Introduction

Last week, XIN reported on its 3^rd quarter performance. Most numbers were up a bit over last quarter and up a lot over the third quarter of 2014. But as I said in an earlier piece: being better than 2014 is testament to just how bad a year 2014 was for Chinese real estate.

Summary Results

Table 1 provides data on recent performance. More floor space was sold in the 3^rd quarter but at lower prices than in the 2^nd quarter. Net income stayed up and XIN projects an increase of 30% for the entire year. That sounds good and indeed offers plenty of coverage for its $0.05 quarterly ADS dividend. But the growth is only half of what XIN projected at the beginning of 2015. At that time, it projected 2015 income in the $90 – $100 million range.

Table 1. – XIN Quarterly Results

Sales Prices and Projected Income

Table 2 provides more information on lower selling prices. There are two ways to view these reductions. The positive way is to say it is part of a program to reduce leverage: speed up the sale of properties and reduce debt. The negative way to view it is that it is a reflection of weaker real estate markets resulting in lower net income.

The properties highlighted in red recorded exceptionally large price reductions. I queried XIN about these. Apparently in each XIN project there are different types of properties selling at very different average prices. So when sales volumes are low you might happen to sell mostly expensive or inexpensive properties. But the overall average of selling prices is probably a good indicator of what is happening, and it is down 12% from the 2^nd quarter.

Table 2. – XIN Selling Prices

It is notable that XIN’s inventory of properties for sale is up slightly from the 2^nd quarter. One can project that if this inventory sells of at its current prices, the total proceeds would be $2.7 billion.

In addition to these active projects, XIN has 576,000 square meters in the planning stage with launches on 64% this quarter and the balance in the first quarter of 2016.