New Energy Systems Group (OTC BB:NEWN)

	Recent 52-week high
	30% Earnings Per Share (EPS) growth rate
	10% revenue growth year over year
	Strong balance sheet
	15% minimum return on equity (ROE)
	8% minimum pre-tax margins
	Under 50 million shares outstanding
	High insider ownership
	Limited institutional ownership
	P/E at least 1/2 of EPS growth rate

Excerpt from GeoWire article.

New Energy Systems Group (OTC BB:NEWN). New Energy Systems Group operates in the lithium battery industry.  On September 15, 2009, Richard Pearson highlighted the stock  when the symbol was CMTP, prompting me to take a closer look at its growth story and add to my share position. The move paid off, but I am expecting more returns from my investment.

I recently interviewed management to determine if shares would follow a similar pattern achieved by shares of Hong Kong Highpower Tech (NASDAQ:HPJ) which attained a January high of $9.82 from its October low of $2.87 and sported a forward P/E of 24.  After interviewing management, I am more confident that New Energy may have the vigor to lift shares to new heights. 

Prior to mid 2008, NEWN primarily manufactured just battery shells. While not a horrible strategy to target a battery market growing 20% annually, the company felt it needed to modify its business plan to gain a long-term competitive advantage. To that end, it embarked on an acquisition strategy to vertically integrate its business, add new product lines and enter international markets.  In fact, New Energy recently announced a $3 million deal in Europe, the company’s first big deal outside of China.

This new focus has resulted in the ability to manufacture, assemble and distribute end products as well as beef up its R&D capabilities.  New Energy claims to be the only vertically integrated player of its type in China and is experiencing cost savings that are passed on to the retailer.  In fact, the company claims that it is actually being approached by some major and well known retailers in the U.S. The new model has increased its customer base and also opens up an additional revenue source as a private label manufacturer to original equipment manufacturers, or OEM’s.

The company has issued EPS guidance of $1.23 for 2010, which assumes a tax rate of approximately 22%, giving it a forward P/E of 5.3x for a company that grew nearly 80% for the first nine months of 2010. More exciting is the fact that its guidance does not include international business, where margins are 4 times higher than domestically.

I was also glad to hear that the company sees no current need to raise money in the form of equity.  The stock has gone relatively unnoticed which could change once its shares graduate from the bulletin board, hopefully in the near future.

Also encouraging are the company’s efforts going forward to increase visibility through investor relations and the fact that they plan to participate in an upcoming Rodman conference in March.  These are sure fire ways to let investors know that they care about shareholder value.