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Who sang the song Whoomp There It Is?

I don't know it anymore, but I know a stock who sung that song yesterday. Longwei Petroleum Investment Holding (LPH) made a run up of more than 15% yesterday to end the day at $1.47. Why?

The company announced completion of their tax reconciliation report yesterday. This report reviewed the Longwei's management reports compared to taxes paid and financial statements filed in China with the company's publicly reported filings with the Securities and Exchange Commission (the "SEC").

Longwei's independent PCAOB (Public Company Accounting Oversight Board) qualified audit firm Child, Van Wagoner & Bradshaw, performed certain agreed-upon procedures as enumerated in the Tax Reconciliation Report with respect to the company's PRC operating subsidiary corporate income tax ("CIT") and value added tax ("VAT") filings for the periods beginning July 1, 2009 to March 31, 2012 as filed with the State Administration of Taxation ("SAT"), and its State Administration for Industry and Commerce ("SAIC") filings for the years ended December 31, 2010 and 2011.

Tax Reconciliation Report - Summary Findings:

  1. SAT (CIT and VAT) Filings - No variance in revenues reported under US GAAP.
  2. SAIC Income Statement Filings - On a consolidated income statement basis, there is no difference in revenues, and net income has a 1.1% or less difference between the US GAAP and the PRC financial statements and tax filings.
  3. SAIC Balance Sheet Filings - On a consolidated balance sheet basis, there is a less than 1% difference in total assets, total liabilities and total stockholders' equity between the US GAAP and the PRC financial statements and tax filings.

Generally, CVB's field work involved independently verifying reported tax payments and filings with tax authorities in the PRC, including direct online access to the SAT secure database to verify CIT and VAT payments and an on-site meeting at the provincial capital's SAIC office in Taiyuan City to observe and obtain stamped copies of the SAIC filings.

"We are pleased the findings in the Report confirm our continued efforts to deliver good financial reporting and transparency for our shareholders," stated Mr. Cai Yongjun, Chairman and CEO of Longwei. "We look forward to reporting strong fiscal 2012 results and completing the acquisition of the Huajie Petroleum assets as a further catalyst for our growth in fiscal 2013."

Final Note

This is big news for investors because it supports the integrity of the company. A big step in corporate governance too, because well established accounting practices is a big plus for a company to regain investor's trust.

With a P/E below 3 this company is still a bargain and personally I think this stock is ready to rock and roll. It will break the $2 mark in a matter of days.

Risk disclaimer
Despite the fact that small caps demonstrate attractive characteristics, liquidity can be low and it takes less volume to move prices. US-listed China stocks lack analyst coverage, so it can be difficult to construct a well-informed opinion of the company.

In the case of Longwei many well-written articles and research has been done by several Seeking Alpha contributors.

Source: Longwei Petroleum, Whoomp There It Is?