China Growth Stocks

[Joe Stocks]

Lebed on NEP

First off, let me make it perfectly clear... I have no financial interest in China North East Petroleum Holdings Limited (NEP) and nobody is paying me to say any of this! All I care about is helping make money for you, my Lebed.biz members!

I believe NEP is a sure thing to double in the short-term! Look at NEP's six month chart below:

As you can see, I discovered NEP right at the bottom and yesterday's move in my opinion is just the beginning of a HUGE breakout that I believe will continue for many days and weeks to come!

I just received in my hand minutes ago the latest short data that just came out and NEP's shorts are rapidly covering! In my last alert I told you NEP's short position had decreased from 1.51 million to 1.42 million, but the new data that I just received shows NEP's latest short position is down to only 1.26 million shares! Even the shorts know NEP is about the explode and I bet these 1.26 million shares that are still short will likely cover in the days ahead, creating a HUGE short squeeze!

The last time NEP traded mega volume of millions of shares was in April when the stock sold off from $4.50 to $3 in just three days, before bouncing back to $4.50 in just one day! Since then, the stock slowly drifted down on almost no volume all the way to a 52-week low of $1.87.

In April, NEP had huge support at $3 and quickly bounced after hitting $3, so I will be shocked if NEP doesn't at least hit $3 extremely fast. However, I truly believe this stock deserves to bounce above $4 in the short-term.

NEP at $2.27 has a P/E of 2 and has a market cap that is just about equal to its cash position. NEP's cash position has increased from $50.5 million in 3Q10, to $61 million in 4Q10, to $75.2 million in 1Q11, and to $80.4 million in 2Q11, the most recent reported quarter!

NEP's current market cap of $80.5 million is only slightly above its cash position, when NEP's cash position has increased by approximately $30 million over just the past 3 quarters! NEP's net income over the past 4 quarters was $35.9 million with operating cash flow of $42.55 million!

NEP's only has $4.66 million in debt and an enterprise value of $4.79 million! This means if you remove NEP's net cash position, NEP's business, which is generating positive operating cash flow of $42.55 million, is being valued at only $4.79 million!

Compare that to Apple (AAPL)! AAPL reported trailing twelve month positive operating cash flow of $32.78 billion and has an enterprise value of $328.18 billion! AAPL is trading for 10 times its operating cash flow!

If NEP was 10 times its operating cash flow the stock would have a market cap of $425.5 million and with 35.45 million shares outstanding would be trading at $12 per share!

I am being very conservative by predicting NEP will double to around $4. In my opinion, oil prices will soon skyrocket and NEP's cash flow will increase tremendously over the next few years. China stocks go through phases where they are either in play or out of play, and as soon as they are in play again I believe NEP has the potential to gain 1,000% over the next few years!

NEP's has HUGE oil leases with PetroChina (PTR), a company that is BIGGER that Microsoft (MSFT)! NEP not only drills on properties leased from PTR, but NEP sells all of the oil they produce to PTR! This means NEP's accounts receivable are almost guaranteed to be collected, unlike other China stocks where you never know if their accounts receivable are for real or not!

I have given NEP a speculative rating of 1, my highest level of confidence!

This is only my opinion and I could be wrong! Never invest based on anything I say!