Friday Earnings Round-Up
posted by The Traveller on Saturday, August 14, 2010

Lotus Pharmaceuticals (LTUS) is currently trading at $1.05, down 17.97% for the year and down 38.24% from its February 3 high at $1.70. The Trading China Tracker Score is 13 (Strong Buy).

Lotus had a very good quarter with 40% revenue growth and 32% net income growth year over year. Both numbers are higher than company guidance of 20-30% growth for the balance of the year. EPS rose from $0.10 to $0.12 on a 9% higher share count. Operating cash flow is looking good with $6.64 million generated in the second quarter. The stock is currently trading at a P/E of just 2.5. In late July the company announced they would complete the construction of their new building with internally generated cash and "consider alternative funding options and structures only when our stock valuation improves, in order to protect against stock dilution." That's what shareholders want to hear.

Yuhe International (YUII) is currently trading at $8.96, down 5.19% for the year and down 27.97% from its March 9 high at $12.43. The Trading China Tracker Score is 3 (Hold).

Broiler breeder Yuhe reported second quarter EPS of $0.19 vs. $0.13 last year and $0.18 analyst consensus. Revenues came in a tad light with $12.48 million vs. $12.89m estimates, still 27% growth over the year ago quarter. The company is well on track to reach its full year target of $17 million net income which translates into EPS of $1.05 and a current P/E-ratio of 8.5. Yuhe's strongest results will occur in the second half of the year, given the seasonality of the business and the fact that the new parent breeders that were purchased in early 2010 will begin to generate revenue in the fourth quarter of 2010.

China Natural Gas (CHNG) is currently trading at $6.64, down 40.29% for the year and down 40.35% from its March 10 high at $11.13. The Trading China Tracker Score is 2 (Hold).

China Natural Gas presented rather unimpressive Q2 numbers with revenue growth of under 2% and adjusted net income (excl. non-cash warrant charges) of $3.9 million vs. $5.2 million in the year-ago quarter. Considering that the share count has climbed by 46% within a year, second quarter results showed negative EPS growth of 48.7%... not good. CHNG did not reiterate their full year guidance in the press release, however it should still stand at $22-23 million net income. This would mean the company has to double their earnings in the second half of 2010 from the first six months, we'll see how that works out.

China Biologic Products (CBPO) is currently trading at $12.90, up 6.78% for the year and down 10.30% from its May 19 high at $14.38. The Trading China Tracker Score is 3 (Hold).

CBPO reported second quarter revenues of $40.9 million, up 23% from 2009 and slightly better than the $40.52 million consensus. Adjusted EPS came in at $0.40, up slightly from $0.38 last year and higher than analyst's calling for $0.36. China Biologic is on track to reach the upper end of their 2010 net income guidance, which means the stock is currently trading at a forward P/E of 9.2. CBPO should be fairly valued with a stock price in the low teens for the time being.

Sancon Resources Recovery (SRRY) is currently trading at $0.36, up 7.572% for the year and down 26.05% from its March 22 high at $0.48. The Trading China Tracker Score is 14 (Strong Buy).

Recycling company Sancon posted respectable Q2 results once again with EPS of $0.02 and a solid balance sheet. The company is steadily generating cash from operations and has now almost 60% of their current market capitalization in cash and cash equivalents. SRRY announced several growth initiatives in May and projected that their new waste paper collection business that started in June will contribute about $4 million in revenue in the first year. That is about 40% of current total revenue. Trading China EPS estimates have been raised to $0.12 for the FY 2010 and the stock is currently trading at a P/E of 3.

China Clean Energy (CCGY) is currently trading at $0.63, up 23.52% for the year and down 36.37% from its April 6 high at $0.99. The Trading China Tracker Score is 14 (Strong Buy).

The biggest positive surprise comes from biodiesel maker CCGY. Revenues grew by 232% to $14.14 million in the second quarter and the company reported EPS of $0.05 compared to breakeven in the year-ago period. The surprise was the strong performance of the biodiesel business which still suffered from tiny margins in Q1. Gross margins for biodiesel increased from 3.74% to 12% over the past 12 months. I've raised full year EPS expectations from $0.10 to $0.18 based on strong Q2 performance. This would value the company currently at just 3.5x 2010 earnings which means the stock has a good chance to revisit its April highs.

China Armco Metals (CNAM) is currently trading at $4.02, up 26.81% for the year and down 63.79% from its March 5 high at $11.10. The preliminary Trading China Tracker Score is -3 (Sell).

And the biggest negative surprise comes from China Armco which posted an unexpected loss for the second quarter which sent the Trading China Tracker Score from positive 10 to negative 3 as all metrics deteriorated. The Score is preliminary until the 10-Q is filed with the SEC as certain numbers like operating cash flow have not been revealed in the press release. CNAM reported revenues of $17 million, down 24.5% from the 2009 quarter. Adjusted EPS dropped to a loss of $0.05 from positive $0.33 last year, mostly due to significantly lower revenue and contracting gross margins. CNAM's recycling factory is just ramping up now and the metal ore trading business came under pressure in May and June.

CNAM management lowered full year net income guidance from $12 million to $10 million which still implies stellar results for the second half of 2010 as the company didn't earn a dime so far this year. We believe this is plausible as their recycling factory is now operational, and this is still one of the best long-term growth stories one can find. However, the very disappointing results show how much execution risk has to be considered when a tiny company like CNAM wants to bring their business to the next level. The stock is down a good 10% after hours and I would expect further weakness in the days ahead as there won't be many players out there defending the stock after those results. Given the unchanged and still excellent growth prospects of China Armco, I would be an aggressive buyer of the stock when it has calmed down, based and settled at a new post-earnings level, where ever that might be.

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2 Comments:

At August 14, 2010 11:26 pm , Anonymous Value1008 said...

Thanks for all that you do, Rames.

Excellent contextualizing of CNAM's results. Yes, if its shareprice takes a dive b/c of very short-term or retro- thinking, i'll be buying heavily to add to some considerable present holdings.

I don't much follow the other cos. you've got here other than LTUS.OB, which came in with a stellar quarter and great prospects for future, non-dilutive growth. $19.2 million in revenue, $6.3M net income on great profit margins, and 12 cents in EPS for the qrtr --now 0.21 EPS for the 1H of 2010, and 0.37 for trailing twelve months, with likely 0.45 to 0.50 for full year 2010 EPS. A trailing P/E of just 6 would make this a $2.22 stock.

With likely EPS of 0.55 or more for 2011, LTUS's forward P/E is under 2!

 
At August 15, 2010 9:31 pm , Blogger kingfrogcash said...

CHNG brought the LNG plant online as promised. Growth should resume.

 

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