LOW FLOAT CHINA IPO SUPERSTOCK EXPLODING
FFHL is a 4 MM float recent China IPO that doubled to $18 in a few weeks now $9.60 but headed back way higher.
FFHL will benefit from China LCD BOOM. LCD-TVs ENJOYED THE BIGGEST GROWTH IN THE CHINESE ELECTRONICS INDUSTRY IN 2006: 168%
In view of its explosive growth prospects, FFHL should trade at a MINIMUM 30% premium to PE for the packaging / film sector or around 25 PE. With IPO fund interest and sales growth augmenting earnings 2007 EPS should be in the $.80 - $1 range, SO FFHL SHOULD TRADE IN THE $20 - $25 RANGE IMO. CONSERVATIVELY.
DETAILED DD:
FFHL will be utilizing IPO monies to invest in new production lines capable of increasing the capacity of the production as well produce thicker films of 50 to 200 microns. FFHL expects to expand into the electrical and electronic film markets with these thicker films. Targeted will be thin film LCD screens. Currently much of the film used in LCD screens in China is imported. FFHL believes they can use their low cost production capabilities in China to manufacture and sell their new films cheaper then the imports.
TOP REASONS TO BUY FFHL:
1)Tiny 4 MM float.
2) Opening 3rd Line(23,000 capacity) of High-end Higher Margin Film in 2007 almost doubling current capacity.
3) FFHL continues to convert current Two Lines(29,000 capacity) of Production from Commodity to High-End Film increasing margins.
4) 3 Targeted acquisitions for 2007 bringing online another 25,000 capacity.
5) Sales/Marketing decrease in 2007 as a percentage of sales. Saw bump up in training/sales 2006 due to start of conversion.
6) Expected drop in Raw Materials-Resin prices in 2007 which weighed down on 2006 margins.
7) Push by China to implement anti-counterfeiting measures--Fuwei's higher margin holographic film will be in much demand.
8) Focus on higher margin Speciality Films used in LCDs, other electronic film.
9) Fuwei's ability to manufacture high-end BOPET film at 20% discount to foreign competitors.
10) Export opportunities.
AI
