China Growth Stocks

[Rames]

NEWN - was just reading through the Global Hunter presentation

http://www.sec.gov/Archives/edgar/data/1144320/000101376210001600/ex991.pdf

and that EPS guidance of $1.23 for 2010 doesn't make much sense to me anymore. This is not a seasonal business and for "old" NEWN all quarterly numbers (revenue, net income, cash flow) were rising throughout 2009. The same seems to be true for both acquired companies (Anytone, NewPower), don't have all the quarterly numbers there.

"New" NEWN made $0.37 for the first quarter with higher margins than "old" NEWN. They are operating at about 50% manufacturing capacity which means they can "grow without meaningful capex". The company also states that "revenue, margins and EPS will increase due to organic growth and improved product mix from recent acquisitions."

In April the company said: "We expect to benefit from an improving cost position, increased revenue from each of our segments, improving gross margins and significant operating leverage."

Yet they left their 2010 guidance unchanged in yesterday's presentation, and it doesn't make much sense. Even if we assume that cost position would not improve, revenue would not increase, margins would not improve, that they would still produce at only 50% capacity and that there would be no synergies at all from the acquisitions, then NEWN is likely to beat Q1/2010 numbers in the quarters to come as their market is growing by 20%+ annually.

Uplisting to Nasdaq could be announced any day now, and if the management is clever they waited with raising their guidance for the Nasdaq listing. I believe they should handily beat their current guidance, even if they raised it to $1.50 per share they should be able to beat that.