Chinese Companies try to woo U.S. Investors
Andrew S. Ross
Tuesday, July 13, 2010
Call it speed dating, investor style.
In 30-minute increments, from 7:30 a.m. to 5 p.m. at San Francisco's St. Regis Hotel, executives from more than 100 Chinese companies are pitching roomfuls of portfolio managers on why they should put millions of dollars into their enterprises.
The more serious romancing takes place in the private one-on-one meetings, requested by many of the 200 eminently wooable money handlers in attendance, mostly from the East Coast.
"We've had 700 requests for one-on-ones," said Edward Lainfiesta, president of Newport Beach (Orange County) boutique investment bank Global Hunter Securities LLC, which put on the two-day 2010 China Conference, ending today. "That's the best indicator, the hidden metric of what is going on." ( www.ghsecurities.com).
What's going on in 2010 with the Chinese companies represented by those on display - in sectors ranging from green insecticides to copper wire to post-secondary education - are profit margins of 25 percent or more, similarly compelling annual growth rates and, in the eyes of eager U.S. investors, cheap valuations that don't square with the potential return on investment.
With the companies, almost all of them listed on U.S. exchanges, looking for fresh private money to help fuel their growth, one might have expected wedding bells to periodically chime at the St. Regis. Ah, but the last time Americans rushed to altar, back before the great financial crash, "a lot of them got burned," said Richard Anslow, managing partner of Anslow & Jaclin LLP, a New Jersey law firm, a number of whose Chinese company clients were present at the conference.
"They're jumping back in, but with their eyes, ears - and noses - wide open. There's a lot more due diligence."
Despite the promise, U.S. investors are still nervous about China, agreed Mark Flather, a director of HC International Inc., an investor relations firm in Encinitas (San Diego County) focused exclusively on Chinese companies listed on U.S. exchanges. "There have been 'interesting situations' you wished you'd stayed away from," he said. "Now there's a premium on quality, rather than quantity."
But with piles of money beginning to burn a hole in their pockets, "we'll see a lot more fund managers getting on a plane and visiting China. People want to go where the growth is."
Brand America: Steve Ye wasn't at the St. Regis to pitch, even though his company, Solar EnerTech Corp., is one of the 550 Chinese companies currently listed on a U.S exchange ($0.14 on OTCBB at Monday's close), and is on the lookout for more U.S. investment.
He was there to network and in town to attend the Intersolar North America show ( www.intersolar.us), which begins today at Moscone Center and the Intercontinental Hotel. Solar EnerTech, whose solar energy photovoltaic cells are sold mostly in Europe and Australia, is one of the 570 exhibitors there.
But Ye not only wants his company to break into the U.S. market, he wants it to be known as a "U.S. company which does its manufacturing in China."
The company has a head start in that rebranding pursuit, having been founded, and still headed, by a Silicon Valley serial entrepreneur, Leo Shi Young, and lists its corporate office in Mountain View.
"We're looking to differentiate ourselves from most Chinese companies in our space," said Ye, Solar EnerTech's CFO. "We want to be known for our quality and technology, even if it takes longer for us to grow. They see themselves simply as commodity suppliers, less focused on the long term, more on making a fast buck now."
Part of that longer-term view involved the establishment last year of a separate R&D facility in partnership with Shanghai University and seeking greater efficiencies in the production of PV cells.
While it "was hit pretty hard" by the global recession and the collapse of solar prices, the company - which I first encountered in a reporting trip to Shanghai in November 2008 - has since opened a second production facility outside Shanghai, recorded consecutive quarterly profits and projects sales of $80 million this year.
The company already has the backing of one major U.S. investor. Its controlling shareholder, as of earlier this year, is the Quercus Trust, a Los Angeles family fund run by David Gelbaum, reportedly one of the country's largest private investors in green tech, with an estimated $500 million invested in "40 to 50 green tech firms," Gelbaum has said. "I'm very bullish on solar."
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