Value Microcaps Pick Six Lotto 14

[abh3vt]

Reasons for PSL14 picks.

First, I'm expecting a bit of a pullback in some of the China stocks....so I've got a cash pick as part of my six. The other five:

1. CCME - I think everyone knows about this one already. Great balance sheet, cash flow from ops, low projected PE, dominant position in an attractive market. I'm expecting a very strong Q4, which should give some confidence in the huge make-good net income expected for 2010. If they come close, the fd eps could be around 2.00/share. Target: 20+

2. SOKF.ob Soko Fitness. This one (beauty spas and fitness centers in Northeast China) hit the radar screens with a very strong quarterly report released this week. Well managed company, with strong organic revenue growth, excellent margins, good balance sheet, very low forward PE. Tax rate is low, but sustainable because of a quirk in tax laws for this segment. I expected 0.70+ for FY10, and have a short term price outlook of 6-7/share.

3. EDS - "wild card" pick, but the financials only show the SPAC's results. The company merging in is Exceed, a Chinese sports clothing company. They appear to be guiding for fd eps of 1.40+ for FY09. Foreign filer, so we may not see the results for a little while. Needs to do a better job with transparency and using PR/IR to improve its exposure to the investment community. Target: 12.50+

4. CNYD - solid company with many different revenue streams. Owner of tourist attraction rights, a TV station, and a new exclusive right to show advertising on all high-speed trains in China. Excellent margins, strong sales growth and good cash flow generation. Will probably need to do a capital raise this year, so the safe play would be to wait until after its placed...but its a good lt hold.

5. TXIC - chassis/cab manufacturer in china. I think warrant overhang has been holding this one back; once that clears, the low forward PE of 6x should attract new investors. Cheap relative to other stocks in this segment: CAAS, WATG, SORL and others have PEs north of 15x. I'd be happy with 10-12x. Target: 14+