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GHII: Yep, not only will they be able to pay off the credit-debt their subcontractors have advanced them but also their insanely-high interest rate loans (I get sick just looking at those). Q4 should go a long way to getting them out of the working-capital hole they have been in for 2 years.
-Fernando
GHII: Q3 PR out. Tidbit about how Q4 looks to be huge in it:
Very lumpy revenue business, they made 36M revenues so far this year (9 months), and will do at least 30M+ in Q4 it seems (Already collected $18M out of one 30M project) :
"Business Outlook
At March 31, 2011, Jin Ma Real Estate has acquired land use rights and/or began developing the several residential projects in cooperation with Jin Ma Construction that acts as the general contractor, an example of projects under the Jin Ma Companies new integrated business model. Jin Ma Real Estate recently completed the Shuian Renjia residential project located at the south part of East Xinhua Street in Hohhot, and consists of two buildings each with 17 floors and a total of 364 apartments. The total development area is 56,841.2 square meters. The Shuian Renjia project was completed in May 2011 and required a total investment of 140 million RMB or about $22 million. This project is expected to yield revenues of 197 million RMB or $30 million during the fourth quarter of 2011. On January 10, 2011, Jin Ma Real Estate signed a sale agreement with a local company. Jin Ma Real Estate expects to sell the Shuian Renjia residential units to employees of a local company pursuant to a sales agreement. As a result, Jin Ma Real Estate has collected approximately 117,600,000 RMB or $18 million by the end of May 2011 and will collect approximately 79,400,000 RMB or $12 million when the sales transaction is completed."
Worth keeping an eye on anyhow, if their Q4 will be so big.
-Fernando
I have owned ssw since $6. I would not be a buyer personally till we see the overall market bottom or at least go down a bit more.
YONG: They closed their 50M deal with MS (As expected). Up nicely in afterhours.
-Fernando
UTA: Yes, I got caught with some shares I bought for a earnings-run when it halted. I also have some calls which have not expired (thankfully).
-Fernando
Your right, UTA is definitely something to celebrate today. The independent Alexa rankings say it has about 40% of the internet traffic of ELONG (You can get an idea of which cities in China the traffic comes from if you also use google website trends) and now it has passed the 10-K :).
Phoenix coming out of the ashes? (chuckle)...
Was bound to happen at some point to some company, not ALL these halted stocks will die off after all -- Some just had accounting issues or auditor problems.
-Fernando
Sorry about that, yes its from Bangkok (not India) :)
I have no insider information regarding a dividend. I purely extrapolated the POTENTIAL for them to give it in 2012 given semi-modest capex plans that year -- They sure cannot do it in 2011 with their extensive capex.
-Fernando
UTA: 10-Q will probably be strong since Alexa website rankings really boomed in Q1 2011 for the company.
Where the stock goes can vary, we might get a nice pop on the 'Its not a fraud!' resumption of trading...Or might get a initial drop on the whole 'GET MY MONEY OUT OF THIS HALTED THING!' -- Depends on Q1 results IMO.
UTA has had a bit of a premium in the space for awhile though, even before it was halted. I agree that many companies went down after UTA halted though, so the stock will have an 'anchor' dragging down evaluation a bit.
-Fernando
UTA: Adj. EPS of 1.337 (Mistake in my calc), I should have used the fully diluted share count for 2010's math of 19,387,818. The real adjusted EPS should be $1.337.
Also, the company really has 59.4M in cash, which comes out to around $3 per share (19.5M or so is in a short-term account at the China construction bank earning yield).
-Fernando
UTA: 1.303 EPS (Adjusted for noncash expenses), 10K filed and Ho Ho Ho!
Common stock, $.001 par value, 70,000,000 shares authorized, 19,898,235 and 16,714,457 issued and outstanding at December 31, 2010 and 2009, respectively
Net Income $ 22,039,394
Gain/(Loss) on change of fair value of derivative liabilities
1,004,390
Stock-based compensation
4,901,222
So Net Income, adjusted for those noncash elements, was: 22039394 - 1004390 + 4901222 = $25,936,226.
25936226 / 19898235 = 1.303 EPS.
-Fernando
Ah, so you agree that if current available cash(with short term investments) is used to pay down debt, companies in the s&p would be massively LESS levered than they used to be years ago? My point is that cash has gone up faster than debt, significantly so. Thus companies could use SOME cash to pay back debt to reduce your definition of leverage and STILL be cash rich relative to a few years ago.
Debt/equity is a flawed measure of leverage when companies have so much cash relative to debt which is uninvested...that's my point.
Look at my post in the china stocks board, I discuss cccl's cash usage there when responding to rato.
The reason I pointed to that debt-cash per book value metric versus simply using a debt per book value metric is that cash is fluid. Companies have the option of using that cash on hand to pay down debt, thus when calculating leverage you need to see what the real debt is if available cash is used to pay it off first.
Without doing that, if a company issues debt, gets cash for that debt, does nothing with the cash, your metric would say leverage increased...when it really does not until the cash is USED.
This is why I say leverage has gone DOWN and you say it has gone UP.
-Fernando
Your incorrect, the article I linked before talks about "Net debt is the amount owed after any surplus short-term assets (like cash and equivalents) are netted against this amount" -- It is NOT talking about only short term debt.
It then compares that net debt to total book-value per share and shows it has been going way down.
https://americancenturyblog.com/wp-content/uploads/2011/04/Weekly-Market-Update-4-12-2011.pdf
-Fernando
A few notes about the actual data he lists in the article: That article is from August 2010 and he is quoting Q1 2010 numbers -- Quite old data. He only refers to non-financials (since of course total debt including financials is way way down).
The article's writer's fallacy:
I suppose it depends on how one measures leverage. Personally I think just summing up total debt is an silly and incorrect way to go about it.
You need to do two measurements which are much better, IMO:
1) How much cash/short-term-investments relative to debt do you have -- This measure has been skyrocketing showing amazing amounts of short term liquidity.
2) Leverage level is based on how much debt you have relative to your asset base. As the article I linked shows, net debt (debt-cash) levels PER book-value are at very very low levels historically (Much much lower than we saw anytime in the 1998-2008 period) -- For the S&P 500.
Shrug. You can have overall debt increase and have companies become less levered over time -- Thats still indicating much better balance sheet strength (NOT worse).
Simple example for those on the board not versed in this:
A company that has 100M in debt but has 100M in book-value is much more levered than one that has 500M in debt but 2000M in book-value.
-Fernando
I believe the correct response to that is "OMG OMG, SELL ALL AMERICAN COMPANIES! WE HAVE A CULTURE OF FRAUD! Lets see what states those companies originate from so we can stop buying anything from those states!"
Hehe. Sorry could not resist ;).
-Fernando
Another article that shows how companies are less levered with regards to debt in the S&P 500 than they were before (massively so) -- In fact the level of leverage is way below historic values:
https://americancenturyblog.com/wp-content/uploads/2011/04/Weekly-Market-Update-4-12-2011.pdf
Page 3:
"
These same companies have rapidly reduced their debt exposure, as shown by the trend below in net debt to book value per share. Net debt is the amount owed after any surplus short-term assets (like cash and equivalents) are netted against this amount. And book value per share is the total amount of shareholder equity on an accounting basis (consisting primarily of stock issued, paid-in-capital and retained earnings). From 1998 to late 2007, this ratio fluctuated in a range of $1.75 to $2.00, but since the Great Recession, it has come down to approximately $1.00 per dollar of shareholder equity.
"
Seems like a good report to read through...and it has updated numbers as of April 2011.
-Fernando
Care to show me where you got the fact that companies have more debt now than ever, especially relative to their cash levels? Thats contrary to what I've seen. Certainly financial companies have MASSIVELY reduced debt levels. Read the following for non-finance companies.
http://www.standardandpoors.com/products-services/articles/en/us/?assetID=1245214635566
"Publication date: 14-Jun-2010 09:21:31 EST
View Analyst Contact Information
Table of Contents
The Market, Credit and Risk Strategies group (MCRS) is a separate and independent research team at Standard & Poor's. The objective of this group is to provide unique financial intelligence by analyzing relationships across multiple asset classes and markets. Enabled with cutting-edge S&P and third-party applications and data, the group offers investors valuable new sources for alpha discovery and "out-of-the-box" thinking through robust data exploration and analysis. The research is delivered through the Market Intellect series that provides investors with actionable and topical market perspectives that can offer innovative ways to leverage credit and risk intelligence.
Observations
The average probability of default (PD) for nonfinancial S&P 500 companies has decreased significantly as the economy gradually rebounds from the recent recession (see "Probability Of Default For S&P 500 Index Debt Plummets With Growing Corporate And Economic Stability," published May 26, 2010). Market, Credit, and Risk Strategies (MCRS) believes that increasing cash levels and consistent debt levels on balance sheets of U.S. S&P 500 corporations have largely spurred this improvement in overall credit quality. Furthermore, this recent phenomenon has not been limited to large-cap corporations: Similar trends have emerged for S&P MidCap 400 and S&P SmallCap 600 Index constituent companies.
The collective U.S. corporate response to the credit crunch, to raise cash and cut debt, is quite understandable considering the magnitude of the financial crisis that followed. As economic recovery takes hold, however, companies may not want to keep such large, unproductive cash holdings on the balance sheet. Given the ongoing sovereign debt crisis in Europe, U.S. corporations might look across the Atlantic for growth options.
Key Findings
Total cash and short-term investments have risen 42.6%, 35.9%, and 30.8%, respectively, for nonfinancial companies in the S&P 500, S&P 400, and S&P 600 indices in the past two years.
Total debt rose by only 5.6% and 3.4% for nonfinancial S&P 500 and S&P 400 companies, respectively, and fell by 8.5% for nonfinancial S&P 600 companies over the same time period.
As a percentage of debt, cash and short-term investments have risen to 36.6% from 27.1% for nonfinancial S&P 500 companies, to 40.1% from 30.5% for non-financial S&P 400 companies, and to 61.2% from 42.8% for non-financial S&P 600 companies in the past two years."
Regarding capex and depreciation, i'm not talking one company -- I'm talking the entire index. Regarding taxing foreign earnings even if they do not bring the cash back into the US, good luck with that scenario happening (chuckles hysterically). I think every republican in the house of representatives just had a collective heart attack.
-Fernando
One reason I disagree with your directional view of corporate earnings is that those S&P companies have:
1) More cash on hand than they have had in decades.
2) Over the past two years, the S&P companies have been using capex BELOW their asset-depreciation levels.
So basically companies have been outperforming while under-investing in their business and building up a cash horde. What do you think will happen once that cash starts being deployed? -- methinks we get higher revenue per book-value-dollar including a nice bump to revenue and income growth ;)
-Fernando
I give you full props for being correct in your China-RTO stance so far :D A good call indeed.
My main problem with your overall market views is that you (Everybody does this at times) seem to have a tendency to become too polarized in one direction or another... The fact is, there are many 'balancing' factors in the world's economy and usually the result is mildly one way or mildly the other direction. Making extreme predictions, both on the upside and downside, tend to be wrong the vast majority of the time. I try to be very conscious of this natural tendency to become too extreme in any viewpoint to avoid that...
Funny how we argue back and forth but our market directional-call is the same at this point in time :D. Let us revisit data when our directional-calls start to differ (probably in 1 or two months).
By the way, I re-established my puts on URE/FAS/etc an hour or two ago :).
-Fernando
Heh, the most cautious report was the one I published on Ihub yesterday. There are no truly bear reports I can find.
Regarding markets, 40-50% of operating profits (as said in the report I put here) of the S&P come from foreign sources right now. Overall revenue and EPS growth has been very solid (and is projected to remain so this year). Only 15% of the S&P costs come from commodities by the way.
You've been too bearish on the overall market for a year now, I am thinking that a year from now you will be shown to have been too bearish for 2 years in a row ;). Hehe.
As I said before though, I am short-term cautious and do believe the markets could easily go down another 5% from here before bottoming over the next month or two.
-Fernando
The US economy won't slow down from 1.8% GDP growth, its going to show around 2.5%-2.8% or so in Q3 and Q4. You'll see ;).
I've listened to Chanos many times, I simply disagree with what he says (as do many others). Why do you say the growth is low quality? More of their growth is coming from sectors like retail sales, restaurant sales, advertising, service industry, consumption than from manufacturing. Whats so low-quality about that growth? Certainly a large percentage of their GDP is from 'low quality sectors' but the growth certainly isn't coming from there now.
If your predicting a tactical default by the US this year, i'll predict I will win the lottery :P. Similar odds IMO. But yes, we will see lots of 'hoopla' as we approach August.
Your right that most analysts have a bullish bias, just as most bears have a wonderful tendency to be wrong for a long long long time before finally being right. Hehe.
Regarding the GS reports, I read things written by different teams inside the company -- not individuals. I have not seen one truly bearish stance right now (Like your stance), although they do suggest caution and say to expect bumpy markets.
-Fernando
TSTC: Very nice bounce off today's low...Looks like it wants to close above the 50MA line at $6.5.
-Fernando
Its all a matter of degree. If the currency devalues at a slow but steady clip over years, the market will not panic -- Its the whole frog and slowly boiling water scenario. I am long gold, silver and commodities though (usually through their respective STOCKs though, not the commodities themselves) -- as you say. If we truly see interest rates skyrocket, i'll be just as bearish on the US economy as you :D. But there is no reason to anticipate that scenario before we see interest rates start spiking -- Its not something that will blindside us.
Japan's debt is a weird case, their saving grace is that 95% of their debt is owned internally by their own population. There is a weird feedback cycle there: They pay out money on interest, their population gets income from that, they tax that money and get revenues back into the government for a good portion of that debt.
-Fernando
Your right that there is a slowdown, but a slowdown is not doomsday -- Heck, even a F1 race-car needs to slow down a bit while making a curve before accelerating again (Not saying the economy is a F1 racecar, just an example...Maybe a go-cart? heh).
The question isn't slowing or speeding up (although thats useful for market timing direction), the question is absolute growth levels.
Absolute Global growth levels projected, even with those 'leading indicators' is quite strong. Europe has consistently outperformed people's projections on growth this past year (At least the big economies like France/Germany have outperformed, which is what matters).
China is slowing down from unsustainable growth but most people are still projecting 9%-9.5% growth in 2011 -- Thats damn strong, I don't care if it used to be 10%. Heck even 9% is not sustainable long term, I expect we will see 8% in the next two years.
What EPS will the S&P make this year on average? Most people seem to range from 90-95 in their predictions (Although I think consensus is even higher than that), so lets take $90. 1290/90 = 14x. That is not expensive if the last 15yrs is anything to go by. Of course, those who like to use weird 10-year-average-earnings to measure market-valuations might disagree -- but I do not place much belief in that metric (How often over the last 15 years has that metric said the market is overvalued and the market kept going higher for years, LOL).
Regarding austerity measures in the US, I would love some but I highly doubt we get anything meaningful with a big election year coming up. If things get bad enough, you can certainly depend on a Q3 though.
Housing is now 2.5% or so of GDP, so while a headwind it is nothing like it used to be.
So yes, slower growth going forward but decent growth nevertheless. Most analysts sure don't seem to think we will be ending the year at 1150 -- thats for sure. So I think we need to accept that such predictions are in the very small minority while consensus is quite a bit more optimistic.
-Fernando
CCCL: Another tile company with similar margins to CCCL is
DYNASTY CERAMIC PUB CO LTD -- India based -- with 44.3% gross margins, 26% operating margins
http://investing.businessweek.com/research/stocks/snapshot/snapshot.asp?ticker=DCC:TB
Funny thing about Dynasty Ceramic? In the description of that link: "The company also imports polished porcelain tiles from China for sale" -- Guess a company that makes porcelain tiles in China? Yep you got it, CCCL (chuckle)
Definitely does not seem to be anything out-of-wack with regards to CCCL's margins to me.
-Fernando
GHII: This company is a VIE format, not a FIE... Thus the SAIC is probably not even audited. Maj has said in the past how SAIC is not reliable for non-FIE's.
I scooped up a few shares on the huge drop today (chuckle) since Q2 is going to be huge for them.
Funny that people worry about this one making the numbers 'too good' when they made such a HUGE blunder in 2009 with their working capital in those 15yr-rental-construction-agreements and reported it faithfully. How long has it been since they raised money again? :D (and they paid their american-investor debentures -- a good chunk with cash).
Definitely a low quality stock though, no doubt about that.
-Fernando
TSTC: Not enough money spent in those puts to indicate a hitpiece -- Plus its for July and not June, so nothing imminent.
More likely a simple hedge due to overall market weakness.
-Fernando
Not re-establishing market shorts yet... Waiting a bit longer.
-Fernando
CCCL: LOL, what a crap report -- Was it autogenerated? Their a tile manufacturer and they complain about CCCL's gross margins? For the industry its quite good!
Just so much wrong in that page, heh.
-Fernando
CCCL: No idea why its going down but Maj himself categorized it as 'Overall Positive' on the ground finding that confirmed the worker count and the ability of the company to generate the revenues they say in their SEC filings (In his post last Friday). No idea why anyone would sell in front of that description, shrug.
-Fernando
SOKF: Sorry I didn't post about the SOKF IR non-renewal here, Burp. I posted about it on the company Yahoo board awhile back. It caused me to sell my position which I had just started buying around $3.5 (I was trying to contact IR to ask a few questions when I found about them no longer having SOKF as a client).
Lack of communication is scary right now, how they could decide to dump the IR firm is mind blowing to me.
-Fernando
Japan is not the only cause, it is simply a big factor :). I agree with you with regards to long term structural debt problems, I simply see more of a runway to 'kick it down the road' than you do -- I also believe fiat currency devaluation will be integral to handling of that debt load going forward, as well as it being a critical tool to avoid deflationary periods.
Here is a new Goldman Sachs PDF Report on the slowdown:
http://www.megaupload.com/?d=ZSIF14Q6
clip from report:
"We should also note that a deceleration in the rate of economic growth is not the same as negative growth. As such, the impact of peaking leading indicators, such as the ISM, is not as detrimental to forward equity returns as intuition might suggest. Indeed, equity returns were positive 83% of the time ten months following the ISM peak, with a median gain of 5%. Assuming the ISM peaked in February, this historical analogue would suggest the S&P ends 2011 at 1393.
Against this backdrop, we remain comfortable with our S&P year-end fair value range of 1300-1375. When the market is fairly valued, as we believe it is now, we think it makes sense for clients to continue to build toward, or maintain, their strategic allocation to equities, especially given the upside risk to our earnings estimates and 25% probability we place on our good case scenario (a 1450 year-end target). That said, volatility is likely to remain high in the near-term as the debate over the debt ceiling, Greek restructuring and the evolving growth trajectory of the global economy continue to make headlines. As mentioned earlier, we should brace ourselves for a bumpy ride."
-Fernando
A double dip is possible but I think the much likelier possibility is that this slowdown is a direct result of Japan's disaster impacting the global economy. The timing of this 'slowdown' is perfect for that being the cause. Personally I believe we will see this slowdown reverse itself in the next 2 months -- Which is why our views differ on where the S&P will go. Certainly Japan's economy is geared to show a BIG recovery in the next 3 months in most sectors (especially manufactoring, reconstruction related jobs, etc etc).
Even with this slowdown though, the economic numbers (and company fundamentals) look a heck of a lot better compared to when the S&P was at 1150 -- aside from housing (chuckle).
Regarding monthly jobs for example, you know how noisy that number is. Economists usually average 3-4 months of jobs numbers to try to erase that noise and get a better 'view' of the real number. IMO you will see the following two months show incremental improvements over what we just saw.
The idea that this slowdown is because of QE2 is silly since that funding has not ended yet and it takes awhile for it to 'perculate' through the economy -- QE2 never had that big a direct impact anyhow except in the CONFIDENCE of people... If we see numbers stabilize and trend back up in the next 2 months that confidence will return.
-Fernando
There you go again with that 1150 prediction (chuckle). I'm sticking with a stance that the bottom will happen before we break 1200 (Probably even around 1250) -- I think we end the year between 1300-1350 with a rally during late Q3 or Q4.
In the short term we both agree though, market downside protection is good to have -- Thats for sure.
I think its simply a bit premature to make big calls like a asking for a further 15% correction -- How about you take 5% at a time and see how the market is acting at each price level before deciding it will go down another 5% ;).
-Fernando
Traderfan, what do you expect these stocks to do when the DOW goes down 500 points in 4 days? Heck, YONG was down alot less today than BAC and C, thats for sure -- and thats after that silly Rosen lawsuit PR this morning started us off down big.
Lets see how they react when the hurricane-strength headwinds slow down some, huh? ;).
-Fernando
CCCL: I disagree on a dividend being the only driver of value and shareholder recognition possible, although I certainly would not be against a dividend when they can afford it (Which should not be too long from now since the majority of their capex is for 2011).
I would like XIN if they actually had good growth prospects -- Lots of reasons to like CCCL over XIN from a shareholder value perspective. A heck of a lot of the housing development coming online, which CCCL benefits from which will probably hurt XIN (Via possible pricing changes on the housing or at least a slowing of pricing growth), is done by government-constructed housing for example. The prospects of both companies are quite different over the next 3 years.
Anyhow, let us not discuss CCCL anymore please -- Or any Chinese stock for that matter. Your views are well known (as are mine) and we get nowhere productive in rehashing the discussions :). The next time we discuss a China stock on the board, hopefully it will be to applaud them for initiating a dividend (chuckle).
I get tiered of typing long responses (laugh)...The next time we want to talk about a company, lets call each other -- alot less work on the hands (chuckle).
-Fernando
CCCL: lol, its a SPAC yeah. Look at CNTF today though (among others), RTO or IPO doesn't seem to matter today (chuckle)...Not on days when BAC and C are down 4.5% themselves.
At least unlike many RTO's, i'm pretty confident the assets and company are real :D. My RTO shorts make me money now, so no complaints if my few long positions go down with the market (for now) ;).
This market is nuts for now, take MNEAF.ob for example -- gold AND silver are up today and yet the stock is down 7% (chuckle)...Talk about making asinine stock movements.
-Fernando
I covered my overall market negative-positions today near the close (Puts on FAS, URE, etc) -- After 4 market down days, I expect a nice little bounce (Before possibly resuming a downward trend). I'm betting we get a positive market day tomorrow or Wednesday -- At which point i'll consider re-establishing my puts into both the strength and VIX reduction.
Cheers!
-Fernando
CCCL: Its funny watching the market maker games here, moving the bid/ask numbers constantly. Glad I had some tiny staggered bids out this morning, caught some cheap shares from whoever was silly enough to sell :D.
Funny how many of the solid names in this space are suffering today -- Ah well. More for me I guess :).
CCCL is now at a P/E under 2, at under the lower bolly band, with RSI below 30, with their strongest quarter (Q2) seasonally coming up (25% or so sales-volume over Q1) and with a 'overall positive' important catalyst coming soon :D. I'll take it.
-Fernando