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
Founded in 1995, with profitable sales in 2008 of approximately $190 million (+25%), the Company has grown to become one of the top importers of luxury vehicles in China. Imported luxury automobiles have been the fastest growing segment of the still young Chinese automobile industry. The Company has fueled its sales and profit growth by also becoming one of China’s top logistical servicing and dealer financing companies for other automobile importers.
On May 15th, the Company announced their First Quarter numbers.
HIGHLIGHTS
- Revenues up 35% to $45.1 million – Pretty good considering this is a luxury car importer. Someones gotta tell the Chinese that there is a world-wide recession going on !
- Net Income 10.09% to $1,161,183 or $0.06 per share
MY COMMENTS:
Now this is what’s important. Accounting for approximately 98% of the Company’s first quarter revenues, luxury imported auto sales gre 37.19% not only that, the average selling price per unit increased nearly 11% from &71,244 to $78,858, indicating continuing strong demand among affluent Chinese consumers for bigger cars, despite the economic environment. Now that’s GREAT meta-data right there. It’s a great indication of what’s going on in China and how it’s being affected by what’s going on around the world. The Company has grown to become one of the top importers of luxury vehicles in China. The Company closed yesterday at $3.90
As always, this is my view in a snapshot. It is intended to give you a running start into your research. Now, you have to do your own due diligence to make sure the valuation is not impaired by other factors including balance sheet items, lawsuits or any other negative events.
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