China GrenTech Corp Limited (ADR) (GRRF)

RodgerRafter (64.71) Submitted: 5/23/08 3:56 PM : Start Price: $7.36 GRRF Score: -52.24

Book Value per share = $8.97, as of 3/31/08.
Stock trading at about $5.00 on 5/23/08.
Trailing 12 month revenue growth = 20%.
Trailing 12 months EPS = $0.45 cents, but that should get better because:

1. Revenue growth has been limited in recent quarters because of uncertainty surrounding Chinese telecom restructuring, which will be resolved very soon.
2. Major customers (China Mobile and China Unicom) have been switching to a regional bidding model that defers revenue and profit recognition out over time for Grentech.
3. EPS would have been about 25% higher if the company hadn't had to book a paper loss for the decline in the value of their US dollars. Dollar accounts will mostly be converted to RMB by the end of Q3, so those charges will be gone.

The reality for US investors in Chinese companies is that the rising value of the Chinese RMB relative to the dollar is a positive, rather than a negative. Book value per share increased by $1.28 over the past 4 quarters, even though GAAP earnings were just 45 cents, mainly because of the currency issues.

GRRF has a good business model and is committed to continue R&D spending to increase product offerings while attempting to build an international customer base. They are well positioned in a growing sector in the world's fastest growing economy.

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