Agoracom Blog Small-Cap Feature: Orient Paper Has Top And Bottom Line Value

Posted by AGORACOM at 9:30 AM on Friday, August 21st, 2009

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.


Orient Paper Inc. (OTC.BB:OPAI)

Opai - header

Orient Paper, Inc., through its wholly owned subsidiaries, controls and operates Hebei Baoding Orient Paper Milling Co., Ltd (‘HBOP’). Founded in 1996, HBOP is engaged in the production and distribution of products such as corrugated paper, offset paper, writing paper and blueprint paper.

On August 17th 2009, announced it Second Quarter revenue.

Check out the full details below!

Read Full Press Release

China Stocks TV Segment


  • Revenue for the second quarter of 2009 was approximately $22.4 million compared to approximately $17.6 million for the same period in 2008, an increase of approximately 27.6%.
  • Gross profit for the second quarter of 2009 increased 25.2% to approximately $4.0 million from approximately $3.2 million for the second quarter of 2008.
  • Net income was approximately $2.5 million, or $0.05 per diluted share


Strong revenue and profit growth is great to see.  Even better to see a company with $0.05 EPS for the quarter.  If they can maintain this pace (excluding the terrible Q1 of the year), then we’re looking at a company with $0.20 in annual earnings.  This assumes no further growth, which we know is unlikely.  Given the fact Orient Paper is trading at $0.85 range, you have a company trading at just over 4X earnings.

The caveat is to make sure the $0.05 in EPS this quarter didn’t come from pent-up demand as a result of Q1 slowdown.

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.


We’ve provided investors with two great starting points to research great Chinese small cap and mid cap companies.

1. – 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.


2 Responses to “ Small-Cap Feature: Orient Paper Has Top And Bottom Line Value”

  1. Assyrian says:

    To understand the Chinese mentality of doing business you have to take a top down approach. George, you rightly stated that Chinese small caps have a tendency to save money where as their north american counter parts do not. I couldn’t agree with your more. Compare the two governments during this recessionary time. China had accumulated trillions of US dollars, while the US was trying to spend itself out of debt. Yes, demand for Chinese products has slightly decrease during this period, however one can imagine what will happen when North Americans open up their wallets again.

  2. Michael Dunder says:

    George, is there any link you can refer us to that we can see how the company plans to stay competitive selling in an ever evolving digital market place? I see they are still making revenues but I can imagine it comes at a cost too.