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Zack Buckley
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Zack Buckley is the founder and President of Buckley Capital Partners, a value-focused long/short equity hedge fund. BCP employs a fundamental approach that is research intensive and concentrated, generally with 10-15 core positions focused primarily in small cap equities. While BCP is... More
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  • Interview with CCGY CFO William Chen

    Interview with CFO of CCGY William Chen

    Can you provide some background details of the company?

    China Clean Energy is located in Fuqing City in Fujian province of China, and is engaged in the developing, manufacturing and distribution of biodiesel and specialty chemical products from renewable resources.  We found a process through research and development to create biodiesel from waste grease including vegetable oil and palm oil.  

    Where do you see the company in 5 years? 10 Years?

    In the next few months, we will continue our focus on expanding shipments to our existing customers and also adding new customers. During the first quarter of 2010 we added 3 new specialty chemical and 2 biodiesel customers and we are negotiating with 6 new customers for our specialty chemical products.

     As we go down the road, we will take conservative measures to upgrade to Amex or the Nasdaq in order to pursue opportunities in acquisition projects such as acquiring one of the upstream feedstock suppliers.  This will help us better manage our feedstock supply and cost, and we may acquire 2 to 3 retail gas stations to sell our own biodiesel to increase profitability and sales volume.  As the demand increases, we will expand additional capacity in our new jiangyin facility.

    What are ccgy’s competitive advantages?  What makes these sustainable over long periods of time?

    One of our major advantages is that we have a sustainable business in our specialty chemical business segment. In addition, our new facility is able to produce more efficiently and our large customer base is able to absorb the additional supply for our products. In addition, we are now located near the sea port and railroad, which gives an advantage to easily export our products as well as transporting our feedstock.

    Can you explain your main competitors a bit more? 

    One of the main competitors would be Gushan, they are the largest biodiesel producers in China. They have 7 facilities in China and one is in our province.

     They are currently having trouble due to the consumption tax.  This tax does not affect ccgy because our customers are not state-owned enterprises.

    Why do your customers choose you over the competition?

    Our specialty chemicals products have received positive feedback from our customers and they have exceeded the regular standard. We are also able to improve our product for specific customers.   For example, if a specialty chemicals customer asks for a specific standard, we are able to develop it.  If they need a different temperature, we have our own R&D team that can change the product for the customers. 

    How is the new factory doing? When do you expect full capacity?

    We have had positive feedback from customers on the factory products, as they have noticed improved quality in the products coming from the Jiangyin plant.  We expect to reach full capacity by the end of this year. 

    Gross margins

    We expect 23-25% for specialty chemicals and approximately 8% for biodiesel.  We expect both of those to improve from quarter to quarter. 

    Can you fully explain your segment lines?

    Our products are environmental friendly and come from renewable resources.  We produce biodiesel, monoacid, dimer acid, polyamide resins, dimer acid-based polyamide hot melt adhesive, trimer acid, and high quality printing ink. These are the feedstock for our customers. Our customer’s end product would be something like antirust oil that is used for ships, bridges and other buildings, soap, detergent, and coating for electronic appliances, glue, lubricants, and printing ink.

    What is the estimated average price per ton of biodiesel? Specialty chemicals?

     For biodiesel, the average selling price is approximately 650 dollars per ton and 1350 dollars for specialty chemicals.

     

    What is the growth like in the industry?

    Demand for diesel is growing at 9% in China.  The motor vehicle fleet is growing at 16-17%.  The demand is so great that China imports over 50% of its diesel. 

    Who are your customers? Can I meet or speak with them?

    Yes, When you come to visit our plant, we can introduce to you some of our local customers. And also we have some of the large customer international customers like air products and chemicals, Cray Valley, and HBG export. They are NYSE listed companies. They were our largest customer in 2008 and they continue to be our largest customers today.

     

    What Chinese businessmen or women do you admire?

    CEO and founder of Baidu Robin Li.. I admire the business model Mr li has accomplished. an innovative company to bring valuable service to Chinese internet users to better search for the information they desire and connecting the chinese people to the world.

     

    If you had to invest in a US listed publicly traded Chinese company other than your own, what would it be?

    Baidu

     

     

     

     



    Disclosure: No position in any companies mentioned
    Tags: CCGY, BIDU
    Jun 07 11:01 AM | Link | Comment!
  • Top 50 Companies of 2010 Part 5
     I believe that if you are planning on buying stocks buy shooting fish in a barrel, by far the best barrel to shoot in is the US Chinese small caps. Go get you’re gun. It’s been hunting season for over a year. You practically can’t miss.

    I feel it would be fun to give some color as to what’s really going on in the market lately and what you should watch out for. Inflation; don’t bet against it. Contrary to popular belief, holding cash or bonds is risky in my opinion as there will be substantial loss in purchasing power.  The latest Goldman Sachs crisis will likely be forgotten; people focus too much on macro events. For some reason, the majority of the money flooding capital markets is going into bond markets. Buying treasuries shouldn’t be anyone’s long term strategy. TIPS won’t protect you from inflation. 

    Sino Agro Foods (siaf) "Chinese agriculture is another thing I think is going to boom because it's such a wreck." ~Jim Rogers.  I agree with Jim wholeheartedly, and SIAF is one of the companies taking advantage of the boom in agriculture in China.  Based on their 2010 guidance, they are trading at a forward p/e of 4, which gives a very attractive valuation if they are able to reach those numbers.    

    China Linen Textile Industry Ltd. (OTC: CTXIF) produces over 50 types of linen yarn and 110 varieties of linen fabric and products. We would argue that it would produce holders of its common shares significant future profits if the holders choose to buy now at the current price. For a company that is arguably growing faster than 20%, the current pricing suggests no growth and the way to bet against the antagonists is to purchase. Go ahead, you can do it.

    China Yongxin (cyxn) just recently released 2009 results of $.15/share, pretty cheap for a company trading around $.60.  They are a pharmaceutical company who is expanding its retail drug stores; they expect to open 28 new stores in 2010.  They also just recently appointed four independent board members, which suggest uplisting in their future.  Our favorite. 

    China Rutai International Holdings (crui) develops cellulose ether and is trading at a p/e of less than 5.  Cellulose ether is used in the pharmaceutical industry, construction industry, food and beverage, petroleum, and cosmetics industries.  If they are able to sustain these numbers this company is cheap, if they can increase them - who knows. 

    China Advanced Construction Materials (cadc) produces concrete materials in China.  They should be able to capitalize on the growth of the construction industry in China based on the recent infrastructure investments by the Chinese government based on the 4 trillion yuan stimulus package.  Their expansion plans consists of adding portable stations in 2010 and 2011, acquiring smaller similar companies, and to add products to their mix. 

    Tongxin International (txic) is in the rapidly expanding auto industry, they build the body structure for commercial vehicles in China.  They are trading at a p/e of 5 based on 2008 net income and growing rapidly.  They will be able to expand within China and also have exports abroad that are growing in other developing nations

    China Insoline (chio) is one of the more speculative plays but will be heavily rewarding to investors if the company become successful.  It is an online insurance provider who services the Beijing area.  They have great profit margins and high returns on equity.  My main issue is I have been unable to get in touch with them, despite trying several different phone numbers and emails. 

    China Power Equipment (Cpqq) is trading at a p/e of about 10, yet they are growing at breakneck rates – net income over the past year almost triped.  They manufacture alloy transformer cores and alloy electricity transformers that are designed to step down voltage in power plants. 

    China Baicaotang Medicine (cnbi) is engaged in three segments in Guangxi province- pharmaceutical distribution, retail pharmacy and manufacture of pharmaceuticals.  They are currently at a p/e of 6, despite solid growth.  They just recently engaged Crocker Coulson for their IR, a great sign that they will uplist in the future. 

    Yasheng Group (yhgg) has had quite the month.  It's up almost 300% since they recently started filing with the SEC, which they have not done in about 3 years.  Rumors are that they are planning on completing all of their late filings and plan on eventually listing on Nasdaq.  If that occurs this 250 million dollar company could easily reach a billion.  Again this is a more speculative company, investors should carefully weigh their decision to invest.

     

     

     



    Disclosure: LONG YHGG, CNBI, CHIO, CYXN, SIAF, TXIC,
    Tags: SIAF-OLD, CPQQ, TXIC, CADC, CYXN
    Apr 19 1:50 PM | Link | Comment!
  • Chinese Pharmaceuticals to Watch Part 1

    When shopping in the supermarket, shoppers always flock to the half off sales.  In the stock market, a half off sale creates worldwide panic.  Although these circumstances are actually exceptional for long term investors, most people fear the world is ending.  I welcome half off sales in the stock market because they are a great way to build long term wealth.

    The Chinese pharmaceutical industry presents multiple bargains for value investors.  Pharmaceuticals sales in China have been growing at a rate of 15.5% annually from 2005-2010.  There is a strong demand for pharmaceutical products in China due to growing income, a larger middle class, and a rapidly aging population.  The elderly population in China grew from 130 million in 2000 to 171 million in 2010.  Healthcare spending by the elderly is 5 times higher.

    In addition the government has made healthcare one of its primary initiatives; as a result, a Universal Health plan package geared to deliver $123 billion in the next three years has been issued. 

     The industry is rapidly consolidating, where the market leaders are rapidly growing in value.  Characteristics of future markets leaders are

    1.      A strong nationwide sales and distribution network

    2.      Strong research and development capabilities

    3.      Access to capital in order to expand

                While some companies trade with P/E ratios as high as 63, Lotus pharmaceuticals has a P/E of only 5.12.  You would expect a low P/E to be indicative of a stalwart company.  However, Lotus Pharmaceuticals grew revenues at 59% from 2005-2008 and has net income up 700% since 2005.  Lotus Pharmaceuticals revenue streams are a combination of pharmaceuticals wholesaling and the development and sale of proprietary drugs.  Their primary growth strategies are expanding their distribution sales channels in order to increase sales, expanding production capacity through the building of a large factory, and bringing new drugs to the market by partnering with top R&D institutions.  We believe a company this cheap should not be overlooked.  In summary, lotus is a comprehensive company with both strong manufacturing capability and a nationwide distribution network, great R&D capabilities with a new drug pipeline including a Class I drug, and a very attractive valuation. 

    China Medicine Corporation (OTCPK:CHME) has a current P/E ratio of 5.91 and P/S of .69.  The company is rapidly growing and has developed a proprietary product rADTZ, which is made to decrease animal mortality rates by fighting Aflatoxins, should substantially enhance revenues.  They estimate the addressable market for rADTZ is up to $4 billion and that the successful commercialization and licensing of rADTZ has the potential to substantially improve revenue and profit picture in the years to come. Their distribution consists of 300 hospitals and 500 other medical companies, which leads to 2000 drug stores.  Revenues are up to 53 million in 2008 from 15 million in 2005.  A company like this is extremely cheap.  A comparable company is 3sBio, which has a P/E of 22 and a P/S of 3.96.  China medicine is much cheaper than 3sBio with better return on equity and profit margins. 

    China Yongxin CYXN has a current P/E ratio of 4.9 and a P/S ratio of .25.  The company has three divisions, they run 93 retail drugstores in China, similar to Walgreens, they are a distributor of pharmaceutical products, and they have their own proprietary ginseng products.  The company’s products are Chinese traditional medicines, chemical pharmaceuticals preparations, flower teas, natural health products, healthy food, cosmetics, and medical equipment.  CYXN will focus on expanding its retail chain across China.  The company has continued to grow its wholesale business and is moving to expand the higher margin retail and manufacturing activities in the pharmaceutical business.  Management also plans to eventually uplist, once the company qualifies. 

    Symbol

    Mkt Cap

    P/E

    Price/Sales

    Rev growth CAGR % 2007-08

    Net income CAGR Growth %, 2007-08

    CYXN

    20.20

    5.00

    .33

    23%

    13%

    NPD

    705.60

    25.00

    2.00

    22%

    30%

    LTUS

    65.58

    5.12

    .96

    51%

    11%

    CHME

    53.93

    5.91

    1.00

    27%

    33%

    SSRX

    239.94

    24.03

    .99

    35%

    -23%

     

    It is clear that these are three great bargains in the Chinese pharmaceuticals industry.  I have a hard time believing markets are efficient when I look at these companies.  These companies seem to be trading well below their intrinsic values, although I reserve the right to be wrong.  In fact, I have founds tons of undervalued Chinese ADRs.  That is why I am going to China this summer to visit as many publicly traded companies as I can fit into two and a half months.  In the past three years on their trips to China, The Motley Fool researchers have identified companies that are now all up between 100-500% since their recommendations, I hope to do the same. 

     



    Disclosure: LONG CYXN, CHME, LTUS
    Mar 14 4:09 AM | Link | Comment!
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    Sep 9, 2010
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    Sep 6, 2010
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