JaysRage (93.75)

Some Chinese small and micro cap recommendations

April 28, 2010 – Comments (8)

For the past month or so, I have been closing out positions in Chinese small and micro caps.   A large number of them have reached high valuations.   As always, this isn't true for all stocks.   I've been waiting for entry points on a number of stocks.   I am still waiting on a couple of them.   I'm actually going to put a couple of recommendations on here that I do not have positions in and my target entry points.   Some of these, I already have positions in.    As the market pulls back (which it will in the short term, these price points should likely be achievable).  

Top Picks

NEWN.OB -- This is a growing micro-cap integrated lithium battery producer.   It has managed to grow through acquisition of its component product partners.   In addition, it is expanding into additional markets in China and into Europe.   It recently signed a distribution agreement to expand into Europe.   The battery industry continues to have demand outstretch supply, and there are hints that China will be subsidizing the industry to increase incentives for increased manufacturing.   This is also an emminent uplisting opportunity.   They have made their uplist intentions well known.   It will happen this year, most likely in the current or next quarter.   Forward P/E is 6.5

http://www.newenergysystemsgroup.com/news_T.asp?t=&id=286 

Entry Price -- Anything around 8 is a solid entry point.   Right now, it sits at 8, so it is a great opportunity.   I have already established a strong position in this stock. 

SOKF.OB -- This is a rapidly growing micro cap selection as well.   This company owns and operates fitness centers and beauty salons and spas in large Chinese cities and suberbs of mega-size Chinese cities.   They are growing purely organically, continually opening and purchasing new facilities.   They have a 90% customer retention rate and a very high product integration rate, among the best in the industry.   They open as many new facilities as their cash-flow will allow.   They generally expand into low-competition areas (thus not into mega-city metropolitan areas).   This year, they expect to open 7-10 new facilities.   There is a possibility of uplisting, but it is not necessarily emminent.    Management is more focused on rapid organic expansion and operational excellence.   I have no problem with that in this case.   This is a very well run business with a nice expansion plan.   A P/E of 8.   Forward P/E around 6.5 or 7

Entry price -- I'm attempting to continue accumulate around 4.25   I would like to double my current position.

ZSTN -- This is a provider of digital networks for cable and telecommunications companies.   The large telcoms continue to build out their 3G, 4G and GPS networks, and ZSTN continues to reap the benefits and rewards of this buildout.   It has recently taken a huge price beating, and the current valuation is extremely attractive.   It has a P/E of around 5 at this point.   Forward P/E is around 4.    This might slip to around 6, if you'd like to try and time the bottom, but the truth is that this is a nice buying opportunity.  

Entry price -- I am looking to accumulate under 6.5   

Other nice choices.

CCME -- High growth, high cash Chinese bus-based advertising company.  CAPS pickable and very attractive valuation.  

CWS -- Wind turbine component manufacturer that has P/E valuation that is very attractive after massive pullback in price.