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China Pharmas- CHME nicely up with earnings PR, LTUS looks even cheaper to me.
CHME has a current market cap of $41 mil and just reported 6.9 mil in net income for 2007- also projecting 8.6 mil net income in '08.
LTUS has a current market cap of $32 mil and earnings are expected at $8.5 mil in '07 and $13.8 mil in '08.
LTUS market cap is 22% less than CHME.
Yet LTUS should earn 23% more than CHME in '07 and 60% more in '08.
I own both, although I own more LTUS. BTW, its earnings should also be out very soon.
CNEH, Northern, Thanks for sharing your conversation with their CFO. Great news that they have yet to drill a dry well, I was wondering if that might have been an issue.
I remember that you made also made a trip to China last year. Do you speak chinese? If not, do many execs (including the CFO you spoke to), speak english or is there a translator also involved?
nelson...CNEH; no doubt concerns about the legitimacy of #s from chinese companies is a part of the problem. It seems to me that the most recent fall of chinese stocks seemed to start after the troubling supersleuth report about CFSG. But to be fair, many american .OB stocks have cratered in the last week as well. Our own VMC index was down about 3% for the week while the SP500 and DJIA were up about that much. Even the Russell 2000 was up 1.8%. It seems to me that small investors were scrambling for cover and closing out positions in smaller and more illiquid stocks across the board.
Along with the downturn in CNEH, I have noticed more and more posts on other boards questioning whether the company even exists. One guy said he couldn't see it on google's worldmap so it must be a scam (googles low resolution free maps are several years old and pre-date the wells). Others wondered why China Petroleum would lease the land to CNEH rather than operate it on their own. Others said the company would be late filing because there must something to hide. Or maybe the cold weather slowed operations in Q1. The more it drops, the more reasons people find to sell it lower.
If people really don't trust the numbers then strong numbers should not help much. I expect to see 11c for Q4 and maybe 15c in Q1. Annualize that and we are at less than a PE of 3 for a company that is growing rapidly and has a guaranteed market for all its production. Assuming they are real, that seems dirt cheap to me.
CNEH-Interesting post from someone named Thunderbird2004 on the IV board for CNEH. He speaks mandarin so he was able to chat with CNEH's CFO. Here are his posts:
Just called the CFO...
Ok I just called the CFO, I am fluent in mandarin, and he said there is no plan to actually delay the nasdaq filing so it should come 4/1.
The website should be up before 5/1, it appears they suck at website building or something and he says there are a lot of contents and they want to actually make it make sense.
I am calling again as I just got cut off...
q1 coming out 5/15....
he says we should be very satisified with q1 numbers.
he says their profit ratio does not meet the criteria for petro, and petro has a higher cost structure, thus petro just rather someone else do the work and they buy it from petro.
7 shareholders called him today, I was the only one who spoke mandarin he says. I guess a lot of people are freaked about the stock.
Anyways, I need to buy more before 4/1....
Great call Cramer,
Last week he told a caller it would be "silly" to get out of Bear Stearns and now he says he was only talking about having funds in one of their accounts. I thought his show is about stocks, not cash in broker accounts. Sorry Len, I couldn't resist posting this one about the boo'yah boob:
CRM- More competition from Microsoft for this good short candidate that has been discussed previously here. Market cap is 11 times sales with a PE of 370.
Microsoft CRM Takes on Salesforce.com
Mon Mar 17
Microsoft offered a sneak peek of the newest version of its CRM application, Dynamics AX 2009, at Convergence 2008, a meeting of Microsoft Dynamics users. The release, due in the first half of this year, is aimed at small and midsize businesses with what analysts say is extremely aggressive pricing...
Chris Alliegro, lead analyst with Directions on Microsoft (an independent research firm focused exclusively on Microsoft strategy and technology), said that Dynamics offers a big advantage over competing products: a familiar interface. "If you're a Microsoft shop, it's an interface you're already familiar with. Having your CRM functionality visible, accessible, and built into Outlook is a huge selling point for Microsoft."
Alliegro told us that Microsoft is directly challenging Salesforce.com with its new hosted CRM service, which is in beta testing now and should be launched for general sign-up in the middle of this year. All indications are that Microsoft will launch a full-scale attack.
"They're coming at the market very aggressively," particularly in terms of pricing, Alliegro said. One version of the hosted product is expected to be $44 per month per subscriber, and $15 higher for the more enhanced version. (The main differences between the two versions, he said, are storage amount and the ability to support offline synchronizations.) He said that Salesforce.com's similar offerings cost about 50 percent more.
"It's fair to ask if Microsoft can even make money at that price point. That's something they're going to learn. I think that companies getting into this kind of business are caught off-guard by how small the margins actually are -- it's a much smaller-margin business than selling packaged software," Alliegro said.
But Microsoft has both the deep pockets and the staying power needed to compete. "Microsoft is the kind of company that has proved that if it believes in something, it's willing to lose money on it for a long time to win the market, and they're a company that's as well positioned as any company to operate in that kind of environment," Alliegro said.
Alliegro noted that Microsoft has been talking up the idea of "xRM," where its CRM platform can have far more uses than simply managing sales, customer service and marketing. "It's also a generic platform that can be tailored to a wide range of functions or applications that are managing relations," Alliegro said. For example, the U.S. Air Force used the platform to build an application to help them manage personnel deployment -- which is not a customer-service application.
Microsoft will be looking hard at ways to exploit xRM and find other uses -- and customers -- for it. "They haven't said anything about what that functionality might be, but they hinted that they're thinking about that. If Microsoft starts to work through the feature specs of the next version, it wouldn't surprise me to see other functional domain areas surfacing, where they're taking this product and trying to make it specific to some applications other than strictly CRM."
http://news.yahoo.com/s/nf/20080317/tc_n...
LTUS, I added today. I thought it was dirt cheap at 84c and now 11 days later it is down another 30%. Estimated PE of 3 for last year (07), and PE of 2 for 08. Good balance sheet and strong growth in revs. Founders put their own shares on the line to "make good" on performance going forward including a nasdaq listing.
CNEH, LTUS, SUTR, CHCG, etc etc...Take your pick, all of these chinese micros have been whacked hard this week. I'm beginning to feel like I am dumping money down the great black hole of China. I can't believe that these are all scams, although the scammy report on CFSG seems to have magnified the drop on many of these. CFSG is now making a dramatic recovery, maybe the others will follow.
CNEH earned about 11c last quarter and it should earn around 15c in the current quarter. Annualize that and we have a PE of 3 for a company that will continue to grow dramatically with a guaranteed market along with record high prices for all the crude oil it can produce.
CNEH, Jimmy Cheung & Co. is their auditor. They are hong kong based and specialize in chinese companies that need to comply with US rules and regs. The firm's founder was an auditor with PriceWaterhouse for 11 years before forming his company and is currently one of the longest standing affiliates of Kreston International. Those two firms are ranked #1 and #15 on Berliet's list of reputable firms from post #82268. I don't see a problem with this firm.
I will be amazed if CNEH drops to $1.50 range but then the market has been full of bad surprises lately. I added more yesterday at $1.90
Here is a link to Cheung's website:
http://www.jimmycheungco.com/
CFSG- A specific projected revenue number may have been a red flag, but the fact that the magic number was $66.6, now that is downright weird.
SUTR- Whoops, sorry about that. I got carried away with the edit function in that part of the post. I also have a partial fill on a buy order at $4.50
Wade, re SUTR, From what I can see, SUTR hit an intraday high of 6.19 on Feb 14 which was also the day its strong earnings report came out. That is also the only day it popped above the $6 level this year. It closed that day at 5.33, and is still above that level. While down 25% from its high point, it also is up 33% from its $3.50 low earlier this year. In fact, since the beginning of the year, it has traded at lower levels than its current price on more days than it has traded above it.
Is SUTR's glass half full or half empty? SUTR has actually held up better than most stocks including those in the china sector and is still 10% above where it started the year. The day will come when SUTR breaks out into new highs. That should be late spring providing the market stops falling like the proverbial rock. FWIW, I like SUTR and have been adding on the recent weakness.
CHME- abh, They also go on to request that the registration statement be withdrawn:
Accordingly, we respectfully request that the Commission issue an order granting the withdrawal of the Registration Statement as soon as possible.
I believe what happened is that there were some already issued shares that had not yet been fully registered. The filing was supposed to be a post-effective filing of those already issued shares. Instead it was was written as a pre-effective filing and the same shares ended up being counted twice.
But let us know what IR says about it.
CHME- The sb2a filing with the higher share count was withdrawn the next day. Here's the link:
http://yahoo.brand.edgar-online.com/fetchFilingFrameset.aspx?FilingID=5642527&Type=HTML
I also own and like CHME's prospects going forward.
Delayed filings of earnings reports?
The more I look into LTUS, the more I like it and the more I add to my holdings, here is a work-up that I did on it:
LTUS.ob- Strong buy, undervalued at 84c.
This Chinese pharmaceutical company is generating very strong revenue and earnings growth with a good balance sheet. At its current stock price of 84c, it is trading at only a PE of about 4 based on estimated 2007 earnings.
Lotus Pharmaceuticals is a developer, manufacturer, and distributor of pharmaceuticals in China and is based in Beijing. They currently have 4 branded drugs which provide 65% of revenues. They expect to have two or more additional drugs approved for production every year through 2010 plus they have 14 more drugs that are currently in pre-clinical trials (from December 2007 presentation here: http://yahoo.brand.edgar-online.com/fetchFilingFrameset.aspx?dcn=0001161697-07-001399&Type=HTML ). Here is a partial list from the company’s website: http://www.lotuseast.com/market-ready.htm
An additional 18% of revenues currently come from contract manufacturing, the balance of current revenues comes from retail pharmacies in or near Beijing (6% of sales) and contract research (5%).
Lotus plans for continued future growth are both organic and through acquisitions. They plan to continue to improve distribution capabilities (currently selling in 28 china provinces through 100 sales employees and 300+ distributors), as well as adding new pharmaceutical drugs as noted above.
Here are the revenues and earnings for the last 4 reported quarters:
Revenues Net income
Q3-07 $16.6 Mil $2.2 Mil
Q2-07 $12.8 Mil $3.0 Mil
Q1-07 $8.3 Mil $0.8 Mil
Q4-06 $12.1 Mil ($.15 Mil ) (loss)
It is worth noting that while earnings were down in Q3-07 (ending Sept 30) compared to the previous quarter, Research and Development expenses increased by over $1.2 Mil as they focus on developing new products for market. If R&D had remained constant, earnings would have substantially increased.
For the year ending Dec, 2006 the company reported revenues of $36 Mil and net income of $4.1 Mil. In the first nine months ending Sept 30, 2007, the company has already reported $6.1 Mil in net income on $37.6 Mil in sales.
Last week, on Feb 26, 2008, the company announced a private placement for $5 million. 5.75 million convertible preferred shares were issued (at 87c/ share) to private investors. An additional 2.87 million warrants were given to the investors. The warrants are convertible at $1.20/ share and are good for 5 years. The funds are being used for corporate purposes to pay off a somewhat caustic $3 million convertible debenture. Lotus was paying 14% interest on the old debentures. The new convertibles are only at 8%, a much lower rate of interest.
What is interesting is that the company founders are required to place 7.5 million of their own personal shares in escrow as “make good” shares and they will only be released back to them providing certain performance parameters are met. The first requirement is that the company has a net income of $8.5 million for 2007. Since we already know that Lotus earned $6.1 million in the first 9 months, and the fourth quarter ended 2 months earlier, the company apparently earned at least $2.4 million in Q4-07. It also appears that there are now 47 million fully diluted shares outstanding (44.3 million diluted shares at the end of Q3 less the 3 million shares from the convertible debentures that are paid off plus 5.7 million from the private placement, so the company earned $2.4 million or 5c/share in Q4. (That also means they earned 19c for the year). Annualized, that is a current PE of only 4.2 for a rapidly growing company.
The founders also set a target of earning 95% of 13.8 million in 2008 and 95% of 17.5 million in 2009. That is before currency adjustments and non cash charges with the private placement. Lotus must earn 28c/ share in 2008 and 35c/ share in 2009 or the founders will forfeit shares to the investors. It seems to me that they are being very conservative with those numbers which work out to a PE of 3 for 2008 and a PE of only 2.4 for 2009.
The founders also have committed to obtaining a nasdaq listing for Lotus within 18 months. One of the problems with Lotus is the lack of liquidity in trading the shares as they are currently listed on the bulletin board. A nasdaq listing will dramatically increase the exposure of this company to the investment community. Also with the World Summer Olympics being held in Beijing this summer, I believe that will also attract more attention to this company. Drugs and medicine is a huge arena for future growth in China as it forges ahead with its transition to a rapidly growing industrial and market economy. This is also bringing higher standards of living and medical care to its citizens.
The stock price is volatile and it only has a low float of about 6 million shares. In the last year, the stock price has ranged between 78c and $3.30/ share. Despite Lotus Pharmaceuticals promising prospects, the stock is currently trading near 52 week lows at 84c. At current levels, I believe it is very undervalued. My target is 10x estimated 2008 earnings of 30c which would return it to near its old highs or about $3.00/ share. As always, do your own due diligence.
I just looked at the exact same message on 4 different boards. Does it really matter all that much about what Cramer is blabbering about?, plus I believe there are IHUB rules against so many "ditto" posts.
CHE.un- Nice to see that the 75 year contract was extended again but I think it was expected. Did you have reasons to doubt it would be extended? I don't see it as cause for a big gap up tomorrow but I sure won't complain if that happens.
OT: Platinum in catalytic converters. I noticed a guy laying underneath of a car parked next to mine while I was in downtown Tacoma last week. It seemed odd especially when he took off after he saw me. Someone later related to me that thieves have been cutting out and stealing catalytic converters from parked cars lately. Apparently, the platinum inside of them makes them quite valuable. So, watch out everyone for catalytic converter thieves.
China Finance CHFI...This company owns many shares in both UTVG and CHCG, both down big today on heavy volume. Perhaps they are the big seller of both today?? Also note that CHFI was a big seller of CHCG one year ago.
From a CHFI filing regarding their holdings:
China 3C Group. The 2,431,906 shares of CHCG represent approximately a 5% interest in the current issued and outstanding common shares of CHCG. The CHCG shares were received as payment for surety guarantee services provided for CHCG’s December 21, 2005 merger transaction with Capital Future Development Limited. The closing price of the CHCG shares was $0.10 per share on December 21, 2005. In March 2007, the Company sold 524,889 shares of CHCG. As of March 31, 2007, the closing price of shares of CHCG common stock was $6.29 per share. Since the remaining 1,907,017 shares of CHCG shares are reasonably expected to qualify for sale within one year, the securities are not considered restricted for the purposes of SFAS No. 115, and, accordingly, quoted market prices have been used to determine fair value.
Universal Travel Group. The 1,200,000 shares of UTVG represent approximately a 6% interest in the current issued and outstanding common shares of UTVG. The UTVG shares were received as payment for surety guarantee services provided for UTVG’s July 12, 2006 merger transaction with Full Power Enterprise Global Limited. The closing price of the UTVG shares was $0.60 per share on July 12, 2006. As of March 31, 2007, the closing price of shares of UTVG common stock was $1.74 per share. Since the UTVG shares are reasonably expected to qualify for sale within one year, the securities are not considered restricted for the purposes of SFAS No. 115, and, accordingly, quoted market prices have been used to determine fair value.
CHCG- Down 15% today to 2.37, very near 52 week lows. Decided to open a long position here. "Best Buy" type retailer in China. Company recently reaffirmed earnings of 45c/ share for the year ending 12/30/07. Back out cash and that is a trailing PE of 4.5 with no debt. CEO bought 120,000 shares last quarter at 3.60-$4. One concern may be winter storms in China slowed sales but from what I have seen, retail sales there has remained very strong in spite of snow storms and bad weather. China Olympics this summer should help as well.
This recent seeking alpha article provides another bullish case:
http://seekingalpha.com/article/65258-5-reasons-why-china-retail-china-3c-group-are-on-a-roll?source=yahoo
BWR..Oops is right...Strip out all of the non cash items and they still only cash flowed 2.64 Mil vs. 48 Mil a year ago from operations in the last quarter. That is well under a penny per share. I'm sure glad they pissed me off enough last quarter to sell out then.
BBWPF...I see that dividends are paid twice a year. FWIW, the stock went ex-dividend on 12/21/07 in order to collect the upcoming dividend payable on 3/18. Do the Aussies withhold a percentage from dividend payments as the Canadians do?
NXG-Decided to sell this one ahead of earnings after the close tomorrow. This gold and copper miner already preannounced a slower quarter some time back but I think I'll have a chance to buy it back cheaper after the report is out. Historically, it has been a good one to sell ahead of the news.
LTUS, Penny, Yes, I did read the 8K. You should look at it again. It says it is for a MAXIMUM of 12 million shares computed by multiplying the the purchase price by 1.5 and dividing by $1.
Filling in the amount financed:
$5 million x 1.5 / $1 = 7.5 million shares which is the number of shares referred to in the top of the 8K. Probably, they weren't sure how much they were going to raise when they worked up the original agreement.
LTUS-As abh noted, a good chunk of the Q2 earnings may have been related to the reduction in the allowances for returns and doubtful accounts, but the change in those allowances from Q2 to Q3 was only minimal (about $150,000) and the company still earned $2.2 million or about 5c/ share diluted in Q3. Also the new PIPE financing is being used to pay off the toxic converts which could have become a problem as abh pointed out in one of his posts. That old financing was also at 14% interest, the new financing is at 8%, a huge reduction.
Of course, the founders are putting 7.5 million of their shares on the line to drastically reduce the risk to the new lenders. They must be very confident that they can meet their targets. The 2007 income target is $8.5 million. So now we know that they must have earned about 2.4 million in Q4 that ended last December. That is about 5.5c/share. Annualize that at 22c/ share and this one is only at a 3.5 current PE.
Next year, their net income target goes up to $13.1 million. 5.7 million diluted shares are added with the PIPE financing but it appears to me that the 3 million shares from the old convertible debt are now gone since that was paid off with the proceeds. Now we have about 46 million shares diluted (the 2.8 M attached warrants are way out of the money). That works out to 28.5c/ share in 2008, which is a PE of less than 3. For 2009, the target is $16.6 million, which is about 36c/ share. It will also cost them more shares if they don't have a nasdaq listing within 18 months. And no doubt, those targets are conservative since management is putting their own shares on the line.
Everything considered, this one sure looks cheap to me at today's prices (80c)
skillz, re SUTR, I don't make a big deal about "restricted cash" with chinese companies. Chinese companies appear to have a different methodology in normal business practices than american companies do. Note the following comment in SUTR's last 10Q:
Advances to Suppliers and from Customers - The Company, as is common practice in the PRC, will often make advance payments to its suppliers for materials, or receive advance payments from its customers. The Company had net advances to suppliers of $55,206,222 and $32,791,928 at December 31, 2007 and June 30, 2007, respectively. The Company also had advances from its customers in the amount of $15,081,018 and $8,414,629 at December 31, 2007 and June 30, 2007, respectively.
It appears to me that restricted cash is probably a combination of advance payments that they have made to their suppliers and may also be cash they have recieved from their customers. I also see it in other chinese companies (GSI, another chinese steel company is an example) so I don't get alarmed by it when I see it. It should all come out in the wash at the end. If I'm wrong here, I hope someone will correct me.
I had thought the potential problem with CDS had been discussed here previously; sorry that I did not share it earlier.
With that I'm off to Reno to see if lady luck will smile at me down there.
SUTR, I also bought more today. Sure there is a risk factor like there is with any stock. But I sure believe their factories are real and as I have noted before, in some quarters the company makes money on related party transactions, in other quarters, it makes all its money on non-related party transactions and in still other quarters it is split. It doesn't mean anything on a quarter to quarter basis.
Skillz, I don't understand why you beat down SUTR, but you like CDS when the president of that company, Marc Siegel, is from Boca Raton, FL and he has been fined by the SEC for running a pump and dump brokerage operation out of there. That makes me much more nervous than related party transactions at SUTR.
http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_C/threadview?m=te&bn=3289&tid=4530&mid=4530&tof=34&frt=3#4530
Len, didn't take long using Yahoo's stock screener and looking for a stock just under $10. Amazing how linear the price drop of MNI has been over an extended period. Even more amazing is that 120% of the float is held by institutions and mutual funds. Man, those overpaid fund managers sure know how to pick them!
Newspapers are in a very tough spot, it should not be that difficult for the big boys to figure out. Other newspaper firms are right behind MNI's price action as well:
http://finance.yahoo.com/q/bc?s=MNI&t=5y&l=on&z=m&q=l&c=meg,gci,%5EGSPC
Len your mystery stock is in the newspaper industry. Papers include the Herald, Bee, Star, Observer and one of them is one that you (Len) may even subscribe to (or read at the library anyway).
LTUS- The new filings relate to the 8K they issued last week. The SEC wanted LTUS to treat the payments they are making to their CEO for money he personally loaned to build a hospital as an intangible rather than an expense as they make them. (In return, LTUS will be the sole supplier of pharmaceuticals to the hospital for the next 20 years) In the new filings that is now being treated as an intangible asset that is written off over 20 years rather than expensed over the next 5 years. Net result is that earnings are slightly higher in the revised filings than they had been. For example, earnings in the March quarter are about $42,000 higher than they had been before. This small bump in earnings will continue until the 5 year period has ended.
I also think this one is undervalued and have been adding shares.
SUTR- Wade, I'm guessing that the market is concerned about tightening margins with iron up so much.
Guidance sure seems downbeat considering that it is the best sulphuric acid market in ages. They commented that sulphur price increases are hurting them. Could they be actually losing money on some long term contracts with those higher raw material prices?
I'm thinking that next Q will look much better but I hope they are questioned on just where they stand with those long term contracts in the conf call.
CHE....Where did you see that Q4 is out tomorrow? I am not looking for the Q4 and annual results for another month.
LTUS 8K filing...Sounds much worse than it is. From what I see the company has been expensing something that the SEC wants them to treat as an intangible asset and capitalize over about 20 years instead of expensing over 5 years. The result is that income will actually increase although the effect is not meaningful. From what I can see it should add about $200,000 per year to the restatements and future P&L for the next 4 years or so.
It looks like it gave the mm a chance to pick up more cheap shares this morning from those whose first impulse was sell.
SUTR- Good earnings report. Even with the recent runup, it is still very cheap compared to CPSL, another nasdaq china steel stock. SUTR has 4 times the revs, almost 3x the income but only about the same market cap as CPSL. Big expansion in capacity starting this month should bring strong growth going forward.
SUTR..2morrowgains, I'll be happy if earnings come in around the previous qrtr when they earned 17c. Per the presentation that you linked to, SUTR was already operating at above capacity in most categories of steel production in Q1. Of course, we could see margin expansion and higher earnings from that but I'm not counting on it. Hopefully, the company will announce in the CC that the new mill is open and that will allow for substantially higher production and profits going forward.
Good info R59. I would only add that since we are already down about 8% for the year (basis SP500), and there are only 12 out of 50 years that were down more than that. Of those 12 years that were worse than 2008 to date, the average loss per year was 14.4%.
We have already lost more than half of that average for the year to date so the odds of being in stocks look much better to me than sitting on the sidelines with cash. I still have much more cash than I normally do but I am gradually reducing my cash position. Also, the FED has dropped rates substantially in the last month and I expect that more are coming. I believe it is a losing proposition to fight the FED now.
TGB- Don't own it but I would be nervous about holding this one into earnings. Mgmt seems to somehow find a way to disappoint..tire shortages, equipment breakdowns, currency losses, mining difficulties, take your pick. They also always have an excuse and I like it longer term with increased production coming...Just watch out at earnings release.
SUTR operates in Changshu which is near Shanghai and Shanghai is nearly 600 km from Beijing where the Olympics will be held. Shenyang city, the cohost city for the Olympics, is even further away.
I would think that SUTR should be safe from any Olympic related shutdown. It may even help them as manufacturers up north look to SUTR to provide steel if local supplies are cut off.
http://www.chinapage.com/map/map.html