China Medicine Corp (CHME) is trading at an adjusted P/E of 7. They recently took a big hit after the release of their 10-K, which allows investors to pick up shares of a great company on the cheap. China medicine generated $17 million in 2009, and is only a $65 million dollar company. China medicine is waiting on government approval of its proprietary drug rADTZ, which should substantially contribute to future revenue growth.
Yongye International (YONG) continues raising revenue guidance, with 2010 net income expected to increase between 60-72%, and has issued the expectation of 50% compounded annual revenue growth over the next 3 years. Their recent count of branded stores is 10,000, with their goal at year end to be 20,000. There are discussions that by the end of the decade they may have 100,000 branded stores.
New Energy Systems Group (OTC:NEWN) has been reaffirming guidance at between 5.3-6 million, since they have reaffirmed this number on three separate occasions, we can assume it will be close to accurate. The company projects 2010 EPS of 1.23, which makes a low p/e of only 6.1 times earnings, even though this incorporates a tripling of net income. With return on equity of 60% and profit margins at 26%, this company has high returns on capital and strong margins. Average return on equity in American business is 12%, anything above 20% is spectacular.
Orient Paper (ONP) – This is a rapidly growing company p/e of 8 in a great industry. They make paper; it is very simple and understandable which we love. They achieve a return on equity of 22%. They expect EPS of adjusted net income of 1.21, which is about 16% growth for 2010.
China Ceramics Co (CCLTF.OB) is one of those companies that makes you proud. Take a look at their super 8-K issued last November and if you’re perceptive, you’ll realize how truly innovative their structuring is. I firmly believe that more companies should go public in this manner. Basically, if the company performs, they get over $100M through their warrants being cashed in. Their warrants trade as (CCLWF). Yesterday, they reported results from the last year and beat my expectations. Again, I wish more companies went public this way. When you’re running at full capacity with a backlog, getting $100M to expand is always worthwhile.
China MediaExpress Holdings (OTC:CCME) – Has issued incredible revenue guidance of 80% growth for 2010, which does not even include the expansion of their bus lines, which will surely occur. With a P/E of just under 7, this companies valuation does not make any sense, considering they just uplisted to AMEX. The markets will eventually realize their mistakes, and investors will be strongly rewarded.
Renhuang Pharmaceuticals (OTC:RHGP) – This company is very exciting as they are planning on uplisting directly from the pink sheets to amex. They are distributors for traditional Chinese medicines that are trading at a very low multiple. With a trailing p/e of about 6, and revenue net income growth in the range of 25%, this company is very cheap.
China Electric Motor (OTC:CELM) makes micro motors that serve the consumer electronics, automobile, power tools, and household appliance industries in China. It is trading at a forward p/e of around 4 based on management’s 2010 guidance. In addition CELM is expecting to grow at over 50% in 2010. CELM had 2009 return on equity of 40%, and is servicing an extremely quickly growing market. Auto sales in China are exploding as China just recently surpassed the US as the largest car market in the world.
China Infrastructure Construction Corp (OTC:CHNC) appointed a new independent member in February and in March made public their quest to raise cash in the public markets. Looking to uplist to the Nasdaq and being as cheap as they are while still being over $5 suggests that someone knows what they’re doing over here. Mutual funds almost are going to be required to eat this up sometime in the near future.
Xinyinhai (XNYH.OB) is our speculative play for this article. This small company is trading at a p/e of 4 based on 2009 net income and 1.5 based on 2008 income. The economic recession hurt their business line in 2009, but Xinyinhai believes their business will return to its former profitability. This claim is backed up by an increasing backlog. If this business is able to fully execute a turnaround, it will be trading at ridiculously cheap price. There is risk with this company,however, as they may not be able to recover.
Disclosure: Author long CHME, XNYH, RHGP, CCLTE.OB, CCLTF, ONP, NEWN and CHNC.OB