Hi tenenbaum,
I thought CCLTF's Q2 numbers were very good, and I agree everything does seem to be on track. The capex on the old facility was surprising but it might have to do with them still not being able to keep up with demand since they outsourced a good chunk of production this quarter.
Based on my rough calculations they barely have enough cash coming in + cash on hand to cover capex for the rest of 2010. They have $10M cash plus an estimated $17M earned in Q3 and Q4, so a total of $27M, and they have $26M in planned capex, so I expect to see them source out a $10M to $15M bank loan, or do an equivalent capital raise.
I'm not 100% sure which direction they will go to raise the cash because there are conflicting issues. The bank loan causes no dilution and therefore doesn't interfere with their chances of reaching their compensation target of a stock price of $20/share, but a capital raise will continue to improve liquidity and may be a short-term setback but a long-term positive in reaching that same $20 price target.
I'm somewhat leaning towards the thinking that they will do a capital raise because the warrant exchange will probably only add about 3M new shares to the float, so a capital raise in the 2-3M share range will quickly double their liquidity without hitting any anti-dilution clauses for the warrants that remain outstanding.
I'm very positive for the future of China Ceramics. Management continues to impress me and I feel in very good hands.
Hope all is going well with you.
-Adam
