Intrinsic value of Xinyuan Real Estate ADR - XIN

Previous Close

$6.41

  Intrinsic Value

$9.88

stock screener

  Rating & Target

str. buy

+54%

Previous close

$6.41

 
Intrinsic value

$9.88

 
Up/down potential

+54%

 
Rating

str. buy

Our model is not good at valuating stocks of financial companies, such as XIN.

We calculate the intrinsic value of XIN stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  34.19
  8.60
  8.24
  7.92
  7.62
  7.36
  7.13
  6.91
  6.72
  6.55
  6.39
  6.26
  6.13
  6.02
  5.92
  5.82
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.39
  5.35
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
Revenue, $m
  1,562
  1,696
  1,836
  1,981
  2,133
  2,290
  2,453
  2,622
  2,798
  2,982
  3,172
  3,371
  3,578
  3,793
  4,017
  4,251
  4,495
  4,750
  5,016
  5,294
  5,584
  5,888
  6,205
  6,538
  6,885
  7,250
  7,631
  8,030
  8,448
  8,887
  9,346
Variable operating expenses, $m
 
  1,428
  1,546
  1,668
  1,796
  1,928
  2,065
  2,208
  2,356
  2,511
  2,671
  2,838
  3,012
  3,194
  3,382
  3,579
  3,785
  3,999
  4,223
  4,457
  4,702
  4,958
  5,225
  5,505
  5,798
  6,104
  6,425
  6,761
  7,113
  7,483
  7,869
Fixed operating expenses, $m
 
  83
  85
  87
  89
  92
  94
  96
  99
  101
  104
  106
  109
  112
  114
  117
  120
  123
  126
  129
  133
  136
  139
  143
  147
  150
  154
  158
  162
  166
  170
Total operating expenses, $m
  1,394
  1,511
  1,631
  1,755
  1,885
  2,020
  2,159
  2,304
  2,455
  2,612
  2,775
  2,944
  3,121
  3,306
  3,496
  3,696
  3,905
  4,122
  4,349
  4,586
  4,835
  5,094
  5,364
  5,648
  5,945
  6,254
  6,579
  6,919
  7,275
  7,649
  8,039
Operating income, $m
  167
  185
  205
  226
  248
  270
  294
  318
  343
  370
  398
  426
  456
  488
  520
  554
  590
  627
  666
  707
  750
  794
  841
  890
  941
  995
  1,052
  1,111
  1,173
  1,238
  1,307
EBITDA, $m
  176
  195
  216
  237
  260
  283
  308
  333
  360
  387
  416
  446
  477
  509
  543
  579
  616
  654
  695
  737
  782
  828
  877
  928
  981
  1,037
  1,096
  1,157
  1,222
  1,289
  1,360
Interest expense (income), $m
  182
  141
  162
  185
  209
  234
  259
  286
  314
  342
  372
  403
  436
  470
  505
  541
  580
  620
  661
  705
  750
  798
  847
  899
  953
  1,010
  1,070
  1,132
  1,197
  1,266
  1,337
Earnings before tax, $m
  166
  44
  43
  41
  39
  37
  34
  32
  30
  28
  25
  23
  20
  18
  15
  13
  10
  8
  5
  2
  -1
  -3
  -6
  -9
  -12
  -15
  -18
  -21
  -24
  -27
  -30
Tax expense, $m
  87
  12
  12
  11
  10
  10
  9
  9
  8
  7
  7
  6
  6
  5
  4
  3
  3
  2
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  73
  32
  31
  30
  28
  27
  25
  24
  22
  20
  18
  17
  15
  13
  11
  9
  7
  6
  4
  2
  -1
  -3
  -6
  -9
  -12
  -15
  -18
  -21
  -24
  -27
  -30

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  618
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  4,236
  3,927
  4,250
  4,587
  4,936
  5,300
  5,677
  6,070
  6,478
  6,902
  7,344
  7,803
  8,281
  8,780
  9,299
  9,840
  10,405
  10,995
  11,611
  12,254
  12,926
  13,629
  14,364
  15,134
  15,939
  16,781
  17,664
  18,588
  19,556
  20,571
  21,634
Adjusted assets (=assets-cash), $m
  3,618
  3,927
  4,250
  4,587
  4,936
  5,300
  5,677
  6,070
  6,478
  6,902
  7,344
  7,803
  8,281
  8,780
  9,299
  9,840
  10,405
  10,995
  11,611
  12,254
  12,926
  13,629
  14,364
  15,134
  15,939
  16,781
  17,664
  18,588
  19,556
  20,571
  21,634
Revenue / Adjusted assets
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
Average production assets, $m
  152
  165
  178
  192
  207
  222
  238
  254
  271
  289
  308
  327
  347
  368
  390
  412
  436
  461
  487
  513
  542
  571
  602
  634
  668
  703
  740
  779
  819
  862
  907
Working capital, $m
  1,870
  848
  918
  991
  1,066
  1,145
  1,226
  1,311
  1,399
  1,491
  1,586
  1,685
  1,789
  1,896
  2,009
  2,126
  2,248
  2,375
  2,508
  2,647
  2,792
  2,944
  3,103
  3,269
  3,443
  3,625
  3,815
  4,015
  4,224
  4,443
  4,673
Total debt, $m
  2,113
  1,726
  1,969
  2,222
  2,484
  2,757
  3,041
  3,336
  3,642
  3,961
  4,292
  4,637
  4,996
  5,370
  5,760
  6,167
  6,591
  7,034
  7,497
  7,980
  8,485
  9,013
  9,565
  10,142
  10,747
  11,380
  12,042
  12,737
  13,464
  14,226
  15,024
Total liabilities, $m
  3,336
  2,949
  3,192
  3,445
  3,707
  3,980
  4,264
  4,559
  4,865
  5,184
  5,515
  5,860
  6,219
  6,593
  6,983
  7,390
  7,814
  8,257
  8,720
  9,203
  9,708
  10,236
  10,788
  11,365
  11,970
  12,603
  13,265
  13,960
  14,687
  15,449
  16,247
Total equity, $m
  900
  978
  1,058
  1,142
  1,229
  1,320
  1,414
  1,511
  1,613
  1,719
  1,829
  1,943
  2,062
  2,186
  2,315
  2,450
  2,591
  2,738
  2,891
  3,051
  3,219
  3,394
  3,577
  3,768
  3,969
  4,179
  4,398
  4,628
  4,870
  5,122
  5,387
Total liabilities and equity, $m
  4,236
  3,927
  4,250
  4,587
  4,936
  5,300
  5,678
  6,070
  6,478
  6,903
  7,344
  7,803
  8,281
  8,779
  9,298
  9,840
  10,405
  10,995
  11,611
  12,254
  12,927
  13,630
  14,365
  15,133
  15,939
  16,782
  17,663
  18,588
  19,557
  20,571
  21,634
Debt-to-equity ratio
  2.348
  1.770
  1.860
  1.950
  2.020
  2.090
  2.150
  2.210
  2.260
  2.300
  2.350
  2.390
  2.420
  2.460
  2.490
  2.520
  2.540
  2.570
  2.590
  2.620
  2.640
  2.660
  2.670
  2.690
  2.710
  2.720
  2.740
  2.750
  2.760
  2.780
  2.790
Adjusted equity ratio
  0.127
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  73
  32
  31
  30
  28
  27
  25
  24
  22
  20
  18
  17
  15
  13
  11
  9
  7
  6
  4
  2
  -1
  -3
  -6
  -9
  -12
  -15
  -18
  -21
  -24
  -27
  -30
Depreciation, amort., depletion, $m
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
  24
  26
  27
  29
  30
  32
  34
  36
  38
  40
  42
  44
  46
  48
  51
  54
Funds from operations, $m
  -378
  42
  42
  41
  40
  40
  39
  39
  38
  37
  37
  36
  35
  35
  34
  34
  33
  33
  32
  32
  32
  30
  29
  28
  28
  27
  26
  25
  24
  24
  23
Change in working capital, $m
  -218
  67
  70
  73
  76
  78
  82
  85
  88
  92
  95
  99
  103
  108
  112
  117
  122
  127
  133
  139
  145
  152
  159
  166
  174
  182
  191
  200
  209
  219
  230
Cash from operations, $m
  -160
  -25
  -28
  -32
  -35
  -39
  -42
  -46
  -50
  -54
  -59
  -63
  -68
  -73
  -78
  -83
  -89
  -95
  -101
  -107
  -114
  -121
  -129
  -138
  -146
  -155
  -165
  -175
  -185
  -195
  -207
Maintenance CAPEX, $m
  0
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -51
New CAPEX, $m
  -3
  -13
  -14
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
Cash from investing activities, $m
  4
  -22
  -24
  -25
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -58
  -61
  -65
  -68
  -72
  -75
  -79
  -83
  -87
  -91
  -96
Free cash flow, $m
  -156
  -47
  -51
  -56
  -61
  -66
  -71
  -77
  -82
  -88
  -94
  -101
  -107
  -114
  -121
  -129
  -137
  -145
  -154
  -163
  -172
  -183
  -194
  -206
  -218
  -230
  -243
  -257
  -271
  -286
  -302
Issuance/(repayment) of debt, $m
  390
  231
  243
  253
  263
  273
  284
  295
  306
  319
  331
  345
  359
  374
  390
  407
  424
  443
  462
  483
  505
  528
  552
  578
  605
  633
  663
  694
  727
  762
  799
Issuance/(repurchase) of shares, $m
  -32
  45
  49
  54
  59
  64
  69
  74
  80
  85
  91
  98
  104
  111
  118
  125
  133
  141
  150
  159
  168
  178
  189
  201
  212
  225
  238
  251
  265
  280
  295
Cash from financing (excl. dividends), $m  
  396
  276
  292
  307
  322
  337
  353
  369
  386
  404
  422
  443
  463
  485
  508
  532
  557
  584
  612
  642
  673
  706
  741
  779
  817
  858
  901
  945
  992
  1,042
  1,094
Total cash flow (excl. dividends), $m
  212
  230
  241
  251
  260
  271
  281
  292
  304
  316
  329
  342
  356
  371
  387
  403
  421
  439
  458
  479
  501
  523
  547
  573
  599
  627
  657
  688
  721
  755
  792
Retained Cash Flow (-), $m
  36
  -78
  -81
  -84
  -87
  -90
  -94
  -98
  -102
  -106
  -110
  -114
  -119
  -124
  -129
  -135
  -141
  -147
  -153
  -160
  -168
  -178
  -189
  -201
  -212
  -225
  -238
  -251
  -265
  -280
  -295
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  152
  160
  167
  173
  180
  187
  195
  202
  210
  219
  228
  237
  247
  257
  268
  280
  292
  305
  319
  333
  345
  358
  372
  387
  403
  419
  437
  456
  476
  497
Discount rate, %
 
  9.40
  9.87
  10.36
  10.88
  11.43
  12.00
  12.60
  13.23
  13.89
  14.58
  15.31
  16.08
  16.88
  17.73
  18.61
  19.54
  20.52
  21.54
  22.62
  23.75
  24.94
  26.19
  27.50
  28.87
  30.32
  31.83
  33.42
  35.09
  36.85
  38.69
PV of cash for distribution, $m
 
  139
  133
  124
  115
  105
  95
  85
  75
  65
  56
  47
  40
  33
  26
  21
  16
  12
  9
  7
  5
  3
  2
  1
  1
  1
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  93.3
  87.0
  81.1
  75.5
  70.3
  65.4
  60.9
  56.6
  52.6
  48.9
  45.4
  42.2
  39.2
  36.4
  33.8
  31.3
  29.1
  27.0
  25.0
  23.2
  21.5
  19.9
  18.4
  17.1
  15.8
  14.6
  13.5
  12.5
  11.5
  10.6

Xinyuan Real Estate Co., Ltd. (Xinyuan) is a holding company and conducts business primarily through its operating subsidiaries in China. The Company is a real estate developer and property manager that primarily focuses on residential properties. Xinyuan is engaged in developing large scale residential projects, which consist of multiple residential buildings that include multi-layer apartment buildings, sub-high-rise apartment buildings or high-rise apartment buildings. Its segments include property developments in Zhengzhou, Henan Province; property developments in Jinan, Shandong Province; property developments in Suzhou, Xuzhou and Kunshan, Jiangsu Province; property developments in Chengdu, Sichuan Province; property developments in Beijing; property developments in Sanya, Hainan Province; property developments in Changsha, Hunan Province; property developments in Shanghai; property developments in Tianjin; property developments in the United States, and other.

FINANCIAL RATIOS  of  Xinyuan Real Estate ADR (XIN)

Valuation Ratios
P/E Ratio 11.5
Price to Sales 0.5
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow -5.3
Price to Free Cash Flow -5.2
Growth Rates
Sales Growth Rate 34.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 50%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio 1
Current Ratio 0.5
LT Debt to Equity 136.1%
Total Debt to Equity 234.8%
Interest Coverage 2
Management Effectiveness
Return On Assets 4.1%
Ret/ On Assets - 3 Yr. Avg. 4.7%
Return On Total Capital 2.6%
Ret/ On T. Cap. - 3 Yr. Avg. 2.5%
Return On Equity 8%
Return On Equity - 3 Yr. Avg. 6.7%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 22.9%
Gross Margin - 3 Yr. Avg. 24.2%
EBITDA Margin 22.9%
EBITDA Margin - 3 Yr. Avg. 24.9%
Operating Margin 10.8%
Oper. Margin - 3 Yr. Avg. 9.7%
Pre-Tax Margin 10.6%
Pre-Tax Margin - 3 Yr. Avg. 9.8%
Net Profit Margin 4.7%
Net Profit Margin - 3 Yr. Avg. 5.2%
Effective Tax Rate 52.4%
Eff/ Tax Rate - 3 Yr. Avg. 45%
Payout Ratio 28.8%

XIN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the XIN stock intrinsic value calculation we used $1562 million for the last fiscal year's total revenue generated by Xinyuan Real Estate ADR. The default revenue input number comes from 2016 income statement of Xinyuan Real Estate ADR. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our XIN stock valuation model: a) initial revenue growth rate of 8.6% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 9.4%, whose default value for XIN is calculated based on our internal credit rating of Xinyuan Real Estate ADR, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Xinyuan Real Estate ADR.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of XIN stock the variable cost ratio is equal to 84.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $81 million in the base year in the intrinsic value calculation for XIN stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 9.4% for Xinyuan Real Estate ADR.

Corporate tax rate of 27% is the nominal tax rate for Xinyuan Real Estate ADR. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the XIN stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for XIN are equal to 9.7%.

Life of production assets of 16.9 years is the average useful life of capital assets used in Xinyuan Real Estate ADR operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for XIN is equal to 50%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $900 million for Xinyuan Real Estate ADR - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 81.678 million for Xinyuan Real Estate ADR is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Xinyuan Real Estate ADR at the current share price and the inputted number of shares is $0.5 billion.

RELATED COMPANIES Price Int.Val. Rating

COMPANY NEWS

▶ Xinyuan posts 4Q profit   [06:17AM  Associated Press]
▶ Xinyuan posts 3Q profit   [Nov-10-17 06:07AM  Associated Press]
▶ Xinyuan posts 2Q profit   [Aug-11-17 08:10PM  Associated Press]
▶ Xinyuan posts 1Q profit   [May-18-17 06:12AM  Associated Press]
▶ Xinyuan posts 4Q profit   [06:19AM  Associated Press]
▶ Is Haverty Furniture Companies, Inc. (HVT) A Good Stock To Buy?   [Dec-09-16 06:00PM  at Insider Monkey]
▶ Corrections & Amplifications   [Dec-02-16 12:22AM  at The Wall Street Journal]
▶ Xinyuan Real Estate Co., Ltd. Announces CFO Transition   [Sep-26-16 08:30AM  PR Newswire]
Financial statements of XIN
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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