I would like to make a distinction between these companies and previous companies because I am only long a few of the opportunities that I am now discussing. That being said, most of these are still very undervalued companies or we would not mention them. In general I believe the previously mentioned companies are better opportunities. But, I’d love to reserve the right to be wrong. I often am.
Skypeople Fruit Juice (SPU) is a rapidly growing company with a P/E of 8. They just recently uplisted to Amex, but despite its recent climb it still appears undervalued. For growth, they are expanding their capacity from 30,000 to 60,000 tons in 2010, promoting their proprietary brand Hedetang, and expanding their product offerings.
China Gerui Advanced Materials (CHOP) - is the largest manufacturer of high precision cold-rolled strip steel products in China. They are a market leader, with a P/E of 7 and have been growing income rapidly. China's steel industry is growing at a cagr of 18%, and is continued to grow as a result of huge government investments in infrastructure spending. To grow they plan on doubling capacity to 500,000 tons by 2011 and adding different metals to their product.
Asia Cork Inc. (AKRK.OB) is a leading producer of cork wood floor, wall and decorations. Their main competitive advantage is their raw material supply, they own a cork forest. In addition, they are currently trading at a P/E of 6.5. Their management team has so far been very shy about displaying the company, but if this changes in the future, the company will be rewarded by greater investor awareness through a higher stock price.
Telestone Technologies (TSTC) is a wireless communications solutions provider. They are exploding with almost 100% revenue growth in 2009, and 2010 expected growth of close to 50%. This company is trading at a P/E of only 12.5. Actually, it’s currently around the low for the year. Tim Sykes suggested it as a potential short. If you have the ability to buy and hold until appreciation, this is one you’ll appreciate to have in your portfolio.
Fuqi International (FUQI) – Fuqi has been growing at a rapid pace and has an incredibly strong balance sheet with a cash balance of 173 million, with a market cap of only 330 million. With a P/E slightly above 5 and exploding earnings, this is an interesting opportunity. Some downsides are that Fuqi has recently had some controversy when they restated earnings. We would like to see the company generate cash, although they have blowout earnings, shareholders are yet to see positive cash flow.
China North East Petroleum (NEP) is engaged in the exploration and production of crude oil in Northern China. If you believe that China is hungry for energy and the next crisis could be related to the global oil production surplus going into a deficit, this is a practical way to capitalize. It’s hard to say, since we are waiting on a report that could send the share price skyrocketing. To do this, all they really need to do is offer non-GAAP guidance on a forward basis.
I’ve been following China Redstone Group (CGPI) since mid-February when I was forced to pass up a purchasing opportunity that has since returned over 100%. It launched under the ticker APBS and recently retickered. Fully diluted my share count is 13.4M and for FY2011 I’m looking at top line revenues of $36M and net income of $15.8M. Did you know that the Death Care industry has consistently ranked among the top 10 most profitable industries in China? You do now.
Sinohub (SIHI) is involved in electronic sales, although it does not modify the products in any way. They provide packing, warehousing, logistics, and import/export services. They currently trade at a P/E of just over 6. They just released 2010 revenue guidance of 180 million, not bad for an expanding 85 million dollar company. Not bad at all.
Gold Horse (GHII.OB) is a speculative play that will be very rewarding to shareholders if it is able to continue gaining construction contracts. They are a construction company in Hohhot, the capital of Inner Mongolia trading at 1/6 of book value and 4 times earnings. They have some recurring streams of revenue that should continue generating money for shareholders. Investors should be very careful, there was some question as to whether they would go bankrupt, but recently secured more construction contracts. We have tried endlessly to get in touch with the US based CFO Adam Wasserman, and unfortunately are still waiting for a response.
China 3c Group (CHCG.OB) is primarily an asset and turnaround play. They are currently trading below their cash balance and at a fraction of revenues and book value. If they were to liquidate tomorrow, the shareholders would all be sent a check in the mail. In order for shareholders to actually be rewarded, management must use its capital wisely. There are no guarantees that management will get the assets invested to generate more money or return those assets back to shareholders.
Disclosure: Long AKRK, CHCG, GHII, TSTC