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I am highly skeptical of the bull run in this market. A lot of overvalued companies out there.
  • Cheapest Chinese Stock  4 comments
    Mar 25, 2014 11:02 AM

    Grand Power Logistics Group appears to be the cheapest Chinese stock when looking at a variety of factors such as low price to earnings, low price to sales and cash per share. It trades on the TSX Venture Exchange under the symbol GPW and its current stock price is 6 cents. Grand Power Express is the operating subsidiary in China which provides ocean freight, warehousing and trucking services. Given China's size as an exporter and growing economy within the borders, GPW is in a good industry.

    The Reuters financial data on GPW shows the value in the company when it trades at 6 cents. The P/E ratio is only 3.32 compared to the industry of 17.29 and sector of 28.84. The Price to Sales is only 0.07 compared to 0.41 for the industry and 2.09 for the sector. The business has turned around as in the past year as sales increased 20.31% even though the 3-year sales growth is -14.64%. EPS improved 149.63% as the company has turned profitable over the past year.

    (click to enlarge)

    Book value is only 0.37 compared to the industry of 1.53 and sector of 2.13. Price to cash flow is only 2.82 versus 7.19 for the industry and 12.72 for the sector. All of these metrics show that GPW should be priced at 4 or 5 times higher than the 6 cent stock price. It should be in the 25 to 30 cent range.

    In addition to that, recent developments for GPW have resulted in an inflow of cash, causing it to be valued at less than cash per share value. Reuters shows Price to Free Cash Flow as negative, but only because GPW used its cash as capital expense to help develop the Yangshan Port Project which it successfully sold its interest in a couple of weeks ago. GPW receives $5.1M for its portion of Yangshan but spent only $1.7M for its interest in the project so it made a profit of $3.4M on the deal. The news release on March 13th states:

    "The sale price for the whole Yangshan Logistics Park project is RMB239 million (approx. US$38.93 million). Grand Power's portion of the sale price is RMB31.55 million (approx. US$5.139) for its 13.2% interest. As of today, Grand Power has received a payment deposit of RMB10.45 million (approx. US$1.7 million). Grand Power has invested a total of HK$13.2 million (approx. US$1.7 million) for its 13.2% interest in the project."

    Because GPW is valued in Canadian dollars on the Toronto Venture Exchange, the deal is for $5.7M in that currency with a US to Canadian exchange ratio of 0.9. GPW has 75,461,278 shares outstanding. So the cash value of the deal is 7.5 cents compared to the 6 cents in stock price. The Yangshan project was not a money making venture for GPW at the time, so none of the earnings and revenue ratios in the Reuters data will be impacted by this deal. So GPW is undervalued versus its peers by 4 or 5 times and now the company has more cash per share than the stock price. It should easily go beyond 30 cents in 2014.

    Below is a snapshot of GPW's official Q3 financial release from November 29th, 2013 for your reference. You can see a great improvement in bottom line profits for Q3 even though revenue went down slightly. The entire release can be found here. GPW will be releasing Q4 results at the end of April. Last year they were released April 30th. I am long GPW.

    (click to enlarge)

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Comments (4)
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  • ShihRyanJ
    , contributor
    Comments (348) | Send Message
    You assume that the numbers are real which is not a realistic assumption for many Chinese companies.
    8 Apr 2014, 04:29 AM Reply Like
  • StockShorter12
    , contributor
    Comments (52) | Send Message
    Author’s reply » GPW is a reporting issuer out of Hong Kong (not China) for the last 10 years and not once has anyone claimed anything fraudulent from them. GPW has a trailing EPS of around 5 now and a 0.1x price to sales ratio and strong cash position in excess of the market cap.


    Contrast that to NQ which has had recent fraud allegations, trades at a trailing P/E of 120 and a price to sales ratio of over 5x. GPW is 20 to 50 times cheaper than NQ without the associated fraud allegations. Either GPW must go up or NQ must come down to come into alignment.


    There are many other peers priced similarly to NQ so my bet is GPW must rise.
    8 Apr 2014, 10:00 AM Reply Like
  • Joe A. Williams
    , contributor
    Comments (1066) | Send Message
    Hell I cant even buy a 6-cent stock at my place! Why compare NQ to a 6 cent stock? If NQ earns just 1.00 a share in 2013 then a p/e of 120 would mean the stock is trading at $120. more like $1.00 eps X around $15 a share = a P/E of around 15. To look at a Trailing P/E of a growing company is practically ridiculous. What was APPLE's "trailing P/E" back when it was $50 a share? Who cares. U make a play on a growth stock because of the GROWTH. NOT what it earned 1 or 2 years ago.
    9 Apr 2014, 06:15 AM Reply Like
  • StockShorter12
    , contributor
    Comments (52) | Send Message
    Author’s reply » I was comparing two companies that both have earnings, with one being more undervalued than the other, no matter if you use trailing or forward P/E. Whether a stock is 6 cents or $600 shouldn't make a difference. Just because it is priced low doesn't make it rubbish. The traditional stigma of a penny stock doesn't apply to GPW. It's not speculative or junk, it's a good earned that just so happens to be a micro cap. Anyone who likes NQ should love GPW as an investment.
    9 Apr 2014, 10:51 AM Reply Like
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