China Expert

China Sky's Financial Irregularities Continue in Third Quarter Earnings

I guess Ascensio might start blasting Chattem Inc (CHTT $63) the manufacturer of Dexatrim. Who knows if it works but I do know that Chattem has 72% gross margins and the advertising expenses are very close to that of cost of good sold. I doubt if there are any barriers to entry for products like Dexatrim either CHTT has an enterprise value of over $10 billion. Not shabby ! I assume CSKI's advertising expense is included in SGA. This short is clearly not working for Ascensio. If the cash of $56.3M is real, than Ascensio can continue whistling Dixie while this company continues to pile on the cash and the stock becomes worth more. The cash simply proves that "it is" what "it is". Maybe a year from now cash will be closer to $80M and the stock will be valued at 3x cash flow. It's those kind of metrics that took CHTT from being a single digit stock a while ago to $63 a share. Ascensio is playing with fire on this stock !

AOB's Cash Generation Provides Backstop to Earnings Miss

Very good report. As the company gets bigger through organic growth and acquisitions, it gets tougher to give accurate estimates. Regultory risk are never really apparent until they happens. I agree, the company is a very nice free cash flow generator and the stock is cheap on a TEV/EBITDA basis. It gets cheaper if you subtract the value of AOB's holding in CAXG. Clearly, the confidence in management is what has created this cheap valuation. Nonetheless, you can't argue that the value of this company continues to increase at a healthy pace due to its strong free cash flow generation. You can't agrue that the outlook for free cash generation is good and its a matter of simply how much !

American Oriental Bioengineering: Questionable Acquisitions

Regarding CAXG....I guess the author simply "forgot" that On August 6, 2009 China Aoxing Pharmaceutical Company completed the sale of 5,263,158 shares of its common stock to fifteen investors. The shares were sold for $.95 per share in cash for total proceeds of $5,000,000. Someone put a "value" on this company clearly more than AOB paid...and now the company continues to be funded. Oooo one other thing... I guess the author failed to mention the list of 14 proprietary drugs that CAXG will be marketing over the next 2-3 years. Gee.... I wonder what the "new cash" and "new drugs" will do for the "going concern" statement going forward that auditor included as the company was in the development stage ? Someone these "minor" details slipped the author's mind..... Ooops I forgot the author would say . Gee....also.... maybe the author also forgot that most drug development companies incurr losses and bear the "going concern" off and on until their products go to market. I wonder who might help CAXG distribute these new drugs ? Gee... I wonder ??? Just maybe CAXG will become very profitable and AOB will look like a FOX for purchasing a company with very unique drugs that will result in both financial and strategic success. But I guess these facts are NOT important and that is why they slipped the authors mind. Darn how that happens !

Imperial Sugar: Spike in Sugar Prices Sweetens Prospects

Some very good points...also...contri... to the "perfect storm" is the fact that currently old sugar and gas contracts are expiring allowing Imperial to realize higher sugar prices and lower gas prices. During the last "perfect storm" besides regular dividends, Imperial paid special dividends of:


Jan 3, 2008 $2.50
Jan 5, 2007 $3.00
Nov 11, 2005 $2.50

Imperial Sugar: Spike in Sugar Prices Sweetens Prospects

Some very good points...also...contri... to the "perfect storm" is the fact that currently old sugar and gas contracts are expiring allowing Imperial to realize higher, besides regular dividends, Imperial paid special dividends of:


Jan 3, 2008 $2.50
Jan 5, 2007 $3.00
Nov 11, 2005 $2.50

Roubini Hates Gold: Is He Wrong Again?

In a recent Fortune article, the author said between now and 2014, 450 more tons of Gold will be produced. Thus he thinks that is a good reason for gold not to go up. Well, 450 tons of gold is worth $14.4 billion or about 3-4 weeks of Chinease net trade surplus with the USA. As central banks "de-dollarize", it won't take much to absorb the increase of any gold production.

E*Trade: A Solid, Deep Value Stock

Deep value stocks trades as a low multiple of EBITDA relative to its total enterprise value. This company has NO EBITDA. This stock is neither a deep value stock nor a value stock .... it is merely a stock that trades measured on hope.

AOB Chairman's Questionable Second Passport and Potential Undisclosed Conflicts of Interest

Thank you for bringing this to the company's attention. I assume they will resolve any matters that need to be resolved and get on with the business at hand. Ascencio's help is much appreciated. Keep up the good work !

Now the question is: How will the government's essential drug list impact AOB next year and how much EBITDA and free cash can this company generate ?

Note: Ascensio, there are about a dozen more Chinese pharma small caps companies outstanding . I am 99% positive that your analysis will find issues with all of them. Get to it ! Knock yourself out !

China-Biotics: An Undervalued Stock with a Growth Catalyst

Some valid points here. To clarify, the company has increased its cash position over the last 12 consecutive quarters to $77.4 million. On the liability side it has a $25M convertible bond that matures 12/2010 and converts at $12 per share and a questionable tax liability of $26.1 million which has increased steadily for a few years. Value and free cash flow investors will like that the business generates consistant 40sh% EBITDA margins and except for plant construction/expansion costs, low maintenance capital expenditures could cause significant free cash flow generation. The fact that China is a net importer of probiotics bodes well for future demand. Once the new plant is running at full capacity in late 2010/early 2011, revenues should approach a $154 million a year run rate with an EBITDA run rate of $55-$65 million. Assuming 19.2 million FD shares and a 15% tax rate (started 1/1/09), EPS would be about $2.47 per share. I assume by that time, the cash position will be much higher and the $25 million of converts will have been converted. Hopefully talk of raising cash for future international expansion/acquisitions is delayed until the stock increases in response to earnngs increases or using organic generated free cash flow is carefully studied at a viable alternative.

Five Reasons to Invest in China Armco Metals

This is forum for "touting" stocks to retail investors who spend more time looking at a menu in a restaurant than looking at a 10K in which they will spend 1,000 times more. This "five reasons article" is nothing more than a way of "pimping" someones long position flogging EPS without focusing on risks in the company. If you want a FCF/Deep value idea ... look at CBPO and SKBI...... both have hair on them as most Chinese stocks do but the metrics are compelling. The is not the forum for "real" analysis but for many "investors", I guess this is as good as it gets. So Sad !

Five Reasons to Invest in China Armco Metals

I wondered what happened to this company so I spent a few moments looking at it. Questions: 1) Why did the company terminate its IR relationship early this year ? Hmmmmmm 2) Why doesn't the company have an English speaking spokesman ? If they did....maybe they'd be attending some of the Chinese investor conferences at Roth or Rodman etc ....3) Not one of the investors in the "deal" is a recognized investor in Chinese companies....hmmmm 4) With a "cashless provision" for the 2.7 million warrants at $5....i expect a lot of selling overhang for quite a while once the stock goes over $5.....5) No Chinese fund has purchased any shares since going public.........Its nice that the company on August 11, 2009, Armet obtained a RMB 90 million three-year line of credit from a financial institution guaranteed by the Company’s chairman and CEO, none of which have be drawn as of August 14, 2009; the interest is a floating rate not to exceed 5%.......Nonetheless..... smells here..... seems the company has made a committed effort to stay away from investors. If management stays away.....then I will stay away. Good luck pumping this to "retail" investors.

Five Reasons to Invest in China Armco Metals

Pretty weak report......warrants dilution (work in process ?)...check 10K......details warrants and strike price....either they are or are not in the money.....if so....calculate enterprise value assuming treasury method..... What's EBITDA ??? What's free cash flow ? What's balance sheet look like ? "strong" is a meaningless without details ...(check 10Q) ? How much st and lt debt ? how much cash ? inventory turns ? How about A/R ? DSO s ? How about comparing valuation to comps ? Any "make good" provisions in this co ? etc etc etc...... Good report for a person who thinks "EPS" is the holy grail to moving stocks higher. Nothing could be further from the truth !

Buy These Three Stocks During the Dip in Highly Valued China

Jordan....while the Chinese stocks trading oversease and on the big board trade at crazy multiple there are many smaller China stocks trading at "value" multiples under 5x, growing fast, debt free and generating attractive FCF. SKBI is in this category along with a small handful of others.

Skystar Bio-Pharmaceutical: Significantly Undervalued

A cash generator and value stock in the most "detailed" interpretation. The company generated $9.7M of EBITDA for the cumulative last twelve months and assuming $19M of net cash generated from the last raise at $12.80 per share, you can buy the whole company for $22.3M (net of cash/debt). I can't find a company in China or in the USA that is valued at less than 2.5x EBITDA, with such nice cash flow margins and that requires so little in capital expenditures to run the business. Can anyone top this value in any company out there ?

International Speedway: Poised to Win

As soon as we have any semblance of an"intermediate-term cyclical recovery" I will look at this stock ....... Ping me when this trades at 5x EBITDA.