Replies to post #3532 on China Growth Stocks

[BiotechValues]

abh3vt

I don't think it's accurate to take CCGY's q2 results and annualize them to get a forward PE of 16 (which is still less than GU's by far). This is a company with a 100% capacity expansion coming online in a few weeks that dramatically alters it's revenue and earnings capabilities.


You also ask: "look at the problems that GU (Gushan) has been having...How will CCGY be able to avoid some of the macro issues that GU is describing?"

The answer is- CCGY is already doing that by making a move into specialty chemicals. In fact the majority of their revenues for the next 6 months are likely to be in specialty chemicals (some of it for export to the West) per the conf. call. Two of their larger and more recent customers from last q are NYSE listed companies. GU is far more locked into biodiesel and doesn't have that flexibility at this time.

CCGY saw the writing on the wall a year ago. See article:
China Clean Energy Shifts Away From Biodiesel.

http://www.reuters.com/article/companyNews/idUKPEK17720220080507?symbol=CCGY.OB&pageNumber=1&virtualBrandChannel=0


On a trailing basis, CCGY's PE is high I agree. But looking forward it's damn cheap if they only make half what they predicted from this new plant last year.

[Brennus]

Just want to mention CCGY

already had the same problem GU did. GU had to shut down diesel production in that province. So did CCGY. The only difference is that CCGY isn't a one trick pony. If CCGY can't sell diesel they can sell dimer acid. If they can't sell dimer acid they can sell hot melt adhesive. If they can't sell hot melt adhesive they can sell ink. Etc, etc.

CCGY have the flexibility to take advantage of the biodiesel market but they are not captive to that market alone.

Another source of confusion out there is the disservice that LPIH IR perpetrated on LPIH shareholders. Sounds like the presentation regarding that company's financing was not well presented. I think a ripple effect from that snafu has resulted in some of the confusion regarding CCGY's financing. So a couple more points regarding that:

1.) CCGY's financing was not a convertible. It was straight equity with a warrant kicker.

2.) CCGY adopted EITF 07-5 in January. So they are treating the warrants as indexed, level 3, and recording the warrant liability on the balance sheet and the change in warrant liability on the income statement. All that is included in the Q's already.

Not sure what LPIH IR told those poor investors...but unless there is some non-cash interest associated with LPIH financing, I don't know how you can predict what the warrant liability is going to do in coming quarters. The non-cash interest charges you can predict to a point...the warrant liability you can't.

But, then again, I wasn't there for the presentation. And I haven't seen the presentation, either.