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Can someone please confirm my count of shares outstanding?
I get:
Latest 10-Q.........12,365,663
Kim Fai.................1,913,265
Warrants*................36,000
Total:............14,350,928
*awarded to IR firm
Is there anything that I'm missing?
I scrapped a much longer post and instead will just say that I have mixed feelings about a share repurchase. It definitely makes sense to repurchase undervalued shares, and would signal to the market that it's truly a "legit" company. However, it never looks good to acquire a company using shares priced at $5.75, and then buying back shares a month later at a higher price. I also prefer a fortress balance sheet (if they spend $5 million to repurchase ~750,000 shares, they'd have $3 million left on the balance sheet with A/R that's only collected every 60 days. Strong, but not fortress).
In any case, I'll probably welcome anything that management decides to do, as long as they do something! Releasing their 10-k earlier than usual would be a nice start.
"Your suggestion on a stock buy-back has also been discussed with the Chairman and the board recently"
Running close to inside information. I guess this means it isn't a possibility anymore, which is probably a good thing considering a growing company can get a better return re-investing that cash into the business rather than buying back shares.
The whole SEC investigation into small-cap China RTOs probably has at least something to do with it, the irrationality of the market is certainly a factor as well. In the short run, the market is a voting machine, in the long run it is a weighing machine. If NEWN is as good as we think it is, this stock will be well north of here in time.
My Top-5 of Chinese Reverse Mergers that will flourish in the coming years and meet my criteria of PPP but also meet my China Investor King's 3U model (Unloved, Undervalued and Underowned):
* Weikang Bio-Technology (WKBT,OB)
* American Lorain (ALN)
* China Botanic Pharmaceutical (CBP)
* New Energy Systems (NEWN)
* SkyPeople Fruit Juice (SPU)
http://seekingalpha.com/article/247403-uncovering-the-real-problem-with-chinese-reverse-takeovers?source=marketwatch
There is certainly plenty to worry about, but the odds seem to be in our favor (longs). Some risks:
-the company is hitting its highest margins ever as a company* through 9 months 2010, and maintaining those margins could be a challenge given the competitive environment (even if there are no direct competitors in China right now, there soon will be if this business model continues to be profitable). even if sales continue their ascension, declining margins will kill the bottom line
-management continues to make acquisitions with undervalued shares, which is essentially giving away part of the company at a bargain price
-anytone relies on its ability to innovate constantly (4 new products every month!). it's not hard to see that innovation slowing down
-it's in china, who knows what goes on over there
That's what I can think of off the top of my head. I'm actually going to recommend NEWN in a stock pitch competition, so I'll have a more organized and thorough list of risks at a later point.
*in analyzing the company after the acquisitions, I combined NEWN, Anytone, and NewPower financials to assume that they were always one company
Kim Fai financials would be nice as well.
Does anyone know Anytone and NewPower's gross margins for 2009 and 9 months 2010? I sent an email to IR but haven't received a reply...
The day-to-day price movements aren't terribly important unless you need your money back soon. NEWN is a healthy and growing company, and its true value will eventually be reflected in the stock price (no matter how insanely cheap it gets in the interim).
"deferred income taxes represent an estimate of income taxes that would be due if assets on your balance sheet were sold at their indicated value"
So does that mean that the DTL is realized if NEWN sells the patents, but is not a liability as long as the patents are not sold?
Thanks harleyman for the two articles btw.
Nevermind. Crescendo Communications provides them.
They are ordinarily supposed to file within 90 days of the close of the fiscal year (FY ends Dec 31), but they got an extension last year because of the acquisitions of Anytone and NewPower. They should file by 3/31/2011 this year.
Does anyone have a written transcript of the conference calls? It's a bit tedious to have to listen to long blocks of Chinese and then try to understand the accent even when the translator is speaking...
Can anyone point me to a bear case for NEWN? I am long, but it hit me that I haven't really seen anybody come out against the stock publicly, and I would like to see what the bears have to say. I'm sure the uncertainties about China and the competitiveness of the industry are on the top of the list of anyone bearish about NEWN, but I'd like to see if anyone actually has a strong case against the stock.
Thanks in advance for any help!
Perhaps the selling pressure on NEWN is due to the shares issued to all of the acquired companies; the shareholders of the acquired companies may not be interested in holding NEWN shares, and are therefore selling. This often occurs after spin-offs, and may be happening in this case.
I am having some trouble understanding the deferred tax liability... Do they actually have to pay that in the future, or is it just there to show that the IRS holds the patents at a higher value than the company does? I never knew that you had to pay taxes on the value of patents, so I guess that's why I'm a bit confused here. If anyone can explain this to me, or point me toward a book or website that would help me figure this out, I would greatly appreciate it!
Does anyone know of any direct competitors to NEWN in their production of li-ion batteries for cell phones, and for their back-up power systems?
I understand that $5.75 was the market price at the time, but the intrinsic value of NEWN's shares is much greater than that. Even if they issued shares at an implied value of $9/share, it still gives away part of the company for less than it's worth.
I'm not an expert on Chinese tax laws, but funding this acquisition with 100% debt might have been a more prudent decision. Nonetheless, NEWN is still poised for growth.
EDIT: I suppose both managements could have taken the undervalued share price into account when negotiating a final sale price. So although NEWN gets to say it made the acquisition for $24MM, it issued shares with the knowledge that the "real" price of the acquisition was closer to $35MM. I don't know much about the quality of Kim Fai's earnings, but a 14% return on investment isn't terrible.
I know this is a little late to be commenting on, but is anyone else distressed that NEWN made the Kim Fai acquisition with stock effectively valued at $5.75/share? Why are they using undervalued equity to make an acquisition?!
It may be up but it's not functional. You can't buy any of the products and nothing under the services tab is useful. This seems to be more of an IR site than anything for doing business.
I'm not sure what you mean by things going badly... The company has significantly increased its value with its recent acquisitions, and they appear to be fueling growth for the company.
Most people who post on message boards are concerned with the stock price, but those who do well over time tend to be more concerned with the intrinsic value of the shares they own. That intrinsic value is still intact, so there is nothing to worry about.
EasyDouble, I'm not sure what kind of analysis you expect on a message board, but I think you're setting your expectations too high. Most people who post on message boards seem to buy the stock without regard to the underlying business.
What did y'all think of the cc? It was kind of scary when they said they were focusing on R+D; luckily the IR guy was there to clear that up.
Q2 adjusted earnings a bit lower than I had hoped... still a good bit higher than the street is giving them credit for.
I hope waking up for this cc will pay off; the other conference call that I've listened to was just full of basic information and no real discussion of where this company is heading... Hopefully mgmt has learned to speak english!
http://marginofsafetyblog.com/2010/08/09/portfolio-addition-new-energy-systems-group-newn/
^^This blogger says conservative estimate of NEWN value is ~$10/share, I'd say it's closer to $12-$13 but I think we can all agree this stock is well undervalued.
It will be interesting to see the reaction in the market tomorrow; it may take two more quarters of strong earnings to start showing up on investors' screens... what we really need is analyst coverage!
It's hard not to be excited about this conference call. I just hope Mr. Market is feeling exuberant on Monday.
Small institutional investors anyway. Remember, this is a tiny Chinese company we're talking about.
and even better FCF. Do you know if the $1.23 projection includes depreciation and amortization? They have a ton of goodwill from their recent acquisitions.
I wonder how the new circuit-breaker rules will affect NEWN's uplist day. I don't like the idea of traders having 5 minutes to think about whether it's actually sensible to buy a stock because it's more expensive.
NEWN has very few customers; I wouldn't buy the company for more than $8.20 or so, but I'm happy to ride the uplist to $11+. I can't imagine that the market would value this company as-is at a multiple greater than 10 over the long run.
Why are the form 3s posted on this site but not the SEC's EDGAR database? Where can I find the SEC filings before the SEC posts them?