China Yida: Ultimately on the Rise

Things are afoot at China Yida (CYID.OB) and I want to use this opportunity to clarify a few things. The first is the number of shares outstanding. When the company was still IAVA.OB, the number of shares outstanding was 100 million. It then did a 1:10 reverse split, bringing down the shares to 10 million. Subsequently it issued 44.75 million shares to its major shareholders, and then another 20 million (13.33m shares and 6.67m warrants) to Pope Investments.

So I have the shares outstanding (diluted) as 74.75 million. This accords with its 10K (issued late March) which had its shares outstanding as 68.08 million, which is 74.75m less 6.67m.

This ultimately accounts for the reason why, when the company did its reverse split, its share price did not automatically go from ~$0.30 to ~$3.00. Actually it did for a short while, until the market figured out what was really happening. It has been trading in the $1 range since.

So the question is, as the retail investors, are we holding the short end of the stick? Sure the dilutions sucked, and the lack of communication exacerbated the whole scenario. But I believe CYID is ultimately a company on the ascendant. First, Pope Investment is a savvy investor. It won't be doing anything with CYID unless there is untapped potential there.

Second, the company just (as of 4/25) appointed a new CFO, a Peter Zheng. I would say for such a (relatively) small company, this is a great catch. Mr. Zheng's previous job was with PriceWaterhouseCoopers in Beijing where his main clients included US-listed entities such as China Life (LFC) and PetroChina (PTR). He has an MBA from the UK and a Master of Accounting from Australia.

Finally, the shares are still undervalued with great upside potential. My estimates (based on full dilution) are as follows:

EPS: (2008) $0.20 (2009) $0.32
P/E: (2008) 6.8x (2009) 4.2x
PEG: 0.11

This one is a long-term investment for me. I like the space the company is in, and so far management appears to be pretty savvy. What it needs now is a good investor relations firm to help it get to where it wants to go.

My Position: Long.

Comments

[CIA:]

I am most happy you are following CYID, however there were two separate 1/10 reverse splits of IAVA (CYID) reducing common shares outstanding to about 1 million. Then the insiders rewarded themselves with 44.5 million new shares at the expense of the minority holders such as myself. This in effect was a forward split for insiders only and substantially reduced the minority interest to almost nothing. Even though this transaction was glossed over by a SEC filing it violates the letter and the spirit of United States security laws and a grievance is on file with the SEC.

I also wish them a bright future but our laws require ALL shareholders to be treated as equals.

2008 May 01 03:05 PM

[RUFCrazy:]

That the owners were quite willing to dilute existing shareholders by a factor of almost 5 (WHAT!*&())(^#%#@!... without previous discussion of the magnitude of such dilution is criminal. I would stay as far away from this diluting POS as possible. Simply, the owners/management can NOT be trusted.

2008 May 02 07:47 PM

[Brian McKee:]

Thanks for explaining what happened to my IYSA shares, which I have not been in a position to track for some time now, except I don't understand 1/10 reverse splits and forward split but I'm certain that my holding has been diminished. If I had 10,000 IYSA shares before the 'splits', how many CYID shares do I have now? Thanks for your help. I agree with your sentiments wholeheartedly.
BGMcK


On May 01 03:05 PM CIA wrote:

> I am most happy you are following CYID, however there were two separate
> 1/10 reverse splits of IAVA (CYID) reducing common shares outstanding
> to about 1 million. Then the insiders rewarded themselves with 44.5
> million new shares at the expense of the minority holders such as
> myself. This in effect was a forward split for insiders only and
> substantially reduced the minority interest to almost nothing. Even
> though this transaction was glossed over by a SEC filing it violates
> the letter and the spirit of United States security laws and a grievance
> is on file with the SEC.
>
> I also wish them a bright future but our laws require ALL shareholders
> to be treated as equals.

2008 May 12 04:29 PM