Hong Kong Highpower (NYSE Amex:HPJ) reported strong 2009 second quarter bottom line results this morning. At first glance this appears to be the company's first positive growth quarter in over a year. On the flip side the sales growth is still negative. The GeoTeam® is taking a closer look at Hong Kong Highpower for possible inclusion as a GeoSpecial, pending further due diligence on three issues:
- Has the company reached an inflection point that will lead to sustained earnings per share growth?
- How close is the company to sustainable revenue growth?
- Need clarification on some items in the company's cash flow statement.
For those interested in technicals, the stock price has been on a steady decline for several months.
We are initially encouraged by the following verbiage in Hong Kong High Power's 2009 2nd quarter financial press release.
"We believe the worst effects from the global financial crisis on our business are now behind us," Mr. Pan said. "Sales are up 36.6% over our first quarter 2009, and we are seeing encouraging signs heading into the third quarter with positive July sales trends. In addition, the cost control measures that we have implemented over the past six months will enable us to gain efficiency and emerge an even stronger company over time."
More details will be provided if warranted.
| 2nd Quarter 2009 | 2nd Quarter 2008 | Period Change | |
| GAAP Revenue | $15.4 million | $19.0 million | -18.9% |
| GAAP EPS | $0.07 | $0.05 | 40.0% |
| Tax Rate | 19.1% | 8.6% | 122.1% |
| Fully Tax-Adjusted EPS a | $0.06 | $0.04 | 50.0% |
| Fully Diluted Shares | 13,812,547 | 12,906,483 | 7.0% |
| Price | $1.68 | n/a | n/a |
| Tax Adjusted trailing EPS | $0.12 | n/a | n/a |
| Tax Adjusted P/E | 14.00 | n/a | n/a |
Source: See Release, August 10, 2009
a Hong Kong Highpower is not paying a full U.S. tax rate. Therefore, all EPS numbers have been adjusted by the GeoTeam® to reflect a U.S. tax rate of 36%.
Source: GeoInvesting.com