Research Paper: Chinese Real Estate Company

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[. . .] Contract sales totaled U.S.$159.7 million, a 63.0% increase from U.S.$98.0 million recorded in the first quarter of 2011, and a 7.2% decrease from U.S.$172.1 million recorded in the fourth quarter of 2011.

Total gross floor area ("GFA") sales were 114,600 square meters, a 40.4% increase from 81,600 square meters sold in the first quarter of 2011 and a 2.4% increase from 111,900 square meters sold in the fourth quarter of 2011.

Selling, General, and Administrative ("SG&A") expenses as a percent of total revenue totaled 6.9% compared to 8.1% in the first quarter of 2011 and 5.8% in the fourth quarter of 2011.

Net income reached U.S.$23.2million, a 98.3% increase from U.S.$11.7 million reported in the first quarter of 2011 and an 18.0% decrease from U.S.$28.3 million in the fourth quarter of 2011.

Diluted net earnings per American Depositary Share ("ADS") attributable to shareholders wereUS $0.31, equivalent to U.S.$0.15 per common share, compared to diluted net earnings per ADS of U.S.$0.16, equivalent to U.S.$0.08 per common share, in the first quarter of 2011 and U.S.$0.38per ADS, equivalent to U.S.$0.19 per common share, in the fourth quarter of 2011.

Cash and cash equivalents, including restricted cash, increased by U.S.$28.1 million toUS $515.7 million as of March 31, 2012 from U.S.$487.6 million as of December 31, 2011. Short- and long-term debt decreased by U.S.$2.8 million to U.S.$282.7 million compared to U.S.$285.5 million as of December 31, 2011.

On April 18, 2012 the Company announced a quarterly dividend of U.S.$0.04 per ADS (U.S.$0.02per share) to shareholders of record on April 30, 2012 payable on May 15, 2012. (Xinyaun Real Estate Company, Ltd. 2012)

Contract sales are reported as having totaled "U.S.$159.7 million in the first quarter compared to U.S.$98.0 million in the first quarter of 2011 and U.S.$172.1 million in the fourth quarter of 2011." (Xinyaun Real Estate Company, Ltd. 2012) The GFA sales of the company are stated at "114,600 square meters in the first quarter of 2012 versus 81,600 square meters in the first quarter of 2011 and 111,900 square meters in the fourth quarter of 2011" (Xinyaun Real Estate Company, Ltd. 2012) The following table lists the breakdown of GFA sales and ASPs by project.

Figure 2

Breakdown of GFA Sales and ASP's by Project

Q1 2011

Q4 2011

Q1 2012

Unsold

GFA

ASP

GFA

ASP

GFA

ASP

GFA

Project

(Rmb)

(Rmb)

(Rmb)

Chengdu Splendid I

5.3

5,266

6.3

10,195

2.8

7,048

15.9

Chengdu Splendid II

28.3

7,045

13.9

6,936

20.2

6,829

31.5

Zhengzhou Modern City

11.9

8,217

15.5

13,462

11.3

9,646

51.6

Zhengzhou Royal Palace

9.2

15,568

6.7

16,244

Zhengzhou Century East B

13.1

8,555

11.2

8,215

Kunshan International City Garden

4.0

11,336

7.9

9,433

(4.6)

8,201

Suzhou International City Garden

2.1

14,800

10.1

10,676

27.8

9,836

40.8

Xuzhou Colorful Garden

21.3

7,321

0.8

11,064

0.8

7,549

0.2

Jinan Xinyuan Splendid

7.5

8,375

16.4

7,723

Zhengzhou Yipinxiangshan II

3.7

8,192

26.8

8,157

20.7

7,228

58.6

Others

5.0

0.8

1.3

6.7

Total

81.6

7,908

9,940

8,787

Share-based compensation is reported at "U.S.$0.1 million for the first quarter of 2012 compared to U.S.$0.5 million for the first quarter of 2011 and U.S.$0.2 million for the fourth quarter of 2011." Net income for the first quarter of 2012 is reported at U.S.$23.2 million in comparison to U.S.$11.7 million for the same period in 2011 and U.S.$28.3 million in fourth quarter of 2011." (Xinyaun Real Estate Company, Ltd. 2012) Reported as active projects in the first quarter of 2012 are those listed in the following table.

Figure 3

Active Projects in the First Quarter of 2012

GFA

Contract Sales

Project Cost

% Complete

(U.S.$ million)

Project

Total

Active

Projects

Sold

to date

Total

Active

Projects

Sales

to date

Sold

Chengdu Splendid I

90.8%

94.8%

Chengdu Splendid II

86.3%

93.0%

Zhengzhou Modern City

75.5%

70.7%

Zhengzhou Royal Palace

28.0

67.7

31.5%

66.8%

Zhengzhou Century East B

60.0

81.5

34.5%

71.2%

Kunshan International City Garden

73.9%

94.7%

Suzhou International City Garden

81.7%

98.3%

Xuzhou Colorful Garden

99.7%

85.2%

Jinan Xinyuan Splendid

18.4%

57.9%

Zhengzhou Yipinxiangshan II

73.8%

72.2%

Others remaining GFA

6.7

Total active projects

2,577.2

1,577.7

3,227.0

1,897.7

58.8%

78.4%

SWOT Analysis

Strengths

This company's strengths are exhibited in its ethical business conduct and its active projects for the company. The company is a well-established business in China with a large customer base.

Weaknesses

Recent reports state that the real estate market in China is greatly affected by falling prices in residential real estate. Added to this is the recent wave of Chinese investment in American real estate. It is reported that the interest of those in China in U.S. real estate started during the meltdown in the U.S. housing market. Stated specifically is that interest is presently growing "as a rising yuan -- up more than 8% since mid-2010 -- gives the Chinese greater purchasing power, and the mainland's restrictions on property purchases encourages them to look overseas." (Chu and Schmidt, 2012)

Opportunities

Opportunities for this company include the chance to enter into the market in the United States in locating real estate investment properties for Chinese customers.

Threats

Included in the threats for this company are the other real estate firms in China who are already assisting Chinese investors in locating real estate in the United States. As well, restrictions on property ownership may serve to hamper the business activity for this company. Finally, the fall in prices in residential real estate in China will also be a threat to this company in the near future.

Analysis

While Realogy has spent the better part of the first six months of 2012 analyzing how it is going to come out of the financial, regulatory and ethical mess that the company has landed in due to poor ethics associated with real estate hedge funds, Xinyuan is reaping the profits of having adhered to a rigid ethical structure that support the company's framework. Xinyuan… [END OF PREVIEW]

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Chinese Real Estate Company.  (2012, June 14).  Retrieved May 20, 2019, from https://www.essaytown.com/subjects/paper/chinese-real-estate-company/9492608

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"Chinese Real Estate Company."  Essaytown.com.  June 14, 2012.  Accessed May 20, 2019.
https://www.essaytown.com/subjects/paper/chinese-real-estate-company/9492608.