HIHO, HIHO: It's China Microcap Highway Holdings (HIHO)

Mar.15.06 | About: Highway Holdings (HIHO)

The Microcap Speculator submits: Don't let the whimsical symbol fool you. Chinese microcap Highway Holdings (ticker: HIHO) runs perhaps the most mundane business you could ever imagine. It is a contract manufacturer, but it doesn't make the latest, greatest wireless handset or high-end telecom equipment. Instead, HIHO specializes in things like LED lights and radio chimes.

That's fine by me. I don't need a sexy story -- I need a solid balance sheet and reasonable valuation. HIHO has those in spades. Last quarter, HIHO earned $.12/share. I should note that a big part if not all of those profits came from the gain on a sale of a prior business, offset by one-time charges. That said, the company has shut down the clock manufacturing operations that drained cash from ts balance sheet all last year, and is now cash flow positive. The resulting business is smaller but stronger. Most importantly, the company has about $5.3M in cash net of debt, versus a market capitalization of only $12.01M. That gives the company an enterprise value of less than $7M, a pittance compared to annualized last quarter revenues of approximately $26M.

I started to build a position in HIHO at $3.50-$3.51, and will probably add more in the coming weeks.

DISCLOSURE: I am long HIHO. Not a recommendation to buy or sell any security. For informational and educational purposes only.

HIHO 1-Yr Price Performance: