Chinese Delistings on U.S. Exchanges

The singlemost important goal for every Chinese company that decided to become publicly traded in the U.S. was to obtain a listing on a senior exchange, NASDAQ or NYSE / NYSE Amex. The reason that many companies chose a reverse merger as their method of going public was that it was much faster and significantly cheaper than a traditional IPO. And many of those reverse merger companies succeeded in getting their stock listed on a senior exchange within a few years.

This listing comes with a number of benefits. First of all it is much cheaper to raise capital when the stock is no longer just quoted on the bulletin boards. And raising capital is a primary reason for going public also for Chinese companies. Secondly this listing creates a liquid market outside of the PRC for Chinese shareholders, and in China money, personal wealth, and with it status is of prime importance, not comparable with Europe or the U.S.

That leads to the third, and probably most important reason for going public in the U.S.: recognition and prestige for the company and its officials. Being a U.S. public company with a NASDAQ or NYSE listing leads to prestige with both customers and suppliers, but also local banks and government. The good will of especially banks and local government officials is extremely important for a small Chinese company. In a country where success in business is largely based on networking and guanxi, status and prestige are invaluable assets for a young company.

But it also means that a delisting notice from NASDAQ or NYSE comes with great embarrassment for the company. In most cases not only the stock price will collapse, but the repercussions for the company's business in China could be severe if it loses that good will from banks and influential officials in the local government administrations. A Chinese company with a delisting notice will always pull all strings possible to maintain their senior exchange listing, not for the best of its foreign shareholders but for their very own survival.

There is no such thing as a "voluntary delisting" from a Chinese company. If you read such a phrase, stay away from the stock. A company that had its stock delisted without much of a fight is either a fraud or it has given up on its public status, in both cases you don't want to touch the stock.

We have seen more than 50 Chinese delistings over the past two years, and with very few exceptions all those companies were frauds or they have now stopped filing reports with the SEC for other reasons. Only the handful of companies that stayed current in filing its Form 10Qs and 10Ks at all times since the delisting are worth a second look.

Chinese Delistings from NYSE/NASDAQ:

2012-09-25 -- SCEI Sino Clean Energy -- Delisting from NASDAQ
2012-09-21 -- CVVT China Valves Technology -- Delisting from NASDAQ
2012-09-07 -- BEST Shiner International -- Delisting from NASDAQ
2012-07-11 -- CDII China Direct Industries -- Delisting from NASDAQ
2012-06-25 -- CAST ChinaCast Education -- Delisting from NASDAQ
2012-06-21 -- CNEP China North East Petroleum -- Delisting from NYSE Amex
2012-06-15 -- XINGF Qiao Xing Universal Resources -- Delisting from NASDAQ
2012-06-15 -- WUHN Wuhan General Group -- Delisting from NASDAQ
2012-06-15 -- QXMCF Qiao Xing Mobile Communication -- Delisting from NASDAQ
2012-06-15 -- CNGL China Nutrifruit -- Delisting from NYSE Amex
2012-05-29 -- AOBI American Oriental Bioengineering -- Delisting from NYSE Amex
2012-05-10 -- CKUN China Shenghuo Pharmaceutical-- Delisting from NYSE Amex
2012-05-08 -- UTRA Universal Travel Group -- Delisting from NYSE
2012-04-26 -- ZSTN ZST Digital Networks -- Delisting from NASDAQ
2012-03-08 -- CSKI China Sky One Medical -- Delisting from NASDAQ
2012-03-08 -- CHNG China Natural Gas -- Delisting from NASDAQ
2012-02-10 -- FEED Agfeed Industries -- Delisting from NASDAQ
2012-01-26 -- DGWIY Duoyuan Global Water -- Delisting from NYSE
2011-12-29 -- CEAI China Education Alliance -- Delisting from NYSE Amex
2011-11-30 -- ABAT Advanced Battery Technology -- Delisting from NASDAQ
2011-11-18 -- CIIC China Infrastructure Investment -- Delisting from NASDAQ
2011-10-21 -- ORSX Orsus Xelent Technologies -- Delisting from NYSE Amex
2011-10-19 -- CTESY SinoTech Energy -- Delisting from NASDAQ
2011-10-17 -- CCDM China Century Dragon Media -- Delisting from NYSE Amex
2011-10-07 -- KEYP Keyuan Petrochemicals -- Delisting from NASDAQ
2011-10-04 -- AUTCF AutoChina International -- Delisting from NASDAQ
2011-09-26 -- APWR A-Power Energy -- Delisting from NASDAQ
2011-09-12 -- WATG Wonder Auto Technology -- Delisting from NASDAQ
2011-09-02 -- PUDA Puda Coal -- Delisting from NYSE Amex
2011-08-17 -- LGFTY Longtop Financial -- Delisting from NYSE
2011-08-04 -- JGBO Jiangbo Pharmaceuticals -- Delisting from NASDAQ
2011-07-21 -- YUII Yuhe International -- Delisting from NASDAQ
2011-07-12 -- HQSM HQ Sustainable Maritime -- Delisting from NYSE Amex
2011-07-05 -- CHBT China-Biotics -- Delisting from NASDAQ
2011-06-24 -- SBAY Subaye -- Delisting from NASDAQ
2011-06-24 -- NIVS NIVS IntelliMedia Technology -- Delisting from NYSE Amex
2011-06-24 -- CRTP China Ritar Power -- Delisting from NASDAQ
2011-06-15 -- CBEH China Integrated Energy -- Delisting from NASDAQ
2011-06-14 -- CILE China Intelligent Lighting -- Delisting from NYSE Amex
2011-06-14 -- CELM China Electric Motors -- Delisting from NYSE Amex
2011-05-20 -- CAGC China Agritech -- Delisting from NASDAQ
2011-05-19 -- CCME China MediaExpress -- Delisting from NASDAQ
2011-04-13 -- DYNP Duoyuan Printing -- Delisting from NYSE
2011-03-29 -- FUQI Fuqi International -- Delisting from NASDAQ
2010-12-08 -- RINO RINO International -- Delisting from NASDAQ

We have identified 24 additional Chinese companies that have already received a delisting notice from their exchange or will likely get such a letter in the near future. Those companies will have their common stock delisted within the next six months unless they take immediate action, usually a reverse stock split (approved by the exchange) will do the trick of getting their stock price above the crucial one dollar level.

Some companies have already completed a reverse split, including Cleantech Solutions International (CLNT, 1:10 Reverse Split on 2012-03-06), China Precision Steel (CPSL, 1:12 Reverse Split on 2012-08-28), and China Information Technology (CNIT, 1:2 Reverse Split on 2012-03-02). Even though the stock price usually suffers even more after a reverse split, this is actually a good sign as the company decided not to give up on its senior exchange listing. Again, any Chinese stock that was delisted for violating the $1 minimum bid price rule without the company fiercly fighting for its survival on NASDAQ or NYSE should be avoided no matter what.

Chinese Stocks Facing Delisting:

BWOW Wowjoint Holdings
-- Minimum $1 Bid Price Rule Violation (Compliance period ends on October 29, 2012)
CADC China Advanced Construction Materials
-- Minimum $1 Bid Price Rule Violation (Compliance period ends on February 19, 2013)
CALI China Auto Logistics
-- Minimum $1 Bid Price Rule Violation (Compliance period ends on January 28, 2013)
CBAK China BAK Battery
-- Minimum $1 Bid Price Rule Violation (Compliance period ends on November 21, 2012)
CJJD China Jo-Jo Drugstores
-- Minimum $1 Bid Price Rule Violation (Compliance period ends on February 27, 2013)
CNET ChinaNet Online
-- Minimum $1 Bid Price Rule Violation (Compliance period ends on November 26, 2012)
CNYD China Yida Holding
-- Minimum $1 Bid Price Rule Violation (Compliance period ends on December 31, 2012)
CPGI China Shengda Packaging
-- Minimum $1 Bid Price Rule Violation (Compliance period ends on November 5, 2012)
DEER Deer Consumer Products
-- Trading Halted since 2012-08-13
DQ Daqo New Energy
-- Minimum $1 Bid Price Rule Violation (Compliance period ends on February 20, 2013. Reverse Split likely.)
GPRC Guanwei Recycling
-- Minimum $1 Bid Price Rule Violation (Compliance period ends on January 7, 2013)
HEAT SmartHeat
-- Trading Halted since 2012-05-30
HGSH China HGS Real Estate
-- Minimum $1 Bid Price Rule Violation (NASDAQ Delisting Notice served on January 18, 2012, status unclear)
KONE Kingtone Wirelessinfo Solution
-- Minimum $1 Bid Price Rule Violation (Compliance period ends on December 17, 2012)
LZEN Lizhan Environmental
-- Minimum $1 Bid Price Rule Violation (Compliance period ends on October 8, 2012)
MCOX Mecox Lane
-- Minimum $1 Bid Price Rule Violation (Compliance period ends on February 4, 2013. Reverse Split intention announced.)
NFEC NF Energy Savings
-- Minimum $1 Bid Price Rule Violation (Compliance period ends on February 26, 2013)
QKLS QKL Stores
-- Minimum $1 Bid Price Rule Violation (Compliance period ends on March 4, 2013)
SIHI SinoHub
-- Trading Halted since 2012-09-07 (Delisting certain)
SUTR Sutor Technology
-- Minimum $1 Bid Price Rule Violation (Compliance period ends on December 24, 2012)
THTI THT Heat Transfer Tech
-- Trading below Minimum $1 Bid Price since September 10, 2012
VALV Shengkai Innovations
-- Minimum $1 Bid Price Rule Violation (Compliance period ends on December 31, 2012)
VISN VisionChina Media
-- Trading below Minimum $1 Bid Price since June 6, 2012
ZOOM Zoom Technologies
-- Trading below Minimum $1 Bid Price since August 31, 2012

NYSE Amex does not have a $1 Minimum Bid Price Rule, yet their regulations state that they can delist a stock when "the aggregate market value of the security has become so reduced as to make further dealings on the Exchange inadvisable." It should also be noted that NYSE Amex recently amended its listing regulations to include several paragraphs about reverse merger companies which now have increased initial listing requirements. Given the large number of Chinese RTO blow-ups on NYSE Amex over the last two years we see the following eight Chinese small caps at risk duet to their low stock price:

AXN -- Aoxing Pharmaceuticals (Day Close below $1.00 since July 18, 2011)
CBP -- China Botanic Pharmaceutical (Day Close below $1.00 since November 11, 2011)
CHGS -- China Gengsheng Minerals (Day Close below $1.00 since February 14, 2012)
CNAM -- China Armco Metals (Day Close below $1.00 since August 17, 2011)
CPHI -- China Pharma Holdings (Day Close below $1.00 since September 29, 2011)
NEWN -- New Energy Systems (Day Close below $1.00 since November 15, 2011)
SHZ -- China Shen Zhou Mining (Day Close below $1.00 since May 8, 2012)
TPI -- Tianyin Pharmaceutical (Day Close below $1.00 since November 15, 2011)

China Model Portfolio Sharply Higher

What a beautiful run it has been for our China Model Portfolio in the last six weeks. The portfolio value is up by 44.34% since September 24th, and the sentiment for China stocks couldn't be better right now. Several of our portfolio positions have reached the price targets we have set, so we are making a couple of changes this weekend.

Please remember that the model portfolio is designed for long-term oriented value investors, set up to be as transparent as possible, and transactions are allowed only on the weekends at Friday's close. Contrary to many other model portfolios out there, we do not claim to have hit the bottom or top of a move, and transactions can be easily reviewed and modeled into a real portfolio. In theory the performance of our China portfolio should be lagging those that can react on intra-week news, price movements, earnings reports and momentum, so we are quite proud of the performance so far.

Closing Positions

Charm Communications (CHRM) is currently trading at $12.23, up 28.73% from the IPO price and down 2.09% from its November 4 high at $12.49. The Trading China Tracker Score is 5 (Hold).

Charm has reached our target price of $12.00 last week and we are closing the position here for a gain of 46.64% or $2,330. While I still believe that the company has a very bright future, the recent price appreciation has lowered the China Tracker Score from 12 (BUY) to 5 (HOLD) and we are locking in the profits here.

China MediaExpress (CCME) is currently trading at $19.61, up 85.00% for the year and down 2.44% from its November 4 high at $14.79. The Trading China Tracker Score is 12 (Strong Buy).

CCME has also reached our target price ($20.00) last week. This has worked out much faster than expected. China MediaExpress is scheduled to report Third Quarter earnings on Monday before the open, what is widely expected to be a very good report. However, as our price target has been reached, we are closing the position here for a gain of 131.25% or $6,555.

Longwei Petroleum (LPH) is currently trading at $3.50, up 29.63% for the year and down 1.13% from its November 5 high at $3.54. The Trading China Tracker Score is 7 (Hold).

Longwei has been doing very well since its uplisting and the stock reached our price target last week, even closed at new highs on Friday. There is a good chance that LPH can establish a new trading range above the $3 mark now, but we are locking in gains here and closing the position for a gain of 76.77% or $3,838.

Tianli Agritech (OINK) is currently trading at $7.73, up 28.83% from the IPO price and down 4.93% from its November 5 high at $8.13. The Trading China Tracker Score is 8 (Buy).

OINK is the second stock in our model portfolio that established new all-time highs on Friday. I believe it has further upside from here, but as we can make changes to our portfolio positions only on the weekends, we will stick with our initial price target ($7.50), that has been surpassed now. We are closing the position here for a gain of 105.58% or $5,280.

New Additions

SinoHub (SIHI) is currently trading at $2.42, down 39.50% for the year and down 25.77% from its April 1 high at $3.26. The Trading China Tracker Score is 4 (Hold).

SinoHub is expanding its virtual contract manufacturing to serve mobile phone distributors in emerging markets outside of China. We do like the stock here because the prospects for FY 2011 are bright. SIHI is currently followed by 4 analysts. All 4 give the stock a positive rating, and the average price target is 5.25, which implies 116.94% upside from current price. Rodman & Renshaw raised their estimates and price target ($7.00) in late October. The stock is currently trading at 2010e and 2011e P/E of 4.4 and 3.5, respectively.

Agfeed Industries (FEED) is currently trading at $3.17, down 36.60% for the year and down 34.64% from its April 14 high at $4.85. The Trading China Tracker Score is -5 (Sell).

Agfeed is a Chinese hog breeder and producer of animal feed that came under pressure as severe floods led to the loss of over 16,000 live animals in the Second Quarter. Thus, results for the first half of 2010 were disastrous and the Trading China Score is currently at negative five, or Sell. But this could be an excellent turnaround play for several reasons.

Impact of the natural disasters will be fading. Peers in the Chinese pork industry like OINK and HOGS have been performing very well, indicating positive developments in the industry. Agfeed said its revenue base will nearly double in connection with the M2P2 acquisition. And the company plans to carve out its animal feed segment soon and has already filed for an IPO with the SEC. This will very likely unlock value for shareholders.

Rodman & Renshaw sees fully diluting EPS climbing from a measly $0.02 in 2010 to $0.59 in 2011 and $1.03 in 2012. The firm has a price target of $7 on the stock and notes that this target "does not include the impact of additional production from the five western style farms being constructed in Dahua and Xinyu." All in all a very favorable risk-reward ratio here, so we are adding FEED to our model portfolio with a price target of $6.00 based on 6x 2012e EPS.

Jade Art Group (JADA) is currently trading at $0.41, down 39.73% for the year and down 62.40% from its April 5 high at $1.09. The Trading China Tracker Score is 16 (Strong Buy).

Jade Art Group is a producer of raw jade that wants to expand into the retail business. I believe such a move would be very positive as the market for luxury goods is expected to see strong growth in the years to come, with the Chinese consumer having more and more money to spend. JADA has been lagging all moves in the China small caps space and is still trading at a P/E of 3.4 with 45% of its market value in cash. I expect the traditionally strong Q3 earnings report to serve as a trigger for a higher share price.

Excellent Buying Opportunities

Last week we saw a broad sell-off in US-listed Chinese companies with the average stock as measured by the Emerging Chinese Small Caps Index dropping about 15%. While OTC-listed stocks were holding up relatively well - our China OTC Index is about flat for the year - we saw the biggest declines in Chinese stocks listed on senior exchanges. Our China Main Index is down a staggering 13.3% year-to-date and closed Friday at new year lows. I believe value investors should now focus on those bigger names in the China small caps space as the depressed price of many of those stocks presents excellent buying opportunities, both for swing traders looking for a bounce and long-term growth-oriented investors who can now gobble up quality stocks at a fraction of their former valuations.

Even if Chanos, Faber and Rogoff are right about an inflated Chinese real estate market and a more or less imminent correction there, many of the US-listed Chinese names should continue to show impressive results and deliver on their promise of high growth in the quarters and years to come. Before I will present you a few ideas, let's have a more detailed look at last week's damage. I will focus solely on Nasdaq, NYSE and Amex stocks in this article, but you will find many more stocks on the OTC.

Stocks that printed a new 2010 low on May 6 or May 7: ABAT, ADY, AMCF, AOB, APWR, BEST, CADC, CAGC, CALI, CBAK, CEU, CGA, CHGS, CHLN, CMFO, CMM, CNTF, COGO, CPSL, CREG, CRIC, CRTP, CSKI, CSR, CTC, CVVT, CWS, CXDC, DEER, DGW, DHRM, FEED, FUQI, GFRE, GRRF, GSI, GU, HOGS, HPJ, HQS, JRJC, NEP, NKBP, ORS, RCON, RINO, SIHI, SKBI, SORL, SUTR, TPI, TRIT, TSTC, TXIC, UTA, VISN, WATG, WH, WUHN, XIN, YONG, ZSTN

Stocks that have retreated 50% or more from their 2010 highs: AMCF, APWR, AUTC, CADC, CAGC, CALI, CBAK, CDII, CEU, CGA, CHGS, CHIO, CHLN, CJJDD, CMM, CNAM, CNET, CNTF, CREG, CSKI, CSR, CWS, DGW, FUQI, GFRE, GRRF, HPJ, KNDI, NEP, ONP, ORS, RINO, SBAY, SCOK, SIHI, SUTR, TBV, TPI, TRIT, TSTC, TXIC, VISN, WATG, WUHN, ZSTN

You can sort through more detailed numbers on our new performance screen.

Now let's have a look at some individual stocks. We want to avoid unnecessary risks now with so many stocks trading at depressed levels, so we will ignore the following sectors that are related to a possible real estate "bubble" and look more vulnerable to more tightening measures by the Chinese government: construction, steel, finance, real estate, exporters and utilities.

China Armco Metals (CNAM)

The stock is down 59% from its March 5 high at $11.10 and trading 30% below the level of its recent equity offering at $6.50. The development of Armco's business is extremely positive and the company guided for net income to exceed $12 million in FY 2010 which translates into 2010e EPS of about $0.85 with all signs pointing at sustainable strong growth in the years ahead. The stock is trading at a P/E of 5 and offers a tremendous buying opportunity at current levels.

Skystar Bio-Pharmaceutical (SKBI)

Skystar lost more than 30% from its January high at $12 and is trading in the low $8 range at the time of writing. The stock price is depressed for a long time already as the company has announced to reorganize their business to include a new product segment, resulting in low growth rates for 2010. But what investors tend to forget is that SKBI's business should take off in FY 2011 and that is not so far ahead as it seems. Rodman & Renshaw's quite ambitious expectations call for SKBI to earn $2.51 per share in 2011 which would mean you can buy the stock now for just roughly 3x 2011 earnings.

SinoHub (SIHI)

Their new contract manufacturing business for mobile phones seems to be taking off now. The company expects to reach full capacity utilization by June and guided for 40% revenue growth in 2010. SIHI reported EPS of $0.48 for 2009 which gives it a trailing P/E of 5 at current levels. The stock is currently trading at 2008 levels and with 20% EPS growth in 2009 and projected 40% revenue growth in 2010 this seems plain silly. The one analyst I know of, Canaccord Adams, has a $6 price target on the stock.

Rino International (RINO)
Tri-Tech Holding (TRIT)

I have talked about both these water companies a lot already, yet their stock prices keep falling. RINO and TRIT are now trading 59% and 57% below their 2010 highs, respectively, and valuation is down to 7-8x 2010 earnings. Yet both companies are very well positioned to benefit from the massive government programs dealing with two of the most dramatic problems China is facing today: pollution and urbanization. Three analysts are covering RINO with Buy ratings and targets between $34 and $40. Piper Jaffray initiated coverage on TRIT in late April with a price target of $20.

ZST Digital Networks (ZSTN)

ZSTN has been beaten down with the whole telecommunications sector (TSTC, GRRF), but I believe this is not at all justified. Analysts (Rodman & Renshaw) are calling for 2010e EPS of $1.20 and 2011e EPS of $1.52, but it seems the market is not believing them or the company's own guidance as the stock is currently trading below $6. ZSTN is expected to report Q1/10 earnings on May 13 and the first quarter is usually the weakest due to the Chinese New Year holidays and other factors. If you are risk avoidant you want to buy this after earnings have been released and the company reaffirmed its 2010 guidance for net income between $13 million and $15 million.

Overall the China Small Caps sector provides many excellent buying opportunities here. There is of course no guarantee that the current correction in the general markets and especially in more risky US-listed emerging market stocks will not continue next week, but as a value investor you might find yourself thrilled with being able to buy high growth stocks at such low valuations now already. Greece and Portugal, the European currency, the Chinese real estate markets and a possible revaluation of the Yuan have little or no impact on those companies' growth prospects. If you don't believe in doomsday scenarios like a double-dip recession triggered by a breakdown of the Euro or a massive crash in China, then you shouldn't be afraid of putting some money to work here.

Most of the companies mentioned here will report Q1/2010 earnings over the next two weeks and in many industries the first quarter will be impacted by seasonal effects like cold weather and the Chinese New Year break. You might want to wait until the companies you are watching have reported their numbers, but given the current valuations you might find yourself buying in at a much higher level then.

Earnings Previews, Part 4

The fourth and last part of my China Small Caps earnings preview for the next week:

RINO International (RINO) will release results on Wednesday, March 31, after the close. Analyst consensus for the Fourth Quarter is EPS $0.49 with Rodman & Renshaw setting the street high with $58.3 million and $0.60 in revenues and EPS. RINO is a player in the very interesting and high growth environmental protection industry and should deserve a P/E multiple of 15 or higher with an earnings beat. The stock is down 17% for the year and is trading at less than 10x projected 2010 earnings now. RINO was trading between $18 and $33 this year and it is likely that wild price swings will continue after earnings.

Sino Clean Energy (SCLX.OB) pre-announced FY2009 numbers with their Third Quarter report. The company is expecting at least $10 million in net income on at least $40 million in revenues. For FY2010 net income should grow by 50% to at least $15 million. There is some confusion about the new facility that began production as the company stated that this additional capacity should contribute $7 million net income this year. But SCLX loves to provide guidance so we should get some clarity with the final earnings report next week. Rumours say that the company is preparing for moving its stock to a senior exchange which would require doing a reverse split first, not a bad idea to bring down the high share count of more than 100 million anyway.

Sino Gas International (SGAS.OB) is set to report on March 31 after the close, followed by a conference call the next morning. The stock is very thinly traded and about flat for the year. Sino Gas is profitable and announced back in January that it secured additional bank loans and private capital to fund its future growth. I have no opinion on the stock at this time and will not take a position whatever might happen this Wednesday.

Songzai International (SGZH.OB) is one of those China Small Caps that leaves investors pretty much completely in the dark. If that would change the stock will likely take off or would at least have participated in the huge China coal stocks rally this winter. The stock is up 20% for the year but still the worst performer in the coal group and the only one that didn't see new highs in 2010. Fundamentally SGZH is cheap and I would call it a buy as soon as the company shows any interest in improving their investor relations and improving communication in general.

SinoHub (SIHI) will release its FY 2009 financial results on March 31 before the market open. I like that the company is actively trying to improve investor relations and telling their growth story by hiring an IR firm and communicating regularly with investors. I don't like that their share count is exploding and that I do not fully understand their business which keeps me from taking a position in SIHI.

Skystar Bio-Pharmaceutical (SKBI) is one of my favourite core holdings in the large group of China Small Caps. I believe this company is widely misunderstood and when (not if) that changes the stock will trade in the $20's. Misunderstood because Skystar is despite its name not a healthcare stock as it serves the agricultural and food industry. Misunderstood because the stock took a beating last winter for diversifying its business, positioning itself for higher growth in an additional market segment, at the price of pushing forward certain vaccine revenues by ONE quarter which resulted in lowering FY 2010 guidance. SKBI is flat for the year and analyst consensus for the Fourth Quarter are $10.6 million and $0.31 for revenues and EPS.

SORL Auto Parts (SORL) will report tomorrow, March 29, before the market opens. The company is expected to report Q4 revenues of $36.25 million and EPS of $0.19. The stock ran up nicely in the past few sessions and is now up 12% for the year, pretty much in line with the auto parts sector. For further upside I would want to see EPS guidance for 2010 coming closer to the $1 mark, right now the stock seems fairly valued with a forward P/E of about 14, but you never know with those auto parts stocks as apparently some analysts believe that peer CAAS deserves a multiple of 30.

SkyPeople Fruit Juice (SPU) pre-announced 2009 net income of $15-$16 million on revenues of $58-60 million. The company has already provided FY 2010 guidance for net income between $19 and $21 million, representing roughly 30% income growth. The stock is one of the big winners so far this year and is up 42% since January.

Sancon Resources Recovery (SRRY.OB) is a bit of a mystery to me. The company seems to have a very solid business, recycling of industrial and commercial waste like plastic, paper and glass, and selling the recycled materials to Chinese manufacturers. The business seems almost risk-free, the company is generating lots of cash, is solidly profitable for many quarters, yet the stock is completely off the radar and SRRY is barely trading 10,000 shares a day around $0.40 or 4x 2009 earnings. The last 10-Q filing is full of statements like "tremendous demand for recycled materials" , "we anticipate rapid growth" and "Sancon is uniquely position to benefits from these initiatives as an early mover in the industry and one of the few foreign companies being awarded a waste management license in China. Sancon has for the past years developed one of the largest collection and recovery network in China for commercial wastes and expects to expand into other areas of environmental services." (bit of Engrish here).

Telestone Technologies (TSTC) has repeatedly reaffirmed its 2009 revenue guidance of $70 million, I don't believe that actual results will differ much from that number. Unusual for a Nasdaq company, there is no announcement for the actual earnings release and conference call yet (unless I missed it). TSTC jumped on everyone's radar screen with very strong Third Quarter earnings and has been a member of the IBD 100 for most of the year. The stock is down 10% YTD and who knows, maybe Q4 earnings and guidance will refuel the rocket ship. I have no idea how the stock will react this time, but I would definitely put it on my watchlist for the coming week.

Tongxin International (TXIC) is by far my favourite of the Chinese auto parts stocks. The company pre-announced Q4 revenues of $29.5-$32.5 million (net income should be $4.8 to $5.0 million) and full year earnings of about $17 million (EPS $1.29) on $124 million revenue. For 2010 Tongxin expects revenue to grow about 25% to $150-$160 million. At the current price of $7.62 TXIC is by far the cheapest of the auto stocks with a trailing P/E of just 6. Compare that to SORL or CAAS and you see why I like it as a value play in this sector.

ZST Digital Networks (ZSTN) will be announcing Fourth Quarter and FY 2009 numbers on March 30 before the market opens, followed by a conference call mid-morning. The one analyst, Rodman & Renshaw, expects the company to report $28.1 million and $0.29 for revenues and EPS. The full year should come in at $98 million revenues with a fully diluted EPS of $0.91. And for 2010 the EPS number should rise about 28% to $1.17. The stock is currently flat for the year and trading range-bound with strong support at $8. ZSTN probably has to beat estimates by a nice margin in order to break out of this range and move back to January highs in the high $11's.