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China Insonline Corp (CHIO) ready to Rock & Roll

If one stock is hated, loved and out of favor than it is CHIO. This stock is a trader’s ball that sometimes scores. For an investor like me that has CHIO shares at prices way above $ 1.00 it is just waiting to see a rebound.

A lot is said about the company. But one thing is for sure it is damn cheap. Fundamentals don’t say anything about a company some investors say. But for me it is just that margin of safety. If book value is much higher than the stock price, P/E is lower than five, etc. etc ……… I love it.

Of course a lot can go wrong with a company, but life is not sure especially the life of a contrarian value investor. To see other people making money and your money being hammered is never easy. Sometimes it takes time and guts to see a company rise like a phoenix from the ashes.

The Case

China INSOnline Corp. (CHIO), incorporated on December 23, 1988, is an Internet services and media company focusing on the China’s insurance industry. The company operates in three segments: software development, online insurance advertising and insurance agency within China. With localized Websites targeting Greater China, the Company primarily provides, through Beijing Zhi Yuan Tian Xia Technology Co., Ltd. (ZYTX), a network portal through its industry Website, (Soobao), to insurance companies, agents and consumers for advertising, online inquiry, news circulation, online transactions, statistic analysis and software development. The company is also a licensed online motor vehicle, property and life insurance agent generating revenues through sales commissions. On October 28, 2008, the company acquired Guang Hua Insurance Agency Company Limited (GHIA).

China INSOnline Corp. reported their net income for the second quarter of fiscal 2010 jumped 33% to $1.16M. The company’s book value per common share jumped emphatically to $0.61/share, attributed to 23% growth in the company’s total assets, when compared to the prior quarter.

Modest growth (3%) in revenues and superior margin growth during the quarter are credited with producing a greater bottom line. “[…] An array of high margin services to the insurance industry in China consistently delivers profits to our shareholders. We will continue to focus on high margin opportunities with our online platform and continue focus on creating greater shareholder value going forward," commented Ms. Betty Xu, the company’s CEO.

Earning $0.11/share, or $4.29 M in the six-month period ended December 31st, 2009, the company’s twelve month trailing Earnings-Per-Share (NYSEARCA:EPS) totals $0.25. Where the price-to-earnings (P/E) ratio is among the most common and reliable measures of value, the company is in my opinion undervalued. Given the recent market price, the company trades with a P/E ratio less than 2.5. If value investors are willing to pay for bargains at these prices, they are likely to find CHIO attractive at twice the current market price. For every other investor that could mean a large ROI. Especially with the hiring of veteran Mr. Han in January the company is ready to Rock and Roll again.


Disclosure: POSITION: LONG