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forzagrifo - you're in Dalian? Do you have any first-hand perspective on Energroup?
Good point gunnar. I found this excerpt, from CCME's GH analyst, to be particularly telling. I actually talked with a guy at an investment firm who suggested that CCME should consider this route, relisting with a pps of $60 in HK. I wonder what kind of premium shareholders would get?
Ping Luo, an analyst with Global Hunter Securities, said Chinese companies have been talking about taking an action similar to Harbin's "going private" for a while now, as frustration has grown over valuations in the U.S. market. The analyst said that Chinese management teams have been anxious to talk to private equity players.
"The negative press accounts and all the scrutiny against Chinese companies has led Chinese management teams to worry about how long this situation will last and what it will take to end this negative reputation," the analyst said, adding, "This is the beginning of some of the more established Chinese companies getting out of the U.S." The analyst said she expects a shakeout among Chinese companies, with less qualified companies going the way of the dodo, while companies with a strong enough profile pursue a similar option to Harbin.
Yet it's not easy for just any company to go public in China, with a primary focus for the IPO market on backing state-run companies. The reason Chinese companies come to the U.S. is that in China it's a long process and there is a very limited number of companies approved to go public, though that is changing with exchanges launched this year to focus on bringing smaller companies public. Global Hunter's Luo noted that the Nasdaq has more listings than all the companies listed in mainland China.
"I think they were frustrated with the public market, and I think it's going to be a while in terms of the stereotype of Chinese stocks and for stocks like Harbin to be differentiated from the general Chinese stock group," Maxim's He said.
Nice little piece - IMO companies like CCME will look at PE buyouts and relist in markets that carry a much better valuation for their shares.
http://www.thestreet.com/_yahoo/story/10885173/1/harbin-electric-lbo-a-sign-of-things-to-come.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA
Atco - The DD report that Starr commissioned says 65k inter-city buses but Lena says the number is now up to 85k with the growth in travel and highway systems. She says the source for this is CTR and is supposedly looking into whether it can be released to the public.
Glen - what is your understanding of the expansion they have in mind?
What I heard is that they have opportunities to reach new customers at both locations...and that they are looking to increase turnover of their inventory to reach these customers.
BTW, has anyone reproduced their 30 days cycle turnover? My rough calculations got me 45 days.
Just started looking at this yesterday and bought some earlier today.
Geez, based on guidance this nice little company's 2011 earning will be almost as much as their market cap minus working capital (note - no receivables).
And with a ton of plots to sell and increasing pricing, their growth prospects are very good.
These are two businesses with a similar name - that's what the first link is about (a lawsuit over the similar names). CNYD did not do business with CCME.
I believe #2 has been resolved. I posted some info to SA and then someone followed it up with a good post on yahoo that included more info than I had.
http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_C/threadview?m=te&bn=101061&tid=20829&mid=20829&tof=49&frt=2#20829
Valueguy
1. Have you seen the Global Hunter research report? Not everyone agrees with GH's estimates, but management likes to be cautious.
http://www.scribd.com/doc/37042815/CCME-GH-Research
2. I posted a few thoughts about the GH report. My post summarized how CCME planned on deploying cash as per the Q2 cc.
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=53733101
Incredible - thanks!
Who is CCME's IR firm again and what are they getting paid to do? Seriously!
Fernando - many thanks, this is very helpful. Sorry I missed it when you posted it before.
With all your knowledge on CCME and given your frequency of posting, I'm surprised you don't publish a comprehensive article/report. I suppose then you feel compelled to deal with all the follow-up questions. I was brainstorming at dinner the other night with Maj - there must be a way to monetize this.
Very nice analysis Rato! I told myself I was actually going to do something similar this w/e since the naysayers keep bringing up VISN and FMCN but haven't gotten to it yet.
Two other things that I've seen brought up:
* Interest income / end of quarter cash: CCME's ratio is .06% in Q2 versus .83% for VISN - I think their point was that if CCME really had so much cash their interest income would be higher.
* Revenue per LCD: As I recall, the person was saying that CCME had a much higher revenue per LCD that was being called into question. I have yet to gather the data on this one yet.
Any insight on these?
Thanks again for the nice analysis - I think the more info we have to counter naysayers the better.
Also, does anyone have details on the investor day? I'm looking into whether a friend of mine in China can go for me.
Thanks value - this is great! I'll probably have a few questions after some sleep. Have a nice night.
Has anyone been able to read over the Global Hunter 8/16 updated report? Here are two things that stood out to me.
1. Low/Flat EPS growth projections: Even with GH raising their 2010 NI estimate to $92MM, CCME's EPS growth will be low/flat for the 4 quarters: Q3 $.59, Q4 $.48, Q1 2011 $.55 and Q2 2011 $.62. The two main factors for the low/flat EPS growth?
- 63% and 64% gross margins for Q3/Q4 and 65% margins next year due to potentially higher concession fees from new/renewed contracts (of course GH doesn't build in the possibility of higher prices)
- 47.6M shares starting in Q4 and through next year
GH's estimate coupled with CCME's cautious 2H 2010 outlook might be another factor for why institutions are being cautious (other factors being the weak economy, the propensity for short-term trading, etc).
2. Use of Cash: the GH report had a nice recap from the cc:
- $10MM equipment upgrades
- $10MM-$20MM acquire operating rights from other media companies
- $10MM-$20MM to implement a new value-added service project ("on-bus brochures" according to GH)
So...how are they going to use that extra cash??? Nothing much new here. GH wrote "management mentioned that the board is considering various options to maximize shareholder’s value, weighing alternatives such as a share buyback, dividend distribution, and investment into future expansion."
Here's hoping for news soon!
Not to mention the bounce around the previous lows.
Looks real promising but depending on the market weakness I'm looking for confirmation in case it decides to close at the previous lows in coming sessions.
Thanks Joe - I had forgotten that. It's not that I don't believe Ping (or you), but for my own peace of mind I'm looking to independently confirm what I can.
I'm looking forward to confirmation from those attending the September investor's day as well. I wish I could just up and fly to China!
It'd be terrific if you can publish or email me (beachcm65@gmail.com) with the info you have. For now, I'd even appreciate the Chinese version - I have friends who can translate for me.
The more information that we all have that shows feasibility of Q2 revenues the better because I think it creates peace of mind and preempts short attacks. That won't change Mr. Market's opinion as everyone is exiting risk, but at least it helps me sleep better at night!
I also have a friend sending me the Global Hunter report. I don't think anyone's posted excerpts, but I'm hoping some of what Joe mentioned about interviews with bus operators and/or ad agencies/direct clients will be mentioned.
Thanks Fernando.
So those numbers you posted were from a Chinese presentation?
If so, it would be good to know this calculation makes them seem reasonable. Looks like Nanjing had 8.88M passengers in 2008 or about 31 buses using the Beijing ratio.
http://en.wikipedia.org/wiki/Nanjing
How about the reasonableness of the rest of the calculations?
Also, has anyone done some DD on verifying the size of CCME's top inter-city bus operators? That was another weak point of ONP that MW turned up that I was going to look at next. I don't want to reinvent the wheel.
So I worked up a quick model for just the revenue for the inter-city segment. For me, this was just a way to gauge reasonableness.
1. How many inter-city buses? @22,780
Gene backed into the inter-city bus network size by estimating the airport bus network size. This seemed logical to me, but instead of using city size I found a site with airport passenger statistics.
http://en.wikipedia.org/wiki/Busiest_airports_of_the_People%27s_Republic_of_China_by_passenger_traffic
Based on Beijing's known network size of 229 buses and published passenger volume of 65M passengers I extrapolated the size of airport buses for the other cities at 183. Of course, who knows what city factors might cause these numbers to be higher or lower. It really doesn't make a huge difference in the inter-city model.
2. Revenue for inter-city buses: $39.9M from Q2 breakout, or 3M RMB/day.
3. Thousands of Passengers/Day: 730 across operational buses
- Outdated 10k data where they said had about 53M passengers monthly in 2008. At the time I think they had 16k inter-city buses.
- 53M/16k/30 days = 110 passengers/day but this seems much too high so I used 40
- 40 x @80% of 22,780 buses being operational at any given time due to maintenance (reasonable based on an old friend who manages fleet maintenance for buses)
- Divide by 1000
4. Ads Sold/Day/Bus: 400
20 ads per hour x 10 hours of bus operations x 60 minutes / 15 second ad spots is 800 ad slots per bus per day. Assume 50% of ad slots are sold = 400.
5. CPM: 10.34 RMB
Cost / Thousand Impressions
#2 / (#4 x #3)
3M RMB / (400 x 730) = 10.34 RMB
Even though a CPM of 10.34 RBM is higher than the @3 RMB in the 10k, I think their revenues for the inter-city bus segment is reasonable because of a) price increases occurred this year so the 10k CPM numbers are outdated and b) even putting in much lower assumptions (60% buses operational and 25% ad sales = CPM of 27.5 RMB) is reasonable with alternatives.
While Gene's model was flawed, I actually appreciated his attempt to create a model. As wefe has done for CHBT, a reasonably good model will support whether CCME's sales are believable and preempt any short attacks.
(It also forced me to check my own homework and not be lazy to accept a company's numbers at face value. Traders aren't as interested in this, but investors are.)
Anyway, I think it would be worth it if folks here work on a model and publish it similar to wefe. Sure it will be full of assumptions, but rather than bombard Jacky with "suggestions" on how to do his job better, people could ask for better disclosure of assumptions that make CCME's business more believable.
I came to the same problem with Gene's model as Millstone - that the airport segment was completely off because he was trying to apply known inter-city segment assumptions to the airport segment.
Not yet please! I only filled 200 of my 10.58 limit order. I've been flipping trading shares in this triangle.
stockcharts.com/h-sc/ui?s=CCME&p=D&yr=0&mn=3&dy=0&id=p91545418380&a=187642458
Still a good possibility of a $10.50 test, but they've got to be releasing some kind of positive news over the next 4-6 weeks and so I aimed a little higher.
First glance the numbers look great.
From what I remember:
- $.71 working capital per share is up (or at least means you get the business for pretty much free....weeeeeeeeeeeee!)
- Sales blew away my expectations; new biz model seems to be working
- EPS blew away my expectations
- Operating cash flow great
We'll see, but I pulled my $.73 limit sell order (thinking from their PR implied the increase in new store expenses would overwhelm the revenue increases).
Incredible numbers. But very surprised and disappointed:
a) No increase in guidance
b) Still no mention of how they will deploy the cash, despite what they told Fernando (more deals in 2H) and some things Jacky has alluded to.
Perhaps on the cc.
Viking - I was pretty concerned about the SAIC disparity as well. What do you make of wefe's blog?
http://wefe5433.blogspot.com/
There are a number of very good posts about SAIC in there that provide a reasonable explanation. Of course, as Maj was saying on CGS a perception problem might still exist that causes price pressure.
Another question - I haven't seen anyone discrediting CHBT yet - have I missed something?
It's tough to know exactly what the catalyst will be that drives the price up, but I'd rank them this way:
* Putting their cash to work in responsible ways. Right now the market doesn't appear to believe their guidance, so I was encouraged by Fernando's interview that they said the second half of the year is when a lot more deals would be done. I'm a little disappointed that they might not hit 30k buses, but I like the potential of the sky-mall catalog and expansion into rail
* Q2 earnings. Even if it keeps the current PE we'll see a boost in pps. Plus, every quarter of additional "history" will add to the credibility of the company making it more attractive to institutional investors.
* Market bearishness. There's still a lot of uncertainty (and therefore risk avoidance) heading into the summer. Maybe in August the market will pick back up. But if the market tanks it will take CCME down with it.
* Analyst coverage. I think this will be helpful, but I'm keeping my expectations low. The SPAC Analytics document was a decent report.
Welcome back Fernando - you have been missed! I hope you feel better real soon.
I agree this is positive long term Gary, but you might also ask about promotion efforts to build brand awareness in the new locations. My experience is that it takes time and incentives to introduce a new brand in a new location, so I would be patient expecting results from the new province stores.
Nothing on the CC about acquisitions?
Thanks for your thoughts - while I still don't get how 200k of lower sales equates to a temporary one month shutdown, I do agree with you about the fear being priced in and that's why I have a small position. We'll see in a few days! GLTY.
SGZH - Burp I have a small position at $10 b/c I don't want to miss out on the upside, but what's your take on the risk here? The price appreciation of coal will be very positive, but I'm cautious about attributing the Q3 decline to one customer being down for one month - their output was cut in half!
For the three months ended September 30, 2009, we had sales of $9.27 million as compared to sales of $14.87 million for the three months ended September 30, 2008, a decrease of approximately 38%. The decrease was mainly due to the temporary closing of a major power plant customer for one month in July for overhauling and maintenance of its boilers. Our total sales volume was 209,793 tons for the third quarter of 2009, as compared to 409,426 tons of sales for the third quarter of 2008, a decrease of 199,633 tons or approximately 49%.
Regarding the CFO - you can probably take my impressions with a grain of salt, as I was also concerned about CCGY's CFO who has far, far less experience and its stock still went up!
Anyway, I've done quite a bit of hiring (including financial people) for my own business and for others - there were two things that stood out to me.
1. Ms. Tang has moved around at lot in her last two jobs; just one year at ABAT and just one year at First Federal.
2. The leap from science/engineering to financial advisor to CFO with just an MBA seems a stretch.
As a shareholder I just know ENHD has a lot of things to get right in the financial category in the next year and want to make sure they have someone who can do it right.
I started a reply a few times, but got tied up with other things. Just wanted to say thanks for getting back to me.
My take - am I missing anything?
This is a significantly undervalued company looking to uplist with some AR risk.
FY 09 growth was very impressive at 170% rev growth and 185% eps growth. However, six months of 09 was much less impressive with just 16% rev growth. While adjusted net income growth was 29% growth, due to a higher count of fd shares, the adjusted eps declined from $2.91 to $1.20.
I guess valuation is the real story for me though. TTM earnings of $2.29 gives this a PE of 2.3. Plus, they have $4.20 working capital per share. I think my main concern is the growth of AR and allowance for bad debt.
"Two customers, China Railway Construction Corp. and Beijing Sanyuan, comprised 25% and 11% of the Company’s accounts receivable balance at November 30, 2009. China Railway Construction Corp. comprised 33% of the Company’s accounts receivable balance at May 31, 2009."
Traderfan or others - am I off base on this?
My take is that the 10k indicates a pretty undervalued situation. The revenues were only 21% higher, however the adjusted eps of $1.07 was substantially higher than $.32 in 08 on what appears to be a sustainable focus on selling through sales agents.
Their balance sheet has $2.25 working capital per share. However, AR has gotten pretty high and they look like they might need some additional facilities to expand at least their slaughtering capacity (FY09 was 1.2M versus capacity of 1.5M).
I'd be a bit cautious about the CFO appointment, but the two new directors seem to be pretty solid. These additions though should address the material SOX weakness discussed in the 10k that would stand in the way of a big-board uplist.
Lastly, it's difficult to get in/out of a large position because of the low volume.
Have they mentioned timing on the uplist Joe?
Done and now posted.
Link to presentation?
I guess no one liked the loss in the 4th quarter?
Hey, I said "might"...I'd love nothing more than "fairly valued" :)
Count me as someone else who appreciates all the DD you've shared Fernando. What others have your attention these days?