GEO Investing

Call(s) to Action: EXETF ($6.58)We are adding to our position in EXETF based a SumZero article by Zack Buckley where he states the company may be acquired at a significant premium or spin-off its U.S operations which in his opinion will unleash significant value to current price.  Zack recently wrote about VITC being a likely acquisition target, and it was acquired for a 27% premium just a few weeks after his article was published.

CREG ($1.57) – It appears that CREG has entered into an equity line of credit with an entity (Ya Global) where it could potentially sell $50 million worth of shares over a 2 year period of time at prices yet to be determined.  We see this equity line of credit arrangement as pumpish in nature.  We believe this tactic has been used by other U.S. listed Chinese companies in the past, LTUS among them, which now trades at $0.01.  The specifics of the potential transactions are still unclear, so we are taking a closer look at them.   We are still short CREG.

AYSI ($1.17) – Seeking Alpha article calls AYSI grossly undervalued; calls for 200 to 300% upside.

Here are the other stories that the GeoTeam is following today… (Please see full disclosures at bottom)

  • ChinaHybrids
    • CCSC ($8.20)Announced preliminary Q2 2014 results. Anticipates revenues within previously stated guidance range.
    • KNDI ($14.72; marked up over $16)announced a 238% increase in electric vehicle sales for Q2 2014 from Q1 2014.
    • VIPS ($191.34) – An article in China alleges maybe more non premium brand products are being sold on VIPS’ site and that some customers may still be under the impression that these brands are premium products.
    • GA ($11.88)Announced shareholder approval of going private transaction for $12.00 per share.
    • BONA ($6.13) – CEO Mr. Yu Dong purchased the entire ownership stake 21st Century Fox controlled in BONA (6.05 million shares).  Also,  the company announced that Fosun International has agreed to purchase 4.1 million shares from the CEO.
    • CXDC ($6.32) –   Refuting allegations in Seeking Alpha article.
    • GSI ($1.00) Announced 5 million share private placement at $1.50 per share (50% higher than Friday’s closing price)

For more timely information, particularly during the daily trading session, we urge our members to read our message board posts daily.

Disclosure: Long EXETF, AYSI, BONA; Short CREG Other Long Positions; Other Short Positions; Pump & Dump Positions (Password GEO2014)

Summary of general highlights:

On the Asian Front…

Country Style Cooking (NYSE:CCSC) ($8.20) – a fast-growing quick service restaurant chain in China, today announced preliminary second quarter 2014 results.

“For the second quarter ended June 30, 2014, the Company opened a net total of 14 restaurants, bringing the total net restaurant count to 317, compared to a total restaurant count of 268 as of June 30, 2013. The new openings include 10 restaurants under the brand name “Mr. Rice.”

The Company currently anticipates to report net revenue within its previous guidance range of RMB 340-360 million ($54.7-$57.9 million), compared to RMB 325.8 million ($53.1 million) in the second quarter of 2013, representing year-over-year growth of at least 4.3%. The Company expects positive net income despite the pressure from higher operating costs and negative same store sales growth in the second quarter of 2014 attributable to rainy, cooler weather in the Southwest region of China in June which reduced restaurant customer traffic.”

Kandi Technolgies Group (NASDAQ:KNDI) ($14.72) – KNDI is a China-based vehicle machinery producer, concentrating on three areas of small vehicle production: go-karts, special purpose vehicles and casual purpose vehicles.  The company announced:

“Kandi Electric Vehicles Group Co., Ltd. (the “JV Company”), which is a 50/50 joint venture between the Company and Shanghai Maple Guorun Automobile Co., Ltd., a 99% owned subsidiary of Geely Automobile Holdings Ltd., sold 4,114 Kandi brand Electric Vehicles (“EVs”) during second quarter of 2014, a 238% increase from 1,215 EVs in the first quarter of 2014. Kandi expects to report its second quarter financial results on August 11, 2014.

Mr. Hu Xiaoming, Chairman & Chief Executive Officer of Kandi commented, “The demand for EVs continues to grow significantly. We are extremely pleased that the JV Company has been able to accelerate its EV sales in the second quarter. We have not only achieved success in implementing the Hangzhou Public EV Sharing System, or the ‘Carshare’ Program, but also in growing our group leasing model.”

Furthermore, on July 7 at the State Council Meeting, Li Keqiang, China’s Prime Minister, spoke about the recently passed government’s policy in waiving a 10% sales tax on electric cars, plug-in hybrids, and fuel-cell vehicles, beginning September 1, 2014 and lasting through the end of 2017, to spur consumers’ demand for electric vehicles. The Chinese government has identified EVs as a strategic industry that can help it gain global leadership, reduce energy dependence and cut emissions that have contributed to worsening air pollution.  Mr. Hu commented,

“We are really excited about the government’s policy to waive the sales tax on EVs. This will help lower the cost to consumers, in addition to boosting EV sales.”

Giant Interactive Group (NYSE:GA) ($11.89) – GA is a leading online game developer and operator in China.  GA announced the Company’s shareholders voted in favor of the proposal to authorize and approve the previously announced going private transaction for $12.00 per share.

Bona Film Group(NASDAQ:BONA) ($6.25) – a leading film distributor and vertically integrated film company in China announced:

an agreement between an affiliate of 21st Century Fox and Bona’s Founder, Chairman and CEO, Mr. Yu Dong, for Mr. Yu to acquire 21st Century Fox’s entire 19.3% interest (6,050,067 ordinary shares, equal to 19.9% interest before dilution from ordinary shares issued in respect of options) in Bona for $71.4 million or $11.80 per share ($5.90 per American Depository Share).

The company also announced an additional strategic investment by Fosun International:

“Fosun has agreed to purchase an additional 13.3% interest in the Company. Fosun, which owned 7.5% of Bona prior to this transaction, is a leading investment group based in China with worldwide operations. Its principal business operations include insurance, industrial operations, property development, media and entertainment, investment and asset management.

Under the investment agreement, Fosun will acquire 4,165,926 Bona ordinary shares, representing approximately a 13.3% equity stake in the Company, from Bona’s Founder, Chairman and CEO, Mr. Yu Dong, at a price of $11.80 per share, or $5.90 per American Depositary Share.

Following the close of the transaction, Mr. Yu and Fosun will own approximately 32.3% (including 2.7% from stock options) and 20.8%, respectively.”

China Xd Plastics Co (NASDAQ:CXDC) ($6.36) – one of China’s leading specialty chemical players engaged in the development, manufacture and sale of polymer composite materials primarily for automotive applications, today:

“strongly refuted the irresponsible allegations made in an article posted by Bleecker Street Research (“Bleecker Street”) on Seeking Alpha’s website on July 10, 2014 (the “Bleecker Street Article”).

China XD Plastics believes that the Bleecker Street Article contains numerous errors of facts, misleading speculations and malicious interpretations of events. China XD Plastics believes that the dissemination of these spurious allegations is irresponsible. The Company is currently evaluating what actions it will take with regard to Bleecker Street.

“The Company has worked hard to build its credibility with the investment community. We are outraged that such irresponsible allegations have been made,” said Jie Han, Chairman of the Board of Directors and Chief Executive Officer of China XD. “We believe that it is important for us to separate facts from fiction and to point out the numerous discrepancies between the allegations in Bleecker Street Article and the actual facts. We are confident that investors who know us will stand by our side.”

For a detailed response to some of the major allegations in the article please go here.

General Steel Holdings (NYSE:GSI) ($1.02) – a leading non-state-owned steel producer in China, today announced:

“…the Company has entered into a definitive Subscription Agreement for a private placement of its common stock, par value $0.001 per share , with Henry Yu, the Company’s Chairman and Chief Executive Officer. The gross proceeds from the private placement will be approximately $7.5 million, and the Company intends to use the proceeds to fund its expansion into high-growth bulk commodity e-commerce.

Pursuant to the Subscription Agreement, the Investor purchased from the Company and the Company issued and sold to the Investor five million shares of Common Stock at a purchase price of $1.50 per share (the “Purchase Price”), for an aggregate amount of $7.5 million. The Purchase Price is approximately 23% higher than that of the 90-day volume weighted average closing price of the Common Stock from March 5, 2014 to July 11, 2014, which ranged from $0.90 to $1.47 per share of Common Stock during the period. The Common Stock purchased and issued will be subject to the six-month holding period provisions of Rule 144 of the Securities Act of 1933, as amended (the “Securities Act”). The private placement is expected to close in July 2014, subject to customary closing conditions.

“My willingness to purchase shares at a premium price reflects my optimism with General Steel’s recovering trend in recent months and the Company’s long-term strategy and growth prospects,” said Henry Yu, Chairman and Chief Executive Officer of General Steel. “I remain highly confident that General Steel will earn positive net income in the second half of 2014, and my injection of additional capital will enable the Company to expand its business scope. It is very clear to me that our planned expansion into commodity e-commerce will enable the Company to not only capitalize on significant growth opportunities ahead but also help to generate positive returns for its investors.”

Speculative Plays…

Alloy Steel Intl (OOTC:AYSI) ($1.20) — AYSI manufactures and distributes Arcoplate, a wear-resistant alloy overlay wear plate produced through a patented process.  In our 6/16/2014 email we mentioned our reasons for tracking AYSI, full details can be read here.

Today, a Seeking Alpha article calls AYSI grossly undervalued; calls for 200 to 300% upside.

For more timely information, particularly during the daily trading session, we urge our members to read our message board posts daily.


The GeoTeam