Trading China Weekly Summary - July 5-9, 2010
posted by The Traveller on Saturday, July 10, 2010

Trading in Orient Paper (ONP) shares has calmed down considerably after the company issued several press releases to defend itself against fraud allegations from Muddy Waters LLC. Orient Paper reaffirmed their 2010 earnings guidance of $0.98 per fully diluted share which gives the stock a P/E ratio of slightly above 7 at current levels. I want to point out that the stock is not exceptionally cheap here when compared to its peers in the U.S.-listed China space, and that neither of the two analysts that are following the company, Hudson Securities and Roth Capital, has issued a note yet to defend the stock after the big turmoil last week. ONP shares lost 4.7% of their value last week.

3SBio Inc. (SSRX) raised their 2010 full year net revenues guidance by about 3% on Monday, due to the strong first quarter sales performance. The stock is up 8.9% for the week.

On Wednesday, China Green Agriculture (CGA) announced the closing of the Beijing Gufeng Chemical Products acquisition and said that this is expected to contribute EPS of $0.39 for FY 2011. While Rodman & Renshaw called the acquisition "attractive both financially and strategically," Brean Murray points out integration risks and expects "all margins to decrease significantly in FY11." All three analysts that follow the stock give it a neutral rating. CGA shares are up 10.1% for the week.

Several Chinese companies stepped up efforts to increase shareholder value by announcing a share buyback program last week. I believe this is exactly the right signal to the market now as most China small caps have lost at least one third of their value in the last three months. China-Biotics (CHBT) announced a $20 million buyback on Wednesday and China Medicine (CHME) a $2 million program on Friday after the close.

Also on Friday, Longwei Petroleum (LPIH) posted strong numbers for April and May and issued a bullish outlook for their 2011 fiscal year that started this month: "The Company expects continued favorable market and industry conditions to boost revenue growth and profitability in the first half of fiscal 2011." The stock gained 11.44% on Friday and is up 17.9% for the week. It is now trading safely above $2 and if LPIH can hold this mark for another four trading days we can expect the stock to trade on Nyse Amex as early as July 19.

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