GeoInvesting Special Situations

[ratobranco]

CCLTF - China Ceramics

I think it should be a geobargain, or at least a geospecial.

Here is the presentation that they gave at Rodman last night. I was originally tipped off to it last week by Fernando.

https://webspace.utexas.edu/bdp366/CCLTF_Corp_Presentation_Final.pdf

The company's name is Hengda Tile.

Here is the website:

http://www.hengdatile.com/

Currently the trailing P/E is about 2.9, with a 4 year CAGR of 25%.

They announced last week that they exceeded their previous 2009 revenue guidance 129M v. 126.6M.

http://finance.yahoo.com/news/China-Ceramics-Co-Ltd-prnews-1794471604.html?x=0&.v=62

They report earnings Mar 29.

There are 8.95M shares O/S, with 5.7M owned by insiders. There are 15.5M warrants, and another 8M or so in escrow that are reserved for the insiders if they meet various net income targets over the next few years.

The warrants strike at 7.5 and expire in 2 years. They are anti-dilutive at current prices. If the stock goes to 10.00, and you account for the warrants with the treasury stock method (warrantes get exercised, and the company buys back shares with the cash), the P/E will be roughly 5 (at 10.00).

The shares in escrow are set to be released per a formula that ensures around a 12-17% EPS growth rate given the added dilution.

Personally, I find the stock extremely compelling at these levels, and have been accumulating all that I can below 7.00.

Upside catalysts are:

1) Mar. 29 Earnings and Press Release (should be positive, and will further increase visibility)

2) Uplisting (which they are actively pursuing)

3) Massive room for P/E expansion. You could double the PPS right now and the stock would still be significantly cheaper than most china small caps on a trailing P/E basis.

Risks are:

1) Exposure to the chinese real estate construction market. Note that as tile producers, their revenues are more exposed to the low-priced end of the market, whereas the bubble is in the high-priced end. The low-priced end of the market is a good investment, as there are still hundreds of millions of agrarian peasants in China that will migrate to urban dwellings over the next 10 years.

2) Warrant overhang.

GLTA.