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Coke is a full-time investor who employs macro-investing strategies.Her biggest strength is the acute identification of macro trends and leverage that strength on stock investing. The approach she utilizes is top-down and fundamental analysis. Her focus areas are commodities,retailers and real... More
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  • No Drought for TRIT 6 comments
    Oct 21, 2009 9:34 PM | about stocks: TRIT

    China's Spending on Water

    As previously discussed in my blog's "Tap into Chinese Water", spending on water resource and wastewater management in China is expected to soar in the next few years.

    According to the budget plan announced by Ministry of Water Resources, China expects to invest $11.7 billion in 2009 in water.resources sectors. China’s central government has allocated $3.8 billion in the first half of 2009. With the projects the central government has approved, this investment will increase to $45 billion in the aggregate over the next 3 years. The projects include mitigation of 6,240 unsafe small and middle-sized reservoirs due to lack of proper maintenance for several years.South-North Water Transfer Project is a large, inter-basin, long-distance water transfer project that is charged with dozens of major urban water supply tasks for such cities as Beijing, Tianjin and Shijiazhuang.

    TRIT Can Ride the Wave

    Tri-Tech Holdings, Inc (NASDAQ:TRIT) is a small Chinese company that specializes in water resource, wastewater and tail gas management. In the first half of 2009, about half of the revenues came from water resource management and the other half from wastewater and tail gas management.

    TRIT definitely falls into the categories of "high-growth" companies. Q2 '09 revenue was up 54% to $3.1M from $2.0 M in Q2 '08. Q2 '09 net income $865K or $0.24 per diluted share up 100% from $444K or $0.12 per diluted share. For the six months ended June 30, 2009, revenue stood at $6.0M, up 75% from $3.4M a year ago. Net income $1.5M or $0.41 per diluted share up 78% from $807K or $0.23 per diluted share.

    Assuming a range of 2009 earnings per share (NYSEARCA:EPS) between $0.65 to $0.82, at yesterday's closing price of $18.25, the stock has a price-to-earnings ratio (NYSE:PE) of about 22 to 28. This is comparable or slightly higher than its Chinese counterpart DGW, another Chinese water management company that too has just made its initial public offerings.

    The valuation is fair on the assumption that the company can succeed in its pursuit of government projects in the next few years. The company is currently pursuing 100 river basin flood monitoring and forecasting systems in more than 100 counties with a market potential of $72.5M. Additional projects are being pursued through distributors and partnerships with a potential value of $43.5M. The company is pursuing wastewater treatment business in several markets including Tianjin Binhai where the government plans to construct over 40 large pumping stations and 30 sewage treatment plants with a total market potential of $8.7B. Hebei Province plans to construct 50 sewage and grey water reuse treatment plants in the next two years. Sales are expected from early flash flood warning system projects in Hubei and Tsinghai provinces. Increased sales also are anticipated in a long distance water transfer project with dozens of urban water supply tasks for major cities including Beijing, Tianjin and Shijiazhuang where the company is already engaged.

    Risks

    Noteworthy is that the company may face political risks in China where regulatory and central and local budget allocation procedure can be very complex and tricky. Small companies like TRIT may not have enough political connections to be granted big projects. In fact, should there be delays in budget allocation or receivables collection  which is not unusual in emerging markets, the company can face problems in its working capital.

    Note:

    1. As both companies are recent IPOs, the number of shares outstanding reported in http://www.google.com/finance is different from the one used in calculations of their most recent SEC filings.

    Disclaimer: Stocks/financial instruments mentioned in this blog are not to be taken as investment advice/recommendation. Readers must consult their own financial advisors and/or consider their own risk/reward profile before making investment/trading decisions. The blog author is not liable for any investment/trading decisions of readers should readers decide to base the decisions on information provided by the blog.

    Disclosure: The blog author has long positions of TRIT in her personal account as of October 21,2009

    Stocks: TRIT
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Comments (6)
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  • John Rayhall
    , contributor
    Comments (97) | Send Message
     
    I'm long TRIT and I believe in the long term growth story for the company, and the whole thesis about the need for clean water and the water shortage in China; but what is your take on the stock being hammered down to the low 12s today( and being crushed all week)? Is it simply profit taking by funds to lock in their profits? Thanks
    28 Oct 2009, 03:44 PM Reply Like
  • cocacolabuffet
    , contributor
    Comments (5) | Send Message
     
    Author’s reply » Thanks for your thoughts, John.
    I see this drop of TRIT no different from all other small caps, high beta stocks that have gotten hammered since last week. TRIT being a less known IPO and very small float is very easy manipulated during times like this.DGW will have earnings next week. I expect that to be a good one. If it comes true, I see this as a good opportunity to accumulate more of TRIT. It should be fruitful once the market calms down, becomes less risk averse and the wall street starts to find growth.

     

    That said, I am very nervous about how the broader market will end up this week. I personally think that Dow should correct to around 9600-9650. By then, provided that the growth story is still intact (GS said otherwise today), I am still expecting a Xmas rally. However, I am hedging my portfolio with ultra shorts ETFs just in case the correction is worse that I have expected this time around.

     

    On Oct 28 03:44 PM John Rayhall wrote:

     

    > I'm long TRIT and I believe in the long term growth story for the
    > company, and the whole thesis about the need for clean water and
    > the water shortage in China; but what is your take on the stock being
    > hammered down to the low 12s today( and being crushed all week)?
    > Is it simply profit taking by funds to lock in their profits? Thanks
    28 Oct 2009, 11:45 PM Reply Like
  • John Rayhall
    , contributor
    Comments (97) | Send Message
     
    Thanks for responding. I noticed that all the previous Chinese high flyer stocks had taken a hit recently. Like TRIT,DGW,RINO,CFSG,VIT. So far TRIT is up a little bit over 8% with the overall market. My in right now is around 15.3, I think the stock should hit at least 21-22. Do you think they will issue more shares to counter the volatility of the small float? Also do you know when earnings are? I think this may be a little gem of a company will shall see.

     

    Market looks like it has recovered and looks very strong this morning. Are you still going to stay in your shorts? Thanks for all your advice. Looking forward to seeing your articles and blog :)
    29 Oct 2009, 01:21 PM Reply Like
  • cocacolabuffet
    , contributor
    Comments (5) | Send Message
     
    Author’s reply » John,
    I am still holding my shorts to hedge my long positions.
    Regarding the earnings, in my original post of TRIT, I think it should be in the range of 0.65-0.82. But I will wait for DGW's ER to get more hints of it.

     

    as it just ipoed a couple of months ago, I doubt it'll issue any shares soon. If it did, it would make it look bad (like a company desperately needing funds). I sure hope not. Not yet.
    29 Oct 2009, 02:43 PM Reply Like
  • John Rayhall
    , contributor
    Comments (97) | Send Message
     
    Hi - What's your take on earnings, and where do you think Trit goes from here? Thanks :)
    12 Nov 2009, 05:39 PM Reply Like
  • cocacolabuffet
    , contributor
    Comments (5) | Send Message
     
    Author’s reply » triple digit growth, what more can I ask of it? lol
    Plus it's just gotten 3 contracts in the last month.
    for an IPO which I admit I still don't have as much information as I want, especially the prospect of future contracts, it's probably as good as it gets.
    I maintain my price target of $24.

     

    On Nov 12 05:39 PM John Rayhall wrote:

     

    > Hi - What's your take on earnings, and where do you think Trit goes
    > from here? Thanks :)
    18 Nov 2009, 02:44 PM Reply Like
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