A Chinese Pick and Shovel Play on China Real Estate

22-Nov-2010

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An eternal optimist, Liu-Yue built two social enterprises to help make the world a better place. Liu-Yue co-founded Oxstones Investment Club a searchable content platform and business tools for knowledge sharing and financial education. Oxstones.com also provides investors with direct access to U.S. commercial real estate opportunities and other alternative investments. In addition, Liu-Yue also co-founded Cute Brands a cause-oriented character brand management and brand licensing company that creates social awareness on global issues and societal challenges through character creations. Prior to his entrepreneurial endeavors, Liu-Yue worked as an Executive Associate at M&T Bank in the Structured Real Estate Finance Group where he worked with senior management on multiple bank-wide risk management projects. He also had a dual role as a commercial banker advising UHNWIs and family offices on investments, credit, and banking needs while focused on residential CRE, infrastructure development, and affordable housing projects. Prior to M&T, he held a number of positions in Latin American equities and bonds investment groups at SBC Warburg Dillon Read (Swiss Bank), OFFITBANK (the wealth management division of Wachovia Bank), and in small cap equities at Steinberg Priest Capital Management (family office). Liu-Yue has an MBA specializing in investment management and strategy from Georgetown University and a Bachelor of Science in Finance and Marketing from Stern School of Business at NYU. He also completed graduate studies in international management at the University of Oxford, Trinity College.

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By Liu-Yue (Louie) Lam, Co-Founder, Oxstone Capital Management,

CRIC, China Real Estate Information Corp – China – $9.45, 11/17/10

CRIC is China’s equivalent to U.S. commercial real estate property analytic and information companies – Loop net and Costar. If you work in commercial real estate or in the real estate investing business, you already understand how useful Loop net and Costar are for due diligence and valuation analysis. China Real Estate Information Corporation provides CRIC system, a real estate information database and analysis system, which include data on specific real estate development projects and parcels of land, macroeconomic, demographic and real estate industry-specific statistics on the Chinese real estate market. CRIC was spun off from E-House – China’s largest real estate company.

CRIC is cash rich with no debts on its balance sheet. It currently trades at an attractive valuation level. A P/E of 17x is reasonable given its decent growth opportunities shown by its PEG Ratio of 1.05x. CRIC has a very profitable business model which generates lots of cash flow by providing users with critical property information across China. It will continue to achieve high revenue growth whether or not China’s real estate implodes or not. Whether you are looking to buy Chinese property or bargain hunt for foreclosures, CRIC will be in the middle of the action.

As a person from a Chinese heritage, I grew up listening to my parents preach about 3 essential things that is a priority for most Chinese families – #1 is food, #2 is education, and #3 is real estate. Those are the three things Chinese families have no problem spending money on. In addition, there is a lack of alternative investment vehicles available for the common Chinese citizen. With inflation rising, Chinese citizens will continue to buy real estate as a storage of value for their hard own savings.

CRIC is currently trading near 52 week lows. Addition comfort is derived from a review of the institutional holders and seeing George Soros’s hedge fund with a position in the company as well.

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