Our GeoBargain and GeoSpecial stocks finally saw their price momentum stall in the midst of recent volatile market conditions, despite the announcement of positive quarterly financial results. The following is a recap of some of the most notable highlights of several of these stocks.
China Education Alliance (NYSE AMEX:CEU) Closing price on Aug. 19 was $4.68.
It is important to note that 2009 earnings per share analyst estimates have been reduced, as reflected in our valuation scenario tables. The estimates portray quarterly growth of 4% to 16% for the next four quarters before picking up again to over 46% in the Company's September ending 2010 third quarter. This may have some bearing on investor valuation assumptions in the short-run. On the flip side the stock is still selling at a significant discount to its peer group and has a PEG ratio that is solidly under 1.
YUII is currently on the GeoBargains on the Radar list. In order to upgrade to a GeoBargain, the company would need to attain earnings per share growth of at least 30%. While analyst estimates indicate that the company will achieve this requirement in some of the upcoming quarters, the EPS growth rate is not forecast to reach 30% on an annual basis.
China Bio Products reported 2009 second quarter financial results well above the GeoTeam's expectations.
- Revenues increased 178.2% year-over-year to a record $33.2 million
- 2009 2nd quarter Non-GAAP EPS increased 151.5% to $0.38 per diluted share vs same quarter in 2008.
- 2009 2nd quarter Non-GAAP EPS increased 90% from the 2009 first quarter.
The GeoTeam participated on China Bio Products 2009 second quarter conference call. Overall the call was bullish. CBPO showed impressive internal growth even if the contribution from a recent acquisition are omitted. On the call the company maintained guidance.
See Updated Financial Tables
See Updated Valuation Scenarios
L & L Intl Holdings (OTC BB:LLFH)
Closing price August 19, 2009 was $4.30.
- Added to GeoBargain list on May 19, 2009 at $1.90.
- Reached a price of $5.32 on August 14, 2009, an increase of 185% since our initiation date.
Earlier this week LLFH shares briefly eclipsed $5.00 as the Company finally filed its fiscal 2009 ending 10K. This was the last obstacle needed in order to apply for an upgraded listing to the NYSE AMEX exchange. Per Management comments L & L Int. prospects for the coming year remain bright. Management commented,
"We will continue to execute our planned expansion focusing on coal activities. We expect to continue our positive momentum as demand for clean coal will be strong in China."
China-Biotics Inc (NASDAQ:CHBT)
Closing price August 19, 2009 was $13.02.
- Added to GeoBargain list on July 14, 2009 at $10.0.
- Reached a price of $14.31 on August 14 2009, and increase of 43% since our initiation date.
participated in the China-Biotics (NASDAQ:CHBT) 2009 first quarter conference call
Conference Call Highlights:
- Expects full year fiscal 2010 revenues to grow at least 50% to $81.3 million
- As the stock may be perceived to be currently "undervalued", investors voiced concerns over dilution related to the potential issuance of shares to complete future acquisitions. The Company did a thorough job addressing this concern, implying the possibility of also using cash to complete an acquisition. Furthermore, if shares are issued there is still a possibility that a transaction will be accretive to earnings per share.
Recall comments from our previous note on July 14, 2009:
Further due diligence confirms the company meets 8 out of 10 GeoBargain criteria. However, the company does not meet the minimum 30% earnings per share (EPS) growth threshold.
Given that it beat analyst estimates, the GeoTeam will need to access the company's outlook to determine if it can achieve 30% EPS growth, . We will also monitor any changes in analyst estimates. If it becomes apparent that 30% EPS growth is currently unachievable we will re-code the stock as a GeoSpecial based on its low tax adjusted PEG Ratio (~0.55).
On August 17, 2009 the company announced strong first quarter fiscal 2010 financial results. The company easily exceeded analyst estimates giving the GeoTeam confidence that China-Biotics may be able to achieve a minimum of 30% earnings per share growth rate for the coming year. Analyst estimates also echo this sentiment indicating earnings per share growing over 30% to $1.30.
See the GeoTeam updated valuation scenarios
RINO International Corporation (NASDAQ:RINO)
Closing price August 19, 2009 was $11.81.
- Added to GeoBargain on Radar list on May 18, 2009 at $4.87.
- Added to GeoSpecial list on June 4, 2009 at $6.70.
- Reached a price of $17.75 on August 7, 2009, and increase of 165% since our GeoSpecial initiation date.
On August 17, 2009, after the market close, RINO International reported its 2009 second quarter financial results
. Earnings per share were $0.39
, exceeding analyst estimates by $0.01
. Regardless, the stock was down sharply in extended hours trading and continued into subsequent trading sessions. The GeoTeam
is speculating that the street had hoped for a larger earnings per share number, although the stock had been in a bullish up trend over the past several weeks, briefly surpassing the GeoTeam potential valuation scenarios
on August 6, 2009. The company has reiterated its 2009 revenue guidance of $176.5 million. A drop in RINO International shares may present a short-term trading opportunity
Hi-Shear Tech Corp (NYSE AMEX:HSR)
Closing price August 19, 2009 was $10.20.
Added to GeoBargain list on August 6, 2009 at $12.05.
Reached a price of $14.15 on August 11 2009, and increase of 17% since our initiation date.
Hi-Shear has not performed as we had first hoped. The stocked appeared to initially have legs, but has pulled back sharply after hitting a 52 week high of 14.14 shortly after we coded the stock as a GeoBargain. The GeoTeam is delving into the HSR story to see if we missed anything on our first pass.
Sinohub (NYSE AMEX:SIHI)
Closing price August 19, 2009 was $3.94.
May qualify as a GeoBargain or GeoSpecial upon further investigation.
On August 13, 2009 the GeoTeam indicated that it considered placing Sinohub on the GeoSpecial or GeoBargain list. The Company reported strong 2009 second quarter financial results.
- Revenues increased 137.9% to $31.4 million.
- Earnings per share increased 333.3% to $0.13.
This marks the second quarter of superb growth in sales and comes on the heals of earnings per share increasing nearly 100% in 2008 to $0.41. Fully tax-adjusted trailing earnings per share is approximately $0.45 putting the P/E at 8.64.
Why is the stock selling at such a low P/E with consistent EPS growth?
The GeoTeam believes that investors may be wary due to the possibility of future dilutive events:
'We believe the SinoHub's procurement-fulfillment and electronic component sales business can be expanded with additional funds depending, in part, on how quickly we can build out new infrastructure and hire additional staff. This is because the electronics business in China is very large relative to the size of the Company's business. Additional working capital would enable us to purchase more electronic components from our suppliers, which should lower our costs, and thus enhance our profitability. Increased volume would also likely enable the Company to get more favorable terms from suppliers which would lower our need for additional financing from third parties. Moreover, the addition of warehouse space to support the Company's growth will require capital investment. Accordingly, if SinoHub is unsuccessful in raising additional working capital, the Company's growth will be adversely affected.
We intend to raise these funds through the sale of additional equity or debt, long-term debt financings, and operating cash flows.' (Source: 10Q, pg. 23)
needs to better understand this issue before making a definitive determination on how to code Sinohub. It initially appears that raising capital will enhance the Company's profitability. However, the earnings per share comparisons will be much tougher in the second half of the year. More details will be provided if warranted.
Other GeoBargain stocks that reported strong quarterly financial results include:
Hq Sustainable Maritime (NYSE AMEX:HQS)
China Valves Tech Inc (OTC BB:CVVZ)
Merrimac Industries Inc (NYSE AMEX:MRM)
China Armco Metals Inc (OTC BB:CNAM)Other GeoSpecial stocks that reported strong quarterly financial results include:
Air Trans Services (NASDAQ:ATSG)
Tongxin Intl Ltd (NASDAQ:TXIC)
(Upgraded to GeoBargain)
Skystar Bio-Pharma Co (NASDAQ:SKBI)
Strong stories also prompted the GeoTeam to add the following stocks to either the GeoBargain list or GeoSpecial list.Added to GeoBargain List:
China Armco Metals Inc (OTC BB:CNAM)
Ricks Cabaret Intl Inc (NASDAQ:RICK)
China Transinfo Tech Corp (NASDAQ:CTFO)
Alpha Pro Tech Ltd (NYSE AMEX:APT)Added to GeoSpecial List:
Biostar Pharmaceuticals (OTC BB:BSPM)
China Kangtai Cactus Bio (OTC BB:CKGT)
China Sun Group High-Tech (OTC BB:CSGH)
Hong Kong Highpower Tech (NYSE AMEX:HPJ)
China Agritech Inc (OTC BB:CAGC)Added to GeoBargain on the Radar List:
Motorcar Parts America (NASDAQ:MPAA)The GeoTeam is also taking a closer look at:
Tiens Biotech Group (NYSE AMEX:TBV)
Rodobo International, Inc. (OTC BB:RDBO)
China Grentech Corp Ltd (NASDAQ:GRRF)
Ballantyne Strong (NYSE AMEX:BTN)
Revlon Inc (NYSE:REV)
Direct Insite Corp (OTC BB:DIRI)
Songzai International Holding Group, Inc. (OTC BB:SGZH)