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probably going to chiong more. just my view. trade with care 
A Follow up by kelvin..............................
The following was posted by Kevin Scully, NRA executive chairman (left), on his blog on Tuesday. Visit www.nracapital.com
China GaoXian.....a major shareholder sells down to below 5%.....what is happening there ??
I noticed some interesting announcements on the SGX website since my last Blog posting on China GaoXian on September 28, 2010.
A significant shareholder (Carry Luck Investments/Hong Rong Zhi) which owned about 10.4% of the company had reduced his stake significantly to 4.99% through a married deal of 78mn shares. (see announcements)
This is not unexpected as the moratorium of the PRE-IPO investors is over. The CFO had alluded to this in my telephone conversation with him.
Another announcement is the appointment of a Deputy CEO - to look at the strategic direction of the company.
The recent sharp fall is probably linked to the placement.......!!!
Third hand but first hand information......
a friend of mine who took some of the placement shares recently visited the factory and told me that despite it being the Golden Week - the factory was working flat out. ......if this is translated into earnings and China GaoXian delivers its RMB400mn or more net profit for 2010.....this could be a buying opportunity.
We should still be cautious and wait for the Q3-2010 numbers first......if the numbers pan out and the balance sheet remains strong, ie the cash levels are still there.....this could become a multi-bagger.
According to Bloomberg......the share is trading at 2-3 times PER only.....so if the 2010 numbers come through.....the stock could double bringing its PER inline with other S-Chips.
Another event that could trigger a rerating is the intended secondary listing in Korea. The latest announcement by the company says its still in a preliminary stage......but if it becomes more concrete with some indicative pricing, it could assist in the rerating of the shares. All in - worth keeping in view (KIV).....for both Q3-2010 and its Korean listing plans.
Recent stories:
| KEVIN SAYS: 'China GaoXian factory working flat out during Golden Week holiday...' |
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Written by Kevin Scully
Thursday, 07 October 2010 07:59
China GaoXian.....a major shareholder sells down to below 5%.....what is happening there ??
Source: Yahoo
A significant shareholder (Carry Luck Investments/Hong Rong Zhi) which owned about 10.4% of the company had reduced his stake significantly to 4.99% through a married deal of 78mn shares. (see announcements)
This is not unexpected as the moratorium of the PRE-IPO investors is over. The CFO had alluded to this in my telephone conversation with him.
Another announcement is the appointment of a Deputy CEO - to look at the strategic direction of the company.
The recent sharp fall is probably linked to the placement.......!!!
Gaoxian's premium yarn goes into making a wide range of products, including car upholstery.
a friend of mine who took some of the placement shares recently visited the factory and told me that despite it being the Golden Week - the factory was working flat out. ......if this is translated into earnings and China GaoXian delivers its RMB400mn or more net profit for 2010.....this could be a buying opportunity.
We should still be cautious and wait for the Q3-2010 numbers first......if the numbers pan out and the balance sheet remains strong, ie the cash levels are still there.....this could become a multi-bagger.
According to Bloomberg......the share is trading at 2-3 times PER only.....so if the 2010 numbers come through.....the stock could double bringing its PER inline with other S-Chips.
Another event that could trigger a rerating is the intended secondary listing in Korea. The latest announcement by the company says its still in a preliminary stage......but if it becomes more concrete with some indicative pricing, it could assist in the rerating of the shares. All in - worth keeping in view (KIV).....for both Q3-2010 and its Korean listing plans.
Recent stories:
THIS IS THE stock of the year....P/E less then 4.....got cash alot.....good growth......dual listing also....why leh ?not moving.....
.....................................................................Let me put the stock in some perspective. Its a new listing and is apparently trading on very low PERs with a lot of cash in the balance sheet. On 10 August 2010, China GaoXian released its Q2-2010 and H1-2010 results.
Result highlights
Revenue rose 5.3% to RMB444.9mn for Q2 and rose 7.6 to RMB904.7mn for H1-2010
Net profit rose 4% to RMB94.9mn while H1-2010 net profit rose 8% to RMB199.9mn
EPS for H1-2010 was RMB13.9 (S$5.6 cents - annualised) cents while NAV was RMB109.5 cents (S$21.9 cents)
Based on yesterday's closing price of S$0.195 - stock is trading on 2010 annualised PER of 3.5 times and at 0.9 time price to book
Balance sheet appears healthy with gross cash as at 30 June 2010 of RMB797mn and net cash of about RMB730mn.
From item 10 in its H1-2010 results announcement (forward looking statement) - the Company said:
"Due to the above factors, barring unforeseen circumstances, the Group expects to maintain its positive performance for the remainder of FY 2010."
Since then the company has also made an announcement regarding its plans for a secondary listing in Korea. The company was concerned about the rise in volume given that it Korean listing plans were still in their early stages.
CFO Raymond Wong. Photo by Sim Kih
1.I noticed a decline in Q2-2010 over Q1-2010 - H1-2010 is normally seasonally lower but it was unusual for Q2-2010 to be lower than Q1-2010. The CFO explained that there plant closures for overhaul and revamping which reduced output in Q2-2010
2.I asked if the second half would be better and whether the Company was still maintaining its positive forward looking statement for the rest of 2010. He replied that unless there was a Government policy change, the forward looking statement was intact.
3. I asked what the cash position in the company would be at the end of 2010. He said that it would be lower.....as about RMB300mn would be used for plant expansion. They will be expanding their equipment by "100 sets". They would also be reducing some of their loans by RMB50-70mn and there would be some expenses for land acquisition.
4. Is the Company likely to pay a dividend in 2010.....he was non-commital in this area as much would depend on the Company's cashflow, working capital and cash requirements.
Conclusion
As this is a new IPO and its my first time speaking with the CFO, I have no feel on the reliability of guidance. This reliability is usually built up over time as we follow guidance and what is actually delivered by the Company relative to guidance. Relying just on guidance and what they have delivered in their H1-2010 numbers, the Company is cheap in terms of PER and seems to be backed by a strong balance sheet (the cash). This is implied guidance that it will delivere mid single digit profit growth for 2010.
Like most other S-Chips, China GaoXian must build investor confidence with regard to the reliability of its guidance....so far so good and if it delivers net profit for FY2010 in excess of RMB400mn.....we are likely to see its PER expand.....more so if they continue to pay dividends.
Plans fo dual listing are linked to this intention to be properly valued, ie have a PER similar to its peers....having a listing and trading on 3-4 times PER is not acceptable. So maybe like Midas and China Animal which were rerated to the high single digit and teens PER, this was achieved as they met guidance and as their dual listing plans became more concrete.
As to the married deal yesterday of 21mn shares, I think that the moratorium on some of the Pre-IPO investors is over and this could be vendor blocks being transacted. If we find fund investors taking up this block - it would be good for the shares. China Animal for example now has BlackStone, Fidelity and Legg Mason as fund investors who collectively own about 20% of the company. I would be watching for the official disclosures on whether any strategic buyer emerges in the announcements in the coming days and weeks.
Definitely worth keeping on the radar screen. It can only be a multi-bagger that Lim suggests if it can gain investor confidence by giving good guidance, paying dividends and successfully going through its dual listing plans.....all these need time.
Recent story: GAOXIAN: Big is beautiful in China's chemical fibre sector
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