China BAK +40% after LG Chem's deal for electric car battery factory in China

China BAK Battery (CBAK +39.8%) shares are soaring, perhaps related to a WSJ article out this morning which discussed South Korea's LG Chem looking to invest hundreds of millions of dollars in building an electric-car battery factory in China, which may begin production in 2015.

The move by LG Chem comes as automakers are rushing to introduce electric vehicles in China, driven by the government's plan to put 500K such vehicles on the road by 2015 and 5M by 2020.

Comments (6)
  • King Rat
    , contributor
    Comments (1740) | Send Message
    As much flak as westerners often give China for poor standards of QC, when you look at photos of Chinese cities 40 years ago, 20 years ago, and today, you have to admit that when China sets a goal, China can often achieve that goal. 5.5million cars between 2015 and 2020 is a huge number. It kind of makes Tesla look like a AAA battery compared to... a car battery.
    2 Jul 2014, 03:50 PM Reply Like
  • Mukticat
    , contributor
    Comments (2075) | Send Message
    And if you were to read the latest 10-Q you would know that this company is functionally bankrupt. How long this condition can last before the stock is cancelled and becomes worthless is anyone's guess but it's likely to be within the next 12 months. As to actually earning money they have a rich history of losses which doesn't exactly inspire confidence in their management.


    Here's a tidbit from the last earnings report-


    'The Company has net liabilities, a working capital deficiency, accumulated deficit from recurring net losses incurred for the current and prior years and significant short-term debt obligations maturing in less than one year as of March 31, 2014. The Company has been suffering *severe cash flow deficiencies*.


    Because the Company defaulted on repayment of loans from Bank of China in August 2013, the Company experiencing and, the Company believes, will continue to experience significant difficulties to renew the Company’s credit facilities or refinance loans from banks.


    Upon request of Bank of China, Shenzhen Municipal Intermediate Court has ordered to freeze all of our properties in Shenzhen BAK Industrial Park and Tianjin Industrial Park Zone near the end of fiscal year 2013. The Company repaid our defaulted loans from Bank of China on January 9, 2014 and its frozen properties were released by the court on January 13, 2014.


    In order to extend bank loans to various due dates to March 2015 , the Company was required to pledge its assets in Shenzhen, including land use rights and property rights, equipment and inventories. As of March 31, 2014, the Company had access to $67.1 million in short-term credit facilities and $25.8 million in other lines of credit, almost all of which were utilized to the extent of short-term bank loans of $65.3 million and bills payable of $25.8 million, leaving *only $1.8 million of short-term funds* available under the Company's credit facilities for additional cash needs.


    These factors raise substantial doubts about its ability to continue as a going concern.'
    2 Jul 2014, 03:54 PM Reply Like
  • barnsey
    , contributor
    Comments (319) | Send Message
    So, why would LG - along with Samsung having some of the most advanced battery tech in the world as well as a network of R&D/fabrication sites in China - want to buy CBAK batteries?
    2 Jul 2014, 04:26 PM Reply Like
  • Mukticat
    , contributor
    Comments (2075) | Send Message
    Question: 'So, why would LG ... want to buy CBAK batteries?'


    Answer: LG wouldn't. They're competitors to a hugely cash-constrained, nearly insolvent CBAK.


    'We face intense competition from other battery cell manufacturers, many of which have significantly greater resources.


    The market for battery cells used for portable electronic devices such as cellular phones is intensely competitive and is characterized by frequent technological changes and evolving industry standards. We expect competition to become more intense. Increased competition may result in declines in average selling prices, causing a decrease in gross profit margins. We have faced and will continue to face competition from manufacturers of traditional rechargeable battery cells, such as nickel-cadmium batteries, from manufacturers of rechargeable battery cells of more recent technologies, such as nickel-metal hydride and liquid electrolyte, other manufacturers of lithium-ion battery cells, as well as from companies engaged in the development of batteries incorporating new technologies. Other manufacturers of lithium-ion battery cells currently include Sony Corporation, Matsushita Electric Industrial Co., Ltd. (Panasonic), NEC Corporation, Hitachi Ltd., ***** LG Chemical Ltd. ***** , Samsung Electronics Co., Ltd., BYD Co. Ltd., Tianjin Lishen Battery Joint Stock Co., Ltd., Harbin Coslight Technology International Group Co., Ltd., and Amperex Technology Limited.'
    3 Jul 2014, 02:30 PM Reply Like
  • barnsey
    , contributor
    Comments (319) | Send Message
    Korean companies rarely outsource anything. They design, develop and distribute much of the technology used in tech devices.
    2 Jul 2014, 04:35 PM Reply Like
    , contributor
    Comment (1) | Send Message
    Wonder short opportunity.
    3 Jul 2014, 11:47 AM Reply Like
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