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  • GeoBargain Stocks Post Solid Quarterly Financial Results in Volatile Market (Part 1) 0 comments
    Aug 20, 2009 1:34 PM | about stocks: CEAI, CBEH, CVU, CBPO

    Our GeoBargain and GeoSpecial stocks finally saw their price momentum stall in the midst of recent volatile market conditions, despite the announcement of positive quarterly financial results. The following is a recap of some of the most notable highlights of several of these stocks.

    China Education Alliance (CEU) Closing price on Aug. 19 was $4.68.

    • Added to GeoBargain list on June 3, 2009 at $2.78.
    • Reached a price of $6.46 on August 7, 2009, an increase of 132% since our initiation price.
    China Education Alliance announced its second quarter financial results on August 11, 2009.
    • Revenues increased 82% to $8.2 million
    • Earnings per share increased 86% to $0.13 and met analyst estimates.

    The GeoTeam has updated The Company's financial snapshot and valuation scenario tables.

    It is important to note that 2009 earnings per share analyst estimates have been reduced, as reflected in our valuation scenario tables. The estimates portray quarterly growth of 4% to 16% for the next four quarters before picking up again to over 46% in the Company's September ending 2010 third quarter. This may have some bearing on investor valuation assumptions in the short-run. On the flip side the stock is still selling at a significant discount to its peer group and has a PEG ratio that is solidly under 1.

    China Bio Energy Holdings (OTCPK:CBEH) Closing price August 19, 2009 was $5.89.
    • Added to GeoSpecial list on June 1, 2009 at $4.25.
    • Reached a price of of $7.50 on August 11, 2009, an increase of 76% since our initiation date.
    As the GeoTeam speculated, in its research note on August 5th, China Bio Energy was able to exceed analyst estimates. The company reported 2009 second earnings per share of $0.25 compared to an estimate of $0.19. CBEH also reaffirmed its previous guidance.

    FULL YEAR 2009 Guidance Ending December

        Full Year 2009 Guidance   Full Year 2008 Reported   Period Change
    GAAP Revenue   $240.7 million   $216.8 million   11.0%
    Non-GAAP Net Income   $33.7 million   $28.6 million   18.0%

    Source: See Release, May 13, 2009

    The GeoTeam has provided potential valuation scenarios for CBEH.

    Impetus for growth going forward per conference call notes:
    1. China's growing demand for energy to accommodate day to day activities.
    2. Increase in fuel consumption to accommodate larger number of commercial and passenger vehicle usage.
    3. Shortage of domestic oil resources.
    4. Increase in government initiatives for alternative energy sources.
    5. China is the world's second largest oil consumer.
    6. Holds valuable difficult to obtain distribution license that should enable the company to gain additional market share.
    7. Strong cash flow and cash positions will allow the company to execute its growth strategy.

    Cpi Aerostructures Inc (NYSEMKT:CVU) Closing price August 19, 2009 was $7.00.
    • Added to GeoBargain list on Feb 4, 2009 at $5.00.
    • Reached a price of $8.30 on August 18,2009, an increase of 66% since our initiation date.
    On August 11, 2009 CVU announced strong 2009 second quarter results:
    • Revenues increased 25.3% to $11.4 million
    • EPS increased 133.3% to $0.14
    • The Company maintains guidance revenue in the range of $42 million to $45 million, resulting in net income guidance of between $3.9 million to $4.3 million. Guidance implies EPS of ~$0.62 to $0.69 for 2009 compared to $0.42 for 2008.

    Yuhe Intl Inc (OTC:YUII) Closing price August 19, 2009 was $5.20.
    • Added to GeoBargain on Radar list on May 18, 2009 at $3.96.
    • Added to GeoSpecial list on August 17, 2009 at $5.10.
    • Reached a price of $5.25 on August 17, 2009, an increase of 3% since our GeoSpecial initiation date.
    On August 14, 2009 Yuhe Intl reported strong second quarter financial results, slightly exceeding analyst estimates.

    • Revenue increased 75.5% to $9.8 million
    • Fully diluted EPS increased 85.7% to $0.13.
    • Company maintains fiscal 2009 guidance of $50 million in total revenue and $13 million in net income.

    Using the current outstanding share count of 15,722,180, Company guidance implies an earnings per share figure of $0.83.

    The share count of 15,722,180 seems like a reasonable assumption due to comments from the Company's most current 10Q filing.

    "The Company expects that its strong positive working capital of $4.84 million as of June 30, 2009 will meet its foreseeable working capital needs for the next 12 months from the date of this report as management believes the Company would be able to renew the $8.3 million bank loans that are due in the next 12 months."

    YUII is currently on the GeoBargains on the Radar list. In order to upgrade to a GeoBargain, the company would need to attain earnings per share growth of at least 30%. While analyst estimates indicate that the company will achieve this requirement in some of the upcoming quarters, the EPS growth rate is not forecast to reach 30% on an annual basis.

    • 2009 annual non-GAAP EPS growth rate: 16.4%
    • 2010 annual growth rate: 17.5%

    The GeoTeam will code YUII a low tier GeoSpecial as a result of the stock's tax adjusted P/E to 2010 earnings per share growth statistics:

    • Price as of August 14, 2009: $5.20
    • 2010 tax adjusted analyst estimate: $0.64a
    • P/E on 2010 tax adjusted analyst estimate: 8.1
    • PEG ratio based on 2010 earnings per share growth rate: 0.46

    Why low tier?

    The Company will face a difficult earnings per share comparison later this year in its fourth quarter. Short-term investors may view this situation with trepidation.

    a For valuation purposes, The GeoTeam prefers to adjust EPS to reflect a tax rate of 36%.

    China Bio Products Inc (NASDAQ:CBPO) Closing price August 19, 2009 was $4.35.
    • Added to GeoBargain list on April 27, 2009 at $4.15.
    • Reached a price of $5.00 on June 2, 2009, an increase of 21% since our initiation date.

    China Bio Products reported 2009 second quarter financial results well above the GeoTeam's expectations.

    • Revenues increased 178.2% year-over-year to a record $33.2 million
    • 2009 2nd quarter Non-GAAP EPS increased 151.5% to $0.38 per diluted share vs same quarter in 2008.
    • 2009 2nd quarter Non-GAAP EPS increased 90% from the 2009 first quarter.

    The GeoTeam participated on China Bio Products 2009 second quarter conference call. Overall the call was bullish. CBPO showed impressive internal growth even if the contribution from a recent acquisition are omitted. On the call the company maintained guidance.

    See Updated Financial Tables
    See Updated Valuation Scenarios

    Part 2>>


    Disclosure: Long CEU, CBEH, CVU, YUII.OB, CBPO.OB

    Stocks: CEAI, CBEH, CVU, CBPO
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