China Growth Stocks

[littlefish]

CHIO looks real speculative to me (losing tangible book value if you question the 'electronic products' they have on the books, almost out of cash, huge tax payable now paritally past due). What's the attraction?

On October 15, 2009, the Company amended an agreement for the purchase of electronic products for the promotion of the insurance agency business amounting to $16,818,767 (RMB115,000,000). For the period ended September 30, 2009, the Company made a 96% prepayment for the products of $16,072,891 (RMB109,900,000). The electronic products will be sold together with the Company’s insurance package and will be inventoried upon receipt and charged to cost of goods sold upon sale. Also see Note 10.


Notice how it says the 'electronic products' will be sold and inventoried upon receipt and charged to COGS upon sale. Yet it is listed as a huge asset for the company.
Is the COGS cost already priced into the asset listed on the balance sheet? Doesn't seem like it, so if it isn't IMO it would be a shrinking asset with time as it gets inventoried and COGS put against the sales. COGS is so extremely low vs revs so far (only 11% in last Q just reported) and has led to wild profitability although weak looking EPS IMO beyond the headline #.

Plus they have the huge tax payable...

So what am I missing? I haven't looked at this much but when saw the positive side put on VMC figured I should bring up some negative when I glanced at it. I could be missing a lot, I don't follow the company and am only going off a quick glance after reading you were buying in the $0.8s range.

You do great work, keep it up. Just tyring to clarify some possible risk here, I could be wrong.

Also, I'm biased.I think most China microcaps are poo. In general, they are about as bad as the proposed trader tax IMO and only spec money should be put into them.

Good luck.

PS- I did not look to see how they funded the purchase of the electronics and haven't looked beyond a glance here so excuse if I have missed many things.