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
China Recycling Energy Corporation (OTC.BB:CREG)
China Recycling Energy Corp. is based in Xi’an, China and provides environmentally friendly waste-to-energy technologies to recycle industrial byproducts for steel mills, cement factories and coke plants in China. Currently, recycled energy represents only an estimated 1% of total energy consumption and this renewable energy resource is viewed as a growth market due to intensified environmental concerns and rising energy costs as the Chinese economy continues to expand.
On August 21st 2009, the Company announced unaudited financial results for the second quarter of 2009 ended June 30, 2009.
Check out the full details below!
Read Full Press Release
China Stocks TV Segment
HIGHLIGHTS
2nd Quarter Ending June 30, 2009
- Revenue was $11.1 million compared to $4.3 million in the first quarter of 2009 and $2.6 million in the second quarter of 2008.
- Net income was $3.2 million with a Diluted EPS of $0.07 versus net income of $1.1 million and a diluted EPS of $0.02 in the first quarter of 2009 and a net loss of $3.8 million and a diluted EPS of $(0.12) in the second quarter of 2008 (restated).
MY COMMENTS:
Both revenue and profits grew at an extraordinarily fast pace, both sequentially and year-over-year. However, the share price has not followed, so investors have a real opportunity to get in to a fast growing company at cheap prices.
Granted, by Chinese standards, revenues are still small but anytime a company more than doubles sequential growth and quadruples annual growth, you have to take notice. EPS of $0.07 for the quarter is extremely attractive for a company trading in the $1.20 range.  When taking a closer look at the company, make sure to examine the balance sheet for any weaknesses. If they’re clean and have no skeletons in the closet, let me know so that we can ride this one together.
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
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