China Growth Stocks

[steeledge]

CIHD gets a writeup on seeking alpha:

http://us.rd.yahoo.com/finance/external/pssa/SIG=1342cr7d9/*http%3A//seekingalpha.com/article/184720-changda-can-help-investors-profit-from-the-chinese-winter?source=yahoo

Changda International (CIHD.OB) is a Weifang-based specialty chemicals producer. Apart from offering a wide array of organic and inorganic fertilizers, Changda is, according to the company, the largest producer of snow melting agent in China.

This is significant. This winter is especially snowy, especially in northeastern China, where Changda is based. Already, the company announced several weeks ago that "its orders for snow melt agent from the Chinese Government bodies for the year 2009 have already doubled as of December 2009, compared to the year 2008." The thing is, winter has only begun. This bodes well for the company.

That is not all. The company has developed a very interesting system of distributing its fertilizers through mail order by partnering with China Post. Again, this has resulted in a significant uptick in sales - 15% increase in demand, according to a December 2009 report. Through its collaboration with China Post, Changda is able to fully penetrate its core Shandong Province market via nearly 80,000 access points.

Valuation

Current Price: $2.85
52-Week Range: $2.25-$4.75
EPS: (2009) $0.27* (2010) $0.39*
P/E: (2009) 10.6x (2010) 7.3x
PEG: 0.24*

* Based on C.O.P. estimates. Does not take into account dilution from proposed offering.

Evaluation

The company currently has an S-1 filing outstanding, so it would be interesting to see what actually happens. The intent is to sell 10.35 million units, each comprised of a common share and a warrant, hopefully to raise $20 million. Even though this is priced at a significant discount to current market, it is not clear how much appetite there is for such an offering. We shall have to wait and see. Perhaps 4Q 2009 results (and more likely Q1 2010, given the winter period) will help the company sell its story.