China small cap - watchlist for 2010

In addition to the top 10 amigos, here is the watch list for 2010's up and coming Chinese small caps.

The list is based on a message board discussion ( (Emerging China Small Caps at http://investorshub.advfn.com/boards/board.aspx?board_id=9884 ).

XODG - Xodtec Group USA

• PPS 1.45, down trend for last few days
• Extremely bullish by some ECSC members
• http://investorshub.advfn.com/boards/board.aspx?board_id=16409
• XODG is a LED story. Energy saving in the energy thirsty country is a go. It is also a carbon play.

JADA Jade Art Grp. (BB) (USBB:JADA)

• The Company is a seller and distributor in China of raw jade, ranging in uses from decorative construction material for both the commercial and residential markets to high-end jewelry.
• Current pps $0.425, PE 2.6
• Check this link

CHBT - ChinaBiotics Inc.

• Latest PPS $14.25, PE 15.91
• The Company is engaged in the research, development, production, marketing and distribution of probiotics products, which contain live microbial food supplements which beneficially affect the host by improving its intestinal microbial balance.
• Pro: x10 capacity (150 ton) expansion complete, paid for and testing to begin commercial production in late Dec (hey that's now isn't it). Will begin another x10 capacity expansion (150 ton) expansion in Jan 2010 (hey that's about now too isn't it). Guiding revenue increase at least 50% in 2010 (sandbagging).
• Cons: relatively high PE

TSTC - Telestone Technologies Corporation

• Pprovides wireless communications coverage solutions
• One of the ESCS members' favorites
• Unique product in WFDS, amazing growth in China and expanding to US and South America, expecting blowout numbers for this quarter.
• NASDAQ listed with a small float and current market cap is only $ 180M at $ 17.31 a share. It can easily be a $ 50 stock with the current growth rate.

SIAF.PK - Sino Agro

• Provides agri feeds for farmers
• Interesting business model: for example, Sanjiang is a joint venture between SIAF and local government in western China. It sells feeds to farmers who raise cows, and then purchase the beef castle from farmers for sales in more affluent coastal cities.
• Another amazing story is that the stock went to less than one cent ($0.009) this year, and bounced back to about $1, for a 10,000% gain.

WEMU

• Current PPS is $5.25. Current PE 16.06, and forward P/E of 3.25
• U.S. based China manufacturer, serving the solar energy, aerospace, telecommunications, automotive, and electronics industries
• Probably one of the cheapest solar play. Solar division has a revenue of $31m.
• Revenue Growth for the nine months ended September 30, 2009 increased 25% and net income before tax increased 85% compared to the same period in 2008.
• The company is guiding for 2010 revenues of $100m and net income of $5.75 million

CNAM - China Armco Metals Inc.

• Importer and wholesaler. The Company imports, sells and distributes metal ores and non-ferrous metals to the metal refinery industry in China.
• PPS ~ $3.18, EPS (TTM) $0.21, PE ~ 15
• Expected to grow huge in 2010 because their scrap metal facility is now ready and being tested and sometimes very early in Q1 they will start with production. It has the capacity of 1 million metric tons of scrap metal and the price per metric ton was around 390 bucks last time I checked.
• With 100% capacity we are talking about potential of $400 million in revenues and if you only take 5% net margin we are talking about potential 2 bucks in EPS once all is up and running!
• Their traditional business does 50 cents EPS in 2009 as well on it's own.
• Some very good chance for uplisting within the next few months.

Pharma Stocks:

Good theme for an article touching on the Chinese approved drug list, western v. eastern medicine, fragmentation, aging population, opportunity...

• BSPM.OB (Biostar), LTUS.OB (Lotus Pharmaceutical), CHME.OB (China Medicine), and SKBI (Skystar BioPharmaceutical ).
• All those stocks are in the 2010 top listt.

Agro Stocks

Potential names: YONG, FEED, CGA, CKGT

Investment thesis/Mega trend:

• China has 1.3 billion people to fed
• Consumption and unit price for all kinds of food, especially the meat (pork, beef, milk, etc.) have been increasing
• The agricultural sector accounts for approximately 13% of China’s GDP
• The agricultural companies are protected by the government and foreign competition is heavily regulated

Growth stocks:

• Another interesting theme might be tremendous nuclear growth, CPQQ, CHGI

Energy Stocks:

• NEP, LPIH, CBEH, etc.

CO (formerly CNDWF.OB)

• China Cord Blood;
• Largest cord blood banking operator in China. The company provides cord blood collection, laboratory testing, hematopoietic stem cell processing, and stem cell storage services.
• Moved from OTCBB to NYSE
• Business model: Expectant parents pay the co to process and store the cord blood of their children at birth for potential future use in medical treatment.
• Q2 (Sep) revenue rose 30.4% yr/yr to $9.4 mln, with huge operating margin of 37%.
• Subscribers currently total 105,812 with 21,752 new subs signed up in 1H09, up 47% yr/yr.
• Pros: China's one child policy, Chinese govt's "one license per region" policy for cord blood operators. Penetration is low with great growth potential: As people become more fluent, more would pay for cord blood banking services for its presumed health benefit.
• Cons: a confusing concept in US. Many people may be turned off by the stock just by its name. A pretty high share count (66.1 mln) makes the P/E valuation somewhat high (no ests) and it results in a $380 mln market cap, which is on the high side for a co with $18 mln in revs for the 6 mos ended Sep 30.

CALI - China Auto Logistics Inc.

• The Company's main business is to provide quality imported automobile sales and trading service and web-based automobile trading sales and information platform to its customers.
• Transitioning from low-margin seller of autos in China to high-margin "Autotrader"-like internet service/advertising player.
• Web-driven growth is growing like wildfire. I get giddy when I think of the inherent value of an early-mover Autotrader-of-China stock.

CHOP - China Gerui Advanced Materials Group Ltd.

• Manufactures cold-rolled specialty steel products in China
• Chinese specialty steel player isn't just another CPSL or GSI, due to end-uses of their steel. Looks cheap going-forward.
• Current PPS $5.55, EPS $0.72, PE Ratio 7.70

CIHD.OB - Changda International Holdings Inc

• Rapidly growing Chinese fertilizer and specialty chemical firm.
• Impending uplist...until their share price dropped below $3...oops!
• Despite that, one has to like the fertilizer macro story in China, but the wildcard is the new deal with Sanofi-Aventis for one of their spec chemicals.

CBTE - Commonwealth Biotechnologies Inc.

• The company is engaged in the life sciences outsourcing business, which offers discovery and development, and chemistry and biology products and services.
• Crossing t's and dotting i's on finalization of merger with highly profitable Chinese peptide firm; priced as if the merger is going to fail, but CBTE mgmt says otherwise (of course).
• This feels like a $3+ stock if/when the merger is consumated, trading at .40 today.

BBCZ.PK

• A pinkie...
• Yet another Chinese fertilizer company which has been hamstrung by legal difficulties preventing investment in their own growth.
• Well, their legal issues are finally behind them, and with a new cash hoarde (>$3M) plus a substantial investment in China Pediatrics (~ another $3M), the stock is trading below cash/investments and should be set to emerge from the brink.
• At .21 there's some good risk/reward there, although I've been unsuccessful in getting responses from mgmt.

CCME - China Mediaexpress Holdings Inc.

• China MediaExpress Holdings, Inc. provides television advertising services on inter-city express buses. It offers advertisements on its network of television displays installed on approximately 18,000 express buses originating in 12 province/municipalities.
• Competitors include FMCN and VISN, all at P/E's of 20+ (With analyst targets at P/E's of 25 or so, they just upgraded for 2010)...Competitors having much slower growth of course. This is a very very hot industry for 2010, ad dollars are surging into China with their whole focus on consumption increase.
• CCME (via Warrants) P/E right now for 2009 is around 6.2 (Not including warrant dilution since they cannot be used in 2009). For 2010, including all warrants exercised (35M+ more cash in balance sheet too), my estimates have them at $2-2.4 EPS (Assumes they make between 70m and their 84m earn-out) so that puts them at a forward P/E of 4.4 to 5.25.
• Truly a cash-generating cow type company though, so should have plenty of cash on its books. Oh and they just added DTT as their auditors.
• Warrant leverage is very nice while it lasts, should be gone in a few months though (sadly they will force us to exercise into the common by February/March).
• http://investorshub.advfn.com/boards/read_msg.aspx?message_id=44223981
• website: http://www.gstv.cc
• Q3 PR: http://finance.yahoo.com/news/China-MediaExpress-Holdings-bw-500656408.h...
• (old) presentation: http://yahoo.brand.edgar-online.com/displayfilinginfo.aspx?FilingID=6666...

CHWY.OB - China Wind Systems Inc.

• The Company supplies forged rolled rings to the wind power and other industries and industrial equipment to the textile and energy industries in China.
• Current PPS around $4.5, EPS (TTM) $0.48 , PE Ratio 9.60
• In process of uplisting, this is a fast growing China Wind Power company.
• Huge contract was signed last week. Should be a great year ahead for this little company.

CFQCF.OB/CFQWF.OB - China Fundamental Acquisition Corporation

• This company has a very different business model from the above companies. It is a "special-purpose acquisition company", or SPAC (see this link if you want to understand the concept.)
• China Fundamental Acquisition Corporation intends to acquire an operating business in the People’s Republic of China through a stock exchange, asset acquisition, or other business combination. The company was founded in 2007 and is based in Central, Hong Kong.
• According to ECSC board, this Chinese SPAC has finalized share purchase agreement with a highly profitable Chinese machinery company. Deal will need to be agreed by shareholders, but the diamond in the rough here are the warrants, which should have almost $3 intrinsic value to them but are trading at around 1/3 that.

GRVY - Gravity Co. Ltd.

• http://investorshub.advfn.com/boards/board.aspx?board_id=15836
• Not exact a China play (the company is based in S. Korea)
• Gravity is a developer and publisher of online games. Gravity's principal product, Ragnarok Online(tm), is a popular online game in many markets, including Japan, Taiwan and Thailand, and is currently commercially offered in 38 markets.
• Good: low PE of ~ 5
• Bad declining revenue