YaSheng Group (HERB)

[Buy-And-Hold]

I have been following this stock for quite some time after an old professor/portfolio manager asked me to do a risk analysis report on the stock. After today's volume I thought i'd chime in:

I was initially attracted to the stock based on Graham's formula [current assets - total liabilities > market cap], which by my math says the stock should still at least double to switch the inequality.

As of March 31, current assets 450,328,000 - 63,745,000 = 386,583,000 , which dwarfs the market cap of 176,810,000. I view it as cheap for any stock price under $2.49.
(that would be a market cap of 386.583 million / 155.10 million shares out = $2.49 per share).

The Main risks I associate with HERB are the following (you are prob. aware of a lot of these):

- Tax issues could lead to delisting from US exchange: as a us listed ADR, by GAAP and SEC, US auditors are supposed to come into China once a year to audit the financials but the CHinese gov has prevented this from happening. There are risks/worries that this will lead to a delisting of CHinese ADRS. ALso the financials could be cooked

- Chinese gov owns the land, yasheng leases it essentially. these land laws are 30-70yr contracts and are paid up front in cash. they do not disclose when these contracts need to be renewed - directly effect balance sheet

- Liquidity (obviously)

- Core competencies : Honestly wtf are they doing buyin gmines in africa IMO, expensive and huge risk

I have a small position and am considering raising it if we can mantain $1+pps for some time