CCGY earnings trend...
Just some color on 2q09 earnings at CCGY for those who may not know the in's and out's of an income statement. I'll start with the bottom line at the top: CCGY earned about +0.011 cents per fully diluted share in 2q09.
Now the detail from the income statment that some overlooked. Effective 01jan09 CCGY adopted EITF 07-5. This requires them to recognize changes in the fair value of outstanding warrants on their income statement. Well, guess what? The fair value of those warrants in 2q09 resulted in a big negative charge that has zero, zip, zilch, nada to do with the operating business of the company.
Look at the trend in Chinese GDP:
1q09: 6.1%
2q09: 7.9%
3q09: 8.5% to 9.5% (projected)
CCGY turned in positive earnings during 2q09, probably one of the three worst GDP quarters for China in recent history. Next quarter GDP is going to rebound in a big way. Meanwhile, car sales in China have gone bonkers, stoking aggregate demand for refined product.
Throw into this the fact that CCGY are about to finish construction on a plant that will increase capacity >5x. That construction is fully funded. Working capital to ramp the plant is fully funded. Demand is recovering in a big way. GDP is recovering in a big way.
And I hate to say it, but the same chintzy accounting mechanism that tanked 2q09 earnings is set to have a big POSITIVE impact on 3q09 earnings. Go figger.
AI
