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heh, this almost reads like a goofy satire... ridiculous... laughable...
OGX - Cashed-up Eike Batista won't sell oil stakes
http://www.reuters.com/article/2011/09/24/us-batista-idUSTRE78N01120110924
(Reuters) - Brazil's richest man said on Friday he has abandoned talks to sell stakes in his offshore oil prospects, which had drawn interest from China, because he already has billions in cash on hand.
Eike Batista's flagship oil company OGX had been in talks with companies including oil firms from China, but no longer sees any need to sell because a $2.6 billion bond issue earlier this year left it flush, he said in a three-hour interview at Reuters' headquarters.
Batista also said OGX was close to signing a long-term supply deal to export part of its oil production to one of the world's largest oil refiners, without naming the company.
"The bond issue, which was spectacular, completely covered the need for cash," Batista said in an interview. "We brought in exactly what we needed to live off our own spoils."
Batista, valued by Forbes at near $30 billion, struck a defiant tone in the face of a quickly worsening global economy, saying his companies ran "idiot-proof" projects that could withstand a sharp drop in commodities prices.
He said he saw "zero" risk that a slower economy could thwart his companies' efforts to raise capital for their estimated $50 billion in planned investment.
"I have to laugh," he said when asked whether he was worried about the recent plunge in the share prices of his companies. "My companies are all going to be massive cash flow machines, I'm going to pump money to my shareholders and dividends to my sons and my grandsons."
Shares in OGX and some of Batista's other companies have suffered steep losses during the market turmoil since the start of August. OGX is down 43 percent since the start of the year.
He expects his five publicly listed companies, which range from oil and gas production to mining and logistics, to generate $1 billion in earnings before interest, taxes, depreciation and amortization in 2012.
RISK-TAKING CULTURE
A flamboyant playboy and larger-than-life figure in Brazil, Batista has vowed to expand Brazil's flagging infrastructure that he says is constraining the country's growth and reducing its competitiveness.
"I want to build Brazil into a modern machine," he said, describing the current chaos of clogged ports that boost costs for exporters and prevent industries from expanding.
His companies -- most of which are not yet generating a profit -- will be able to pay shareholders dividends by 2014 as they generate earnings, he said.
OGX, Batista's biggest company by market capitalization, drew billions of dollars in investment in a 2008 share offering and has come to be seen as an alternative to state-run Petrobras, which critics say suffers from political intervention by state leaders.
Batista, who made his first fortune buying gold from wildcat miners in the 1980s, said he's willing to take financial risks that his Brazilian counterparts shy away from.
"Without my culture of risk-taking, nothing would have happened," he said. "These guys don't have the stomach for risk," he said of Brazilian businessmen.
He also benefits from an uncanny sense of where to find riches. "I have a pact with nature," he said.
OIL PRODUCTION
OGX plans to pump its first oil in November and says its drilling campaign has had success rate near 90 percent. It plans to boost output from 20,000 barrels per day (bpd) late this year, to 1.4 million bpd in 2019.
From his first operating oil field, known as Waimea, Batista plans to start selling oil to a "top 3" oil major with huge refining interests, he said.
"When we sign that contract, the world will see the quality of our oil," he said, declining to identify the company because of securities regulations.
Batista said low costs of his shallow-water drilling mean OGX would break even if world oil prices fell as low as $24 a barrel. Benchmark Brent oil currently trades above $104 a barrel, and he expects prices to average around $90 a barrel in the future.
OGX shares closed up 1.1 percent to 11.71 reais per share on Brazil's Bovespa exchange on Friday.
BOUYANT BRAZIL
He said market volatility in recent weeks has prompted the Brazilian real to lose value against the U.S. dollar at a faster rate than Brazil's government had intended.
The rate closed near 1.84 reais per dollar on Friday, but had fallen as low as 1.90 on Thursday. As recently as late August, the rate was below 1.60.
But he said Brazil is in a better position than other countries to weather the global economic downturn, citing 190,000 jobs that Brazil added last month.
"We're running full employment. Big projects are having trouble hiring people," he said in an interview with Reuters Insider. "By 2020 we're going to have 75 percent of our population in the middle class. It's beautiful, isn't it?"
Renewables Overtake Nuclear: How to Play the Switch
http://seekingalpha.com/article/286553-renewables-overtake-nuclear-how-to-play-the-switch
Very interesting discussion in the comments of this article.
I remain bullish long-term on oil.
Fracking Linked To Methane In Flammable Drinking Water For First Time In Scientific Study
http://www.huffingtonpost.com/2011/05/09/fracking-methane-flammable-drinking-water-study_n_859677.html
"The research was conducted by four scientists at Duke University. They found that levels of flammable methane gas in drinking water wells increased to dangerous levels when those water supplies were close to natural gas wells. They also found that the type of gas detected at high levels in the water was the same type of gas that energy companies were extracting from thousands of feet underground, strongly implying that the gas may be seeping underground through natural or manmade faults and fractures, or coming from cracks in the well structure itself."
...
“We certainly didn’t expect to see such a strong relationship between the concentration of methane in water and the nearest gas wells. That was a real surprise,” said Robert Jackson, a biology professor at Duke and one of the report’s authors.
Anti-Hydraulic Fracturing Movement Not Based on Rational Thought
http://seekingalpha.com/article/274316-anti-hydraulic-fracturing-movement-not-based-on-rational-thought?source=yahoo
Whether the evidence supports it or not (debatable), the media loves to emphasize negative environmental and safety aspects... mainly based on anecdotal evidence.
OGX Could Be the Next Exxon Mobil
http://moneymorning.com/2011/07/28/ogx-petroleo-e-gas-participacoes-sa-pink-ogxpy-could-be-the-next-exxon-mobil/
OGX Petróleo e Gás Participações SA (PINK: OGXPY) Could Be the Next Exxon Mobil
BY JACK BARNES, Contributing Writer, Money Morning
OGX Petróleo e Gás Participações SA (OTC PINK: OGXPY) is probably the biggest oil and gas company you've never heard of.
That's understandable, considering it has not yet produced a single barrel of commercial oil. But this Brazilian company could soon be on par with the likes of Exxon Mobil Corp. (NYSE: XOM), CNOOC Ltd. (NYSE ADR: CEO) and state-owned local rival Petroleo de Brasileiro SA (NYSE ADR: PBR).
Since its initial public offering (IPO) in 2008, OGX's resource base has more than doubled from 4.8 billion barrels of oil equivalent (boe) to 10.8 billion boe. It has drilled 52 wells in the last 20 months, with a success rate of over 90%, as it prepares for its first commercial production this fall.
OGX's first long-term well test is expected to produce about 20,000 barrels of oil a day starting this fall. And the company already has ordered the long lead items needed to ramp up production to 150,000 boe per day by 2014. From there, OGX is expected to ramp up its production to 1.4 million boe per day in 2019.
In simple terms, this oil and gas company is conducting the largest private sector exploratory campaign in the history of Brazil.
So it's time to buy Petróleo e Gás Participações S.A. (**).
The Next Energy Super Giant
There are about 123 billion barrels of oil buried beneath the waters of Brazil's coast. And OGX - an up-and-coming producer that hardly anyone in the United States has heard of - will play a big part in extracting those crude deposits.
That is why I like this investment so much.
Could you imagine getting a tip about Exxon Mobil before mainstream investors ever found out about it?
Well, that's essentially what we have here. So let's take a closer look.
OGX was built from scratch in 2007 with the goal of creating a large, focused private energy company to profit from the Brazilian exploration boom that was just getting underway at the time. In June 2008, OGX became the largest primary IPO in the history of Brazil, raising $4.3 billion (6.7 billion reals).
Today, it has reserves and a production growth path that rivals some of the smaller members of the Organization of Petroleum Exporting Countries (OPEC).
OGX has built up an amazing list of offshore and onshore exploration licenses in South America. It has 22 offshore exploration blocks covering an area of about 7,000 square kilometers, and 12 onshore exploration blocks covering another 21,500 square kilometers.
What's more is that these 34 exploratory blocks include the Campos, Santos, Espírito Santo, Pará-Maranhão, and Parnaíba basins, which means OGX's asset portfolio is well diversified. These projects amount to net potential resources of 10.8 billion boe.
OGX estimates that it will be able to produce about 1.4 million boe per day by 2020.
Even more impressive, OGX estimates that each barrel of oil it produces will have an average capital investment cost of $2.00 and operating expenditures equal to just $16.00 per barrel. If these numbers are correct, the company is going to have a significant margin advantage over most companies, which pay twice as much.
Finally, the company just closed an unsecured bond issue, securing $4 billion that will fund its expansion through 2014. While I expect that the company will still need to dilute its shareholders at some point in the next decade, I don't see a need for another capital call in the near term.
Ambow Announces Launch of Cisco and Apple Training Facilities on Dalian Career Enhancement Campus
http://finance.yahoo.com/news/Ambow-Announces-Launch-of-prnews-2149303547.html?x=0&.v=1
Press Release Source: Ambow Education Holding Ltd. On Wednesday July 27, 2011, 4:00 am EDT
BEIJING, July 27, 2011 /PRNewswire-Asia/ -- Ambow Education Holding, Ltd. (NYSE:AMBO - News) announced today the launch of Cisco unified networking and Apple authorized training facilities on its Dalian career enhancement campus. This is another example of Ambow's strategy of integrating world class information technology (IT) resources with its IT training and education expertise to help university graduates and professionals attain better careers.
Ambow's career enhancement center in Dalian has the capacity to serve up to 5,000 students. It is currently focused on IT career enhancement services and software outsourcing training.
Ambow's joint efforts with Cisco and Apple will improve the quality of regional IT education. It will also enable Ambow to meet increasing demand for higher level IT talents as China moves from a labor intensive to a technology driven economy.
Cisco Unified Networking Lab is one of the most advanced training facilities in China. It is equipped with a comprehensive array of Cisco router, switch, security, voice, wireless and Tele-Presence equipment. It enables hands-on training for a variety of Cisco certificate programs such as CCNP (Cisco Certified Network Professional), CCSP (Cisco Certified Security Professional), CCVP (Cisco Certified Voice Professional) and CCIE (Cisco Certified Internetwork Expert). The lab's advanced networking platforms also allow Ambow to offer enterprise-grade training programs tailored to meet corporate needs.
Apple Authorized Training Center offers an open environment providing training in mobile application development, graphic design and video production. The facility consists of 5 different labs: iPhone/iPad development, video production standard, video production pro, Apple motion graphics and Apple servers. The facility is equipped with a total of about 300 Apple computers, 100 video production workstations and related development applications. It enables students to gain practical experience while training for a wide variety of Apple certifications.
These two facilities fully demonstrate Ambow's leadership, commitment to and capability in career enhancement training.
Wow, this is the most interesting discussion i've read on an investing forum in a long time :)
The only thing i'd point out is that an "atheist" is not necessarily someone who claims to be certain of the non-existence of god.
It bothers me that atheists are often thought to be closed-minded because they deny the existence of gods, whereas agnostics appear to be open-minded because they do not know for sure. This is a mistake because atheists do not necessarily make a claim toward knowledge and may indeed be an atheist precisely because they do not know for sure — in other words, they may be an agnostic as well.
This is why "agnostic" and "atheist" are not mutually exclusive. Agnosticism deals with the question of knowledge, while atheism deals with the question of belief. I would even venture to say that most atheists are agnostic atheists. That is, most disbelieve in gods without claiming to know for sure that no gods can or do exist.
Too many people are just afraid of labeling themselves as "atheist", but it's bullshit in my opinion. People need to stop dancing around the question of belief. Being agnostic doesn't mean you do or don't believe, so it isn't a third option when asked if you believe in a god. You either believe or you don't, no matter what you know about the claim. If you don't know if you believe, then you don't.
On that note, i would agree that "gnostic atheism" would be pretty silly, if that is what you were getting at.
((((OK... sorry... quietly stepping down from my soap box now...))))
Debate Intensifies Over Climate Change Aspects of Canada's Oil Sands Pipeline
http://www.nytimes.com/cwire/2011/07/25/25climatewire-debate-intensifies-over-climate-change-aspec-46622.html
Saudi Arabia's coming oil and fiscal challenge
http://arabnews.com/economy/article474849.ece
oil - agree 100%
It's stupidly simple. Finite resources of the planet will not infinitely sustain us as a species. Oil will be the first key limiting resource. Practical alternatives are very slowly emerging but are extremely unlikely to keep pace with demand. Consumption continues to accelerate.
IMO, we will see the consequences sooner than most imagine. Certainly within 10-20 years.
http://en.wikipedia.org/wiki/Oil_reserves
http://en.wikipedia.org/wiki/Oil_consumption#Demand_for_oil
http://www.oilposter.org/posterlarge.html
We will look back on $100/barrel and laugh about it.
AMBO - "Ambow-Microsoft" Campus Star Contest Launched
http://finance.yahoo.com/news/AmbowMicrosoft-Campus-Star-prnews-812469055.html?x=0&.v=1
BEIJING, 20 July, 2011 /PRNewswire-Asia/ -- Ambow Education Holding Ltd (NYSE:AMBO - News) and Microsoft (China) jointly announced the launch of "Ambow-Microsoft Campus Star Contest" at the 5th International IT Talent Education Summit.
The theme of the contest is in two key areas including .NET framework and Systems and Network Management. As of today, over 10,000 IT students from more than 80 colleges and universities among 20 provinces have taken the comprehensive ability and technical skills test in their respective institutions. The participants will go through several rounds of screening in their respective city, region and ultimately enter into the national finals.
"Ambow-Microsoft Campus Star Contest aims to build a mutual communication platform between corporates and students where the students are able to demonstrate themselves and gain opportunities, while the contest will showcase high quality IT students to reputable IT employers at the same time," said Ms. Yisi Gu, Senior Vice President and CTO of Ambow Education Holding Ltd, at the opening ceremony.
"Hosted and sponsored by Microsoft (China), this annual competition has been supported by many colleges and universities in China. Participants' skills in communication, innovation, teamwork and other professional attributes are important parts of the assessment. Those who enter the national finals will have internship opportunities in Microsoft and Microsoft's strategic alliances," added Mr. Yi Tang, General Manager of Microsoft (China) Education and Certification Division.
This annual contest reaffirms Ambow and Microsoft's strategic partnership in building talents in China. Ambow has already been working with Microsoft as exclusive partner in the Microsoft Academy Service Partner program as well as setting up Microsoft Computing Service Centers in different education institutions.
About Ambow Education Holding Ltd.
Ambow Education Holding Ltd. (NYSE:AMBO - News) is a leading national provider of educational and career enhancement services in China, offering high-quality, individualized services and products. Ambow has two business divisions: "Better Schools," which includes tutoring centers and K-12 schools; and "Better Jobs," which includes career enhancement centers and colleges.
With its extensive network of regional service hubs complemented by a dynamic proprietary learning platform and distributors, Ambow provides its services and products to students in 30 out of the 31 provinces and autonomous regions within China.
Forward Looking Statements
Some of the statements in this press release are forward-looking statements within the meaning of the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. Investors are cautioned that actual events and results could differ materially from these statements as a result of a variety of factors, including any changes in government policies, laws and regulations, competition and economic conditions. Investors also should consider the information contained in Ambow's filings with the U.S. Securities and Exchange Commission from time to time. Other unknown or unpredictable factors also could cause actual events and results to differ materially. In light of these risks, uncertainties and factors, you are cautioned not to place undue reliance on forward-looking statements. Ambow disclaims any obligation to update information contained in forward-looking statements, whether as a result of new information, future events or otherwise.
"Ambow-Microsoft" Campus Star Contest Launched
Press Release Source: Ambow Education Holding Ltd. On Wednesday July 20, 2011, 5:00 am EDT
BEIJING, 20 July, 2011 /PRNewswire-Asia/ -- Ambow Education Holding Ltd (NYSE:AMBO - News) and Microsoft (China) jointly announced the launch of "Ambow-Microsoft Campus Star Contest" at the 5th International IT Talent Education Summit.
The theme of the contest is in two key areas including .NET framework and Systems and Network Management. As of today, over 10,000 IT students from more than 80 colleges and universities among 20 provinces have taken the comprehensive ability and technical skills test in their respective institutions. The participants will go through several rounds of screening in their respective city, region and ultimately enter into the national finals.
"Ambow-Microsoft Campus Star Contest aims to build a mutual communication platform between corporates and students where the students are able to demonstrate themselves and gain opportunities, while the contest will showcase high quality IT students to reputable IT employers at the same time," said Ms. Yisi Gu, Senior Vice President and CTO of Ambow Education Holding Ltd, at the opening ceremony.
"Hosted and sponsored by Microsoft (China), this annual competition has been supported by many colleges and universities in China. Participants' skills in communication, innovation, teamwork and other professional attributes are important parts of the assessment. Those who enter the national finals will have internship opportunities in Microsoft and Microsoft's strategic alliances," added Mr. Yi Tang, General Manager of Microsoft (China) Education and Certification Division.
This annual contest reaffirms Ambow and Microsoft's strategic partnership in building talents in China. Ambow has already been working with Microsoft as exclusive partner in the Microsoft Academy Service Partner program as well as setting up Microsoft Computing Service Centers in different education institutions.
About Ambow Education Holding Ltd.
Ambow Education Holding Ltd. (NYSE:AMBO - News) is a leading national provider of educational and career enhancement services in China, offering high-quality, individualized services and products. Ambow has two business divisions: "Better Schools," which includes tutoring centers and K-12 schools; and "Better Jobs," which includes career enhancement centers and colleges.
With its extensive network of regional service hubs complemented by a dynamic proprietary learning platform and distributors, Ambow provides its services and products to students in 30 out of the 31 provinces and autonomous regions within China.
Forward Looking Statements
Some of the statements in this press release are forward-looking statements within the meaning of the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. Investors are cautioned that actual events and results could differ materially from these statements as a result of a variety of factors, including any changes in government policies, laws and regulations, competition and economic conditions. Investors also should consider the information contained in Ambow's filings with the U.S. Securities and Exchange Commission from time to time. Other unknown or unpredictable factors also could cause actual events and results to differ materially. In light of these risks, uncertainties and factors, you are cautioned not to place undue reliance on forward-looking statements. Ambow disclaims any obligation to update information contained in forward-looking statements, whether as a result of new information, future events or otherwise.
Anyone listen to the CCCL presentation? Any comments/notes?
Jim Rogers: Commodities Like Oil Win in Every Scenario
http://seekingalpha.com/article/278915-jim-rogers-commodities-like-oil-win-in-every-scenario?source=yahoo
Rogers: "If the world economy gets better I’m going to make a lot of money in commodities because of the shortages, and if the world economy doesn’t get any better I’m going to make a lot of money in commodities because governments are going to print more money."
7 Reasons to Concentrate on Unconventional Oil Producers
http://seekingalpha.com/article/275108-7-reasons-to-concentrate-on-unconventional-oil-producers?source=yahoo
"Undeveloped acreage tends to be undervalued by the stock market – Despite the positive things I have said already about these unconventional resource players, I would not be interested in them unless I thought they were undervalued by the stock market. What I am finding in many cases is that the stock market values these companies based on existing production and is slow to acknowledge cases where a company holds huge parcels of undeveloped land within established boundaries of a particular resource play. Every week I see transactions involving undeveloped land that proves it has considerable value, but until the stock market sees production coming out of the ground little value is often assigned. This means there is great opportunity to find a company that has a relatively small amount of current production but a long runway or production growth through a large undeveloped land base within an unconventional play."
Jim Rogers vs Jim Chanos on China
http://www.cnbc.com/id/43629269
AMBO - odd PR:
Ambow States That Its Policy is Not to Comment on Unusual Market Activity or Rumors
BEIJING, June 30, 2011 /PRNewswire-Asia/ -- In view of the unusual market activity in the stock of Ambow Education Holding Ltd (“Ambow” or the “Company”) (NYSE:AMBO - News), the NYSE has contacted the Company in accordance with its usual practice and requested that the Company issues a press release. The company stated that its policy is not to comment on unusual market activity or rumors. The company is not aware of any non-public information that would account for the unusual trading activity.
About Ambow Education Holding Ltd.
Ambow Education Holding Ltd. (NYSE:AMBO - News) is a leading national provider of educational and career enhancement services in China, offering high-quality, individualized services and products. Ambow has two business divisions: "Better Schools," which includes K-12 schools and tutoring centers; and "Better Jobs," which includes colleges and career enhancement centers.
With its extensive network of regional service hubs complemented by a dynamic proprietary learning platform and distributors, Ambow provides its services and products to students in 30 out of the 31 provinces and autonomous regions within China.
Ambow Reiterates Second Quarter Guidance
Press Release Source: Ambow Education Holding Ltd. On Thursday June 30, 2011, 6:00 pm EDT
BEIJING, June 30, 2011 /PRNewswire-Asia/ -- Ambow Education Holding Ltd. ("Ambow" or the "Company") (NYSE:AMBO - News), a leading national provider of educational and career enhancement services in China, announces that it remains firmly confident in its long-term business outlook, and is comfortable with the revenue guidance previously provided.
The revenue guidance for the second quarter of 2011 is to be in the range of $74.8 million (RMB 490 million) to $76.4 million (RMB 500 million), as provided in the last earnings call on May 18, 2011. This is the Company's current view and is subject to market changes and other future events that may occur.
About Ambow Education Holding Ltd.
Ambow Education Holding Ltd. (NYSE:AMBO - News) is a leading national provider of educational and career enhancement services in China, offering high-quality, individualized services and products. Ambow has two business divisions: "Better Schools," which includes K-12 schools and tutoring centers; and "Better Jobs," which includes colleges and career enhancement centers.
With its extensive network of regional service hubs complemented by a dynamic proprietary learning platform and distributors, Ambow provides its services and products to students in 30 out of the 31 provinces and autonomous regions within China.
Thanks. So, is there any particular advantage to buying the stock on the Brazilian exchange vs. the ADR? Or no difference at all? Does the ADR (OGXPY.PK) actually "track" the price of the foreign stock perfectly? I am curious how this works.
"An American Depositary Receipt (abbreviated ADR) represents ownership in the shares of a non-U.S. company that trades in U.S. financial markets. The stock of many non-US companies trade on US stock exchanges through the use of ADRs. ADRs enable U.S. investors to buy shares in foreign companies without the hazards or inconveniences of cross-border & cross-currency transactions. ADRs carry prices in US dollars, pay dividends in US dollars, and can be traded like the shares of US-based companies.
Each ADR is issued by a U.S. depository bank and can represent a fraction of a share, a single share, or multiple shares of the foreign stock. An owner of an ADR has the right to obtain the foreign stock it represents, but US investors usually find it more convenient simply to own the ADR. The price of an ADR often tracks the price of the foreign stock in its home market, adjusted for the ratio of ADRs to foreign company shares."
Can someone please explain why OGX trades on the pink sheets?
CNTF - Agreed. I find it hilariously sad (or sadly hilarious?) that many people (including myself) would be more comfortable buying CNTF right now if the recent numbers had not been as good.
How many billions of dollars will fraudulent Chinese companies steal from American investors before we qualify this as "stock market terrorism"?
High Exposure to China Could Be Trouble for These Companies
http://seekingalpha.com/article/275396-high-exposure-to-china-could-be-trouble-for-these-companies
"From the table above, China is consuming an alarming portion of major construction and energy-related materials (cement, iron ore, coal, steel, lead, copper). If China experiences a slowdown or a hard landing, there will be ripple effects to many sectors of the global (commodity-producing countries like Canada, Australia, Brazil) as well as the U.S. economy. We remain cautious on many commodity producers and many companies that have benefited from the global demand for construction, infrastructure and commodities."
CNTF -
1. CNTF has not done excessive/unnecessary stock offerings
2. CNTF has reported losses in previous years
If CNTF is a fraud, it is a pretty ineffective fraud. Maybe they should hire Zheng Cheng to teach 'em how it's done properly.
Also, margins appear to be reasonably in line with competition.
Scud PR missle -
Come on Cheng, it would make us happy as happy beans!!
http://www.ccme.tv/eng/video/ex-comedy.php
"I wish you a happy life!" - Switow's "about us" page via google translator
LOL... This type of thing makes me want to stab Zheng Cheng in the eyeball.
http://www.switow.com/helpcenter/manager.do?method=getArticle2&helpinfoid=005001
Analysis: Investors drop China broadly; shun big names, IPOs
http://www.reuters.com/article/2011/06/10/us-markets-stocks-adrs-idUSTRE75969320110610?feedType=RSS&feedName=PersonalFinance&rpc=43
(Reuters) - For U.S. investors wanting direct exposure to Chinese stocks, there appear to be fewer and fewer safe places to enter.
Huge numbers of Chinese shares traded in the United States have sold off recently following a rash of accounting scandals. The scandals have prompted attention from regulators and brokers, and has some of the auditors involved facing legal action.
With even some investor favorites pressured, some are turning to U.S. companies with deep exposure to China to play its growth story, or waiting for a bottom in Chinese names seen as more stable.
The selloff continued on Friday, with shares dropping broadly. Industry bellwethers haven't escaped the recent flight from China even though the criticism has been on stocks traded on U.S. exchanges through reverse mergers.
Beijing-based Internet giant Baidu Inc has slumped 18 percent since the start of May while New Oriental Education & Technology Group is down almost 19 percent.
Baidu shed 1.2 percent on Friday to $121.69. New Oriental fell 3.4 percent to $101.20 and PetroChina, one of the biggest Chinese companies by market cap, lost 2.7 percent to $137.41.
Even IPOs, often seen as a measure of investor risk appetite and which debut with a higher level of scrutiny than reverse mergers, have come under the spotlight, adding to the flight away from Chinese stocks.
"People hear that there isn't the greatest transparency in China, and (the recent scandals) validate those existing fears," said Alec Young, equity strategist at S&P Equity Research in New York, adding that the controversy was hitting names unconnected to the concerns.
"If you drive through a bad neighborhood, you're going to lock your doors to be safe, but if you see something outside the windows you're going to be even more freaked out," he said.
U.S. listings of China-based IPO companies had attracted buyers with their above-average returns. But after the recent sell-off, their shine has faded.
In the first quarter of 2011, U.S.-listed Chinese IPO companies posted an average 30-day profit of 15.1 percent compared with an average 30-day profit of 10.4 percent for all U.S. IPOs.
In the second quarter, however, huge losses have plagued newly listed Chinese ADRs. Data through the close of U.S. markets on Wednesday show an average drop of 24.7 percent in the first 30 days of trading. All U.S. IPOs are up an average of just under 7 percent on the same basis.
"Investors are scared of having another Longtop Financial or another Duoyuan Global Water," said Josef Schuster, founder of Chicago-based IPO investment firm IPOX Schuster LLC., referring to two shares that have drawn intense criticism from analysts. Both have fallen sharply and haven't traded for weeks.
The heightened attention came after short seller Muddy Waters accused Sino-Forest of fraud on June 3. Analysts joined the timber company in defending the stock, which slumped more than 70 percent since the allegations.
Sino-Forest is only the latest named in a series of accusations this past year, with some charges proving accurate, leading to delistings and massive stock drops.
"It's possible that (accusations of fraud) could get broad-based, and that will scare people regardless of how strong the economy is," said Yu-Dee Chang, chief trader of ACE Investments in McLean, Virginia. "That's why you're seeing all these better-known and better-quality stocks like Baidu getting hit along with the others."
Chang forecast further downside in the near-term but is starting to look for places to add positions in beaten-down shares. "Internal demand is still pretty strong," he said.
The Chinese economy's growth rate has slowed lately, contributing to the broader weakness. Recent data showed factory growth in the country expanding at its lowest pace in at least nine months, while trade data on Friday also showed weakness.
With China still considered one of the world's growth engines, there is still investor interest in getting exposure to the expansion. But the scandals and Chinese government's policy of tightening to curb inflation are pushing investors to seek alternatives.
"There's no doubt that Asia is going to be a great investment, despite some bumps, but we're not going directly into China," said Matt McCormick, a money manager at Cincinnati-based Bahl & Gaynor Inc. "We like names like Procter & Gamble and McDonald's, which have revenue exposure to China and will benefit from the growth there but aren't directly exposed."
The scandals, along with bearish macroeconomic trends, "have all added up," he said.
CNTF - short interest more than doubled to 301k from 5/13 to 5/31... although this may not be surprising as the price had spiked during that time period.
Also notable: CCCL short interest nearly quadrupled to 135k
Meanwhile, YONG short interest dropped considerably to 4.9M
Interpret this data as you will.
http://www.nasdaq.com/aspxcontent/shortinterests.aspx?symbol=AAPL&symbol=GOOG&symbol=XOM&symbol=NEP&symbol=SCEI&symbol=CHBT&symbol=PPG&symbol=YOKU&symbol=YONG&symbol=XIN&symbol=LIWA&symbol=AMBO&symbol=CNTF&symbol=CCCL&symbol=BIDU&symbol=LLEN&symbol=UTA&symbol=CCME&selected=YONG
CCCL - the funny thing is that if CCCL has slightly low gross margins vs. its industry peers, that could be viewed as positive in this space.
As Carson Block himself stated on CNBC, a stock being "too good to be true" is a key warning sign. CCCL appears safe in that aspect.
Now, if only CCCL would issue a buyback of some kind... I mean, the stock has a P/E of 1.8! How can any legitimate company NOT be buying back its own stock at that price?
"The Intelligent Investing Interview: Matthews Asia CIO, Robert Horrocks"
http://www.forbes.com/2011/06/03/robert-horrocks-matthews-asia-china-bubble-inflation-intelligent-investing-video.html
http://blogs.forbes.com/investor/2011/06/06/robert-horrocks-transcript/?partner=yahootix
Misperception Of Asia
Matthew Schifrin: Welcome, Robert. Thanks for joining us.
Robert Horrocks: Thanks for having me.
Schifrin: Your fund invests in Asian dividend stocks. And so most investors in America, they think of China, they think of growth. They think of growth, they think of high PEs. Is there a misperception about, you know, what’s available to investors in China and Asia?
Horrocks: There’s definite misperception, sure. And I think it comes from a variety of reasons. I’ve been trying to communicate with people that the way I think about dividend-paying companies in Asia is somewhat akin to the pit stop in a Formula One Grand Prix or a race. And that yes, this is a fast-growing region, just as Formula One Grand Prix cars are fast cars. But the key things to winning the race and making sure that the wheels are on and that there’s gas in the tank, that you do a proper pit stop.
And actually, dividends play a very similar role in investing. Yes, these are fast-growing companies, fast-growing economies, and so really, the growth takes care of itself. What you’ve got to focus on is corporate governance issues. Is there cash in the business? Are the minority shareholders being looked after? Are the earnings real? And how do you measure that growth over time?
Yields In Asia
Schifrin: So what kind of like yields can investors expect in a place like China or in Asian stocks? Is it commensurate with what goes on here at American companies?
Horrocks: The yields in Asia are not commensurate with the U.S. They’re actually a little bit higher. And this is what surprises some people. But if you look at the general liquid universe as represented by some of the benchmarks, the U.S. is currently around about 2%. And Asia is in excess of 2.5%.
So here’s the big conundrum. You’re getting higher yields and those dividends, of course, as well, are going faster over time. And so there’s obviously some kind of inefficiency happening here. And my view of what is happening is that when people look at Asia, they tend to think of Asia as, “This is a place I’ll invest for six months, maybe 12 months. I’ll make my money by timing the market, by being more savvy about the global economic cycle.” And so they really don’t care whether a company is paying a dividend, because they’re thinking about making their 20% or their 30% or whatever they had in mind over a short period of time.
But these dividends add up. Or more accurately, they compound over time. In fact over the last 20 years, about 60% of your total return in the Asia Pacific region has come from dividends reinvested. So it’s one of those areas where there is an inefficiency in the market because of the way people behave and their time horizons. And it’s certainly one of the things that we try to take advantage of.
Not Just Multinationals
Schifrin: So China as a place for safety in income. Because most advisors will tell their clients, “If you want to invest in Asia, one of the best ways is to buy a multinational U.S. company, because it’s safer.” But you’re saying that that’s not necessarily the case.
Horrocks: It’s not necessarily the case. So I disagree with the idea, although I heartily embrace the sentiment behind it. What people are really saying is that when you invest, it doesn’t really matter what the economy is doing or what the region is doing in terms of growth, because you’re going to ultimately be investing in a business.
And so you have to make sure that the business is a good franchise. It’s professionally managed and they care about minority shareholders. I just think that when people say, “Therefore, use multinational companies,” what they’re really saying is, “That’s what we know and that’s what we’re comfortable with.”
But there are plenty of well-managed, professionally managed businesses in Asia who, again, do pay out dividends, do care about minority shareholders and will grow those dividends over time. And a lot of the time when people are investing in places like China, they’re actually doing it through Hong Kong or Singapore – these places which have very modern market institutions, coupled with a very well in-built corporate governance culture.
Emerging Is A Misnomer
Schifrin: So it’s not as emerging as the label would imply.
Horrocks: That’s a great, great question, because no, it’s not as emerging. In fact, we tend to shy away from this whole emerging label as a whole. Corporate governance is one of these things that isn’t about a relative, gradual scale. You’ve either got it or you don’t have it. And if people are going to say that corporate governance, on average, is not as well advanced in Asia versus the rest of the world, it’s sort of the wrong way of looking at it. Is corporate governance advanced to a stage where it’s good enough to protect your interests?
Schifrin: But the valuations have tended to be fairly high on many Chinese and Asian companies. Do investors need to kind of accept higher valuations? High P/Es, things like that?
Horrocks: Well, they don’t have to, no. You can put together a good strategy in Asia, focusing on the right kinds of business – domestic demand businesses, consumer retail, these sorts of attractive areas – without actually having a very high valuation. Obviously, if you take a dividend yield-based valuation, the valuation’s actually cheaper in Asia. If you look at P/E ratios, they’re roughly equivalent to what you’d get in the U.S. So there’s actually no premium to be paid in that sense.
Now, in some sectors, yes. Health care is one example, which is less developed in Asia and there’s less to choose from. And so a lot of the best companies have had their companies bid up. In the Internet sector we’re seeing that.
But I would also caution people not to use P/Es too strictly, because P/Es are a shot in the time of the valuation of a company compared to where its earnings are now. What they abstract away from is the future growth in the business. So what we like to try and do is say, “If I was to buy this business today outright, how much would I pay for it? And does that seem reasonable in the context of how much I think the whole business might be worth, ten years down the line?” And when you take that view, some on the face of it, high P/E businesses, actually appear much more reasonable.
Response To China Bears
Schifrin: Now there have been some really focus naysayers about China, in particular Jim Chanos. I saw him on TV the other day – he’s very bearish on Chinese, worried about the real estate bubble there. And then there’s talk of these reverse mergers and how they’re kind of infecting the market. You’re very close to China, and you’ve lived there for some time. How do you respond to that kind of negativity and bearishness?
Horrocks: Well, the first thing I do is say – closeness is not always the best thing. We’re actually in San Francisco and we think being 8000 miles away is actually a positive benefit, because we try to take a more dispassionate view of things. I think Jim Chanos has some good arguments and some less-good arguments. Let’s start with the good arguments first.
There has definitely been, over the last two years, an increase in the credit injected into the Chinese economy. That, in itself, wouldn’t be a worry if it had been injected in a way that was efficient or based on market principles. But it wasn’t. What we had in 2008 was a global meltdown. The Chinese were just as fearful and as panicked as other policy-makers. And so they turned around to their banking system and they said, “Anything, any projects out there, anything that the local government wants to invest in, an industrial park here, a hotel there – give them the money. We need to stimulate the economy.”
And some of the banks did. And credit growth, which had been growing at 15%, 18%, shot up to 35% year on year and stayed there for the most part of the year and then has come back down again. It’s inconceivable to me that, given the type of landing and the pace at which the landing was made, there aren’t bad loans building up in the Chinese banking system. I just think it’s two years worth, for the most part. And therefore, I don’t think it’s a huge, systemic problem.
Now I would agree that the banks don’t look like a great investment right now. They’re not particularly commercially driven. There will be concerns about asset quality. I agree that a lot of the property development companies are poorly financed, very leveraged. But I don’t necessarily think that translates into an argument that the property sector itself in China is a huge problem.
And I’ll give you some examples of that and also some context for that. In China there’s been a lot of talk about property development, but actually a lot of his has been redevelopment. And by some counts 70% or 80% of the new property built is actually urban redevelopment, where houses have been mown down in the center of the city and then rebuilt outside the city. And in their place, office space has been put up.
Also the typical purchaser of property in China, individuals will put down 50%. Mortgages themselves are probably only about 15% of bank assets. Added to that, when you look at it from the Chinese investors’ point of view, property is a really attractive long-term asset, because what have you got to invest in? Deposits, which give you a negative yield? The stock market and the domestic market has been highly volatile, and people still don’t trust it. So property is one of the few assets that you could think of as holding for the long-term and bequeathing to your children.
Schifrin: So not nearly as bubbly as, say, the U.S., in terms of leverage and how our real-estate market has gotten.
Horrocks: I don’t think it’s nearly as bubbly as that. And also, as soon as prices start coming down, there’s a lot of pent-up demand in China. Well, that’s not necessarily the case in the U.S.
I also think the other part of Jim Chanos’s argument, which I think is less strong, is the idea that there’s been over-investment in China for a prolonged period of time, leading up to 2008. This doesn’t seem to be the case if you look at actual capital things – buildings, equipment – that the Chinese have per head of population. It doesn’t appear to be the case if you look at their capital stock per unit of GDP, which looks reasonable. Whereas on absolute terms, it’s still, of course, a poorer country. It’s excessively low.
Nor does it seem to be the case, if you look at the underlying returns on capital in Chinese businesses. And it doesn’t matter if you take a bottom up view or a top-down view. In general, returns on capital in the Chinese economy have been stable, if not rising. And if there had been widespread over-investment for a prolonged period of time, you would expect to see the exact opposite.
So what’s actually been happening in China is that it’s becoming a more efficient economy. What used to be socialist, centrally planned, state-run – it’s becoming progressively more private. Entrepreneurs have a bigger role to play.
What used to be 70% state-owned as an economy is now 30% state-owned. And as a consequence, businesses are getting more efficient, more profitable. Productivity in China has been growing at rates of 8%, year on year.
Inflation Concerns?
Schifrin: Are you worried about inflation at all?
Horrocks: Not really. I mean, inflation is often treated as a single phenomenon. But it’s actually different phenomena in different parts of Asia. So let me go from the bad to the good. India’s certainly got problems with inflation. High single digits, low double digits inflation. They have external deficits, government deficits. It’s very difficult for them to control inflation by raising interest rates, because that would just worsen their deficit problems. So they should be squeezing fiscal policy right now.
However, another side of their inflation problem is the lack of supply. They don’t have the logistics, the warehousing, the infrastructure to have a properly efficient economy. And so they waste enough food in a year to feed half of America, or the whole of Brazil. What they need to do is invest now in the short-term to increase efficiencies in the long-term. But of course, they can’t do that without pushing up short-term inflation.
So I think India is one country where to get a hold on inflation in the short-term, they’re going to have to slow things down in the economy. In China, inflation was really a reflection of the exchange rate. The U.S. has been asking China to appreciate its exchange rate, to raise the price of labor and goods to make U.S. goods more attractive, to raise consumption power in China just as it’s flagging in the U.S. – a kind of win-win situation.
Well, you can do that either by raising the exchange rate or by holding the exchange rate fixed and raising wages. And essentially, that’s what China has done. So headline inflation may be at 6%, but minimum wage has grown by about 23% in the last year.
So consumption power is actually going up in China as a consequence. Now there are policy difficulties in trying to manage high wage growth and keep a cap on property prices. But I’m less concerned about China than I am about India. And the one country in Asia where I think inflation would be a positive benefit would be Japan. So inflation has different impacts and different connotations, depending on where you’re looking.
Japan’s Rebound
Schifrin: Do you have a prognosis for Japan, since you brought it up, in terms of the rebound and how long that’ll take?
Horrocks: It’s difficult to know what the effects of the earthquake and the tsunami will be. The first general comment I would make is these big, horrific events, whilst they sort of burn themselves on our consciousness, tend to be less significant in terms of impact on GDP. So if you try and quantify the effect on GDP, it’s going to be fractions of a percentage point, I suspect.
Now there are short to medium-term implications on supply chains in the auto industry, in the tech industry and other manufacturing industries. And the market is currently reflecting that in and maybe overdoing it in certain cases. If it acts as a stimulus to the government to take a more aggressive approach – particularly on the monetary side, to try and give a cushion and for the country as it tries to sort of re-grow through this – it could actually be very positive. Because if you get a positive rate of inflation in Japan, that means real interest rates are going to come down. That should spur both consumption and investment, and generally could be quite positive. You’re talking about a country and a stock market where the valuations are generally low. The balance sheets can be extremely conservative.
China Hoarding Gold
Schifrin: Switching back to China for a second, one of our contributors wrote an article recently about his theory about China potentially hoarding gold, accumulating gold as almost kind of a central government policy. Do you have any views on that and in other words, that we’re printing dollars and it’s kind of almost a defensive measure? What’s your view on this potential phenomenon? And certainly gold – do you have a view on gold?
Horrocks: I do have a view on gold. I do have a view on this phenomenon. You’ve actually seen more of the central banks, I think recently, buying into gold. For the Chinese, they’re kind of stuck. As long as they want to maintain a fixed exchange rate, they’ve got to buy U.S. paper. It’s not that they particularly want to buy it, I don’t think. I’ve had people I know in Singapore actually describe U.S. paper as return-free risk.
So they’re kind of stuck into that whole sort of mechanism. And therefore, I think diversifying into gold, just in case there is a big devaluation of the dollar or inflation in the U.S. to try and bring the debt burden down, on margin seems a sensible precaution to take. I personally don’t think the debt problems in the U.S. are that severe at the moment. So I don’t necessarily prescribe to this as a big near-term risk.
My view on gold is, well, you have to know me. I’m generally quite a mean, stingy individual. I don’t buy my wife enough jewelry. Therefore, I’ve never really seen the value of gold, because it’s more about something that you buy because you think you can sell it onto somebody else at a higher price. You don’t really derive any income from it.
I think I read somewhere that you could fit all of the gold that exists in the world into a 20 meter cube. And it would be roughly equivalent in value to 15% of U.S. household wealth. Not income, but wealth. And if I had a 20 meter cube of gold or 15% of the U.S. household wealth, I’d know which one I would rather own.
Regions To Watch
Schifrin: So as a last question, I’d like to ask you – is there a less widely followed Asian nation or region that you are most excited about, where you would be deploying new capital?
Horrocks: Well, we look at everything from Pakistan to Japan and from Mongolia to Australia. I think there’s a lot of attention that’s been focused on some of the more frontier markets, places like Vietnam and even taking into account places like Laos. Cambodia is even opening up. Sri Lanka is obviously a more established market.
So we’ve been watching those carefully. I still think they’re not a big part of what we do. And the reason is this – that there is obviously inefficiencies in frontier markets. And people talk about inefficiencies in Asian markets. And they always seem to talk about it in terms of informational inefficiencies, going to those hard-to-find places, on discovering little gems that nobody’s ever come across before. I don’t know if they have views of the Matthews Asia research analysts hacking their way through a jungle with a machete to try and get to these businesses in the middle of nowhere.
It’s really not where the inefficiencies lie. We go out to the region. We research. We get the information. We come back to San Francisco and we discuss it there in an atmosphere where we’re not caught up.
Schifrin: The excitement of it?
Horrocks: The excitement and the noise of what’s happening in the market. And we try and take a longer-term view. And that’s the secret. It’s the environment within which you frame your decisions and how you come to manipulate that information that is freely available to anybody. Information seeps into every corner of our lives these days. But too few people think about how to put it together in a way that makes most sense. So these markets, they are of interest to us. But it’s of far more interest to us to find the right businesses, wherever they may be.
Schifrin: So bottom-up?
Horrocks: Yes. To prosper over the next decade.
Schifrin: Okay. Thanks very much.
Horrocks: My pleasure, thank you.
Thanks for posting this... Such a brutally honest reminder of China's reality.
Get Ready: Here Comes the Yuan
http://online.wsj.com/article/SB10001424052702304066504576340753526394100.html
Fairly interesting discussion with Robert Horrocks of Matthews Asia Funds:
http://blogs.forbes.com/chrisbarth/2011/06/03/dont-worry-about-a-hard-landing-in-china-heres-whats-next-for-asian-markets/?partner=yahootix
"One final question which I think is one that a lot of U.S. investors raise. How can investors be sure of what they’re buying into in Asia? A lot of investors have doubts as to the financial reporting of Asian companies, looking at historical situations where they haven’t necessarily been getting the full story. How do you address that?
I think there’s two ways I would address this. The first thing I would say is that Europe and the U.S. are not without their scandals too. And corporate governance is an issue anywhere.
The second thing I would say is that people throw out the term “emerging markets” a lot. It’s a very widely used term. And I think it was perhaps a more appropriate word twenty years ago when it was coined than it is now. I might accept that a lot of Asian economies are not as developed in their market institutions and in their legal infrastructure surrounding those investments as maybe Europe or the U.S. are, but the gap has certainly decreased tremendously over the last year. And even then, if you look at places like Hong Kong and Singapore, that have these deeply entrenched corporate governance culture, market institutions, very strong legal and accounting systems to back it up – they to me are very developed markets. A lot of what one does when one invests in China is one is actually investing in Hong Kong entities or Hong Kong listed entities or Hong Kong businesses or Singaporean businesses. And so therefore the data issues are less severe than a lot of people would paint them to be.
India’s had a stock market since – I forget exactly when it opened up – something like 1865. So there’s years of building of a corporate governance culture. In China, much less so. The market, after having been closed during the communist years, opened up in the early nineties, so there’s been less time to build up that infrastructure, that corporate governance culture around them. But nevertheless, you’re investing through Hong Kong a lot of the time, so you have the protection of their system. They’re also ways, as well, that you try to assess good management, responsible management. We do this through looking at dividend policies – are they paying out a dividend? Do they have a commitment to the minority shareholders?
So we do focus on it a lot. And I would say that a lot of time people’s fears are exaggerated because they are foreign markets. And because they’re attached to this emerging market label that is probably past its sell-by date."
Ambow Education Announces Strong First Quarter 2011 Unaudited Financial Results
Net Revenues Increased 29.6% Year-Over-Year
Net Income Attributable to Ambow Increased 151.6% Year-Over-Year
BEIJING, May 18, 2011 /PRNewswire-Asia/ -- Ambow Education Holding Ltd. ("Ambow" or the "Company") (NYSE:AMBO - News), a leading national provider of educational and career enhancement services in China, today reported its unaudited financial results for the first quarter of 2011.
Financial Highlights for the Quarter Ended March 31, 2011:
Total net revenues increased 29.6% to $51.5 million(1) from $39.7 million for the same period in 2010. Existing business contributed 24.2% growth, while 5.4% came from acquisitions.
Tutoring revenues increased 24.6% to $25.3 million from $20.3 million for the same period in 2010.
Career Enhancement revenues increased 116.2% to $11.8 million from $5.5 million for the same period in 2010.
Net income(2) increased 151.6% to $1.5 million from $0.6 million for the same period in 2010.
Operating income increased 86.5% to $2.8 million from $1.5 million for the same period in 2010.
Adjusted EBITDA(3) increased 28.9% to $8.6 million from $6.7 million for the same period in 2010.
Total student enrollments increased 16% year-over-year to 234,000.
Commenting on the first quarter results, Ambow's President and Chief Executive Officer Dr. Jin Huang said, "We are pleased to report that Ambow started the year with a strong quarter, highlighted by impressive revenue and net income growth. Ambow is the only listed company in the education sector that is able to address two fundamental market demands in China - the desire to get into a better school and the desire to get a better job. Our business objective is to acquire more and more students and retain them through Ambow's education services platform."
Dr. Huang continued, "We continue to execute our strategy to maintain sustained growth in order to provide quality services to more students. A highlight of our first quarter was the robust growth in our Career Enhancement segment, where we experienced a 116.2% increase in revenues and a 110.2% increase in enrollment year-over-year. We have seen great demand in our Career Enhancement segment, where Ambow is a clear market leader. Our strategy is to continue to increase market penetration with a broad range of products and services tailored to meet the demands of people pursuing career development."
"Turning to acquisitions, we closed five acquisitions during the quarter, which is in line with our strategy to expand Ambow's footprint and offerings throughout China. Given the nature of China's highly fragmented education market and our proven ability to successfully identify and integrate acquisition targets, we believe we are well positioned to consolidate this market," said Dr. Huang.
Ambow's Chief Financial Officer Paul Chow added, "I'm pleased to report that our net revenues increased 29.6% year-over-year, with 24.2% of revenues growth attributable to existing business and 5.4% attributable to acquisitions. Our net income attributable to the Company increased by 151.6% year-over-year, despite the seasonal effect of school and public holidays, which always makes the first quarter challenging. In addition, our operating margin improved 1.7% to 5.4% in the first quarter of 2011."
Mr. Chow continued, "Turning to margins, net income margin(4) improved 1.4% to 2.9% in the first quarter of 2011. The Company's net margin is traditionally lowest in the first quarter as it is subject to seasonality. Adjusted EBITDA margin was 16.7% in the first quarter of 2011. Ambow's depreciation and amortization constitute a relatively high percentage of revenue, so adjusted EBITDA is a particularly useful metric for understanding Ambow's profitability."
Financial Results for the First Quarter of 2011
Net Revenues
Total net revenues for the first quarter of 2011 increased 29.6% to $51.5 million from $39.7 million for the same period in 2010. This improvement was primarily the result of strong revenues contribution from Career Enhancement and Tutoring.
Net Revenue Breakdown by Key Operating Segments:
Better Schools
Better Schools increased 19.7% to $33.5 million, with Tutoring and K-12 Schools accounting for $25.2 million and $8.3 million of total net revenues, respectively, for the first quarter of 2011.
The Company noted that Tutoring revenues grew 24.6% year-over-year, with a balanced 12.2% growth in enrollments and 11.1% growth in Average Selling Price ("ASP").
Total student enrollments in Better Schools during the first quarter of 2011 was approximately 204,000, with 181,000 in Tutoring and 23,000 in K-12 Schools. Compared with the same period in 2010, there was a 11.4% increase in total Better Schools enrollments, with an increase of 12.2% and an increase of 5.4% for Tutoring and K-12 Schools enrollments, respectively.
Better Jobs
Better Jobs increased 53.2% to $18.0 million, with Career Enhancement and Colleges accounting for $11.8 million and $6.2 million of total net revenues, respectively, for the first quarter of 2011.
The Company noted that Career Enhancement revenues grew a record 116.2% year-over-year, with an impressive 110.2% growth in enrollments to 18,000 and a 2.8% increase in ASP. This revenue increase was primarily driven by strong growth in existing business (83%) with the remaining growth attributable to acquisition activities.
Total student enrollments in Better Jobs during the first quarter of 2011 was approximately 30,000, with 18,000 in Career Enhancement and over 12,000 in Colleges. Compared with the same period in 2010, there was a 44.0% increase in total Better Jobs enrollments, with an increase of 110.2% in Career Enhancement enrollments, while enrollments in Colleges remained flat.
Gross Profit and Gross Margin
Gross profit was $26.4 million for the first quarter of 2011, increasing 29.8% year-over-year from $20.3 million for the same period in 2010. Gross margin was 51.2% for the first quarter of 2011, compared to 51.1% for the same period in 2010.
Operating Expenses
Operating expenses, which include selling and marketing, general and administrative and research and development expenses, were $23.6 million for the first quarter of 2011, increasing 25.3% year-over-year from $18.8 million for the same period in 2010. This increase is mainly attributable to the increased expense of being a public company, costs related to recent acquisitions and a higher number of centers as compared to the first quarter of 2010. The increased operating expenses are primarily due to the Company's continued investment in growth, which is necessary to support Ambow's continued business expansion.
Operating expenses, as a percentage of revenues, improved 1.6%, from 47.4% in the first quarter of 2010 to 45.8% in the same period in 2011. Selling and marketing expenses, as a percentage of revenues, decreased 2.2%, from 19.9% to 17.7%, as a result of operating efficiency contributing to revenues growth. General and administrative expenses, as a percentage of revenue, remained nearly flat at 25.8%, a slight increase compared to 25.5% for the same period in 2010. General and administrative expenses include increased expenses attributable to being a public company. Research and development expenses, as a percentage of revenues, were 2.3%, a slight increase compared to 2.0% for the same period in 2010. The research and development expenses are consistent with the Company's strategy to support future business growth. The Company believes that continued investments in growth, and the associated increases in operating expenses, will support its continued business expansion.
Income Tax Expenses
Our income tax expenses were $236,000 for the first quarter of 2011 compared to income tax expenses of $570,000 for the same period in 2010. The Group anticipates that in 2011 it will be able to utilise certain tax losses brought forward and take advantage of tax exemptions for a recently established entity, resulting in a full-year effective tax rate of 10% compared to 15% in 2010.
Net Income
Net income was $1.5 million for the first quarter of 2011, increasing 151.6% year-over-year from $0.6 million for the same period in 2010. Net income margin was 2.9%, improving 1.4%, compared to net income margin of 1.5% for the same period in 2010. Basic and diluted net income per adjusted ADS(5) attributable to Ambow was $0.02, compared to net income per adjusted ADS of $0.01 for the same period in 2010.
Non-GAAP net income(6) was $2.5 million for the first quarter of 2011, increasing 72.4% year-over-year, compared to $1.5 million for the same period in 2010. Non-GAAP net income margin(7) was 4.9% for the first quarter of 2011, compared to 3.7% for the same period in 2010. Basic and diluted non-GAAP net income per adjusted ADS attributable to Ambow(8) was $0.04 and $0.03, respectively, compared to $0.02 for the same period in 2010.
Adjusted EBITDA
Adjusted EBITDA was $8.6 million for the first quarter of 2011, increasing 28.9% year-over-year, compared to $6.7 million for the same period in 2010. Depreciation and amortization in the first quarter of 2011 was $5.0 million as compared to $4.2 million in the same period 2010.
Adjusted EBITDA margin(9) was 16.7%, compared to 16.8% for the same period in 2010. Depreciation and amortization as a percentage of revenue was 9.7%.
Balance Sheet and Cash Flow Information
Cash and cash equivalents, restricted cash and term deposits as of March 31, 2011 were $125.3 million, compared to $141.8 million as of December 31, 2010. The reduction in cash is mainly due to payments for acquisitions and deposits in connection with establishing the Company's Career Enhancement Center.
The Company's deferred revenue balance as of March 31, 2011 was $72.9 million compared to $68.1 million as of March 31, 2010, an increase of 7.1%. Deferred revenue includes tuition fees from enrolled students for courses not yet delivered as of the period ended March 31, 2011.
Financial Outlook for the Second Quarter of Full-Year 2011
Ambow expects total net revenues for the second quarter of 2011 to be in the range of $74.8 million (Rmb490 million) to $76.4 million (Rmb500 million).
I understand your point that short sellers often give auditors a "head start" with detecting china fraud.
My point is that I am more comfortable investing in a company that has low short interest to begin with.
That is all :)
So you are saying that CNTF would appear more legit if it had been under heavy attack by shorts prior to Deloitte's audit? That logic is backwards. The low short interest in CNTF is an indication of low fraud risk, IMO.
CNTF 5/13 short interest= 124k
LFT 5/13 short interest= 14.4M
Just curious - what is your preferred method for going long oil
China Says Tax Fraud No Longer Punishable by Death
http://www.minyanville.com/dailyfeed/2011/05/26/china-says-tax-fraud-no/