Portfolio Check - CCME CREG CSGH CNYD
posted by The Traveller on Wednesday, July 14, 2010
China MediaExpress (CCME) is currently trading at $10.27, down 3.12% for the year and down 30.57% from its March 24 high at $14.79. The Trading China Tracker Score is 15 (Strong Buy).
This Monday CCME raised its 2010 net income guidance by 14.4% to a range of $82 million to $85 million (non-GAAP). The company stressed that this guidance "excludes the impact of any possible acquisitions, additional new buses, new revenue streams and any new investments in other media projects in 2010." Earlier this month the company got their first independent analyst coverage. Global Hunter Securities started the stock with a BUY rating and $18 price target. I believe the stock should be worth at least $21.50 based on roughly 10x this year's earnings. This would be in line with Global Hunter's target when factoring in the improved company guidance.
China Recycling Energy (CREG) is currently trading at $3.29, down 20.15% for the year and down 46.60% from its March 24 high at $6.16. The Trading China Tracker Score is 4 (Hold).
The company has reaffirmed its 2010 net income guidance of $18 million to $20 million, which would give earnings per share of about $0.40 for the current fiscal year. CREG's business model heavily relies on funding large projects with returns dripping in over the next 15-20 years. Operating cash flow looks much better than net income for the past few quarters. The only analyst coverage I could find is from small boutique firm Gar Wood Securities which upgraded the stock to BUY with a $6 target in mid-May. My 12-month price target for CREG stays at $5.50 but I would wait for a catalyst before starting a new position in this stock.
China Sun Group (CSGH) is currently trading at $0.84, down 54.84% for the year and down 51.45% from its April 14 high at $1.73. The Trading China Tracker Score is 8 (Buy).
Due to the company's irregular fiscal year, the next earnings we get from China Sun will be the annual report for their FY 2010 at the end of August. For the 4th quarter (ended May 31) the company said it expects approximately $11.0-$12.0 million in revenue and $2.0-$2.5 million in net income. Valuation is very low with a trailing P/E-ratio under 5. A problem might be that CSGH's independent auditor is ZYCPA, the same firm that got under pressure recently with the China Marine Food (CMFO) discussion. I am lowering my price target from $3.50 to 10x 2010 EPS or $2 to acknowledge that I don't have any visibility into FY 2011, mainly because the company fails to communicate with investors.
China Yida Holding (CNYD) is currently trading at $13.14, down 5.54% for the year and down 22.71% from its June 11 high at $17.00. The Trading China Tracker Score is 8 (Buy).
CNYD has achieved high revenue growth (110% in '08 and 67% in '09) and strong profitability (gross margin of 75% in '08 and 79% in '09). The trend in China with higher wages leading to more domestic consumption incl. travel will be on China Yida's side, and the company is aggressively purchasing new tourism destinations. The stock has survived the negativity regarding all China small caps mostly unharmed which might indicate that it could maintain higher multiples than its U.S.-listed Chinese peers in the future. My price target stays relatively high at $25, which is rougly 14x FY2011 earnings.