Seeking Alpha

Zack Buckley's  Instablog

Zack Buckley
Send Message
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
My blog:
Uncovering Alpha
  • Interview with Michelle Zhu CFO of CSGJ 1 comment
    Aug 13, 2010 1:05 AM | about stocks: CSGJ
      

    Interview with Michelle Zhu CFO of CSGJ

     

    ·       Can you give me some background for the company?

     

    China Shuangji (OTC:CSGJ) is based in Shandong province with 3 plants in operation and 1 new plant in construction, 54 million in sales, and 4.4 million net income in 2009.  It became public in the USA in 2008. The company was taken over by the management team in March 2002 (previously a state owned enterprise). Currently we have 1.5 million tons capacity per year, 500,000 tons each for 3 plants.  With the completion of the Zhaoyuan facilities, we should have 2.5 million tons of production.  The new plant will cause a 79% increase in revenue and 71% increase in net income.  Given full 2011 revenues and expected margins, CSGJ has a forward pe of 2.1. 

     

    ·        I see the company is dual listed, how does that affect the shareholders and what percentage does the US listed OTCBB company comprise of the company?

    The total shares outstanding is not affected by the dual listing.  It is listed on the lowest grade exchange in Germany, which is like the pink sheets. This enables European or other international investors to buy and sell in that time zone, but as I understand it, if it is traded over there, Euroclear will buy or sell an equal number of shares on the OTCBB.  Basically, the only shares outstanding are the ones issued by the China Shuangji Cement, Ltd. (CSGJ OTCBB). 

    ·        So what will you do with the 3.7 million un-secured non-convertible loan?

    We are using the money to acquire the final pieces of equipment and doing the finish work to complete our new 1 million ton capacity plant in Zhaoyuan.

    ·        When will you start production on the new plant?

    3-4 months to finish the plant

    ·        When will you reach full capacity?

    1st 1-2 months is 60% capacity, after 2-3 months it will be at full capacity

    Where do you see the company in 5-10 years? What type of growth do you foresee?

     

    Currently we want to get this plant online.  In a year we will upgrade another plant at Longkou. Longer term plans are contingent upon the ability to grow organically.  If we see other opportunities to buy at good prices, we will look to do that.  We don’t plan to grow at any cost.  Mr. Song the Chairman had offers from investors to buy stock at cheap prices, but he rejected them because the shares were priced too low.

     

    ·       Do you have plans to raise capital in the future?

    Right now there are no plans to raise capital,  we need to get the plant online and that is what we are focusing on.  If at a later date the stock price is at a good price, we might consider raising money, but with the main goal being to increase EPS.

     

    ·       What are your various segments?

    3 operating facilities and 1 under construction

    2 in Hainan - a large island/province in the south.  Hainan is very fast growing. 

    The other plant is in Longkou, a 45 minute drive from Zhaoyuan, own 51%.  In another 3-4 months, the Zhaoyuan facility will be open. 

    The 3 operating facilities make 500,000 tons, which is about 20 mm USD.  The Zhaoyuan facility will have about a million metric tons, which is about another 40 mm USD in additional sales. 

     

    Who are your main competitors?

    Cement is localized so it cost money to import it.  There are other cement producers in Shandong province, but it is a fragmented industry.  The shipping cost adds to the expense. It is not like a computer that is low cost shipping.

     

    The government is behind the facility. Local contractors want to use it.  Local cement is always cheaper than anything

     

    How do you know the factory will continue to do well?

    Government officials are all friends and the government favors the Chairman, the Chinese government doesn’t want overcapacity in these areas. 

    Older cement plants pollute more, are less energy efficient, and also the government wants fewer cement plants instead of smaller ones.  5,000 cement plants in china and they want to reduce to 3,000. 

     

    ·       What size is your auditor?

    Bernstein and Pinchuk (BP Accountants) is under the BDO alliance, which means they adhere to BDO standards. they have about 40 US- listed Chinese companies.  They are well known and respected among almost all investors in the US listed China space.  I have never heard an investor say anything bad about them.  In this space, they are the cream of crop, without the high price.  Their audit prices range 115,000-150,000 including K’s and Q’S (full year).  We specifically chose them for the low cost and the high quality.  They have offices in Guangzhou and Beijing, with about 40 people on the ground in China.  They usually spend 4-6 weeks for the audit with a four person team.  They visit all the factories and do inventory counts.

     

     

    ·       If you were investing in China, how would you avoid fraud?

    Look at the audit firm, look at how the audit team does the audit, the audit teams need to look at the documentation, and make sure that is one of the biggest issues.  Documentation is vital in an audit, if there are no supporting documents, you should know that.  Companies must have a reputable auditor like Bernstein and Pinchuk. 

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

     

    China green agriculture (NYSE:CGA) and  Yongye (NASDAQ:YONG)

     

     

     

     

     



    Disclosure: LONG CSGJ
    Stocks: CSGJ
Back To Zack Buckley's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (1)
Track new comments
  • World Market Media
    , contributor
    Comments (48) | Send Message
     
    China Shuangji Cement, Ltd (OTCBB: CSGJ) Benefiting From Industrial Production Boom
    www.worldmarketmedia.c...
    7 Oct 2010, 05:03 AM Reply Like
Full index of posts »
Latest Followers

StockTalks

  • Tuesday night CNYD, Wednesday CCLTF and EDS. Today met with AMCN and VISN Flying back to New York tomorrow morning China time for Rodman
    Sep 9, 2010
  • In Fuzhou for Day 1 of CCME.OB investor conference.
    Sep 6, 2010
  • Saw a massive steel factory today. Tomorrow going to terracotta warriors.
    Sep 2, 2010
More »

Latest Comments


Most Commented
Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.