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"JADA (profitable, no debt) trading below cash now"....Yeah, thanks to a bunch of bag holders like me who decided the risk of another Q with 0 EPS wasn't worth it. Took a 50 percent haircut on trusting "seasonality". Oh well, it was a small position and hopefully the lesson learned about earnings consistency will outweigh the loss, LOL.
My take on NEP is as follows: Warrants are much lower percent of common compared to say, LPH, so cannot totally wipe-out 40 or 50 percent of net revenue with GAAP warrant adjustments at this time. Secondly, after the trading halt last summer a lot of people have doubled their impression of NEP's proper "China discount" on it's P/E. But that extra P/E discount due to distrust is very temporary, I would imagine if NEP releases earnings that show net revenue for the Q is similar (oil production plus drilling net earnings) to within +/- 10 percent of previous 2 or 3 quarters, we are golden because that will (1) reinforce in investors minds that NEPs revenues are legit and not likely to be drastically revised due to greater accounting scrutiny, therefore allowing investors to retract some of that extra P/E discount -- my guess is from P/E 4-ish to P/E 6-ish just from the confidence builder of another 10Q release. So if revenues decline 10 percent, over next 2 weeks investors will still realize their drilling subsidiary is going to start picking up the slack (remember the 100 well contract was not announced till Sept. 30 and is not reflected in this 10Q but will be in the next 10Q); and in addition investor confidence should grow the PPS from P/E 4-ish to P/E 6-ish. But that might be offset by a small 5-15 percent warrants adjustment to GAAP. It's certainly no worse when you add those 3 factors up than break even to where we are now. And that in my mind is the worst scenario. The mid-range scenario is that net revenue is equal, not down from previous 2 or 3 Qs, investor sentiment rises due to greater trust from P/E 4-ish to P/E 6-ish, and warrants have a small impact. The best scenario is net revenues rise QoQ, investor sentiment improves from P/E 4 to 8, and warrants are negligible to minor. So regardless of what happens in the first morning of trading after earnings release, within 1 week we should have no downside below where we are now and more likely upside of 15 to 30 percent, maybe even 40 percent in next month.
This is totally a guess not based on solid numbers, although I did run some warrants adjustments estimates a few weeks ago, hard given the multiple expirations, but I did a range of possible average values and no scenarios looked like they could wipe-out the lions share of Q net revenue.
MSMLX was holdover from old investing in MFs - Matthews of Asia just closed the fund to new investors last Friday. It's strictly small companies and they have the freedom in this fund to pick from any asian nations, so there's a lot of wiggle room to have a good portfolio. Seriously though one can do a lot better with individual microcaps, but risk is diversified for you with MF.
Top Holdings mostly energy:
NEP:25%, LPH:24%, LLEN:20%, AERL:10%, CHGY:6%. Rationale for overweight is low downside risk and high China demand.
Remaining positions are 2.5% to 3% each:
UTA, LTUS, MSMLX, SIHI, ZSTN, SVNT. Quarterly changes in EPS and investor sentiment are less predictable than with energy stocks.
I also used the dip as a chance to buy. I'm thinking we'll see $4.15 to $4.30 as the next top sometime in early spring.
Asia Entertainment & Resources Ltd. Completes Acquisition of King's Gaming Promotion Limited's VIP Room in the Venetian Macau
8:30AM 11/16/10 | BusinessWire
Asia Entertainment & Resources Ltd. ("AERL") (NASDAQ: AERL, AERLW), which operates through its subsidiaries and related promoter companies as a VIP room gaming promoter, today announced that, through AERL's wholly-owned subsidiary, it has completed the acquisition of 100% of the profit interest in the operations of King's Gaming Promotion Limited ("KGP"), a Macau-based VIP room gaming promoter that currently operates one room with five tables at the Venetian Macao-Resort-Hotel on the Cotai Strip. KGP has been successful in maintaining an average Rolling Chip Turnover of approximately HK$1 billion (approximately US$129 million) per month over the past ten months under a fixed 1.25% commission on Rolling Chip Turnover.
As a result of the acquisition closing on November 15, AERL has the right to all of the profit interest of KGP dating back to November 1. Following the completion of the KGP acquisition, AERL has approximately 22.5 million total shares outstanding.
"The addition of this VIP gaming room will enhance our ability to serve our existing customers, and by combining our operations and network of agents with that of King's Gaming, we can expand our presence in the Macau VIP gaming market into the Cotai Strip, ultimately providing our shareholders with long-term value," said AERL Chairman Lam. "The acquisition, combined with our recent successful warrant redemption and capital raise, has positioned us well for future growth."
With the completion of the KGP acquisition, AERL reiterates its preliminary guidance of expecting 2011 Rolling Chip Turnover of US$1.15 billion per month and full year net income of US$55-60 million.
If it dips to 6, I'll have a nice place to stash the cash from my LPH sale at 3:51pm today, LOL. But then again, what are the odds of 2 earnings slaughters happening in the same week...Wait, rethink that strategy...LOL
You're assuming they will all live until October, 2012, LOL.
CHGY 14C: 3:1 rev.splt.+authoriz 5M pref. shares.
On 11/12/10, CHGY issued SEC filing 14C. They are doing two things - a 3:1 reverse split was authorized and they created a new class of shares authorizing up to 5M preferred shares. The rationale for this is uplisting minimum share price and also making it much harder for any other coal company to effect a hostile takeover without paying much, much more. Some quotes from the 14C filing:
"The Board believes the creation of the Preferred Stock is in the best interests of the Company and its stockholders and believes it advisable to authorize such shares to have them available for, among other things, possible issuance in connection with such activities as public or private offerings of shares for cash, dividends payable in stock of the Company, acquisitions of other companies, implementation of employee benefit plans and otherwise."
"Although the Board has no present intention of doing so, it could issue shares of Preferred Stock that could, depending on the terms of such series, make more difficult or discourage an attempt to obtain control of the Company by means of a merger, tender offer, proxy contest or other means. When in the judgment of the Board this action will be in the best interests of the Company, such shares could be used to create voting or other impediments or to discourage persons seeking to gain control of the Company. Such shares could be privately placed with purchasers favorable to the Board in opposing such action. In addition, the Board could authorize holders of a series of Preferred Stock to vote either separately as a class or with the holders of the Company's Common Stock on any merger, sale or exchange of assets by the Company or any other extraordinary corporate transaction. The existence of the additional authorized shares could have the effect of discouraging unsolicited takeover attempts. The issuance of new shares also could be used to dilute the stock ownership of a person or entity seeking to obtain control of the Company."
"Potential Anti-Takeover Effect Of Certain Provisions. Tender offers or other non-open market acquisitions of stock are usually made at prices above the prevailing market price. In addition, acquisitions of stock by persons attempting to acquire control through market purchases may cause the market price of the stock to reach levels which are higher than would otherwise be the case. By increasing the number of shares available to authorize and issue, the Company has caused a potential anti takeover effect by creating potential dilution to the number of outstanding shares. Such dilution will cause a party attempting a takeover to be required to buy more shares of the Company stock and to expend additional resources to accomplish such a measure."
Is China's inflation rate statistic just a head fake? This article in 11/13/10 China Daily News:
"Expert: China has no inflation problem
By Gao Yuan (chinadaily.com.cn)"
"China has no inflation problem because the current commodity prices hike were caused by supply shortage and not by an excessive amount of currency being issued, said Wang Guogang, head of institute of finance and banking at Chinese Academy of Social Sciences, at the academy's annual forum held on Thursday.
"If a country's consumer price index (CPI) is higher than three percent in six successive months, it can be defined as inflation by Western standards," Wang said. "But the price changes of agricultural products are not included when Western countries calculating their CPIs."
"Agricultural products account for one third of the goods used to calculate China's CPI, he said, adding that the high prices of agricultural products were caused by this year's frequently occurring natural disasters.
Hu Xiaolian, deputy governor of the People's Bank of China, said that the country's short-term inflation pressure is not so bad.
The central bank will continue to monitor the market and implement more flexible measures to stabilize the prices, and hasn't ruled out the possibility of increasing the interest rates again, she said."
Is China's inflation rate statistic just a head fake? This article in 11/13/10 China Daily News:
"Expert: China has no inflation problem
By Gao Yuan (chinadaily.com.cn)"
"China has no inflation problem because the current commodity prices hike were caused by supply shortage and not by an excessive amount of currency being issued, said Wang Guogang, head of institute of finance and banking at Chinese Academy of Social Sciences, at the academy's annual forum held on Thursday.
"If a country's consumer price index (CPI) is higher than three percent in six successive months, it can be defined as inflation by Western standards," Wang said. "But the price changes of agricultural products are not included when Western countries calculating their CPIs."
"Agricultural products account for one third of the goods used to calculate China's CPI, he said, adding that the high prices of agricultural products were caused by this year's frequently occurring natural disasters.
Hu Xiaolian, deputy governor of the People's Bank of China, said that the country's short-term inflation pressure is not so bad.
The central bank will continue to monitor the market and implement more flexible measures to stabilize the prices, and hasn't ruled out the possibility of increasing the interest rates again, she said."
OT - prevent brokerage from shorting:
Speaking of marginable, I could easily change my account from margin to cash-only. While that would not be good for me in a bull market, I think it might be good for the long investors in a bear market if everyone did that during a pullback, so brokerages could not loan out our shares for shorting. Then after the market is ready to rock again people could just change their accounts back to margin accounts. I wonder how much effect that would have on short volume if everyone did it?
On ETrade marginable if PPS >$2, which must be a slightly different policy than your brokerage.
Back at the end of the summer when LPH dipped below 2, I did get a margin call one time, but PPS bounced back in a couple days. But to be on the safe side I sold another brokerage equity and transferred cash to ETrade because I didn't want my LPH shares sold out at the bottom by ETrade. Since September earnings and PPS rise I have diversified so my marginable stocks are spread out better. Actually I am margined 10 percent in ETrade and 10 percent on my home equity loan, since this fall is a good season to stay in the money.
What's up with AERL? Thought Sykes was done shorting yesterday, yet it's dropped like a rock for the last hour?
Added more AERL on the dip. If Timmy had done a better job of bashing, might have dropped more than 10 percent for a day, LOL. I was hoping for a price in the upper 8s, oh well, I still think it has the best combination of undervalued, hot sector, and ready to pop. GLTA.
Tim Sykes article: bought on the dip since he doesn't really have any valid points to hold this down for more than a day.
The bounce has already started.
All my China stocks started to reverse early in the day;
All ended up negative except NEP (+0.5%):
LPH -6.9%
LLEN -5.9%
CHGY -3.3%
LTUS -0.3%
UTA -0.6%
AERL -9.6% (thanks a lot, Timothy!)
ZSTN -5.8%
JADA -2.4%
My cost basis in all of these is very low so no reason to panic, but watching the market react to Beijing's pronouncements is deja vu.
I noticed even Latin American ETFs pulled back (GXG, EWZS, EPU).
I'm in CHGY, too and have been posting over on Yahoo that it is the most undervalued US-listed China coal stock. The pops seem to have started with Hong Kong coal stocks first, followed by the bigger US-listed firms like PUDA, then down to the medium-sized like LLEN, which had a nice pop last week.
CHGY's P/E is in the high 3s, so it should easily double this winter. Being a relatively smaller company compared to the biggest firms, some of its P/E discount could be related to investor worry about risk related to random mining accidents that could disrupt revenues moreso in a smaller company than with one that owns many mines. However, I think that outstanding low valuation, higher coal prices, and high coal demand will very soon cause a sudden run-up in PPS. I bought more CHGY a week ago when it had a one-day dip down $1.60.
Burp - SVNT question: I went long after the stock dropped from $22 to $12.51, when I bought. Should this be a hold just in case another buyout deal comes up, while in the alternative it'll probably keep drifting down til December sales kick in? Should I assume no downside risk if I am patient enough and is the upside even if they go it alone worth hanging on at a cost basis of $12.51? Unpredictable waiting periods of "dead money" is why I usually avoid pharma plays that hinge on certain drugs, except that I thought the FDA approval status of Krytexxa would make this a safe bet with no downside risk if I hold a while.
Thx
Thanks to this board for insight. I'm in LPH, NEP, LLEN, CHGY, LTUS, UTA, JADA, and SVNT and all but the last one are looking pretty green today. Also have some stodgy old EWZS, GXG, EPU, and MSMLX.
GLTA.
OT: Bought some JADA at P/E 1.9 today.
Bought a position in JADA today, currently at a P/E of 1.9-something. Jade mining is very lucrative and has a good customer base in China. This stock has previously hit YTD highs over 2.5 x greater than the current PPS, but the pops are hard to predict when. Based on current P/E alone, JADA is a huge investor magnet.
Is there a 10M $ error in fair value warrants for 06/30/10 Q?
This only affects GAAP numbers, not non-GAAP, so what that means is in 6 months it doesn't matter, good earnings will dominate.
I'm not a finance major, but at one time held 100K shares of LPH so downloaded a few (4 or 5) of the "Black Scholes" calculators.
Based on that, it seems to me there is a 10 MILLION $$ ERROR in the 06/30/10 fair value of outstanding warrants. I could easily match the fair values for all the other quarters, but their value is listed as 2M as of 6/30, which should be 12M, roughly (I'm going off of memory, have it on a spreadsheet on my other computer).
There is a tremendous increase in fair value QoQ if the Q ending 09/30 has warrrants correctly valued, yet the Q ending 06/30 has warrants valued 10M too low. Basically, it shoots EPS in the foot for 09/30 10Q.
Now if LPH corrects the 06/30/10 10Q at the same time as the 09/30 10Q is issued, then the adjustment isn't as severe.
But either way, the day the 10Q is released P/E increases quite a bit - but it could support a PPS of 2.75 at a TTM GAAP P/E of 10 if BOTH quarters are corrected but might drop to a PPS of 2.55 if only corrected going forward (9/30 10Q valued correctly but 6/30 10Q left alone).
Disclaimer: I am not a finance major and could be totally off on this, do your own due dilligence.
All 4 or 5 interactive calculators online or Excel download calculators all yielded similar (almost identical) results, except for minor differences as to whether dilution of shares is taken into account for the fair value calculation where the warrants would all be exercised.
GLTA, I'm still in this stock, but there is uncertainty in the next 2 Qs trailing 12 months GAAP earnings. Sooner or later though the warrants expire and if one Q is down then the next is likely to be up for the reverse reason when warrant valuations changed opposite to PPS changes.
Louis Navellier pumping LPH anonymously to drum up subscriptions:
If you read the details (too much to quote here, it is clearly LPH that he is citing in his Email sent out today (11/01):
"2$ China Oil Stock to Hit 5$"
"Buy this one stock in the next 24 hours, and I guarantee you’ll grab your first 50% by November 21—or you won’t pay a dime."
"In tonight’s issue he reveals another new trade he’s targeting for 50% gains in the next 30 days and a double by year’s end."
"As part of a special introductory offer you can test-drive Louis’s Quantum Growth advisory for the next 30 days risk-free."
"Since the company just reported earnings September 29, you’re getting the opportunity to jump on this one not only 90 days before it declares earnings but also before the weather gets cold and the chain reaction increases fuel demand and the company’s profits."
"But you'll have to act now...After midnight, my $695 90-day trial will revert to $1,395".
He's a little off there - doesn't realize LPH has earnings to report on Nov.15 (not Dec.31, which would be 90 days after Sept.30).
Also added 500sh at 6.38. Also bought at 6.5 on Friday, so didn't add quite as much this time...Not long till earnings.
Bought more. Most undervalued coal play.
Any thoughts as to if CHGY is at or close to a bottom now before the upswing as coal "heats up" this fall/winter?
Only thing that concerns me is lack of news when as this is the long waiting period before the 10K (10Q for Q3 ending 09/30 was released in mid-Oct.)
With the end of September release of news about their drilling contract to complete 100 wells by next summer, no matter what happens to oil revenues their will be some serious EPS growth. So I'm not really concerned what happens to PPS in the next 48 hours during election day or QE2 announcements, since I'm long not simply day trading. But yeah, I felt the same way back last April when LPH announced it's board of directors and planned move to AMEX, so I sat underwater on that holding for 6 months. But if you really understood the fundamentals, LPH was certainly worth the wait, and NEP also has great fundamentals.
LLEN upside 38-52%; 4% off bottom;
Those are good odds for the upcoming winter coal season:
Comparing YTD charts of LLEN versus CHGY, LLEN has almost as high of upside based on previous YTD highs, yet less downside risk as it is much closer to the YTD bottom.
LLEN -
Current PPS $8.00; for roughly a period of 1.5 months in 2010 LLEN closing prices were at or above 1.375 x $8.00 = $11.00 PPS, for 3 weeks it was above 1.52 x $8.00 = $12.15 (38% to 52 percent upside from current price).
LLEN has VERY little downside risk; in late summer the closing prices were averaging at or below 7.7, which means PPS is within 4% of the bottom of the YTD low (almost no downside risk).
To get any better upside chance in China coal US-listed stocks, you'd have to consider a much smaller company, such as CHGY (much more thinly traded and therefore harder to be nimble and quickly exit a large position at an optimum time).
CHGY -
Current PPS $1.75; for roughly a period of 1 month in 2010 CHGY closing prices were at or above 1.71 x $1.75 = $3.00 PPS, for 1 week it was above 2.06 x $1.75 = $3.60 (71% to 106 percent upside from current price).
BUT CHGY has higher YTD downside risk; in late summer the closing price hovered for a month in a range at or below 1.31 (average of 1.20-1.42), which means PPS is already 31% above the bottom of the YTD low. So there is a potential 31 percent short term downside risk, which is added to the additional medium term risk of a very small coal company like CHGY having a single-mine accident or government-forced closeout of a critically important mine (the latter is an issue since China is pressuring their provinces to eliminate the smallest coal mines by merger and acquistion).
So LLEN has the best upside potential for this winter but meanwhile the lowest downside risk from where it's at right now.
Bought more shares in the mid-6s, can't lose at this price.
Officially "blue light special" territory with P/E at 4.28. 5 percent lower and it would cross over to a P/E of 3.99, which would be irresistible and gobbled up by watching eyes on the sidelines so fast that we could see a 10 percent reversal upturn in one day.
NEP is so volatile it never stays very long near its short term minimum or maximum. Hoping to see low 9s in November and 10 by EOY.
Yeah, but today's price action is related to macro effects on US markets due to the uncertainty of Nov. 2 elections and Nov. 3 Fed announcements (QE2). A lot of articles are stating folks in commodities lightened a portion of their holdings until after these events, since it is hard to predict the direction of the overall market swing with two back-to-back events of such major influence. NEP will come back strong after that, but who knows if it will dip further between now and then (same thing for LPH, LLEN, and a few others). I have been hesitating on buying more at these prices in case we go even lower in the next 3 days before next Tuesday.
Nice breakout today, charts show multiple buyers throughout the afternoon. P/E of low 4s along with the company's record of great earnings growth and multiple acquisitions over the last 2 years make two very compelling reasons to buy now before prices rise close to the date of the next earnings report due out in mid-November. UTA is the most undervalued compared to other China travel companies, plus their credibility has been successfully defended after articles were published by hedge fund short interests back in September. UTA should be headed upwards from the low 5s towards the mid 6s before earnings date and eventually it will retake 2010's previous high, which was well over 10 bucks a share, over the next one or two quarters.
OT - nice breakout happening with UTA
Consistent buying and upward movement today for UTA, a travel company in southern China with a P/E around 4. It was cratered by shorts in mid-September but various authorities have since re-affirmed its credibility. Since summer is the peak season for tour-based travel and airfare travel, expect UTA's upcoming 10Q soon to be released in mid-November to be a blowout. UTA has acquired several other travel services over the last 2.5 years and is growing fast, without any signficant debt or warrant issues. Expect UTA to move back into the low 7s before earnings and eventually to retake the highs of last year over 10 bucks a share. PPS now at 5.42.
Coal stocks risk/reward comparison:
As a broad brush comparison, the Hong Kong listed coal stocks include the largest companies, but that market is much more overbought and P/Es are double those of the US-listed coal stocks. Among US listed stocks, the compromises are between having the lowest P/E, but along with that a smaller company and higher risk, versus a high P/E with a larger company, which is lower risk.
CHGY
CHGY is my first choice for the most short term upside because its P/E is in the low 4s, so when coal stocks break out this fall it could have the largest short term ramp up. However, long term it could be acquired since it is so small.
PUDA
The safest may be PUDA, and since it has just announced an acquisition, there is long term growth. However, since its P/E is in the higher range of US-listed china coal stocks, the short term spike might be smaller for the seasonal jump this year.
LLEN
LLEN falls in the mid-range of risk/reward with a P/E in the 6s, between PUDA and CHGY. It owns multiple mines so it has relatively low risk, but still a good upside.
I own positions in more than one of the above, a diversified basket allows one to take advantage of the full continuum of growth/risk strategies.
Coal stocks risk/reward comparison:
As a broad brush comparison, the Hong Kong listed coal stocks include the largest companies, but that market is much more overbought and P/Es are double those of the US-listed coal stocks. Among US listed stocks, the compromises are between having the lowest P/E, but along with that a smaller company and higher risk, versus a high P/E with a larger company, which is lower risk.
CHGY
CHGY is my first choice for the most short term upside because its P/E is in the low 4s, so when coal stocks break out this fall it could have the largest short term ramp up. However, long term it could be acquired since it is so small.
PUDA
The safest may be PUDA, and since it has just announced an acquisition, there is long term growth. However, since its P/E is in the higher range of US-listed china coal stocks, the short term spike might be smaller for the seasonal jump this year.
LLEN
LLEN falls in the mid-range of risk/reward with a P/E in the 6s, between PUDA and CHGY. It owns multiple mines so it has relatively low risk, but still a good upside.
I own positions in more than one of the above, a diversified basket allows one to take advantage of the full continuum of growth/risk strategies.
I'd go for LTUS instead.. they are very well managed and have good infrastructure for their late-stage product development pipeline and good sales network. Right now the upside potential is huge if LTUS gets uplisted...They are looking for directors to add with uplisting experience according to today's PR, which caused a brief 16 percent spike in LTUS stock price at noon today. Note also they just got a patent approved 3 or 4 days ago for a diabetes drug.
Up 13.8% in the hour after the announcement on PRnewswire that LTUS plans on applying for uplisting to a major exchange.
"WEEEEEEEEEEEEEE", as BURRRRP would say over on ChinaGrowthStocks message board
NEP posters on other boards have said recently that they would buy more under 7, if that is any general indication (obviously not a representative sampling). So far, today does not seem to represent any NEP company-specific reaction but rather a broad market mini-correction triggerred by investors being fearful of market reactions to China slightly raising interest rates -- but that news alone does not significantly change the predicted earnings or profits of NEP or other microcaps in China.
If the news is an isolated event, maybe the minions over at GS and JPM won't jump out and contrive a bunch of additional gloom and doom spin articles to attempt to influence bearish bets on the market direction.
Goldman changes their announcements every few months. In the last year Goldman and other players have sometimes predicted right, other times wrong in regards to BBL oil price direction. Goldman, JP Morgan, and other big firms tend to publish hype so they can promote market sentiment when they have long bets and conversely drive down market sentiment when they have short positions. So take it with a grain of salt, about all I believe in the near term is that oil is up from a month ago and there's a fair chance we'll see crude oil highs that are higher than those in 2010, but along the way I expect a full trading range of volatility swings.
Price increase is good news for current Q which we won't see reported until 2/15/11...
Meanwhile, a 10Q for Q ending 09/30 is coming out 11/15 and will show a higher TTM EPS since after the expansion quarterly EPS is now 0.18-0.19, and the oldest Q will be dropped from TTM calculation (which was 0.08).
Next release should show a TTM EPS around 0.58 up from 0.48, and that reduces the stock screeners cited TTM P/E about 17%, give or take depending on the 3% to 4% impact from the influence of QoQ warrant valuation change for the period 06/30 to 09/30 (1.95 EOM PPS to 2.29 EOM PPS).
Another good quarter is just around the corner. Going into calendar year 2011 there will come a point when we hit 0.80 EPS, which will be phenomenal when you compare it back to 18 months ago.
Could have guessed that the same day I tweaked my portfolio to balance a little NEP in with LPH, that NEP goes through a little bit of profit taking, but not LPH. No big deal, in a few minutes to a few hours of trading once again both have a similar uptrend. Just goes to show that it's better to watch your holdings manually than to have a stop loss order, since NEP exhibited a classic nose dive for about 10 minutes then shot back.
Balanced portfolio now that I am well above waterline in LPH. NEP looks like a fast ramp but it is riskier based on past history, so I have gradually adjusted several holdings until I'm at a current ratio of 7:3 LPH:NEP. Comments on the short term aspect of this ratio? Didn't want to move too much money around since I increase short term capital gains if I sell less than 1 year.