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
New Energy Systems Group (OTC.BB:NEWN)
New Energy Systems Group, is a vertically integrated original design manufacturer and distributor of lithium ion batteries and backup power systems for mobile phones, laptops, digital cameras, MP3s and a variety of other portable electronics. The company’s end-user consumer products are sold under the Anytone brand in China, and the company has begun expanding its international sales efforts.
On May 14th 2010, the Company announced financial results for the quarter ended March 31, 2010.
Check out the full details below:
HIGHLIGHTS
First Quarter 2010 Highlights:
— Revenue increased 753% to approximately $22.5 million
— Gross profit increased 801% to approximately $6.4 million
— GAAP EPS increased 235% to $0.30 per diluted share
— Adjusted EPS increased 297% to $0.37 per diluted share
— Generated $6.6 million of cash flow from operations
— Reaffirms 2010 adjusted EPS guidance of $1.23 per diluted share
My Comments
These are record revenues and EPS according to the company. More importantly, NEWN re-affirmed guidance of $1.23 EPS for 2010. At a closing price of $7.97 yesterday, you have a company trading at 6.5X 2010 earnings, while growing revenues by 753% and GAAP EPS at 235%.
Unless there is a skeleton in the closet, this seems like tremendous value to me. Let me know what you find.
YOUR RESEARCH STARTING POINTS FOR CHINESE SMALL CAP AND MID CAP COMPANIESWe’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