China Natural Resources' 70% Leap Just Another Bubble

We present China Natural Resources (CHNR) - with a name like that how could one go wrong? Up 70% yesterday.

A quick look shows us 2 of the hottest parts intersecting into 1 stock - mining and China. This must be the next Rio Tinto (RIO)or BHP Billiton (BHP) - let's look at its massive revenue growth.

Per an update in mid September the company reported 32,526 RMB in revenue in the year ago quarter. Well if you are mining for 1.3 billion people revenue must have shot up this year - what are we talking? 60K RMB? 70K RMB? Perhaps 100K RMB? I mean after all this company is in the home of 1.3 billion people.

Well 1 year later, the quarterly revenue shot up to 33,070. Yes folks, that an impressive year over year gain of 1.7%. Massive. Unbelievable. 1.3 Billion people served. I don't believe I've seen growth rates like that since the lemonade stand down the street owned by 1.3 person, a 4 year old girl and her dog. 1.7% wow. That deserves a 70% premium.

Profits of course went ...down... year over year. So how has the market rewarded this stock? Well the market has rewarded this awesome grower, a value between $6 and $12 for the better part of 2 years. Then word got out today that the company has special words in its corporate logo - words like China, and Natural Resources. Word of this leaked Monday when the stock jumped from mid $13s to $16.

This highlighted the stock on thousands of momentum traders desks overnight - and boom $16 to $28 yesterday. Why stop there? If it's worth $28 today it should be worth $50 tomorrow. The new market economics. I mean they do serve 1.3 billion people with natural resources. Did I mention the 1.7% yearly growth? Awesome. Worth 70% to me to get that type of growth.

I am getting dreaded flashbacks of '.com'. Replace China with .com. Then rinse, wash every 7 years, repeat. New bubble. Did I mention China Architecture (RCN)? Brand new IPO - was priced at $6 - yesterday we decided that was a steal, its really worth $11. +50% today. Magic words - China and Architecture. This company provides Architecture to 1.3 billion people. Cool.

Did I mention China Tech Development Group (CTDC) +33% yesterday. This company provides Tech Development to 1.3 billion people. Oops I forgot China Shenghuo Pharmaceutical (KUN) - only $6 and it provides drugs to 1.3 billion people. This one will be $50 by next week. Just imagine the market opportunity... china, drugs, 1.3 billion people. $6? Are you kidding me. Shameful.

American investors clearly are missing these opportunities. Insert (buzzword theme - architecture, pharmaceutical, natural resources) + China + 1.3 Billion people = the next Microsoft, Cisco, General Electric, Exxon, Pfizer. Preferably by next week. Thank you and may I have another? See you tomorrow.

Disclosure: Long CHNR (yeh right!)

Comments

[vleck]

HAH, this is a new paradigm. The stock is up another 40% today.
Who needs growth and cash flows, it's not about that anymore in the new global economy.

Disclosure - Long (I WISH!)

2007 Oct 03 05:00 PM

[MChen]

You are wrong by a factor of one thousand:
the company reported 32,526 kilo-RMB, not 32,526 RMB in revenue in the year ago quarter.

2007 Oct 03 06:24 PM

[TraderMark]

vleck - yes on my blog I have been tracking daily "This Day in Bubbles" and stock after stock sub $10 China stocks that are going to double digits and 100s of %s in just a few days. When was the last time I heard new paradigm? Don't remind me. Doesn't mean craziness can't continue for a long time.

Mchen - whatever the degree - it grew 1.7% year over year - yes I know it is running, but once the mania dies down I see this one being a great short :) But not until the maniacs leave the stock.

2007 Oct 04 06:52 PM

[Mathews]

I agree with you. In fact in my opinion not only this one, many (or you can even say most) other China stocks are overvalued.

However, one still can find undervalued ones, mainly in OTCBB market. For example, SUOT is a new stock in OTCBB, just announced the result of the year ended June 30. Revenue grew 59.2% and net income grew 78.0%, with EPS = $0.59. The price now is under $6.

2007 Oct 05 01:25 PM

[calvino]

You think you are funny huh. Now you owe me the dry cleaning fees for my shirt, since I was drooling and dribbling on it by the middle of your article. Pay up pal, or I'm going to send in the multiples after you. Btw, let us not forget our own best company in the world of all time and the future time to come as well. Lehman just googled goog, and appraised them to be worth significantly more than xom, in 12 months time. Can we list cisco in china too, then, hopefully soon, we won't have to see the third world's children communicating seamlessly in real time every commercial break.

2007 Oct 10 03:53 AM

[Amber Moritz]

I like Cheese!......

2009 Jun 03 12:45 AM

[Amber Moritz]

I'm Hungry.......

2009 Jun 03 12:47 AM

[Amber Moritz]

My cat eats cupcakes....it's true...

2009 Jul 14 11:01 PM