Late Filers Set to Report This Week

A large number of Chinese Small Caps, mostly OTC-traded companies, filed an extension to their annual reports by the end of March. All of them are now set to report by April 15, and there might be some good opportunities coming out of this. Remember that many of the following companies do not have a history of publishing a press release with earnings, so it would be wise to monitor SEC filings in the next 2 days.

Asia Cork (AKRK.OB)

Manufacturer and distributor of cork and cork products. I am expecting EPS of $0.09 for the year. Watch out for more detailed growth plans (incl. acquisitions) and news about the planned share offering. I like the stock at current levels.

BioPharm Asia (BFAR.OB)

The company is selling traditional Chinese medicine and other drugs. Very cheap at current levels, the company reported EPS of $0.15 in the last two quarters alone. High growth rates in the past two years. Watch out for hidden guidance in the 10-K as there probably won't be a press release.

China Growth Development (CGDI.OB)

CGDI owns six shopping malls and plans to acquire more. Consistently profitable and trading below book value. This one could double with a good report. Watch out for leasing rates, expansion plans and operating costs (power and heating).

China Agri-Business (CHBU.OB)

Sells organic fertilizer and bactericides to Chinese farmers. Plans to establish their own direct sales network. Stock rallied last week, about doubled for the year, so be careful here. There are faster growing companies in the sector, I'm not a fan here.

China 3C Group (CHCG.OB)

Electronics retailer in trouble. Promised to do everything necessary to turn the business around. Trading below cash at current levels. A return to profitability or just positive 2010 guidance would make this a clear buy at current levels below $0.50.

China Carbon Graphite (CHGI.OB)

After a TheStreet.com induced hype in March the stock fell back below book value. I'd like to see them reporting well above $1 million in net income for the Fourth Quarter, which could bring CHGI back on the radar screen of many traders.

China Industrial Waste Management (CIWT.OB)

Expect the filing for this one in a few hours as the company announced a conference call for later this morning. A very important industry for China, but the whole sector is underperforming so far this year. Not cheap based on past numbers, it all depends on future guidance.

China Kangtai Cactus (CKGT.OB)

One of my favourite picks in the China OTC space. Very cheap, high growth rates, several promising business segments, but apparently many US investors are only reluctantly investing in a cactus farmer. I'm confident that they will deliver this week.

China Organic Agriculture (CNOA.OB)

CNOA has several seemingly unrelated business segments in the agricultural/food area. Their newest one is blueberries. Just watch out for bottom line numbers, the stock is very liquid and many people are waiting for the annual report to jump in (or not).

China Shuangji Cement (CSGJ.OB)

The stock doubled over the past few weeks and I believe that this one has to report way above expectations just to keep its current levels. It doesn't have a history of doing so, but I am looking forward to getting surprised for once.

GC China Turbine (GCHT.OB)

Wind turbines manufacturer just coming out of development stage. Their press releases with project agreements have been frequent, their guidance is astronomical, any reassurance that their business plan will be achievable could propel this one to much higher levels.

Huifeng Bio-Pharma (HFGB.OB)

Huifeng supplied the pharmaceutical industry with rutin and related plant-derived chemicals. The company issued very bullish guidance in February and is very cheap at current levels with a P/E of less than 5. Also plans to uplist this year. Watch out for guidance confirmation.

Jade Art Group (JADA.OB)

They are selling jade. We hear nothing from the company outside of earnings filings, so key here is to watch out for new sales contracts, and ideally for new customers. If they report any of that the stock should trade much higher, if not then I would avoid it here.

New Energy Systems (NEWN.OB)

Lithium-ion battery producer on the verge of uplisting to Nasdaq. Crazy cheap here compared to its peers. We get the first consolidated earnings report with their two big acquisitions. Expectations seem to be low.

Songzai International (SGZH.OB)

Another one of those Chinese companies that leave shareholders in the dark most of the year. A coal miner that was ignored in the Chinese coal rally. Huge potential with a good 10-K, even bigger potential with reignited uplisting chatter.

Five Forgotten Book Value Plays

There are many OTC-traded Chinese micro caps hardly anybody has ever heard of. Some of them might be ready for big rewards later this year and follow the likes of JADA and CCGY. I've compiled five of the most promising stocks that currently trade far below book value. Please keep in mind that all of those bear significant risks and you should only invest a small part of your portfolio in this group.

Sino Gas International Holdings (SGAS.OB)
Current Price: $0.95 | Book Value per Share: $2.05 (115.8%)

Sino Gas owns local natural gas distribution networks in small and medium-sized cities in China. The company earns money from connection fees and the resale of natural gas it acquires from large state-owned companies. For 2009 Sino Gas increased revenues by 28.64% from 2008 levels, connected 32,681 new customers to their network and sold 21% more gas. Gross margins were stable in the 34% range overall and up to 72.3% for the connection fees. Net income improved by 152.9% from 2008 fully diluted EPS was $0.14 (FY 2008: $0.05).

The stock is currently selling below the value of their biggest asset, the pipelines. Those are not yet connected to the main China pipelines and the company has to refill their storage tanks with gas from trucks. To change this SGAS wants to build upstream connections as soon as possible and this will require a lot of money. The company also plans to build more local distribution networks (more funds needed) and while all those plans will eventually lead to higher margins and growth it is very likely that SGAS will have to access the US capital markets more than once to finance all of this.

China Growth Development (CGDI.OB)
Current Price: $0.43 | Book Value per Share: $0.83 (93.0%)

CGDI owns six shopping malls in Taiyuan City (twin city of Nashville, TN), the capital of Shanxi province with a population of about 4 million. The company is generating revenues from management services and leasing commercial space within these malls. The 2009 annual report is not yet filed but for the first nine months of 2009 the company reported a 6% increase of revenues but a 16% decrease of net income compared with 2008. Lower income was caused by a much higher tax rate which caused income tax expenses to increase by $1 million for the first nine months.

For the next 3 years the company plans to acquire 2 additional shopping centers. The value of their current malls is with ~$80 million much higher than the market capitalization ($15 million). The success of CGDI's business model depends basically on domestic consumption and all indicators point to the Chinese consumer to spend money at a record breaking pace with no signs of a slowdown. There might be some problems with an urbanization project of the Taijuan City Council that involves most of CGDI's operations, we should learn more about the possible impact with the upcoming annual report.

Shengtai Pharmaceutical (SGTI.OB)
Current Price: $1.50 | Book Value per Share: $2.46 (64.0%)

Shengtai is the market leader for pharmaceutical grade glucose in China with about 40% market share. The company also produces other corn-based products for the food and beverage industry. For the most recent quarter SGTI's revenues increased by 92.7% and the company posted a net income of $1.05 million or $0.05 per share, compared to a loss in the 2008 period. Gross margins increased slightly despite higher corn prices. Corn is the raw material for practically all of SGTI's products and high corn prices from increased demand for the alternative fuel production are the biggest cost factor.

Asia Cork (AKRK.OB)
Current Price: $0.39 | Book Value per Share: $0.55 (41.0%)

Asia Cork is a Xi'an based manufacturer and distributor of cork and cork-based products as cork floors. The company is a cost leader in the industry and plans to substantially increase production capacity (also through acquisitions) and sell their products in China and internationally by their own sales network. To finance all that AKRK has currently a big share offering open which will lead to significant dilution of current shareholders but rewards could be huge.

The annual report is delayed because of the offering but for the most recent quarter the company reported revenues increasing by 13% offset by higher selling expenses (36%) which lead to a 12% decrease in net income. Still the company is set to report EPS of about $0.09 for the year, giving it a P/E ratio of just 4.x. AKRK expects higher revenues and operating margins for the fourth quarter and beyond. One possible risk for future earnings is that a Yuan revaluation might cut into Asia Cork's cost advantage and export margins.

China Runji Cement (CRJI.OB)
Current Price: $0.28 | Book Value per Share: $0.34 (21.4%)

China Runji is a cement producer in central China. It has a strong market position in its province and a secure supply of high quality raw materials for the next 40 years. The share price is depressed because the company has a huge liquidity problem and working capital deficit, although should the company be able to obtain new financing the business outlook is very promising.

For the most recent quarter CRJI reported net income of $1.2 million or $0.02 per share. For the yet to be reported fourth quarter of 2009 and beyond, the company's new waste heat power generator system will be in operation and is expected to save about $4.6 million per year in electricity costs, significantly improve margins and reduce reliance on outside power sources. China Runji is also entitled to receive a government reward of $880k for this environmental friendly project.

Earnings Previews, Part 1

American Lorain (ALN) reports on March 30 before the open. The stock is doing well so far this year (up 15%) after it beat Q3 estimates nicely. One analyst expects ALN to report Q4 revenues of $58.3 million and EPS of $0.20. This one has further upside with a good earnings report.

Biostar Pharmaceuticals (BSPM.OB) has already pre-announced FY09 numbers with $52-$54 million revenue and $16-$17 million operating income. Watch for confirmation when they report next week. BSPM has already provided guidance for FY10 with $69-$71 million revenue and $16.2-$17 million net income, mind the difference between 'operating' and 'net' here. The stock is expected to move up from the OTC/BB in the very near future, keep your eyes close on this for an announcement.

China Agritech (CAGC) reports on March 31 before the open. The stock is up a whopping 95.7% for the year and now sports a hefty market capitalization of almost half a billion dollars. Whatever they report it will hardly be sufficient to support the current stock price from the fundamental side, but an earnings beat combined with strong forward guidance might reignite the strong momentum CAGC enjoyed for most of its Nasdaq life.

China Green Material (CAGM.OB) is down 12% for the year so far but as the stock reached its all-time-high at the turn of the year it is still performing well. CAGM is currently priced at 10x trailing earnings and 3x sales and I believe for being able to test its highs again the company should report an uptrend in both earnings and net income, both year-over-year and sequentially. CAGM reported $1.11m net income on $4.19m revenues for the Third Quarter of 2009.

China Auto Logistics (CALI) reports on Monday, March 29 before the open. The stock has not participated in the China automotive stocks rally so far and is one of the few in the sector that are down for the year (15%), trading range-bound between $4.20 and $4.70 since late January. Look for revenues of at least $60 million and net income of $2 million for a possible break-out.

China Clean Energy (CCGY.OB) is up 29% for the year already but I see much room for further upside as the company guided back in January for Q1/2010 revenues of $7.3 million or 150% growth from 2009 numbers. Their new chemical plant started operating on a commercial basis in January and for the yet-to-be-reported Fourth Quarter it was still in trial production. We do not know if this trial phase generated significant revenues and I do not expect the company to report outstanding numbers for this period, but that doesn't matter as we should see a reiteration of Q1 guidance which positions the company as a growth play that is trading well below book value.

China Electric Motors (CELM) will be reporting their first quarter as a public company after the market closes on Tuesday, March 30. I would keep a close eye on that one as CELM's industry peers (HRBN) reported strong growth for Q4/2009 and CELM has yet to issue guidance for 2010 and basically introduce itself to the US investing world with their first public conference call. Everything about this company looks very promising to me and we could see big money taking a shot at CELM if those events go well.

China Growth Development (CGDI.OB) is due with their annual report by March 31. We won't see a conference call, probably not even a press release, the company's investor relations are non-existent and it's one of those hidden OTC stocks most people have never heard of. CGDI is profitable, reported $900k net income on $4.5 million revenue in their most recent quarter, and the stock is trading at less than half of its book value. If they report another profitable quarter on top of those numbers then the stock could take off from currently depressed levels. A highly speculative trading idea for a possible 100%+ gain.

China Energy Recovery (CGYV.OB) is another widely unknown China OTC play. But contrary to CGDI all the metrics here say 'avoid'! The stock is down 42% for the year and closed 2 cents off its lows on Friday. Watch for Fourth Quarter numbers more than FY09 ones. The company will likely report a small profit for the year but the trend has been down lately. Last quarter CGYV reported a loss of $0.12 million on revenues of slightly above $6 million.

China 3C Group (CHCG.OB) is trading well below book value and cash on hand, actually it looks like one of the cheapest stocks around based on those numbers alone. Though the stock is down 10% for the year and trading around 45 cents for the past two months. The company posted a big loss for the Third Quarter and Fourth Quarter numbers will likely not look better as CHCG expects their "business performance for the 2009 fourth quarter to be on par with that of the third quarter." The key here is to look for signs that the company can turnaround their business, if there is light on the horizon the stock would be a clear buy at current levels:

"While we expect the remainder of 2009 to be challenging, we remain focused on building a platform for long-term sustainable growth. We have a lot of work to do but believe we have the right plan and managerial team in place to execute on our mission. We look forward to updating you on our developments in the months ahead." (Source: Q3/09 press release)

China Carbon Graphite (CHGI.OB) is in a strong uptrend lately, both for their business with a 50% sequential rise in earnings last quarter, as for their stock price which has appreciated almost 60% this year. Watch out for a confirmation of this trend with Q4 and year end numbers that are due next week. The stock benefited hugely from an internet plug this month but is down about $1 from its mid-month highs and that would be the target for the stock with a trend confirmation.

China Gengsheng Minerals (CHGS) plans to release fourth quarter results on Monday, March 29, after the close. The stock has gained 40% so far this year on several catalysts as the NYSE Amex listing and new contract announcements. Though CHGS is currently trading well below its March 5 high of $4.30. For the stock to resume its uptrend I would be looking for revenues of $15.5-$16 million and net income of about $1.8 million.