By Mike Marsh
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Many times we look into that quick profit..That quick trade.. At least since many message board data centers on how a stock will trade in the short term confirms this behavior…We get caught on looking too close at the tree many times when if one will take their eye off those first few trees that loom in front of their eyes, there’s a huge forest in size on many equities….Look at RINO, CAGC.OB & CPQQ.OB for example-very small cap China Stocks…..Let’s start with RINO,,,With a market cap of 338 million and revenue of 100 million during the 2nd half of 2009, the stock at 13.50 is trading at a P/E of 7.10…The conservative estimate of EPS at 97 cents for the 2nd half of 2009, the 89 cents for the first 6 months of 2009 is only part of the forest to size up…These estimates include outsourcing to get installation of their waste treatment products that the government has already announced they are backing as the # 1 leader in the Steel sector desulpher equipment and a new capacity coming in 2010 as well…Plus oil sludge product revenue’s will come in later this year..This is a real under promise and over deliver picture in my opinion the company is forecasting…
The $1.87 in net income confirming valuations at 13.50 a share (its current price) makes a conservative trailing P/E of 7.1..But reading the forest –its highly probable with added products like the oil sludge products–2010 looks like 4 to 5 times P/E at this current price and current market cap of 338 million..There is a potential estimate based on many variable measures that I have heard from an institutional company but its only a projection –so dont count on it as solid ..That institutional investment company thinks that this company at 338 million market cap could grow one day to a 15 (US) billion dollar company ..This is not 100% confirmed by my sources conclusively yet as we are still in process of getting in touch with RINO’s new CFO Jenny Liu ourselves on such a lofty projection. …But a well-renowned institutional company who has had many interviews with the company’s directors and been in the plant thinks its a possibility ..I will say this myself–most investor’s get it wrong in our opinion where they think RINO’S revenue from desulferization systems and accessories will dry up next year since they make up to 75% in current revenues..This is a very wrong perception and couldnt be further from the truth..RINO has massive repeat revenue sources surrounding their desulferization business…The other important reading of a giant forest is RINO’s sludge treatment equipment slated for commercial use in the next couple of months that will make revenues massive to its already giant revenues…An average P/E of 15 and the stock could be traded as double-higher,a conservative figure of 27.90 can be ascertained..When outsourcing stops and the oil sludge begins,then a higher price PPS than 27.90 can be expected as institutions are chop-licking on this..This stock will trade up for the future and not on that mistep 2nd quarter due to outsourcing that caused cost of capital to rise that quarter…RINO in our opinion is the real deal…
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Next,we focus on CAGC.OB..China Agritech..It is trading as of this writing after hours on 8/27/09 at 2.89 a share..They have already a 150,000 metric ton fertilizer capacity of organic fertilizer that increased revenues by 56.9% in the 2nd quarter over the 2008 2nd quarter almost all of it due to the new production facilities at Anhui province in eastern China and Harbin in northern China that started operations in the 2nd quarter of 2009….The third production facility should be completed by the end of 2009…The Chinese government projected that raw material prices are gradually declining…This should bring in higher profits on its anticipated revenues in the future..They have no long term debt and 66.5 million in net working capital and accounts receivables at 43.7 million and cash is 16.5 million..The company has announced they are staying on top of operating cash flows..The first 6 months of this year generated over 8 million in positive operating cash flow as opposed to a negative figure in the first 6 months of 2008..They have implemented a penalty policy to their sales staff with collection responsibility,contraction of new accounts receivables to 6 months instead of 12 months,more strict credit check passing criteria as well…They established these new collection policies in the first quarter & started implementing them in the 2nd quarter..They expect to produce good results in the 4th quarter and 2010 from account receivables management program..Their bad debt decreased by .5% in the 2nd quarter when they just implemented these new policies..They can focus on the extending their operating cash flows to the now established good paying customers…They plan to come out with more higher margin products in the future to balance the mix of low margin organic fertilizer…The company is projecting 20,000 metric tons of organic fertilizers in the 3rd quarter of 2009..They have full confidence of exceeded net revenue for the year of approximately 60 million & net revenue attributable to common shareholders of 9.5 million will be exceeded…Here’s how I look at it–150,000 metric tons with government backing in a land that is scarce for farming over population demands cause a great rise in share price if this company manages receivables and delivers more higher margin products which they have indicated on doing both..Expect a PPS rise that should comfort existing and near future shareholders future income appreciation from the stock in my opinion & maybe within 6 months,a delivery to AMEX listing…
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Last a power company in China….CPQQ.OB..China Power Equipment Inc..This company fits right on in with the government’s demand for clean energy and saving of energy..They have a patented and proprietary technology of producing energy saving transformers and transformers cores..They have 55 different models of transformers in 4 product series in China..This centers around transferring an electrical energy from one circuit to another by use of inductively coupled inductors or the transformers coils..Net revenues for the first 6 months in 2009 rose 88% over the 6 months of the first 6 months of 2008..Net income nearly doubled from .06 a share to .11 cents a share..Net income for the 2nd quarter was 1.3 million, .09 cents as compared to 310,746 or .02 per share for 2nd quarter in 2008..The company expects to grow on the strong foundation of government agencies and regional utilities as they continue to expand China’s power grid infrastructure…I have high expectation for massive returns on this company in my opinion…
So after looking at such companies..I ask you this: Are you a tree reader or a forest reader?..Trying to guess Wall Street’s psychology of the short term trading swings only to possibly get tripped up in that guesswork and constantly looking at the streamer impeding other possibilities of income? Or are you a forest reader?..Seeing that a more predictable future of a possible great forest that sometimes is forgotten by the traders that keep watching too close at the trees at the edge of the forest instead of seeing data that can tell you possibly this is a great forest that is undervalued…Go ahead, try to look at the trading activity like the direction of ants migrating up and down and sideways on one or two trees..Then realize sometimes you watched the trees too closely forgetting about the whole forest…
Both Mike Marsh and his brother Rob Marsh currently own shares of CAGC.OB as of this writing.. Mike also cur
rently owns shares of CPQQ.OB and RINO as well……Please do your own independent research before you make an investment purchase..See our disclaimer.
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