China Investment Conferences in March

There are two big investment conferences coming up this March. About 150 US-listed Chinese companies will be presenting there and I would expect new investor presentations and FY10 guidance coming out of these events, especially from companies which are notoriously reluctant with press releases. Here are all the presenting companies as of today, keep your eyes open for new SEC filings soon.

Rodman & Renshaw Annual China Investment Conference
March 7-9, 2010 (Schedule)

2010-03-08 AM

• Advanced Battery Technologies, Inc. (ABAT)
• American Lorain Corporation (ALN)
• ATA, Inc. (ATAI)
• Biostar Pharmaceuticals, Inc. (BSPM)
• China Aoxing Pharmaceutical Company, Inc. (CAXG)
• China Biologic Products, Inc. (CBPO)
• China Direct Industries, Inc. (CDII)
• China Education Alliance, Inc. (CEU)
• China Fire & Security Group, Inc. (CFSG)
• China Gerui Advanced Materials Group Limited (CHOP)
• China Green Agriculture, Inc. (CGA)
• China Hydroelectric Corporation (CHC)
• China Industrial Waste Management, Inc. (CIWT)
• China Information Security Technology, Inc. (CPBY)
• China Integrated Energy, Inc. (CBEH)
• China Sky One Medical, Inc. (CSKI)
• China Wind Systems, Inc. (CWS)
• Far East Energy Corporation (FEEC)
• General Steel Holdings Inc. (GSI)
• Hong Kong Highpower Technology, Inc. (HPJ)
• Jingwei International Limited (JNGW)
• New Energy Systems Group (NEWN)
• NF Energy Saving Corporation (NFEC)
• Origin Agritech Limited (SEED)
• RINO International Corporation (RINO)
• Shengkai Innovations, Inc. (SHE)
• SORL Auto Parts, Inc. (SORL)
• Sutor Technology Group Limited (SUTR)
• Wonder Auto Technology, Inc. (WATG)
• Yayi International Inc. (YYIN)
• Yuhe International, Inc. (YUII)

2010-03-08 PM

• 3SBio Inc. (SSRX)
• China Armco Metals, Inc. (CNAM)
• China Carbon Graphite Group, Inc. (CHGI)
• China Digital Animation Development, Inc. (CHDA)
• China Electric Motor, Inc. (CELM)
• China Energy Corporation (CHGY)
• China Marine Food Group Limited (CMFO)
• China MediaExpress Holdings, Inc. (CCME)
• China Medical Technologies, Inc. (CMED)
• China North East Petroleum Holdings Limited (NEP)
• China Pharma Holdings, Inc. (CPHI)
• China Power Equipment, Inc. (CPQQ)
• China Precision Steel, Inc. (CPSL)
• China Ruitai International Holdings Co., Ltd. (CRUI)
• China Security & Surveillance Technology, Inc. (CSR)
• China Technology Development Group Corporation (CTDC)
• China TransInfo Technology Corp. (CTFO)
• China Yida Holding Co. (CNYD)
• City Telecom (H.K.) Limited (CTEL)
• Cogo Group, Inc. (COGO)
• Duoyuan Printing, Inc. (DYP)
• Funtalk China Holdings Limited (FTLK)
• Noah Education Holdings Ltd. (NED)
• Orient Paper, Inc. (ONP)
• Qiao Xing Universal Resources, Inc. (XING)
• SciClone Pharmaceuticals, Inc. (SCLN)
• Sinobiopharma, Inc. (SNBP)
• Skystar Bio-Pharmaceutical Company (SKBI)
• SOKO Fitness & Spa Group, Inc. (SOKF)
• Vimicro International Corporation (VIMC)
• VLOV, Inc. (VLOV)
• Winner Medical Group Inc. (WWIN)
• ZOOM Technologies, Inc. (ZOOM)

2010-03-09 AM

• AgFeed Industries, Inc. (FEED)
• Andatee China Marine Fuel Services Corporation (AMCF)
• China-Biotics, Inc. (CHBT)
• China Advanced Construction Materials Group, Inc. (CADC)
• China Agritech, Inc. (CAGC)
• China Automotive Systems, Inc. (CAAS)
• China Cord Blood Corporation (CO)
• China Energy Recovery, Inc. (CGYV)
• China Finance Online Co. Limited (JRJC)
• China Gengsheng Minerals, Inc. (CHGS)
• China Green Material Technologies, Inc. (CAGM)
• China GrenTech Corporation Limited (GRRF)
• China INSOnline Corp. (CHIO)
• China Mass Media Corp. (CMM)
• China Natural Gas, Inc. (CHNG)
• China New Energy Group Company (CNER)
• China Nutrifruit Group Limited (CNGL)
• China Ritar Power Corp. (CRTP)
• China Valves Technology, Inc. (CVVT)
• China XD Plastics Company Ltd. (CXDC)
• ChinaCast Education Corporation (CAST)
• ChinaEdu Corporation (CEDU)
• Duoyuan Global Water Inc. (DGW)
• GC China Turbine Corp. (GCHT)
• Gulf Resources, Inc. (GFRE)
• Huifeng Bio-Pharmaceutical Technology, Inc. (HFGB)
• Legend Media, Inc. (LEGE)
• Lihua International, Inc. (LIWA)
• NetSol Technologies, Inc. (NTWK)
• QKL Stores Inc. (QKLS)
• Sancon Resources Recovery, Inc. (SRRY)
• Sino Green Land Corporation (SGLA)
• SinoHub, Inc. (SIHI)
• Telestone Technologies Corporation (TSTC)
• Tongxin International Ltd. (TXIC)
• Universal Travel Group (UTA)
• VanceInfo Technologies Inc. (VIT)
• Wuhan General Group (China), Inc. (WUHN)
• Yongye International, Inc. (YONG)
• Yucheng Technologies Limited (YTEC)
• Zhongpin Inc. (HOGS)
• ZST Digital Networks, Inc. (ZSTN)

2010-03-09 PM

• China Baicaotang Medicine Limited (PDNK)
• China Ceramics Co., Ltd. (CCLTF)
• China Distance Education Holdings Limited (DL)
• China Interactive Education, Inc. (CIVN)
• China New Media Corporation (CMDI)
• China Recycling Energy Corp. (CREG)
• China Redstone Group (APBS)
• China Shuangji Cement, Ltd. (CSGJ)
• China Solar & Clean Energy Solutions, Inc. (CSOL)
• China Vitup Healthcare Holdings, Inc. (CVPH)
• ChinaNet Online Holdings, Inc. (CHNT)
• Diguang International Development Co., Ltd. (DGNG)
• eFuture Information Technology, Inc. (EFUT)
• Emerald Dairy, Inc. (EMDY)
• Gold Horse International, Inc. (GHII)
• LJ International Inc. (JADE)
• Nutrastar International Inc. (NUIN)
• Pacific Bepure Industry, Inc. (PBEP)
• Pansoft Company Limited (PSOF)
• Renhuang Pharmaceuticals, Inc. (RHGP)
• Shiner International, Inc. (BEST)
• Sino Gas International Holdings, Inc. (SGAS)
• Tianyin Pharmaceutical Co., Inc. (TPI)
• Xinyuan Real Estate Co., Ltd. (XIN)

Roth Capital Partners' 22nd Annual OC Growth Stock Conference
March 15-17, 2010

• 3SBio Inc. (SSRX)
• 7 Days Group Holdings Limited (SVN)
• Acorn International, Inc. (ATV)
• American Dairy Inc. (ADY)
• Asia Entertainment & Resources Ltd. (CSAQF)
• AutoChina International Ltd. (AUTC)
• CDC Corporation (CHINA)
• China Advanced Construction Materials Group, Inc. (CADC)
• China Aoxing Pharmaceutical Co., Inc. (CAXG)
• China Automotive Systems, Inc. (CAAS)
• China Cablecom Holdings, Ltd. (CABL)
• China Clean Energy (CCGY)
• China Cord Blood Corporation (CO)
• China Distance Education Holdings Limited (DL)
• China Education Alliance, Inc. (CEU)
• China Electric Motor, Inc. (CELM)
• China Finance Online Co. Ltd. (JRJC)
• China Fire & Security Group, Inc. (CFSG)
• China Gengsheng Mineral (CHGS)
• China Gerui Advanced Materials Group Ltd. (CHOP)
• China Green Agriculture, Inc. (CGA)
• China Housing and Land Development, Inc. (CHLN)
• China Infrastructure Construction Corporation (CHNC)
• China Integrated Energy, Inc. (CBEH)
• China Interactive Education, Inc. (CIVN)
• China MediaExpress Holdings, Inc. (CCME)
• China Natural Gas, Inc. (CHNG)
• China Nepstar Chain Drugstore Ltd. (NPD)
• China Nutrifruit Group Ltd. (CNGL)
• China Pharma Holdings, Inc. (CPHI)
• China Precision Steel, Inc. (CPSL)
• China Recycling Energy Corporation (CREG)
• China Ritar Power Corp. (CRTP)
• China RuiTai International Holding, Co. (CRUI)
• China TransInfo Technology Corp. (CTFO)
• China Valves Technology, Inc. (CVVT)
• China Wind Systems, Inc. (CWS)
• China XD Plastics Company Ltd. (CXDC)
• China Yida Holding, Co. (CNYD)
• China-Biotics, Inc. (CHBT)
• ChinaCast Education Corporation (CAST)
• ChinaEdu Corporation (CEDU)
• ChinaNet Online Holdings, Inc. (CHNT)
• City Telecom (H.K.) Limited (CTEL)
• Duoyuan Printing, Inc. (DYP)
• Funtalk China Holdings Limited (FTLK)
• Fuqi International, Inc. (FUQI)
• Fushi Copperweld, Inc. (FSIN)
• Global Sources Ltd. (GSOL)
• Harbin Electric, Inc. (HRBN)
• Hollysys Automation Technologies Ltd. (HOLI)
• Home Inns & Hotels Management Inc. (HMIN)
• HQ Sustainable Maritime Industries Inc. (HQS)
• Jinpan International Ltd. (JST)
• Lihua International Inc. (LIWA)
• LJ International Inc. (JADE)
• Neostem, Inc. (NBS)
• Noah Education Holdings, Ltd. (NED)
• Orient Paper Inc. (ONP)
• Perfect World Co., Ltd. (PWRD)
• QKL Stores Inc. (QKLS)
• SciClone Pharmaceuticals, Inc. (SCLN)
• SearchMedia Holdings Ltd (IDI)
• Shengkai Innovations, Inc. (SHE)
• Si Mei Te Food Ltd (CADUF)
• SinoHub, Inc. (SIHI)
• SkyPeople Fruit Juice, Inc. (SPU)
• Skystar Bio Pharmaceutical Company (SKBI)
• SOKO Fitness & Spa Group Inc. (SOKF)
• Solar Power, Inc. (SOPW)
• SORL Auto Parts, Inc. (SORL)
• Sunway Global Inc. (SUWG)
• Sutor Technology Group, Ltd. (SUTR)
• Synthesis Energy Systems, Inc. (SYMX)
• Synutra International (SYUT)
• Telestone Technologies Corp. (TSTC)
• Tianyin Pharmaceutical Co., Inc. (TPI)
• Tongxin International, Ltd. (TXIC)
• Tri-Tech Holding, Inc. (TRIT)
• UTStarcom, Inc. (UTSI)
• Winner Medical Group Inc. (WWIN)
• Wonder Auto Tech Inc., (WATG)
• Xinyuan Real Estate Company Ltd. (XIN)
• Yongye International, Inc. (YONG)
• Yucheng Technology Group, Ltd. (YTEC)
• Yuhe International, Inc. (YUII)
• ZAP (ZAAP)
• Zhongpin, Inc. (HOGS)
• ZST Digital Networks, Inc. (ZSTN)

SinoCoking Coal (SCOK)

SCOK Valuation based on presentation filed last night (February 12):

FY 2010 (June 30, 2010) Net Income Guidance: $19.311 million
Diluted Share Count (Feb 5, 2010): 15,352,240
Implied 2010 EPS: $1.26
Current P/E (PPS $6.80): 5.4

- net income pretty much flat for the past 2 years
- margins declining

Maybe it's just me but all the photos of the facilities in that presentation make it look like an industrial ruin. SCOK operates their own coal mine, a coal washing facility, a coal trading business and a coking facility. Without the planned new coking facility there is very limited room for future growth.

SCOK plans construction of a new coking facility that would increase current capacity by factor 4.

"Plans to complete construction and start production by the first calendar quarter of 2011, assuming sufficient capital for construction (approximately $65 million in incremental capital) available by March 2010"

- adjusted cash about $8 million (incl. recent private placement)
- SinoCoking has received approval for a project loan in the amount of RMB 300 million ($USD 44 million)

Looks like the company is on track to start construction of the new coking facility this spring, another round of equity financing seems likely in 2010, though.

Projections of the company are based on a very optimistic scenario for steel demand in the next five years. Here are some articles on the subject of coking coal prices and steel over-capacity:

China Steelmakers Compete For Import Of Coking Coal (Mining Exploration News)
BHP Seeks Quarterly Revision of Coking Coal Prices (Reuters)

China Has More Idle Steel Capacity Than Japanese And Korean Production Combined (Business Insider)
China Baosteel’s Profit Falls in 2009 (Talksteel.com)

So.. bottom line is that betting on 10% annual growth for steel demand and accordingly rising prices for coking coal seems more risky than serving the power generation industry with thermal coal. The pricing situation could change dramatically until Q1/2011 and not just for a tighter lending environment. China's largest steelmaker Baoshan Iron & Steel already stepped back from a planned price increase for February.

And to compare SCOK with its peers:

Ticker    PPS   FY10e EPS   FY10e P/E
-------------------------------------
SCOK    $6.80       $1.26        5.40
LLEN    $6.85       $1.20        5.71
SGZH    $8.05       $1.80        4.47
PUDA    $4.90       $1.45        3.38

LLEN uplists to NasdaqGM on Feb 18
PUDA estimates might be too optimistic (under revision)

With limited growth prospects for the next 12 months and a substantially more risky business plan, I believe SCOK will likely underperform its peers this year. My favourite in the group is LLEN.

China Electric Motor (CELM)

It was quite unfortunate for China Electric Motor Inc. (CELM) that market conditions deteriorated so much since mid-January that the IPO market is in big trouble once again. Just about a month ago the company was hoping to fetch up to $7 a share for their offering, was forced to cut the asking price twice since, replaced one of their underwriters, and finally sold their shares at the low end of the range ($4.50) on January 29th.

However, Nasdaq-listed CELM is the only Chinese IPO this year that is trading above their offering price, gaining about 10% last week and closing in on the $5 mark. Digging deeper into the company's business and financials reveals that it provides a good opportunity for value investors at the current price.

China Electric Motor is a Shenzhen-based manufacturer of micro-motors for consumer electronics, automobiles, power tools, toys and household appliances under the "Sunna" brand. They produce a wide variety of micro-motor products, 1200 to be exact, made for hairdyrers, juicers, paper shredders, air conditioners, heaters, windshield wipers, trimmers, lawn mowers and so on, but they are also used as digital drives and for power transmission in industries such as mining or petroleum. The closest comparable might be Nasdaq-listed Harbin Electric.

CELM is currently selling their products to OEMs and distributors in China, Hong Kong and Korea and their goal is "to become a global leader in the development and manufacture of micro-motor products." For its home market CELM sees good growth ahead: "We feel the Chinese markets are underserved and there exists vast opportunities to expand market presence."

The company's senior management is very young. All of the senior management is age 35 or younger and CEO Yue Wang, a 2005 graduate of University of Leeds in London, is just 26 years old. Having a young, second generation, internationally educated senior management should give CELM an edge in competition, a fact not to be ignored.

Valuation

Shares Outstanding: 19.87 million (627,000 exercisable warrants)
Current Float: about 7.9 million shares
Stock Price: $4.98 (February 5, 2010)
Market Capitalization: $99 million
Cash: $6.5 million plus $21 million IPO proceeds (27.7% of market cap)
Revenue 2009e: $86 million (Revenue Growth: 62%, Price/Rev: 1.15)
Gross Margin 2009 (2008): 28.2% (27.9%)
Net Income 2009e: $14.4 million (Net Income Growth: 46%)
EPS (TTM): $0.73
P/E (TTM): 6.87 (PEG: 0.15)

Accounts receivable are relatively high at $7.83 million (September 30, 2009). But none of those are outstanding in excess of 90 days and the company typically provides payment terms ranging from 30 to 45 days. There were no bad debts written off for the nine months ended September 30, 2009, and the years ended December 31, 2008 and 2007.

If we assume similar growth rates of 40% for FY 2010 - the company didn't give out any guidance yet - CELM's net income should increase to at least $20 million this year. This growth assumption is conservative as the company intends to use the IPO proceeds to increase manufacturing capacity, to purchase more industrial space and to modernize factory equipment.

EPS (2010e): $1.02
P/E (2010e): 4.90 (PEG: 0.12)

Price Target

The originally intended price range for CELM's IPO at $6-7 would have been a perfectly fair offer in a normal IPO market. In the current market environment you can get the stock at a steep discount of more than 30% and I believe investing in CELM at this point will be rewarded well. My price target for CELM is $10, based on roughly 10x expected EPS for 2010, flat gross margins, and conservatively estimated growth of 40% year over year.

The "Quiet Period" after CELM's IPO ends on March 10 and it can be safely assumed that lead underwriter Roth Capital, not known for particularly conservative price targets, will initiate coverage of the stock with a Buy rating and a price target in the double digits.

China Model Portfolio

I am adding 1000 shares of CELM to the model portfolio at Friday's close of $4.98.