CCCL is one of my favorite among the China stocks and one I consider to be legitimate with bright prospects because of the following:
1) 3 American board members, 2 from the original SPAC with stellar reputations, Paul Kelly, company chairman and CEO of Knox and company who owns 4% of the company. Mr. Kelly is a member of the Board of Trustees of the University of Pennsylvania, he is a member of the Director’s Advisory Board of the Yale Cancer Center. He is a past director of American Life and Health Insurance Company of New York, The Chicago Sun-Times Corporation, Hydrox Corporation, Ltd. (New Zealand), MCR Corporation, and Porta Systems Corporation (ASE). Second director is Cheng Davis who was affiliated with Columbia and was Vice Dean of International Programs and Development at the University of Pennsylvania Graduate School of Education. Since 1998, Ms. Davis has worked with Morgan Stanley on the International Conference on Higher Education Management in Shanghai, the establishment of the China Center, which focuses on management training for U.S.-China joint ventures, and the China Pension Program, which works with the state council of China in designing the architecture and training of a senior workforce in comprehensive pension management. Ms. Davis has also worked with CIGNA and Lucent Technologies on various professional education projects since 1997, designing a variety of training and professional development programs. Ms. Davis also serves as an advisor on quality workforce standards for the Shanghai Municipal Government and the Shanghai Foreign Trade Commission. Ms. Davis is a board member of the New York Film Academy, Senior Advisor to Motorola and Oracle on international government relations, and Advisor Professor to East China Normal University. Third director is Bill Stulginsky who retired as Partner from PricewaterhouseCoopers LLP in September 2009. He has over thirty six years of public accounting experience and was a partner at PricewaterhouseCoopers and predecessor firms for twenty-four years prior to his retirement. Having an experienced U.S. banker and another director with deep ties in China and one with broad accounting experience may not ensure legitimacy but enhance credibility, imo.
2) Their brand name is widely known in China construction industry that has been verified by Channel checks
3) Their margins are in line with similar companies in Hong Kong
4) The original deal was valued at $10 per share. Their subsequent capital raise allowed them to increase capacity over 60% by 2012 over 2009 and gave the company tradable float which they sorely needed. Those advantages were worth the issuance at $7.75, considered widely a bargain price then in view of many original SPAC investors including myself who were consulted. Warrant exchange was thoughtful and lowered overhang
5) 2010 Grant Thornton audit, Internal controls in line.
6) Focus on tier II and tier III cities and well positioned to take advantage of the low income housing initiative. Less exposed to house pricing trends than increasing unit sales, a direction supported by Chinese gov't.
7) ISO certified facilities that exist based on site visits and name of major customers are disclosed
8) 2009 SAIC matches and available on website
9) Expansion plans fully funded and no new issuance expected
10) Low cost producer with state of the art facilities
Each one of the above points may not be sufficient to confer above board behavior but collectively have convinced me of their legitimacy. I own over 300,000 warrants and almost 100,000 shares in my PA, so I welcome any due diligence that will uncover cracks in the investment thesis. I added more today and looking to increase my position if stock price weakens further.
I also own EDS and SOKF.ob, consider both to be legitimate, will post my views on those as well. China stocks are approx 20% of my portfolio.
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