China Stocks Trading Below Net Cash - Part III

by: Markus Aarnio

I wrote part II of "China Stocks Trading Below Net Cash" on July 6th; I covered Acorn International (NYSE:ATV) and The9 (NASDAQ:NCTY). I will discuss two additional companies in this article and update my previous articles:

1. Xueda Education Group (NYSE:XUE) is a leading national provider of tutoring services for primary and secondary school students in China with a focus on offering personalized tutoring services. Since opening its first learning center in 2004, Xueda has organically built an extensive tutoring service network comprised of 342 learning centers and over 13,000 full-time service professionals, serving customers located in 66 economically developed cities across 28 provinces and municipalities as of March 31, 2012.

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The company had cash and cash equivalents plus short-term investments totaling $245.4 million and no debt as of March 31, 2012. The company has 66.7 million shares outstanding which creates net cash of $3.68 per share. Basic net income per ADS for the first quarter of 2012 was $0.01.

ADS repurchases

As of May 22, 2012, under the company's authorized plan to repurchase up to $30 million worth of the company's outstanding ADSs, the company has repurchased an aggregate of approximately 3.6 million ADSs at an average price of $3.50 per ADS for a total of $12.7 million.

Business outlook

The company currently expects its net revenue for the second quarter of 2012 to be in the estimated range of $87.8 million to $91.3 million, an increase of approximately 22.5% to 27.5% from the same quarter of the previous year.

The company reiterates its expectation that its net revenue for the full year 2012 will be in the estimated range of $272 million to $282 million, an increase of approximately 22.5% to 27.0% from the full year 2011.

2. Tianyin Pharmaceutical (NYSEMKT:TPI) is a leading manufacturer and supplier engaged in the development, manufacturing, marketing and sale of modernized traditional Chinese medicines and branded generics, with two state-of-the-art manufacturing facilities and an extensive nationwide sales and distribution network throughout China.

The company currently manufactures and markets a comprehensive portfolio of 58 products, of which 24 are listed in the highly selective National Medicine Catalog of the National Medical Insurance program, 7 are included in the essential drug list of China.

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Tianyin's cash and cash equivalents totaled $29.9 million on March 31, 2012. The company had a $4.4 million short-term bank loan which creates net cash of $25.5 million. The company has 29.3 million shares outstanding which creates net cash of $0.87 per share. Tianyin's earnings per share were $0.03 for the quarter ended March 31st.

Fiscal year 2012 (ending June 30th) financial guidance

As a result of the current pricing restriction by the healthcare reform policies of the government along with the rippling effect of the highly competitive market environment for our generic portfolio, we revised our fiscal 2012 revenue guidance from $100 million to $66 million and our net income guidance from $10 million to $6.5 million.

Insider buys

Guoqing Jiang purchased 59,200 shares on May 18th and currently holds 7,432,784 shares or 25% of the company. Dr. Guoqing Jiang, MD is Chairman, Chief Executive Officer of the company.

Updates on my previous articles

On July 5th Linktone (NASDAQ:LTON) announced the acquisition of, a Bahasa Indonesian online portal focused on delivering breaking news, as well as entertainment, information and video content. The purchase price was not disclosed but it is possible that after this acquisition Linktone no longer trades below net cash per share.

On July 3rd China Botanic Pharmaceutical (NYSEMKT:CBP) announced that the company's Siberian Ginseng Extract was recognized as Safe Medicine at the 8th session of the Selection Event, hosted by the Health Newspaper in China and supported by the Ministry of Health of China.


Here is a table on all Chinese companies that I have covered in Seeking Alpha trading below their respective net cash levels. I have currently a position in 13/19 of these companies. I believe most of these companies will trade at or above their respective net cash per share levels during the next 12-24 months.

Company Share price on July 6 Net cash per share
NED $1.30 $2.22
CISG $6.78 $7.44
SPU $1.62 $2.55
CNTF $1.15 $4.70
LTON $1.59 $2.52
JRJC $1.47 $3.31
ATV $3.15 $4.09
NCTY $5.58 $6.94
XUE $3.66 $3.68
TPI $0.47 $0.87
BSPM $1.36 $2.23
CBP $0.66 $0.86
OTC:WKBT $0.23 $2.34
GURE $1.42 $2.37
OTCPK:VALV $0.74 $4.19
ACTS $1.70 $3.04
UTSI $1.19 $1.89
XNY $1.51 $2.54
ZA $3.67 $5.35
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