GeoBargains Stocks Post Solid Quarterly Financials in Volatile Market

Thursday, August 20, 2009, 1:30 PM ET -

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.

Added to GeoBargain list on June 3, 2009 at $2.78.
Reached a price of $6.46 on August 7, 2009, an increase of 132% since our initiation price.

China Education Alliance announced its second quarter financial results on August 11, 2009.

Revenues increased 82% to $8.2 million
Earnings per share increased 86% to $0.13 and met analyst estimates.

The GeoTeam has updated The Company's financial snapshot and valuation scenario tables.

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.

China Bio Energy Holdings (NASDAQ:CBEH) Closing price August 19, 2009 was $5.89.

Added to GeoSpecial list on June 1, 2009 at $4.25.
Reached a price of of $7.50 on August 11, 2009, an increase of 76% since our initiation date.

As the GeoTeam speculated, in its research note on August 5th, China Bio Energy was able to exceed analyst estimates. The company reported 2009 second earnings per share of $0.25 compared to an estimate of $0.19. CBEH also reaffirmed its previous guidance.

FULL YEAR 2009 Guidance Ending December

	Full Year 2009 Guidance	Full Year 2008 Reported	Period Change
GAAP Revenue	$240.7 million	$216.8 million	11.0%
Non-GAAP Net Income	$33.7 million	$28.6 million	18.0%

Source: See Release, May 13, 2009

The GeoTeam has provided potential valuation scenarios for CBEH.

Impetus for growth going forward per conference call notes:

China's growing demand for energy to accommodate day to day activities.
Increase in fuel consumption to accommodate larger number of commercial and passenger vehicle usage.
Shortage of domestic oil resources.
Increase in government initiatives for alternative energy sources.
China is the world's second largest oil consumer.
Holds valuable difficult to obtain distribution license that should enable the company to gain additional market share.
Strong cash flow and cash positions will allow the company to execute its growth strategy.

Cpi Aerostructures Inc (NYSE AMEX:CVU) Closing price August 19, 2009 was $7.00.

Added to GeoBargain list on Feb 4, 2009 at $5.00.
Reached a price of $8.30 on August 18,2009, an increase of 66% since our initiation date.

On August 11, 2009 CVU announced strong 2009 second quarter results:

Revenues increased 25.3% to $11.4 million
EPS increased 133.3% to $0.14
The Company maintains guidance revenue in the range of $42 million to $45 million, resulting in net income guidance of between $3.9 million to $4.3 million. Guidance implies EPS of ~$0.62 to $0.69 for 2009 compared to $0.42 for 2008.

Yuhe Intl Inc (OTC BB:YUII) Closing price August 19, 2009 was $5.20.

Added to GeoBargain on Radar list on May 18, 2009 at $3.96.
Added to GeoSpecial list on August 17, 2009 at $5.10.
Reached a price of $5.25 on August 17, 2009, an increase of 3% since our GeoSpecial initiation date.

On August 14, 2009 Yuhe Intl reported strong second quarter financial results, slightly exceeding analyst estimates.

Highlights:

Revenue increased 75.5% to $9.8 million
Fully diluted EPS increased 85.7% to $0.13.
Company maintains fiscal 2009 guidance of $50 million in total revenue and $13 million in net income.

Using the current outstanding share count of 15,722,180, Company guidance implies an earnings per share figure of $0.83.

The share count of 15,722,180 seems like a reasonable assumption due to comments from the Company's most current 10Q filing.

"The Company expects that its strong positive working capital of $4.84 million as of June 30, 2009 will meet its foreseeable working capital needs for the next 12 months from the date of this report as management believes the Company would be able to renew the $8.3 million bank loans that are due in the next 12 months."

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.

2009 annual non-GAAP EPS growth rate: 16.4%
2010 annual growth rate: 17.5%

The GeoTeam will code YUII a low tier GeoSpecial as a result of the stock's tax adjusted P/E to 2010 earnings per share growth statistics:

Price as of August 14, 2009: $5.20
2010 tax adjusted analyst estimate: $0.64^a
P/E on 2010 tax adjusted analyst estimate: 8.1
PEG ratio based on 2010 earnings per share growth rate: 0.46

Why low tier?

The Company will face a difficult earnings per share comparison later this year in its fourth quarter. Short-term investors may view this situation with trepidation.

^a For valuation purposes, The GeoTeam prefers to adjust EPS to reflect a tax rate of 36%.

China Bio Products Inc (OTC BB:CBPO) Closing price August 19, 2009 was $4.35.

Added to GeoBargain list on April 27, 2009 at $4.15.
Reached a price of $5.00 on June 2, 2009, an increase of 21% since our initiation date.

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.

The GeoTeam 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)

The GeoTeam 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)

Source: GeoInvesting.com