Vanke is No. 1 home builder in China. Today. Vanke A share (000002) went up 10% in Shenzhen, after it moved sideways for about two months. Note today is the first trading day after China national holiday break.
Real estate companies in China don’t get much respect these days. No matter how many new homes they built, how much tax they pay and how many jobs they create. This is similar to the US big oil companies. In this case it’s because the housing prices in China cities spiked again. The hot topic in China these days are “why the new home prices increase so fast”, “why those guys bid the land at such a high price (down the road, they will sell the homes at price even higher”. The “conclusion” is the developers must make good money off home buyers. This is certainly not accurate. I’m not saying the banks are making all the money, while the real estate companies are getting nothing. They certainly get a fair piece of the pie so that they can feed their families.
On the other hand, if we examine this thing without “missing the boat” mentality, we will see many happy home owners of Vanke (from my friends to Wang Jianshuo, who praised Vanke from his own exp). The bottom line is home builders like Vanke are creating homes and communites that people can play, live and rest. In other words, the home builders do create value for customers.
Yesterday as I was checked out an old apartment (built in 1992) near Zhongshan park, I asked the owner where did they moved. The owner told me they moved to “Jin Sha Ya Yuan”, which is a new community in Putuo district. Although the location is not as prime as the old apartment, but I think the home, the servies, and environment there would be superior than the “old apartment”. So what’s my point? People in China have been upgrading their living (homes) in last 10 years and the trend is continuing: move from smaller home to bigger ones; from older apartments to new ones with better landscape and services…
From stock investor point, we can not complete analysis without numbers. In the case of Vanke it still got a growth story: 2007 earning 0.60 to 0.70; revenue growth 60% in next 2 or 3 years; PE of about 55 (stock closed 33.22 today).