2morrow, thanks for posting that analyst report for HRBN. As you know, I'm pretty bullish on China in general, so I've kept close tabs here.
Here is a key paragraph:
Net Income and Earnings Per Share
In arriving at our projection on net income figures, we assume that proceeds from $50 million floating rate notes at the end of August 2006 will not be repaid before their maturity. This liquidity will earn interest at an average rate of approximately 3.6%, compared to 8.7%–10% interest charges based on today’s LIBOR. Net interest expenses are estimated at $0.8 million in FY2006, $3.1 million in FY2007 and $3.4 million in FY2008.
The Company’s net income is expected to grow 35.1% year-on-year to $13.5 million in FY2006 against $10.0 million in
FY2005. Diluted earnings per share are expected to rise 19.7% to $0.79 in FY2006 from $0.66 in FY2005. The lower
increase in diluted EPS relative to net income is due to the dilution impact of issuing some 2 million new shares during the year.
In FY2007, we expect the Company’s net income to increase 23.5% year-on-year to $16.7 million. Increase in diluted
earnings per share will be slightly lower at 3.8% to $0.82 from $0.79 in FY2006. Due to the issuing of new shares for the
acquisition of Harbin Taifu in the first quarter of 2007 and 2.1 million shares related to the warrants attached to the $50
million floating rate notes, the impact of dilution on EPS in FY2007 is visible.
In FY2008, we expect net income to increase 93.6% to $32.3 million, largely driven by the 74.6% increase in revenue.
Diluted earnings per share will rise 93.9% to $1.59 from $0.82 in FY2007.
---------------------
So, we have a mediocre year in FY07 for eps growth, followed by what could be really strong comp in FY08. With the stock currently trading at 9, HRBN trades at 11x FY07 estimates. Not bad, but given the tepid earnings growth projection for next year, you may get a chance to buy it cheaper, IMHO.
A few chinese stocks I follow are trading at 5-7x FY07 estimates, and I would put them a bit higher up on the buy list...for now.
Which ones?
CSSTF
BBC
TBYH
CAGC
CXTI
CPHI
CKGT
AI
