls joined it. At present, Yinghuai has established 14 joint ventures nationwide that involve major cities in 13 provinces. According to the plan, there will be 60 business development service projects in Yinghuai in 2018 and 100 projects in 2019.

5. Xinyuan Property (property management): Xinyuan Property has established more than 20 branch offices in Zhengzhou, Jinan, Suzhou, Chengdu, Beijing, Xi’an and Shanghai, covering residential, office, commercial, mixed-use, industrial parks, and hotels. , hotels, etc. Unlike other traditional property management businesses, Xinyuan Property has built a generic property industry ecosystem. According to the owner's service upgrade requirements, the Xinyuan Property Business extended to the community education, health, and pension industry, launched the “Xinyuan Education” brand, provided the “Radius Classroom” for the owner, and opened the “Xin Cantang” elderly restaurant. In addition, with the Group's technological advantages, Xinyuan Property has also integrated new technologies such as AI and blockchain into property management.

..."Relying on the real estate industry and the above five major real estate related businesses, Xinyuan hopes to build an ecological (?) platform for coordinated development of the main and auxiliary industries....

...."I believe that the strategy is to play it out. The goal of Xinyuan is to strengthen the main business and expand the business. This is the strategic choice Xinyuan has made in adapting to the changing market environment," said Zhang Lizhou.
WG Investment Research profile picture
Very insightful, thanks for sharing.

Sun Myung profile picture
Q1 contract sales estimate out: 6.04B Rmb

Sun Myung profile picture
February 2018 NBS Price Data in Leading Chinese Cities With Home Price Restrictions:


Year-over-year pricing in the 15 First tier and hot second tier cities was flat.
XIN better focuses on its core business! Too much distraction through adventures in US, UK and blockchain may become killing....
Sun Myung profile picture
XIN blockchain news:

XIN and Tencent announce strategic cooperation agreement:


(a portion translated)
Xin Yuan Group and Tencent announced Cross-border cooperation, the two sides signed a strategic cooperation agreement across the field. Xin Yuan Group will be the technology to help real estate, through the wisdom cloud sales platform, the Conbow Butler Robot and other Internet products, for the real estate industry plug technology wings. Tencent will integrate the platform energy, for the real estate industry, and Xin Yuan group together to create greater value.



In 2017 XIN #5 in the world in blockchain patents, while Tencent came in at #23

...all from John Sheehy
WG Investment Research profile picture
Blockchain may eventually become a significant portion of Xinyuan's long-term story - very interested to see how this plays out. A partnership with Tencent seems promising.

Sun Myung profile picture

Xinyuan Real Estate Co., Ltd. Announces Equity Investment In The Madison Project, London

BEIJING, March 21, 2018 /PRNewswire/ -- Xinyuan Real Estate Co., Ltd. ("Xinyuan" or the "Company") (NYSE: XIN), an NYSE-listed real estate developer and property manager operating primarily in China and also in other countries, today announced that it has acquired, from ED Jersey Limited, a 100% owned subsidiary of ED Group Holding Limited ("ED Group"), 50% equity stake in Madison Developments Limited ("MDL"), the developer of the Madison Project at Marsh Wall, London E14 9YT, via Xinyuan's 100% subsidiary Xinyuan International (HK) Property Investment Co., Limited for a total consideration of GBP 29.11 million.

The Madison Project site extends to 0.38 hectares (or approximately 0.94 acres) and is located adjacent to Canary Wharf, one of Europe's largest commercial centres. The planning permission was granted in March 2015 for the site to develop a 53 story building comprised of 423 residential apartments, including 319 private apartments and 104 affordable apartments, with approximately 425 sq. meters of community facilities. Construction is currently underway and its project completion is expected for the third quarter 2020. To date, approximately 40% of the private apartments have been pre-sold and 100% of the affordable apartments have been pre-sold.

Mr. Yong Zhang, Xinyuan's Chairman, commented, "We are pleased to announce this equity investment in MDL. This is our first step in the UK real estate market and an important milestone for Xinyuan's international expansion strategy. While China remains our core market, we would like to take advantage of our experience in overseas investment and join hands with competitive local partners, and are confident that our investment in MDL will generate favorable returns for our shareholders."

Mr. Gordon Crawford, Chairman of ED Group, commented. "We are pleased to welcome Xinyuan Real Estate as our partner in this project. The Madison is set to be a landmark building in Canary Wharf, a location we believe will benefit over the coming years, especially upon the arrival of Crossrail later this year. We look forward to working with Xinyuan on their debut investment in the UK to establish a successful, long term partnership."
Sun Myung profile picture
Anybody have thoughts on this deal?

So, XIN paid $41M for 50% of Madison Developments Limited ("MDL") the developer on a project that is 55% (total) pre-sold.

Not mentioned in the release is LBS properties, a property development and investment company, which has this project listed as part of their portfolio. I have not found a link between LBS and ED Group

Site link from LBS:

ED group:

LBS properties:
Sun Myung profile picture

TPG sold about 1.236M shares from 2/13 to 3/8 with the highest number on 3/8 of 353,100. Coincides with the run down from $6.70 to $6

Saw this awhile ago and forgot to post. Really find it unlikely there were buy backs this quarter.
Herman Tai profile picture
That means TPG pretty much sold all their shares, that explained the recent drop a lot, thanks.
TPG did simply not believe in the strange escapade of XIN in UK
Sun Myung profile picture
Actually, no they didn't. According to the 2016 annual report, they had 12 million shares or 8.2% of the company. They sold about 10% of their holdings.
Sun Myung profile picture
Next up for XIN is the 2017 annual report. Should see it this week or next.
The Diligent CPA in NJ profile picture
Be funny if stock took off due to their blockchain technology
WG Investment Research profile picture
I agree, CPA. I really want to hear more about how they are utilizing the technology and how they plan to use it in the future.

Sun Myung profile picture
March 12, 2018:

New bond issue: Xinyuan Real Estate issued international bonds with a 9.875% coupon for USD 200.0m maturing in 2020.

WG Investment Research profile picture
Xinyuan is slowly rolling its debt into bonds with more attractive rates, which will turn out to be a significant long-term catalyst for the stock, IMHO.

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