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XIN XIN

|Includes: Xinyuan Real Estate Co., Ltd. (XIN)

Your editor mostly considers Soldier's Field Road across the River Charles from the Harvard campus as the site of football games. When I graduated from what was then Radcliffe nearly 50 years ago, the Harvard Business School, HBS, also on Soldier's Field Road, was off-limits to women. If we wanted a business career, Radcliffe offered a program to teach its ABs typing and shorthand.

More for paid subscribers from the oil patch, the cellphone market, biotech, aviation, financial service, real estate, and consumer goods follows.

*Xinyuan won a Chinese award for being one of the country's top ten real estate developers measured by operating efficiency part-sponsored by Tsinghua University.
It also won another accolade as "the world's cheapest stock" from Jared Sleeper of the Harvard Financial Analysts Club, a part of the Harvard HBS finance program. Mr. Sleeper argues that XIN, developer of property projects in Chinese smaller cities, has a market cap of roughly $200 mn and net income of $100 mn (and guidance for that level as well in 2012). It has $487 mn in cash and cash equivalents, plus $768 mn in tangible assets, (housing for sale) offsetting outstanding debt and accounts payable of about $500 mn. Net-net its quick ratio shows that its $523 mn of assets are 2.5x its market cap. If you value the company at 5x earnings, you also get a valuation of c$500 mn.
Mr. Sleeper tests various theories as to why XIN is cheap. No, it is not a scam as some Chinese reverse-listed issues proved to be. It went through the full monty of an initial public offering audited by Ernst & Young (and what he omitted, owned by US real estate company Blue Ridge in their portfolios.) It pays a dividend and runs a buy-back program. It has few short sales outstanding (meaning "Muddy Waters" is not planning an exposé.)
Its management includes Tom Gurnee, CFO, a Stanford grad with whom Sleeper exchanged emails, who had been CFO of Sohu before, and who has business experience.
Mr. Sleeper also notes something your editor keeps stressing too: "Outright collapse of property prices in China is unlikely because [it] has very little private leverage [ed: Chinese buyers pay cash] and the government is already heavily restricting home buying. Should prices fall in a way that would be overly damanging, the government can simply loosen its controls and dramatically increase demand." So "an uncontrolled collapse that might seriously weaken Xinyuan's financials going forward is unlikely" given that the government has already popped the property bubble. (His paper was published at http://bit.ly/89UJPz where I write from time to time too.)

Disclosure: I am long XIN.

Additional disclosure: global-investing.com subscribers and its editor, me, have been loading up in XIN with profits as of today of over 50%.