Its been a while since i’ve found one of these Chinese stocks that used to be so easy to find months ago it was like trying to find piece of hay, in a pile of hay. Since Xinyuan’s IPO in December the trend has been in bear mode as the market has faced credit and housing issues all year long lead by the U.S. which hasn’t been in favor of upside movement for stocks. I’m not one to call a bottom in the housing sector by any means. But there are always short squeezes and short term opportunities to capitalize on in depressed stocks on the long side.
Fundamentally (NYSE:XIN) is deeply undervalued within the Residential construction industry carrying an extremely low forward price/earnings ratio of just 4.38x compared to the industry average of 26.67x. For the recent fourth quarter XIN posted strong results with income up 81% , excluding a one time charge, and revenue more than doubling to $91m. Looking forward XIN is expecting strong growth with an estimated 1.77eps in 09′ hence the extremely low forward P/E. Given these estimates XIN carries a future fair value within the industry near $46/share compared to todays closing price of just 7.83. Obviously is far fetched to think this stock is going to sky rocket to $46/share. But this depressed valuation along with a bullish chart setup is likely to result in a significant upside move that we can capitalize on. I’m going long XIN Monday.
