China Ceramics Co. Ltd. (CCLTF)

[redman_2014]

Projections for CCLWF warrants

Share price: $8.90
Warrant price: $1.60
Warrant strike price: $7.50

Here are some projections including the cash and using 25.7M o/s and using expected 2009 numbers:

2009E Net Income = $23.77($0.93 eps using 25.7M o/s)
$8.90(share price) - $4.57(cash) = $4.33 adjusted share price.
$4.33/$0.93(Expected 2009 eps using 25.7M o/s) = PE of 4.65

Projections(using 2009E eps):

PE of 5 = 9.22(intrinsic value of warrants = $1.72)
PE of 6 = 10.15(intrinsic value of warrants = $2.65)
PE of 7 = 11.08(intrinsic value of warrants = $3.58)
PE of 8 = 12.01(intrinsic value of warrants = $4.51)
PE of 10.41 = 14.25 conversion price (warrants = $6.75)

Warrant potential:

Share price of $10 = $2.50(56% upside)
Share price of $11 = $3.50(119% upside)
Share price of $12 = $4.50(181% upside)
Share price of $14.25 = $6.75(322% upside)


Downside risk:

Housing industry has disruptions. They are expecting 20-30% growth in 2010 so that provides a cushion if the bottom falls out of the industry(They already have orders for $33.5M for Q1 which is 30%+ higher than Q1 2009). Right now they are producing at 100%+ capacity and have to outsource to fill orders. They will be able to shift that overflow to the new factory.


Summary:

I don't consider the common real compelling at present levels, but the warrants I believe will eventually be worth north of $4.00 which allows for a 150%+ appreciation from today's price of $1.60. The 10-K should help CCLTF become a little less unknown. I don't think it's a far stretch to expect the common to trade in the $11-13 range within the next few months.

Note: I only used 2009 numbers. The story is much more compelling if you use 2010 numbers.


-Adam