This is a blank check company (similar to how YTEC, SEED, HLSYF, and many other chinese companies started)>
I'm going to start of with this link:
http://www.sec.gov/Archives/edgar/data/1332552/000136231007002247/c71230exv99w2.htm
This link shows their presentation of the upcoming acquisition of Hunan Tongxin Enterprise.
Couple of highlights:
- Revenue growth of 47% from 2004-2006
- Growth of 28% in first half of 2007 over first half of 2006
- Gross margin increase from 29.9% to 35.5%
- EBITDA increase from 16.7% to 24.1%
- 95% increase in net income from first half of 2006 to first half of 2007
- Target net income in 2007 -> 9.5 mil (12.8 mil total O/S after the transaction and including incentives of 2 mil for reaching net income target) ...giving the total net earnings of 0.74 in 2007.
- Total O/S after acquisition -> 12.8 mil including incentives, float is roughly 5 mil
- Will seek NASDAQ listing after acquisition is complete
- Additional 4 potential acquisitions are coming
- Very experienced management with each having over 25/30 years experience in automotive industry
Now, as recent as last week, Jeff Feinberg bought a big chunk of shares increasing his share to 18% of current O/S. (total of just over 1 mil shares now owned by him)
http://www.sec.gov/Archives/edgar/data/1088219/000091957407004751/xslF345X02/p788846a_ex.xml
Couple of financial facts from new company:
On a historical basis, Hunan TX Enterprise Co. Ltd(TX) had audited revenues of $66.6 million in 2006 compared to $58.8 million in the previous year, an increase of 13.3% and earned net income of $5.7 million in 2006 compared to $752k in the previous year, an increase of 658%.
As a performance incentive, 2 million shares will be issuable to TX management on an all or none basis by March, 2008 in the event that TX attains 2007 net income of $9.5 million, which would represent a 66.7% increase from 2006.
For the first six months of 2007, on a reviewed basis, TX had revenues of $41.1 million compared to $32.8 million in the same period in 2006, an increase of 28%. In the same periods, net income rose to $5.3 million from $2.7 million representing an increase of 94%.
This is taken from here: http://biz.yahoo.com/prnews/070918/cltu069.html?.v=96
Now, let's recap - in 2006, net income was $5.7 million. In first half of 2007 alone, they already had net income of $5.3 mil, increase of 94% over last year. They expect to have a net income of $9.5 mil with only 12.8 mil O/S after incentives and transaction. Stock is currently trading at $8, with PE for 2007 of less than 12. With the growth they have, they should be trading a lot higher once the transaction is complete, and they trade on NASDAQ.
This is exactly how YTEC (former YCHTF.OB started), which I highligted back in January of 2007. The number here are even better.
Warrants have an expiration date of April 11, 2012 - PLENTY of time, making it very safe buy. They have a strike of $5.
Do your own DD and good luck.
4 comments:
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