Chinese markets outperformed the U.S. markets during the week ending October 19. The Shanghai Stock Exchange Composite Index was up 1.11% for the week ending October 19. The S&P 500 Index was up 0.32% and the Nasdaq 100 Index was down 1.54% for the week ending October 19. Based on this observation, I screened with Finviz for top five performing U.S.-listed Chinese stocks trading above $1. Here is a look at these five stocks.
1. China Shengda Packaging Group (CPGI) is a leading paper packaging company in China. It is principally engaged in the design, manufacturing and sale of flexo-printed and color-printed corrugated paper cartons in a variety of sizes and strengths. It also manufactures corrugated paperboards, which are used for the production of its flexo-printed and color-printed cartons. The company provides paper packaging solutions to a wide variety of industries, including food, beverage, cigarette, household appliance, consumer electronics, pharmaceuticals, chemicals, machinery and other consumer and industrial sectors in China.
China Shengda Packaging Group announced on October 15 that its Board of Directors has received a preliminary, non-binding proposal from its Chairman, Mr. Nengbin Fang, in which Mr. Fang has offered to acquire all of the outstanding shares of the company's common stock he and his family currently do not own in a going-private transaction at a proposed price of $1.40 per share to be paid in cash. According to the proposal, Mr. Fang intends to fund the acquisition with a combination of debt and equity financing. Currently, Mr. Fang and his family collectively beneficially own approximately 54.03% of the company's common stock.
On October 18, Rigrodsky & Long announced that it is investigating potential legal claims against the board of directors of China Shengda Packaging Group regarding possible breaches of fiduciary duties and other violations of law related to the company's receipt of a proposal to be acquired by the company's Chairman of the Board, Nengbin Fang, in a transaction valued at approximately $24 million.
The investigation concerns the company's board of directors' process for consideration of the proposed transaction, whether China Shengda is acting in its shareholders' best interests and whether the proposed consideration to be paid to China Shengda's shareholders would be fair and adequate. According to Yahoo Finance, at least one analyst has set a price target for China Shengda stock at $3.50 per share.
The stock was up 31.87% for the week ending October 19. The company has a cash position of $14.4 million and restricted cash of $18.5 million. Total short- and long-term loans are $12.5 million which makes the company's net cash position $20.4 million. The company has 38,790,811 shares outstanding which makes net cash of $0.53 per share. The company has a book value of $2.64 per share. The stock is trading at a P/E ratio of 6.67. I believe it is likely that the offer price will be raised to at least $2 per share.
2. Gulf Resources (GURE) operates through two wholly-owned subsidiaries, Shouguang City Haoyuan Chemical Company Limited [SCHC] and Shouguang Yuxin Chemical Industry Co., Limited [SYCI]. The company believes that it is one of the largest producers of bromine in China. Elemental Bromine is used to manufacture a wide variety of compounds utilized in industry and agriculture. Through SYCI, the company manufactures chemical products utilized in a variety of applications, including oil & gas field explorations and as papermaking chemical agents.
The company reported the second-quarter financial results on August 9 with the following highlights:
|Net income||$5.7 million|
|Net cash||$72.0 million|
|Shares outstanding||34.6 million|
|Net cash per share||$2.08|
|Book value per share||$7.26|
CEO, Xiaobin Liu commented on August 9:
In the near-term, we are likely to encounter operating pressure due to a foreseeable increase in labor and lowered bromine price influenced by the nationwide housing price control by the central government. As soon as the economy pass the phase of structural change and the condition, turn favorable, we expect we will be able to benefit from the underground bromine reserve we previously obtained with our equipment and facilities being consistently upgraded. In addition, as the market prices of potential acquisition targets are subjected to undervaluation due to the current economic environment, we will attempt to retain cash in order to take advantage of the market by acquiring quality assets that can enable our company to sustain long-term growth in the future.
The stock was up 29.52% last week and is currently trading at a 35% discount to its net cash per share value. The company did not announce any news last week. The stock is trading at a P/E ratio of 3.02. The company's insider ownership is 39.03%. The stock could be a good pick below the net cash per share value.
3. eFuture Information Technology (EFUT) is a leading provider of software and services in China's rapidly growing retail and consumer goods industries. eFuture provides integrated software and services to manufacturers, distributors, wholesalers, logistics companies and retailers in China's front-end supply chain (from factory to consumer) market, especially in the retail and fast moving consumer goods industries.
The company reported the second-quarter financial results on August 13 with the following highlights:
|Net loss||$0.1 million|
|Book value||$5.02 per share|
eFuture expects total revenue for the third quarter 2012 to be in the range of $5.5 million to $6.3 million. Adjusted EBITDA for the third quarter 2012 is expected to be in the range of breakeven to loss $0.3 million.
The stock was up 22.91% last week and is currently trading at a 14% discount to its net cash per share value. The company did not announce any news last week. The stock could be a good pick below the book value.
4. Longwei Petroleum Investment Holding (LPH) is an energy company engaged in the storage and distribution of finished petroleum products in the People's Republic of China. The company's oil and gas operations consist of transporting, storing and selling finished petroleum products, entirely in the PRC. The company's headquarters are located in Taiyuan City, Shanxi Province. The company has a storage capacity for its products of 220,000 metric tons located at three storage facilities within Shanxi: Taiyuan, Gujiao and Huajie, which have an individual storage capacity of approximately 50,000 metric tons, 70,000mt, and 100,000mt, respectively. The company has the necessary licenses to operate and sell petroleum products not only in Shanxi, but throughout the entire PRC. The company's storage tanks have the largest storage capacity of any non-government operated entity in Shanxi.
The company seeks to earn profits by selling its products at competitive prices with timely delivery to transportation companies, coal mining operations, power supply customers, large-scale gas stations and small, independent gas stations. The company also earns revenue from agency fees by acting as a purchasing agent for other intermediaries in Shanxi, and through limited sales of diesel and gasoline at two retail gas stations, each located at the company's Taiyuan and Gujiao facilities. The company seeks to continue to expand its customer base and distribution platform through the utilization of its large storage capacity, which allows the company the flexibility to take advantage of pricing, supply and demand fluctuations in the marketplace.
Longwei was recently named to the Forbes list of "Asia's 200 Best Under a Billion" from a universe of 15,000 companies. Forbes ranked the companies based on sales growth, earnings growth and return on equity in the past 12 months and over three years. As was reported, Longwei's three-year track record is 45% sales growth, 28% earnings per share growth and 28% return on equity.
Longwei Petroleum Investment Holding announced on October 15 that it has commenced operations at its Huajie fuel storage depot in northern Shanxi Province.
Longwei began to sell product to customers on October 11, 2012. Longwei finalized the $110.6 million purchase of the assets of Huajie Petroleum, a fuel storage depot with a 100,000-metric-ton storage capacity, on September 26, 2012.
Cai Yongjun, Chairman and Chief Executive Officer of Longwei, commented on October 15:
"The Huajie facility nearly doubles our storage capacity to a total of 220,000 metric tons and extends our reach into the fast-growing industrial region of northern Shanxi Province. We are pleased to have closed on the Huajie asset purchase using our own cash resources without dilution to our shareholders."
The company reported the fiscal year 2012, which ended June 30, financial results on September 13 with the following highlights:
|Net income||$65.1 million|
|Book value||$3.3 per share|
Longwei Petroleum Investment Holding announced on October 11 that MaxSoar Financial and Investments has updated its research coverage on Longwei with a rating of "Outperform" and raised its fair value assessment to $5.67 per share based on an intrinsic valuation detailed in its research report.
The stock was up 21.59% last week and is currently trading at a 35% discount to its book value. The company did announce news last week. The stock is trading at a P/E ratio of 3.45. The company's insider ownership is 67%. The stock could be a good pick below the book value.
5. Vipshop (VIPS) is China's leading online discount retailer for brands. The company offers high quality and popular branded products to consumers throughout China at a significant discount from retail prices. Since its founding in August 2008, the company has rapidly built a sizeable and growing base of customers and brand partners.
The company reported the second-quarter financial results on August 9 with the following highlights:
|Net loss||$5.8 million|
|Net cash||$115.6 million|
|Shares outstanding [ADS]||50.6 million|
|Net cash per share||$2.28|
For the third quarter of 2012, the company expects its net revenues to be between $145 million and $150 million, representing a year-over-year growth rate of approximately 176% to 186%.
The stock was up 19.02% last week. The company did not announce any news last week. The company is not yet profitable but is growing very aggressively. I have a neutral bias for the stock currently.