2010 Projections for CCLWF warrants
I got bored so decided to do the 2010 projections aswell.
Share price: $8.90
Shares o/s: 10.16M
Warrant price: $1.60
Warrant strike price: $7.50
Warrants o/s: 15.55M(will raise $116.5M when converted)
The projections include the cash and use 25.7M o/s(includes the warrants) and are based on expected 2010 numbers:
2010E Net Income = $31.40M($1.22 eps using 25.7M o/s)
$8.90(share price) - $4.57(cash) = $4.33 adjusted share price.
$4.33/$1.22(Expected 2010 eps) = PE of 3.55
Projections(using 2010E eps of $1.22):
PE of 5 = $10.67(intrinsic value of warrants = $3.17)
PE of 6 = $11.89(intrinsic value of warrants = $4.39)
PE of 7 = $13.11(intrinsic value of warrants = $5.61)
PE of 8 = $14.33(intrinsic value of warrants = $6.83)
Warrant potential:
Share price of $11 = $3.50(119% upside)
Share price of $12 = $4.50(181% upside)
Share price of $13 = $5.50(244% upside)
Share price of $14.25 = $6.75(322% upside)
Notes:
In their investor presentation they mentioned that sales volume for Q4 2009 was +20.8% year over year from Q4 2008, and their preliminary results for Q1 2010 show a 36% increase compared to Q1 2009, so it looks as though they are accelerating growth going into 2010. Mr. Jia Dong Huang, Chairman of China Ceramics "Our outlook for 2010 remains positive and our backlog of orders for delivery in the first quarter stands at approximately $35.5 million, representing an underlying annual growth rate of 36% compared to the first quarter of last year."
Summary:
It only requires a forward PE of 8 to make it to the $14.25 redemption price for the warrants. The annual report next week and the Q1 report in a month or two will provide a great deal of clarity as to whether the $31.4M earnout target for 2010 is achievable.
-Adam
"Invert, Always Invert" Carl Jacobi
