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China's crude oil processing volume up 7% in Sep YoY
"China, the world's second-largest oil consumer, saw its oil processing volume climb 7% YoY to 38.76 million metric tons in September, according to a statement released by the National Development and Reform Commission."
http://www.energychinaforum.com/news/67864.shtml
PROVEN transparency, respect for shareholder value, & accretive earnings growth:
1) Reconciliation performed by auditor of SAIC/SAT tax filings over period 2009 to March 31 2012 vs. SEC filings... Showed NO material differences (agreement within 1 percent).
2) LPH rescinded S-3 that would have allowed $50M for acquisition 18 months earlier, in order to prevent diluting shareholders when stock was too undervalued.
3) LPH proved its earnings are real by raising capital over 18 month period to close acqusition of Huajie Petroleum using $110 million cash from profits and zero shareholder dilution.
4) LPH previously executed a big expansion in 2009 from one facility to 2 facilities, which grew EPS from 0.28 in 2009 to 0.62 in 2011.
5) LPH is a longstanding entity - in business for 17 years, CEO has been with company for 17 years.
6) LPH has never over-diluted shareholders during previous expansions:
(The following EPS citations are corrected from a previous post:)
Note the big picture of a HUGE EPS growth story - examining the use of capital and the extent of EPS growth associated with the expansion at that point in time:
Consider this big picture analysis of historical LPH EPS/sharecount:
Examine page 6 of this SEC filing from September 5 2008:
http://www.secfilings.com/searchresultswide.aspx?TabIndex=2&FilingID=6140629&companyid=80123&ppu=%252fdefault.aspx%253fformtypeid%253d%2526amp%253bindustryid%253d%2526amp%253bticker%253dLPH%2526amp%253bauth%253d1
Year…LPH Sharecount…Annual EPS
2003………69,000,000………0.03
2004………69,000,000………0.10
2005………69,000,000………0.12
2006………69,000,000………0.21
2007………69,000,000………0.17
And page F-2 of this SEC filing from September 13, 2009:
http://www.secfilings.com/searchresultswide.aspx?TabIndex=2&FilingID=6838154&companyid=80123&ppu=%252fdefault.aspx%253fticker%253dLPH%2526amp%253bauth%253d1
Year…….…LPH Sharecount….Annual EPS
2008……….75,739,000…………………0.27
2009……….78,524,000…………………0.28
And page F-5 of this SEC filing from September 13, 2011:
http://www.secfilings.com/searchresultswide.aspx?TabIndex=2&FilingID=7478332&companyid=80123&ppu=%252fdefault.aspx%253fformtypeid%253d%2526amp%253bindustryid%253d%2526amp%253bticker%253dLPH%2526amp%253bauth%253d1
EPS increase from $0.28 to $0.62 and sharecount change from Gujiao (startup Jan/2010 to full speed June 30, 2011):
Year………LPH Sharecount…Annual EPS
2010………95,262,000……………0.43
2011………101,684,000……………0.62
And page F-3 of this SEC filing from September 13, 2012:
http://www.secfilings.com/searchresultswide.aspx?TabIndex=2&FilingID=8821523&companyid=80123&ppu=%252fdefault.aspx%253fformtypeid%253d%2526amp%253bindustryid%253d%2526amp%253bticker%253dLPH%2526amp%253bauth%253d1
Year………LPH Sharecount…Annual EPS
2012………101,773,000………………0.61
If warrant redemption used for Huajie startup, sharecount could go from 100.7M to 112.2M, while EPS will increase from $0.61 to $0.96:
Projected $0.96 EPS = (current sharecount EPS estimate of $1.07 EPS) x (100.8)/(100.8 + 11.5)
Projection for FY 2014 (assuming if 11.5M dilution used to build inventory at Huajie):
Year………Projected Sharecount…Annual EPS
2014………112,273,000…………………0.96
SUMMARY:
Shareholders saw a HUGE increase in EARNINGS PER SHARE between 2007 and 2012 (0.25 to 0.61), largely attributable to Gujiao second facility acquisition.
Exceptional future EPS growth will also be realized with LPH for those who buy now and hold through Huajie ramp-up (0.61 to 0.96)
PPS is influenced by fear tactics across the sector.
EPS is not.
EOM.
Consider the big picture of EPS growth - you can't just cherry-pick an isolated SEC filing and conclude that it was bad or good for shareholders without examining the use of capital and the extent of EPS growth associated with the expansion at that point in time:
Consider this big picture analysis of historical LPH EPS/sharecount:
Examine page 6 of this SEC filing from September 5 2008:
http://secfilings.com/searchresultswide.aspx?TabIndex=2&FilingID=6140629&companyid=80123&ppu=%252fdefault.aspx%253fformtypeid%253d%2526amp%253bindustryid%253d%2526amp%253bticker%253dLPH%2526amp%253bauth%253d1
Year…LPH Sharecount…Annual EPS
2003………69,000,000………0.03
2004………69,000,000………0.10
2005………69,000,000………0.12
2006………69,000,000………0.17
2007………72,643,636………0.25
And page F-2 of this SEC filing from September 28, 2009:
http://secfilings.com/searchresultswide.aspx?TabIndex=2&FilingID=7478332&companyid=80123&ppu=%252fdefault.aspx%253fformtypeid%253d%2526amp%253bindustryid%253d%2526amp%253bticker%253dLPH%2526amp%253bauth%253d1
Year………LPH Sharecount…………Annual EPS
2008………75,739,000……………………0.27
2009………78,524,000……………………0.28
And page F-5 of this SEC filing from September 13, 2011:
http://secfilings.com/searchresultswide.aspx?TabIndex=2&FilingID=7478332&companyid=80123&ppu=%252fdefault.aspx%253fformtypeid%253d%2526amp%253bindustryid%253d%2526amp%253bticker%253dLPH%2526amp%253bauth%253d1
EPS increase from $0.28 to $0.61 and sharecount change from Gujiao (startup Jan/2010 to full speed June 30, 2011):
Year………LPH Sharecount…………Annual EPS
2010………95,262,000………………………0.43
2011………101,684,000……………………0.61
And page F-3 of this SEC filing from September 13, 2012:
http://secfilings.com/searchresultswide.aspx?TabIndex=2&FilingID=8821523&companyid=80123&ppu=%252fdefault.aspx%253fformtypeid%253d%2526amp%253bindustryid%253d%2526amp%253bticker%253dLPH%2526amp%253bauth%253d1
Year………LPH Sharecount…………Annual EPS
2012………101,773,000………………………0.61
If warrant redemption used for Huajie startup, shares: 100.7M to 112.2M & EPS increases $0.61 to $0.96:
Estimated $0.96 EPS = previous estimate of $1.07 EPS x (100.8)/(100.8 + 11.5)
Projection for FY 2014 (assuming if 11.5M dilution used to build inventory at Huajie):
Year………Projected Sharecount…Annual EPS
2014………112,273,000……………………0.96
SUMMARY:
Shareholders saw a HUGE increase in EARNINGS PER SHARE between 2007 and 2012 (0.25 to 0.61).
Tremendous EPS growth will also be realized with LPH for those who buy now and hold through Huajie ramp-up (0.62 to 0.96)
If warrants are transferrable, new institutions could buy large blocks from existing warrant holders to grab a sizable position without driving the price up. It would be nice to see 25 percent of the public float owned by institutions for a change. (11.5M + 33M = 44.5M). Not counting management's 67M.
Confirmed by PR News Release October 30.
As to the 30-day extension, more than likely it has to do with financial instruments being traded and valued based on the Black-Scholes model which is normally updated using various software routines in increments of 30 days to determine the value of warrants as of a certain date.
"As a result, the Company has received strong institutional investor interest in its business activities" -- From October 30 News Release
This is a strong clue as to what has been moving the share price upwards.
This warrants discussion is irrelevant since extension was due to market closing on day of expiry not giving holders alloted time to convert, as per Michael Toups (contacted by one poster) and as per Mike Li (LPH V.P. - who was contacted separately by a well known analyst).
OTC markets were included in the study.
There are PLENTY of warrants in shaky startups on OTC, just sayin'
Of course, I would much more trust the results of a study published by pHDs in finance in a peer-revied study of 368 stocks reported in the Journal of Finance than I would trust innuendo on message boards from anonymous uneducated masses.
That was not specific to anyone in particular, just a general comment as to how I choose my information sources.
EXCERPT: "The Valuation Effects of Warrant Extensions"
John S. Howe and Peihwang Wei, Journal of Finance, Vol. 48, no. March 1993:
"We examine the warrant price and stock price reactions to the announcement of warrant life extensions. As predicted by option-pricing theory, warrant prices increase in response to an extension. Our principal finding is that the stocks of firms making the extension announcements experience positive abnormal returns on average. We interpret the evidence as supportive of an anticipation hypothesis in which the market perceives the decision to extend the warrants' expiration date as a favorable indication for the stock price before the subsequent expiration."
"If management acts on behalf of shareholders, an extension will be undertaken only if the expected benefit exceeds the expected cost. Thus, when an extension is announced, the market may reassess the probability that the stock price will rise above the exercise price. This (partial) anticipation of a price increase would lead to a positive stock price reaction. The "anticipation hypothesis" has two additional implications. First, holding all else constant, the further out-of-the-money is the warrant, the more positive will be the stock price reaction. Second, the shorter the extension, the more positive will be the stock price reaction; i.e., a shorter extension means that the requisite stock price increase must occur more quickly in order to realize the benefits of the extension."
"We examined every issue of the Daily Stock Price Record from July 1972 to December 1990 for the NYSE, the ASE, and the OTC market. Of the more than 1500 warrants traded in these markets over this time period, 346 exhibited changes in the stated expiration date to a later date. Extensions accompanied by other changes in warrant terms (e.g., reduction of exercise price) are excluded from consideration...The estimation period runs from day -120 to day -21 relative to the event day. We then explore the determinants of the cross-sectional variation in stock price response to announcements of extensions."
"III. Summary and Conclusions"
"Our principal finding is that the stocks of firms making the announcements experience positive abnormal returns on average. Expropriation of shareholder wealth is not the dominant effect of warrant extension. We also provide evidence inconsistent with a tax motivation for extensions....Empirically, the extension of warrant life is one of the few financing decisions associated with positive abnormal common stock returns. We interpret the evidence as supportive of an anticipation hypothesis in which the market perceives the decision to extend the warrants' expiration date as a favorable indication for the stock price before the subsequent expiration."
Heads up...you have one more chance.
" my warrants will expire worthless "
Never say never.
Some said that about the cash purchase of Huajie
Some said that about the tax reconciliation
And now local officials are making statements about Huajie, too.
$1 of warrant redemption creates $1.63 annual profit if the proceeds are plowed completely into oil inventory, according to MaxSoarFinancial report:
"It is worth noting that Longwei has a warranty agreement in place that allows investors to purchase an additional 13,499, 274 shares (11,542,252 currently outstanding) of common stock at an exercise price of $2.255 per share with a three-year term. The weighted average remaining contractual life is 21 days. We did not include the exercise into our model but, in our opinion, there is possibility that some or all of the 11.5 million share warrants be exercised and, as a result, will change pro-forma revenue, net profit, shares outstanding, and EPS (and thus naturally the fair value of the stock). A rough calculation indicates that exercising of any warrants may increase the Company’s EPS. Assume that one million warrants get exercised (i.e., shares outstanding increases slightly less than 1%) and the Company will get $2.25 million in cash. Assuming five times annual inventory turnover for Huajie, which is achievable at current low inventory level, revenue is likely to increase $11.25 million. At 13% net margin, net profit would increase $1.46 million, or 1.63% of the current forecast of $89.82 million for all three sites. The net effect is that EPS may increase 0.6% with every one million warrant exercising."
No studies on hurricane market closing extensions of warrants.
I guess we will have to wait and see, LOL.
"Stocks of firms making the extension announcements experience positive abnormal returns on average"
This is documented in a study of around a dozen stocks that I linked below.
http://www.jstor.org/discover/10.2307/2328891?uid=3739864&uid=2129&uid=2&uid=70&uid=4&uid=3739256&sid=21101244984951
In answer to your question, I tend to believe the law of averages, based on a study of hard data, which found that announcements of warrant extensions are correlated with an INCREASE IN THE STOCK PRICE over subsequent weeks after announcement.
That is based on hard data and a scientific study.
Of course, you can always believe whomever you'd like.
FWIW - I am a study person.
Generally, I don't put much faith into anonymous individuals who have contradicted themselves between expressing extremely positive versus extremely negative sentiment over the course of one single month, despite having no new data to justify such a sudden flip-flop.
But Glen Bradford will be ecstatic!
“Warrant expiration dates can be extended with board approval.”
http://www.ehow.com/about_4692028_stock-options-warrants.html#ixzz28cregND3
“The Valuation Effects of Warrant Extension”
http://www.jstor.org/discover/10.2307/2328891?uid=3739864&uid=2129&uid=2&uid=70&uid=4&uid=3739256&sid=21101244984951
“The stocks of firms making the extension announcements experience positive abnormal returns on average. … The market perceives the decision to extend the warrants’ expiration date as a favorable indication for the stock price before the subsequent expiration.”
http://www.personal.anderson.ucla.edu/francis.longstaff/pricingoptions.pdf
“Pricing Options with Extendable Maturities: Analysis and Applications”
“If the warrants are allowed to expire out-of-the-money, the firm faces the substantial transaction costs associated with an equity offering. However, if the warrants are extended and subsequently expire in-the-money, then the new shares can be issued at a price close to the market price with little or no marginal cost. … While extending the maturities of warrants does not guarantee that the warrants will subsequently be exercised, it does provide the warrantholder a second chance to do so.”
New 8K out October 29:
"On October 29, 2012, Longwei Petroleum Investment Holding Limited (the “Company”) extended the expiration date of certain of its outstanding warrants (the “Warrants”) to 5:00pm New York time on November 29 , 2012."
http://secfilings.com/searchresultswide.aspx?link=1&filingid=8883668
There is an accompanying 424B3 as well:
"This Prospectus Supplement No. 1 supplements our Prospectus dated February 22, 2011, as amended by Post-Effective Amendment No. 1 declared effective on October 6, 2011. The shares of common stock underlying warrants (the “Warrants”) that are the subject of the Prospectus have been registered to permit their resale to the public by the selling stockholders named in the Prospectus. We are not selling any shares of common stock in this offering and therefore will not receive any proceeds from this offering. You should read this Prospectus Supplement No. 1 together with the Prospectus and Post-Effective Amendment No. 1.
The purpose of this Prospectus Supplement No.1 is to update disclosure relating to the expiration date of the Warrants. On October 29, 2012, the Board of Directors and management of Longwei Petroleum Investment Holding Limited extended the expiration date of the Warrants from October 29, 2012 to November 29 , 2012."
http://secfilings.com/searchresultswide.aspx?link=1&filingid=8883681
So they still might want to get money to fill the tanks from warrants.
We will just have to agree to disagree. All opinions welcome.
Rather than say, "companies don't handle business in this manner", I would counter with "companies SHOULDN'T HAVE TO handle business this way".
Rather than say, "if LPH wants to be come a Tier 1 company they should start to conduct business in a manner...", I would counter with "LPH HAS started to conduct business in a manner befitting a Tier 1 company" by delivering the goods, and following through with promises to (1) rescind the S-3 and not issue shares at a price below what the company is worth; (2) complete a huge acquisition using all cash and without diluting shareholders - even though it set them back 15 to 18 months; (3) executing well-managed arbitrage over the last few years - China companies don't buy derivative contracts to hedge their oil price - instead they lock-in delivery prices months ahead (just like I do in the summer with my home heating oil). As a result, they decided to close the deal exactly when they had rebuilt inventories and locked-in advances to suppliers that had been depleted from the intial downpayment a 15 months ago.
And if you ask me, all of the fall of 2012 news releases are in fact true. Full transparency from here forward - we know how many customers have been signed as of today, October 29 at Huajie (9); we know what the August and September oil sales were ahead of November earnings (18% YoY volume increase and 11% net profit increase); we know what day the new facility started delivering oil to customers (October 11); we have a copy of the 8K with the signed agreement; and we have a copy of a new appraisal done on Huajie Petroleum to prove management double-checked that they were getting the right value for their money when they were ready to close the deal.
Management could have closed several months earlier but they didn't have enough money to both close the deal and fill the tanks at Huajie at the same time. They were evaluating month-to-month cash flow and their analysis was not able to be done until monthly accounting reports for the prior month were ready sometime around the third week in September.
Also, there are multiple lines of evidence to suggest the lack of fanfare was intentional. For example, LPH's mid-September earnings conference call in which they said they just extended the contractual window for deal closing to the end of the year, without giving any other clues as to the possible date, effectively dampened the stock's attractiveness to opportunists who only wanted to buy the stock before deal closing and did not wish to remain in the stock over the longer term.
Similarly, on September 24, the news of the Huajie acquisition was given in a pre-announcement which stated merely that the acquisition would close by end of the month, nothing to suggest it would occur in only two days. This information by itself was not proof of the event closing, so that individuals seeking only to trade the news could not buy in just for a quick pop.
Then, when the final signing of the acquisition was announced September 27, short term traders would have thought the news of closing the deal had already partially been baked into price and sentiment, which would make it less certain or advantageous to try to buy only for the news so as to sell a quick pop.
The next event, announcement of operations startup and first sales, was announced in a sort of low-key way via a live conference October 11 in San Francisco, and there was no written PR newsrelease the next morning. Because the official startup news was released several days later around October 15, again the news had already been pre-released and so the timing of information did not create too big of a bang to entice new traders to buy and sell the news.
From the above multiple lines of evidence, LPH management is adopting a new strategy - they are proving to investors their credibility and shareholder friendliness, meanwhile dampening the opportunities for short term traders to jump in and play the news pops.
Why would LPH wish to do this? Two reasons: (1) In the long run this is good for the stock because investors will be less fearful of selloffs originating from short term people selling the news. As a result, a greater percentage of long term investors versus a smaller proportion of short term traders will be holding the outstanding shares in the public float.
(2) The change in the composition of shareholders could lessen the number of negative articles and comments that historically tend to pop up after a big run in the stock, which also helps stock sentiment for the long run.
Conclusion: If management continues to protect shareholder value and orchestrate effectively timed PRs, LPH may turn into a textbook example of a turnaround stock.
"Might see that $3.00 level fall very quickly"
agreed.
Coincidence PPS stalled right at $2.25, IMHO. Could have gone a bit higher, but only a month after acquisition, kind of a stretch.
Not a coincidence that RedChip IR and LPH want more positive exposure and are not being stupid to announce all of the recent events. It obviously helps share price a lot to improve legitimacy, credibility, and shareholder respect.
Given several positive events in a row (tax reconciliation, news of August/September preliminary earnings, acquisition closing, and expiration of warrants), the bottom line is these events were all facts to be released either sooner or later, so they would all ultimately impact valuation.
The tax reconciliation could have been rushed sooner or delayed later, but as it stands, the tax reconciliation period of performance (July 2009 to March 2012) was close enough to the release date (July 2, 2012) - it's not like they did it 9 months ahead and just sat on the results.
The acquisition could have been rushed sooner, but LPH wanted to make sure they had adequate funds to operate after closing. Furthermore, the arbitrage opportunities afforded by the dip in oil prices in May and June, combined with crude prices rebounding in August and September, made for better August and September earnings, which opened the door for a closing with cash sooner than later.
Marek602 poster on Yahoo Message board has consistently projected the most accurate quarterly earnings in advance of release for the last 2 years, and he posted many months ago that the acqusition was not going to happen earlier than September because based on the rate of earnings and cash generation, there would have been inadequate funds to both close the deal and have cash left to fill the tanks and operate before this point in time:
http://finance.yahoo.com/mbview/threadview/?&bn=c0a667df-8f0d-3ee9-8dda-972b0870fabf&tid=1336743709000-22cbe986-0bc8-3cc4-b94b-823ef7707fc6&tls=la%2Cd%2C9
Coincidence that PPS stalled right at $2.25, IMHO. Could have gone a bit higher, but only a month after acquisition, kind of a stretch.
Not a coincidence that RedChip IR and LPH want more positive exposure and are not being stupid to announce all of the recent events. It obviously helps share price a lot to improve legitimacy, credibility, and shareholder respect.
Given several positive events in a row (tax reconciliation, news of August/September preliminary earnings, acquisition closing, and expiration of warrants), the bottom line is these events were all facts to be released either sooner or later, so they would all ultimately impact valuation.
The tax reconciliation could have been rushed sooner or delayed later, but as it stands, the tax reconciliation period of performance close enough to the release date.
The acquisition could have been rushed sooner, but LPH wanted to make sure they had adequate funds to operate after closing. The arbitrage opportunities afforded by the dip in oil prices in May and June, combined with crude prices rebounding in August and September, made for better August and September earnings, which opened the door for a closing with cash sooner than later.
Even though PIPE investors got their preferred stock at $1.10 and have long since cashed out for profit, the freebie tossed in with that PIPE deal (equivalent number of free stock warrants with a strike of $2.25) was not taken advantage of for 11.5million stock warrant holders. They didn't utilize the cashless conversion sweetened offer from a couple years back before it ended, and were still holding warrants coming into the fall of 2012. Warrant holders just last week saw the LPH PPS stall just after hitting $2.25 conversion price, which had to be disappointing in case they were still thinking of converting at a price well above the strike price before tomorrow's 10/29/12 expiration date.
Most accurate - Marek602's old posts on earnings projections.
Marek predicted 0.77 TTM EPS for year ending 06/30/12 before the company came out with this prediction. He also predicts LPH will achieve a $1 EPS sometime during the period 7/1/13 to 7/1/14.
His projections have been right on the money for almost 2 1/2 years now.
Now is not the time to sell. Now is the time to lock this stock up for appreciation quarter over quarter, starting with the 12/31/12 earnings that should reflect 2.5 months of beginning Huajie sales.
Each quarter is only going to get better from here.
READ THE DATE OF CITED POSTS ON LPH.
Many are two years out-of-date and no longer are relevant
Congrats to investors in LPH: growth a done deal
Legitimacy proven, shareholder value respected, and growth a done deal.
Legitimacy:
SAIC/SAT tax filing reconciliation by auditor covers 2009-2012 and is based on directly observing PRC computers in state tax office. Results agreed within 1% and no material differences.
Respect for shareholder value:
When planning this acquisition, company first issued then later rescinded an S-3 share offering to protect shareholder value. It took them 18 months to raise all the $110M cash to close the deal without capital raise, but its now a done deal.
Company lets stock warrants expire worthless this Monday 10/29/12. These warrants represent 11 percent of sharecount and will now expire because stock price didn't get barely above $2.25. Those warrants are leftover from 2009 acquisition of Gujiao.
Physical Expansion Growth:
Track record of growth is proven: 2009 one facility and 50,000 metric tons, to 2012 three facilities and 220,000 metric tons.
Earnings Growth:
Gujiao took about 4 or 5 quarters to reach full pace of sales and inventory levels. Huajie will change annual EPS from current value of $0.62 to between $1 and $1.17 when at full speed operations.
BOTTOM LINE:
Quarterly EPS will grow from about $0.15 or $0.16 which are typical values for the last year, to about $0.25 to $0.29. That represents 67 percent to over 70 percent growth and will take about 5 quarters.
"old cfo crane..." Been gone 2 years. SAIC/SAT tax reconciliation versus SEC filings covered the period 2009 to 2012. Auditor verified tax info. directly from PRC computers in state tax filing office. No reason to worry about anything in 2009, 2010, 2011, 2012.
"against these warrants..." Warrants are gone, toast by close of business Monday. No more overhang.
"I thought this to be interesting." Only if you think time is going backwards. This is 2012, not 1992. Toups is CFO, warrants are expired as of Monday. Company has finished ramping up their second facility and purchased their third facility.
Forward earnings are the focus.
67% growth in Quarterly EPS $0.15-$0.25, over next 5 quarters.
Zero debt, warrant overhang removed monday, and 67% growth to follow.
Yeah, I'd say that calls for Champagne.
Why quote a price change based on a single trade of 11K shares to paint the tape down 3 cents at 4:02? Well?
LPH warrant overhang GONE after Monday!
No debt, no warrants, and a new operating facility selling oil.
Quarterly EPS will grow 67% from $0.15 to $0.25 as it ramps up.
Congrats to long time holders Globe Trade, Scandle, Legolas, and others.
Moving up for one or two days, then trading sideways for the next 3-4 days has been the LPH pattern for the last few weeks. Plus, given how hard the price of oil and other oil stocks have been hammered over the last 2 days, actually LPH has outperformed by gaining a bit and not losing more than 5 or 6 percent of recent gains on pullbacks. That's a lot better than I can say for many of the US oil stocks, resource stocks, and gold miners at the moment. This kind of strength during market volatility, along with healthy daily volume, tells me that LPH interest is not going to suddenly wane after October 29. We move higher through the China party elections in early November, at a minimum. After it just might hit $3 by the next earnings announcement around Nov. 15. While the July through September earnings did not include Huajie and have already been pre-released in general terms, the earnings conference call will be a good opportunity for updates on sales at the Huajie facility.
Conservative projection.
Consider that LPH has delivered on its promise to perform an acquisition without diluting shareholders for a price tag of $106 million - a step that took 18 months of patience to raise that much cash for the purchase. Consider also that LPH's auditor performed a reconciliation, covering the period 2009 - 2012, of SAIC/SAT tax fillings based on directly verifying data on PRC computers in the state tax office, versus SEC filings over the same periods, and found complete agreement with no material differences.
Based on projected growth, nondilutive acquisition, and tax filing credibility, LPH is now a different kind of stock compared to others in China, with lower beta but more steady interest over time. Much less attractive to the day trader, more attractive to the longer term investor.
TTM P/E before the Huajie deal closed was $0.62...and with this 80% increase in capacity and new operating facility fully online, TTM P/E is projected to rise to $0.77 by June 30 and to $1.04 - $1.17 range by the end of next year. So PPS will rise more steadily as each new quarter adds more revenue from having 3 facilities with 220,000 metric tons capacity versus the old status quo of 2 facilities and 120,000 tons capacity. LPH will play "show me the money" to Wall Street".
This fall, I am expecting a PPS of $3.08 based on projected EPS of $0.77 and a conservative forward P/E of 4 (based on current fiscal year period from July 2012 through June 2013).
In a little over 2 months, by January 2013, analysts will be considering LPH forward earnings covering January 2013 through December 2013, which will comprise 9 months with Huajie running pretty near full-tilt operations and sales, plus 3 months still in a ramping period. Therefore, forward EPS should be approximately weighted 3-to-1, using $1 versus $0.77, or EPS = $0.94 for calendar year 2013. So by January expect a PPS of $3.77 based on a projected forward EPS of $0.94 for calendar year and a conservative forward P/E of 4.
For a less conservative projection, use a forward P/E of 4.5 for this fall combined with forward EPS of 0.77, yielding $3.46 PPS target for November/December. For next calendar year, use a forward P/E of 5 for early 2013 and a forward EPS of $1.07, yielding a $5.35 price target. The latter target is pretty close to the values stated by MaxSoarFinancial and the value stated by RedChip analysts.
$LPH: Couple of new SeekingAlpha mentions:
"The Global Economic Outlook: A Direct Path To Chinese Equities"
Jeffrey Friedland, October 21, 2012
"I believe that now is the time to take a look at Chinese equities, not from a short-term trading perspective, but instead from a medium- to long-term investment strategy, a strategy for the next three to five years."..."the IMF projected China's economic growth for this year at 7.8% and for next year at 8.2%."... "This and other indicators, including recent increases in the prices of certain commodities including iron ore, are signaling that China's growth may be rebounding after a seven-quarter slowdown."..."When you compare China's GDP growth of 7.8% to that of the eurozone or U.S., you have to admit that China's growth is incredible in today's global economic and financial environment."
"After the November 8th change in China's senior leadership, I expect additional measures will be taken to stimulate the country's economy, but these may not "kick in" until China's new leadership has time to "get its feet on the ground" and create its own programs, which I see as occurring late fourth quarter of this year, at the earliest, and more likely the first quarter of next year."
"One of my focuses here at Seeking Alpha has been on analyzing Chinese companies that meet a few general criteria. These include positive trends in revenue and income; low PEs; companies that are focused on internal Chinese demand rather than export; and companies with good growth prospects for the future."..."Some of the companies that I believe meet these criteria and that I've discussed in detail here at Seeking Alpha include:"
"Chinese companies that I've been reviewing, that I believe meet the above criteria and are worthy of investment consideration are SinoCoking Coal and Coke Chemical Industries Inc. (SCOK), Longwei Petroleum Investment Holding Ltd. (LPH) and Xinyuan Real Estate Co. (XIN)."
"I may initiate a position in XIN, LPH and SCOK in the next 72 hours."
http://www.seekingalpha.com/article/937531-the-global-economic-outlook-a-direct-path-to-chinese-equities
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Second article:
"Top 5 Performing China Stocks During The Week Ending October 19"
seekingalpha.com/a/k3et
Sellers are few here...most are just playing the waiting game for October 29...
Consolidation will bring a new group of buyers before the October 29 warrant expiration. Those buyers are likely to hang on for earnings November 15.
SEC Form 424B3, March 10, 2010 "We may receive proceeds from any exercise of outstanding warrants. The selling shareholders and placement agent (and its designees) may exercise the warrants on a cashless basis if the shares of common stock underlying the warrants are not then registered pursuant to an effective registration statement." --- Based on that the warrants were originally cashless-exercisable, but then after a certain date they were precluded from doing that (the date when it was registered). So you were right about the window of time which allowed cashless exercise closing. But I didn't realize they had been allowing cashless exercise all along up to that point.
Now you have got my curiosity. I am going to look that up in my archives.
LPH: Warrant holders wont be interested in redeeming (deadline 10/29/12 for expiration). The group of warrant holders now is roughly the same as the group back in 2010. And back in 2010 there were a total of 14 million warrants in total, just before LPH made a one-time only, limited-duration offer for cashless exercise at the price differential. To clarify...LPH was at about $3.00 at that time. So the differential between current PPS and strike price was $3.00 - $2.25 = $0.75. So one could turn in 4 warrants for one share of LPH without paying cash up front. ($0.75 x 4) = $3.
And even that sweetened offer only resulted in a reduction in total number of warrants outstanding, after the smoke cleared and the offer was over with, from 14 million warrants to 11.5 million warrants outstanding (which is where the number has remained frozen ever since then).
So if a cashless offer only resulted in 2.5 million warrants being redeemed back when PPS was $3 in 2010, by no stretch of the imagination would the normal warrant redemption contract (paying up $2.25 to redeem one warrant for one share of LPH) result in anything but a tiny pittance of redemptions by this same group of warrant holders 2 years later. Even if 2 million were redeemed (which is unlikely at a PPS below $3, based on past history), that would only be 2 / 100.8 = 1% dilution.
So virtually zero chance of any dilution of significance based on the warrants expiring in 10 trading days from now.
LPH - EPS will attain the range of $1.08 to $1.17 once Huajie is firing on all cylinders and inventory/advanced lock-ins are back to normal ratios. Just like with Gujiao back in early 2010, this will take 3 quarters to get to that point (plus or minus). 3 quarters to get to a rate of $1.08/4 = quarterly EPS, to clarify
Sector Rotation into Oil, Straits of Hormez closing Fears
Breaking News: Iran's revolutionary guards have drawn up a plan to have a supertanker collide on the rocks in the Straits of Hormez and spill all of its oil in order to force the straits to have to close...but the Ayatollah has not decided to implement these plans as of yet.
source CNBC: http://www.cnbc.com/id/49426899
No matter if Romney wins or Obama wins...the fear factor of Iran closing the straits is unaffected.
The European Union announced on Tuesday the imposition of sanctions against state-owned Iranian oil and gas firms in response to Tehran's ongoing nuclear ambitions.
In the markets, this action is expected to have the effect of maintaining or driving crude prices high over the course of the next few weeks as supplies are restricted and speculators take advantage of the situation.
Reuters reports that the National Iranian Oil Company, one of the world's largest oil exporters, was on the list of over 30 companies and institutions listed by the EU as targets for asset freezing, as were the National Iranian Gas Company and the National Iranian Oil Refining and Distribution Company.
http://www.mining.com/iranian-oil-and-gas-hit-with-eu-sanctions-25426/