As many of you know, we are very bullish on the long-term future of Chinese small cap and mid cap companies for two reasons:
1] The obvious reason – China is the fastest growing economy on the planet and nothing is going to slow down its ascent over the next 50 years and beyond. Investing in growth companies there just makes too much sense.
2] Great Results and Valuations - Many Small Cap Chinese Companies are listing in the US (OTCBB, NYSE Alternext and NASDAQ) with great financial results. Unlike many dubious US Small Cap Companies, Chinese Companies don’t seem to believe in losing money or failing to execute in a business plan. As such, 7-digit revenues and profits are very common.
From a valuation point of view, many Chinese companies became a victim of their own success in Q4 2008 and Q1 2009. Why? When the world needed to start liquidating, one of the first places they looked were China where most investors had significant gains to sell into. This resulted in the proverbial baby being thrown out with the bathwater and some great valuations.
TODAY’S FEATURED COMPANY
Sinovac (NYSEAmex:SVA)
Sinovac Biotech Ltd. is a China-based biopharmaceutical company that focuses on the research, development, manufacture and commercialization of vaccines that protect against human infectious diseases. Sinovac’s commercialized vaccine products include Healive® (hepatitis A), Bilive® (combined hepatitis A and B), Anflu® (seasonal influenza), Panflu(TM) (pandemic influenza (H5N1)), and PANFLU.1(TM) (pandemic influenza A (H1N1)).
On November 15th 2009, the Company reported it’s unaudited third quarter financial results.
Check out the full details below:
Read Full Press Release
Chinese Stocks TV Segment
HIGHLIGHTS
- Sales for the third quarter increased 142% to $21.2 million
- Sales for the nine-month period increased 40% to $47.8 million
- Operating income for the third quarter rose 436% to $12.4 million
- Operating income for the nine-month period increased 90% to $23.7 million.
- Net income attributable to the shareholders increased 606% to $5.2 million in the third quarter, with diluted EPS of $0.12
- Cash and cash equivalents at September 30, 2009 was $46.6 million.
MY COMMENTS:
This press release is great on so many levels. First, before getting into the numbers, consider this statement:
Mr. Weidong Yin, Chairman, President and CEO of Sinovac, commented, “We are very proud that Sinovac was the first company in the world to develop a vaccine for the H1N1 pandemic flu virus.
That’s a pretty big statement to make. Personally, I had no idea that Sinovac was the first company in the world to develop an H1N1 vaccine. More than just lip service, this has translated into serious top and bottom line growth for the company, as seen in my bullet points above.
The company also has about $1/share in cash, so you are actually buying the business at about $7.25 per share. However, given the fact Sinovac reported EPS of $0.12, that puts them at about 15X P/E if they can maintain that level of earnings for the entire year.
Normally, that would still be considered cheap for a company increasing the top and bottom line by 40% (9 months) and 606% (this quarter) respectively – but so much of that is dependent on H1N1 sales. How long will that last?
As always, these are my own views and conclusions. Do your own due diligence. I know this is one company that would benefit from online investor relations.
If you have any comments, I’d love to see them below.
YOUR RESEARCH STARTING POINTS FOR CHINESE SMALL CAP AND MID CAP COMPANIES
We’ve provided investors with two great starting points to research great Chinese small cap and mid cap companies.
1. ChinaSecurities.com – ChinaSecurities.com tracks 250 of the best small cap and mid cap companies trading on North American exchanges. It provides you with the best of the best in two ways. First, the front page lists the best news of the day coming out of the space. It does so by giving you a text view of the best press releases by industry and via Chinese Stocks TV, a 5-minute broadcast every morning just after the open. Chinse Stocks TV is archived, so you can catch up on shows you missed.
Second, if you want to research each of the 250 companies to find candidates for your portfolio, it has a very intuitive directory that lets you quickly review each company on the master list, or parse it out by industry and exchange if you have a particular sector of interest. Cool stuff.
2. Right here on AGORACOM, you can refer to our China category for other featured Chinese Small-Cap Companies. As always, we will disclose any IR relationship with any public company. Given the sheer number of great Chinese Small-Cap Companies out there, you can expect us NOT to have an IR relationship with most of these companies.
Regards,
George
