ASN

Jinpan Int'l: A Small-Cap Chinese Infrastructure Play

JST is in an extremely interesting space and appears, on the face of it, to be a well run company. Electricity demand in China and across Asia has grown steadily over the last 20 yrs and will continue to do so in the future. In particular, as state owned utilities across the region are pushed to improve their distribution networks and technical efficiencies, companies like JST will be presented with a growing market. So, my view is that the macro/industry growth story is good. There are two things holding me back, though. First, I don't have a good feel for the competitive pressures, other than the fact that JST has increased sales 47% YOY last qtr. Second, it's free cash flow generation has been spotty at best and was $8 MM in the red in 2007 as its Accts Recvble spiked 4-fold from the previous year. For any business to generate operating cash flow that is signficantly lower than net income is not a good sign. Any views? Thx.