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发帖数: 1172 | 1 http://seekingalpha.com/article/316966-3-china-stocks-poised-to
I believe these three China stocks, Sino Clean Energy (SCEI), Shengkai
Innovations, Inc. (VALV) and Agria Corporation (GRO), could double in the
next 12 months. They are all trading substantially below book value or below
cash balance. Seasonality factors should favor Sino Clean Energy in the
coming months. I think all these three stocks should start trading closer to
their fair value at the beginning of 2012 when the tax loss selling is done.
Sino Clean Energy is the third largest producer of coal-water slurry fuel by
sales in China, a cleaner alternative to burning coal aggregate in heating,
industrial and power generation for residential and industrial applications
. The company has seven production lines located in Shaanxi, Liaoning, and
Guangdong provinces. The ongoing winter heating season in China should help
revenues in the near future. Most of Sino Clean Energy's revenue has come
from heating customers in the past.
Sino Clean Energy has also announced that its major customer, Shenyang
Haizhong Heating, has completed pipeline modifications and is expected to
resume operations in October as scheduled. This customer has accounted for
30% of Sino Clean Energy's revenue in past quarters.
Sino Clean Energy has a large cash position of $2.49 per share. Company's
management has fiscal year 2011 revenue guidance of between $101.5 million
and $110.7. The company expects Non-GAAP adjusted earnings to be in the
range of $23.02 million to $24.80 million and full year adjusted earnings
per share of between $0.98 and $1.06.
There is one analyst covering Sino Clean Energy. Crystal Equity Research has
updated their Sino Clean Energy report on November 28th. They have a
speculative buy rating with a $2.75 price target. Sino Clean Energy's share
price ended year 2011 at $1.00. There is more than 100% upside potential for
the company's share price if it was to trade just at the cash at hand value.
Shengkai Innovations is a leading ceramic valve manufacturer in the People's
Republic of China. The company's industrial valve products are used by
companies in the electric power, petrochemical and chemical, metallurgy and
other industries as high-performance, more durable alternatives to
traditional metal valves.
Shengkai management has decided to gradually phase out its less profitable
domestic market segments including the electric power market and focus on
expanding the company's presence in the more profitable domestic and foreign
oil and chemical industries, where ceramic valve products typically command
higher prices than the domestic Chinese market.
Shengkai Innovations has a cash balance of $1.89 per share. The current
market valuation is one third of the company's cash balance. Shangkai
Innovations is expected to produce positive cash flow from business, albeit
less than in previous quarters.
I am expecting company's share price to correct closer to its cash balance
based on company's past performance, which would translate into 100-200%
upside potential from the current share price. Geo Investing has a price
target of at least $2.79 for Shengkai.
One of the reasons why Shengkai's stock price has been so depressed lately
is because Vision Opportunity of China Fund has been selling its block of
over 10 million Shengkai company shares. As of September 30th they only had
1,512,275 shares of Shengkai left to sell. Latest insider buys of Shengkai
are from November which is a positive sign.
If you believe that Shengkai Innovations will keep making positive cash flow
in the future as it has in the past, I see no reason why a rational
investor should not buy this company. My recommendation is to buy this stock
as long as it is trading below its cash balance.
Agria Corporation is a China-based agriculture company with operations in
China and internationally. In China, the company engages in research and
development, production and sale of seed products, including field corn
seeds, edible corn seeds and vegetable seeds.
Agria's revenue increased to US$158.8 million, with net income attributable
to the company of US$4.0 million for the six month period ended June 30,
2011. This compares to revenue of US$3.3 million, with a net loss of US$16.3
million for the six month period ended June 30, 2010.
Agria Corporation owns through Agria Asia a majority equity interest in PGG
Wrightson [PGWFF.PK], New Zealand's largest agricultural services company.
PGG Wrightson reported turnover of NZ$1.2 billion (US$1.0 billion) for the
12 months ended June 30, 2011.
Agria owns a 50.01% stake in PGG Wrightson. PGG Wrightson is listed in New
Zealand's stock exchange under symbol PGW. PGW has 757,985,639 ordinary
shares issued. PGG Wrightson is currently trading at NZD 0.38. Agria's stake
in PGG Wrightson is worth 757,985,639 x 0.50001 x 0.38 x $0.77 = $110,895,
517.
Agria has 55,383,300 ADSs outstanding as of June 30, 2011. Agria's stake in
PGG Wrightson is ($110,895,517 / 55,383,300) $2 per share. Agria's share
price was $1.04 at end of 2011. I would not be surprised if Agria traded
again at $2 share price in coming months. I see Agria as a free lunch
currently. I think every rational investor should be selling PGG Wrightson
and buying Agria because of this arbitrage. If you buy 1 share in Agria you
get 1 share in PGG Wrightson for free.
Disclosure: I am long SCEI, VALV, GRO. |
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