Fund Manager Peter Siris Spots Gold in China

Writing for the New York Daily News Saturday, he singled out quite a few Chinese companies he likes including the following C.O.P. companies:
1) American Lorain (ALRC.OB);
2) China Yingxia [CYXI.OB];
3) China Agritech (CAGC.OB);
4) China Pharma (CPHI.OB);
5) China Solar (CSOL.OB);
6) China 3C Group (CHCG.OB); and
7) China Educational Alliance (CEUA.OB).

Former C.O.P. companies were also cited: Zhongpin (HOGS), Sutor (SUTR), Sinoenergy (SNEN.OB) and Ever-Glory (EVK).

A quote:

"I have visited the facilities of these companies and met with management — and I own these stocks in my investment fund. That means it is in my interest to see their prices go up. But I think there is still a lot more growth potential."

The full article here.

My Position: Long CYXI.OB, CPHI.OB, CHCG.OB.

Comments

[pnin:]

I follow many of those mentined such as CPHI and CAGC. One thing - for these two and many others cited, the accounts receivable are astronomical. Its easier to grow your business in revenue and profits when you don't seem to care if you ever get paid. As for the cash flow problems - when they need some cash, they just issue some shares.

2008 Aug 25 08:28 AM

[pnin:]

Whats up with the accounts recievables on some of these plays? CAGC and CPHI are super high. Its a lot easier to generate great revenue and earnings when you don't care if you ever get paid. And when they do need cash, they just sell their other main product - shares in their stock.

2008 Aug 25 08:28 AM

[pnin:]

Sorry about the similar posting. I didn't think my first one went through.

2008 Aug 25 11:03 AM

[User 251787:]

I have to agree with writer.I own Sorl Hrbn Cphi Chcg Cacg. I believe they offer great value at extreme low valuations,low PE PEG and good growth.You must be invested in China

2008 Aug 27 08:24 AM

[Rubberman:]

It is normal in China for accounts receivable to be both high and long. Why? Let's take CAGC for example. My question to PNIN is did you read the entire filing before posting? I ask that sincerly as I asked the company the same question. Guess what? They extend the farmers credit when they purchase fertalizer and get paid after the crops have been harvested and sold. My grandfather owned a chain of Hareware stores in west Texas and did the same thing for the farmers there. He knew he didn't have a chance of selling a new refrigerator or a new aything for that matter, because the farmers had no money during planting season. They had expenses like, irrigation, machinary, the crews that worked and had to help plant, fuel, not too mention the seed and fertilizer itself. He extended them credit until their crops came in. He had less than 1% default rate. Please look at the filing again for both companies and see what the default rate is. Then compare to a US company in the same business that is public and post which of the two has the largest default rate. It would be a great excersize for anyone wanting to know customary business practices in China. We Americans could learn a few things from these old time philosophies.

2008 Sep 01 08:52 AM

[Rubberman:]

Finally lets look at he receivables over the next couple of quarters and see how they change. The one risk factor I see here is there is a chance of a higher default rate this year do to weather related conditions. However, this company was one that was singled out as a company that could prosper because of the disaster. I am not sold on that idea, but who am I but a guy posting on Labor Day weekend when I sould be fishing!

2008 Sep 01 08:55 AM

[NOWHEREMAN:]

It is also something called expansion. Trying to get market share means if you find acceptance, you have to be able to deliver in Bulk if necessary.

I own Cagc and Seed. Both have to be considered to be in the Fledgling Category. Sales, word of mouth, research, manufacturing, growth...only word of mouth is cheap.

Fertilizer and Genetically Modified seeds, Cagc may become another "Miracle Gro" and Seed another Monsanto or they may both go bankrupt.

To me revenue growth is the key and as long as I see it expanding, I know that eventually it will filter to the Bottom Line. There will be setbacks due to "earthquakes" or failed research or whatever, but if manangement reasonably explains the reasons for the short fall, I will continue to hold them. My time horizon is 5 years for a double.

2008 Sep 06 05:05 AM

[Josh Stern:]

In the case of CPHI, they have the following comment on late payments from their 10Q, also echoed on conference calls:

"As to the peculiarity of the Chinese pharmaceutical environment, defaults in payments to pharmaceutical companies by state owned hospitals are a normal phenomenon. Over 90% of our drugs are sold to state owned hospitals, the greater our business with the hospital, the more payments are defaulted, although in actual fact, all the defaulted payments are eventually paid, it is only a matter of time."

2008 Sep 11 08:53 AM

[The GeoTeam:]

China OTC Player,

You hit the nail on the head when you said that Chinese firms have done a poor job communicating with their investors. Many don't even have IR firms to supplement their own IR department staff who are often unqualified to relay the company's story in a manner that conveys the true advantages of investing in them.

My firm is actually proactively encouraging small and micro cap Chinese firms to join an established network in which they can get some more exposure. Of course, we invest in those companies and have an interest to see their stock prices increase.

It seems you have a pretty good handle on the situation and look forward to hearing more of your thoughts in the near future.

Apr 08 11:04 AM