Some reasons behind my picks...
1. CPHI.ob: Earned 0.09 in the last quarter, and still appears to be on track for FY07 eps of 0.30. If so, its trading at a forward multiple of 5x with organic growth of 40-50%+. We know the risks here: poor cash flow, long A/R collection times....even with these issues, I think it should be worth 8-10x forward earnings. Would be a much higher multiple if management were more proactive with CCs, PRs and actually tried to uplist. Looking for at least $2.40 - a gain of 55% from current levels.
2. TBYH.ob: Another China stock that is involved in cell phone design and production. Sells almost exclusively into the Chinese market and other Asian countries. The stock is down because they were forced to write off some A/R under more conservative accounting in the last quarter. Q1 eps were down y/y as a result, although the company was still profitable and had solid positive cash flow from operations. Company management has guided for rev growth of 30-40% and net income growth of 20-30% (0.49 - 0.53) in FY08. Hoping for a better sequential quarter in Q2 vs Q1; second half of their fiscal year is much stronger. If they don't disappoint, I'm looking for 8x forward earnings or a gain of 74%.
3. AIRT: Company does two things: air cargo shipper for FedEx and ground equipment supplier (deicing equipment). Air cargo growth is nil, but the ground equipment backlog was up sequentially and y/y. I'm hoping that these higher margin sales come through starting in Q2. Company has been buying back stock around 8/share; only 2.46MM shares outstanding. Earned 0.25/share in Q1....I'm hoping they can top that in Q2. My goal for EPS in FY08 is around 1.25; I'd be happy to see 10x that. Potential gain: 38%.
4. FSIN: China infrastructure play. They produce material for use in coaxial cable, magnet wire, and shielding wire. Moving into supplying material for the transformer industry as well. One of the larger "bimetallic" suppliers in the region. Ramping up capacity for strong growth; higher margins anticipated in second half as operating efficiencies improve. Company has guided for 1.03 - 1.13...I'm hoping that it can garner a 15x multiple. Positive cash flow from ops; recieved a cash infusion from Citadel Equity (one of the largest hedge funds in the world.) Hoping for a gain of 35% here.
5. DFNS.ob: Isreali maker of body armor. Looks poised to continue a strong period of growth, if their solid backlog is any indication. Would have reported 0.03 fully taxed fd without some one-time expenses. Looks like they should earn 0.10 - 0.12 fd, ft eps in FY07. I'd be happy with a 10x multiple, so upside potential: 82%
6. QADMF.pk (or QUA.to): Miner of copper and gold, two materials that should continue to be in solid demand the rest of the year. Last of its hedges have come off (these impacted cash flow by -$43.4MM in Q2 alone.) If those two commodities hold up, then the company could earn upwards of $US3.00 - 3.50 (fully taxed, fully diluted). I'd be happy with 8x, or 45% gain from current levels.
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In general, I like low PEG plays with decent visibility into their business. I like to buy low PE when possible, combined with strong catalysts for continued growth and increased investor interest.
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