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 Automotive Systems (NASDAQ:CAAS)
Based in Hubei Province, People’s Republic of China, China Automotive Systems, Inc. is a leading supplier of power steering components and systems to the Chinese automotive industry, operating through nine Sino-foreign joint ventures. The Company offers a full range of steering system parts for passenger automobiles and commercial vehicles.
On March 25th 2010, CAAS reported 119% Net Sales Increase and 1,200% Net Income Growth for the Fourth Quarter 2009.
Check out the full details below:
Fourth Quarter 2009 Highlights
— Net sales increased 118.9% YoY to a record $83.8 million;
— Gross margin increased to 29% from 28% in Q4 2008 and 27% in Q3 2009;
— Net income surged 1,199.5% YoY from $0.5 million to $6.5 million;
diluted EPS was $0.21;
— Cash and equivalents were $43.5 million at December 31, 2009.
Fiscal Year 2009 Highlights
— Net sales rose by 56.6% YoY to a record $255.6 million;
— Net income grew 88.3% YoY to $23.4 million; diluted EPS was $0.78;
— Net cash flow from operations was $35.0 million;
— Free cash flow was $17.5 million in 2009.
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. Chinese 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