The President's Message
In step with the extraordinary changes already underway in China, Largo Vista is entering the most exciting period of its history. Along with describing some current and near future developments, I want to take this opportunity to give you a brief overview of your company's endeavors during the past seven years.
In 1990ÿ management flew to the Far East in search of opportunities for ventures in the world's fastest growing economy. By June 1992, Largo Vista was chosen by local and central government to coordinate the planning and building of a $5.2 Billion Business center in the Guangdong Province contiguous to Hong Kong.ÿ (visit WEB site 6/28/92) This project was begun in anticipation of the 1997 reversion of Hong Kong back to Mainland China and of the merger of Hong Kong with Shenzhen as a unified province.
Despite our diligence in meeting our obligations in this project, and the thousands of dollars we spent on engineering and design work on a master plan, an unforeseeable change in central government bank policy -stopping bank guarantees for projects throughout China caused a delay not only in our development but in other unrelated projects under the bank guarantee program. Nevertheless, this development opened the Chinese door for Largo Vista and allowed us an alternative venture that has taken us to a higher level of business presence in that country. In 1993, I flew to Shenyang in the Liaoning province (pop 40 million, just below Korea) to represent Largo Vista and our Chinese joint venture partner. There we negotiated the purchase of a pager network with 7 earth stations located throughout the province.ÿ Today our Chinese partner owns 69% of the network.
Going Public
Because of China's emerging markets and the nature of our Joint Ventures our Chinese partners (government)ÿ felt that Largo Vista would be better recognized in China as a U.S. publicly held company. We then spent a lot of time and money preparing for an Initial Public Offering, registered in California (one of the most regulated states), and got our approvals. At the last minute, however, a better opportunity appeared: a compatible company that we could merge with became available as a route to going public. In a meeting at Largo Vista Headquarters, management and several brokers who would be market makers for us decided on the merger, and in April 1994ÿ LGOV became public. Announcements went out and our stock went to $ 2.50.ÿ That stock movement taught us two things. 1. The US market was ready for a Chinese investment. 2. we had no revenues and our stock sold off . To keep costs at a minimum, management decided to keep Largo Vista as a non-reporting company until we had revenues.
Housing
In response to property development offers from local government, Largo Vista participated in the first real estate exhibition in Shenzhen, Guangdong province. We were the only foreign company to attend.ÿ It was our way to test the housing market. and our exhibit showed videos, photographs and brochures of homes. The exhibition proved successful. Largo Vista formed a Chinese housing company, New Mayflower Housing and Development Co. LTD., which took over 8 months of approvals to consummate.
The following year we shipped model homes to the same exhibition with high expectations of many sales through orders and deposits. We arranged television coverage of the homes leaving our dock in San Pedro, California (visit WEB site 7/30/94, 11/1/94, 11/2/94, 11/10/94, 12/8/94, 12/30/94, Asian Wall Street Journal 1/9/95). Radio, newspaper and television covered the arrival of the homes in China. Unfortunately, problems developed in customs. in response to this development, I immediately flew to China to revise our business plan. The problems made it necessary to make internal changes May 2, 1995 our CEO and VP resigned. We immediately had a closer operating relationship with our Chinese partners and have been able to better develop our objectives. Currently with co-operation from our JV partner the homes will be re-purchased through customs to satisfy accumulated fees, and will thenÿ beÿ moved to a designated location for exhibiting.
LPG
With information that Texaco, Chevron and Mobil were seeking approval for construction of wholesale liquid petroleum gas terminals / depots in China, our Chinese's partners moved quickly in order to take advantage of opportunities in the LPG markets. We anticipated that the major oil companies would want to develop the retail market. We also knew that their only routes to those markets would require either a joint venture with an established company, or a similar arrangement with a new company that would have to apply for licensing and meet stringent storage and distribution requirements.
We then analyzed all existing LPG retail companies operating at a city or county level and found one that stood out: Kunming Xinmao Petrochemical Co., a fully licensed firm with over 40,000 customers (visit WEB site / photos) and enough storage capacity for future growth. Located in the Yunan Province (pop 40 million) , the company was a Hong Kong owned joint venture operation. Our partners simply bought the Hong Kong company and started reorganizing it. It took us 1 year (visit WEB site 1/8/96, 11/11/96, l1/14/96, 2/3/97, 5/12/97, 5/13/97) to transfer licensees and ownership in order to make LGOV a Chinese holding company in the liquid petroleum gas business, now with revenues and assets that qualify us for NASDAQ National Market listing.ÿ Currently we are the Largest Southern Chinese LPG utility company and the only one established on a provincial bases (statewide).
Largo Vista is the only company in China with an aggressive LPG marketing plan using the 4th largest bank as our agent (see below). We have negotiated three other LPG companies from other provinces (200 million pop) to merge with us.ÿ There are currently many small mom and pop companies that purchase their LPG from us and make their living from the delivery fee. Very shortly, and under friendly persuasion, these small middleman firms, now approximately 60 companies, will have the choice of either joining us and continuing delivery while making more fees through our customer growth, or go bankrupt.
Marketing and the Bank of Agriculture
We are proud of our first of its kind agreement with the Agricultural Bank of China, (visit WEB site 2/3/97). We have contracted with the bank as our agent in a program of our design that enables its 1,100 branch locations to make more fees and to market Largo Vista LPG services. Our contract confirms Xinmao as a provincial (statewide) company.ÿ In the past, potential LPG customers in China had been signed up for service by companies (other than Xinmao) but did not receive their service. In order to remove this risk under the LGOV/Xinmao reorganization, a computerized registered coupon is purchased for LPG delivery by our customers and the account is insured through the Peoples Insurance Co, of China.
OIL Companies
Kunming Xinmao Petrochemical Co. is recognized world wide by hundreds of energy companies.ÿ The Major Oil companies now know what we have accomplished Chevron and Texaco jointly are building a $120 million wholesale LPG depot currently under construction in Shantou, China, Mobil is spending $ 90 million on a wholesale LPG depot under construction in Zhuhai, China; UNOCAL, Enron and many more are looking at the Asian market. Many companies have visited our facilities; two of the companies spent 3 months at our Kunming headquarters with 3 representatives on a feasibility study recently completed. Largo Vista has been very busy with following up on invitations to visit and talk with executive management of many oil and energy companies which had previously visited our facilities in China. These talks have been very promising. We have had offers for joint ventures, and we are currently analyzing these offers and exchanging information. We expect to reach an agreement in principal with one of these companies in the very near future, with closure executed this year. This agreement will strongly accelerate our expansion.
GROWTH
Largo Vista is significantly increasing its base of customers, who in fact have nowhere else to go for LPG services. We have drafted concrete plans that project over the next three years with specific criteria and schedules for aggressive growth. Of special interest is the fact that Largo Vista is one of two companies authorized by the government to build gas pipelines in the province. We currently have one under construction and two that are contracted. The completion of these pipelines will increase our customer base by another 3O thousand new customers. We have purchased 6 new rail cars for current and future growth. Our joint venture partner has contracted to bring three other LPG companies into our holding company this year. By all of theseÿ operations we intend to acquire a major share of the 18.5 million qualified users waiting for LPG service to reach them. The potential for outstanding growth is already a matter of historical record. Fromÿÿ 1990ÿ to 1996 LPG imports in China increased over 1500% . Projections of over 1000% additional growth from 1997 to 2005 are conservative . At our current rate of expansion we anticipate a very substantialÿ increase in our customers base every year.
STOCK
We believe the stock is a technical buy and is extremely undervalued. The fact that we qualify for NASDAQ National Market but do not have the stock price tells us, we must get back to our shareholders and remind them Largo Vista is your company and this is a long term investment. We have to remind our shareholders to look at our website (www.largovista.com) or simply make a phone call,
Largo Vista is leading the way in the LPG business in China and very shortly a leader in Telecommunications there as well. A few months ago we announced the closing of our LPG merger that took over 1 year to consummate,ÿ a customer base that grew from 40,000 to over 80,000 in that period. we announced financials for the first time in our history and shortly we will announce our 1997 financials. Investors have to make their own decision to either sell their stock or hold on to it for future value. There is no doubt that both Wall Street and reporting and tracking services ignore small-cap stocks like the plague. Few , if any, look for companies with market caps under $500 million. Yet every Blue Chip stock today started as a emerging growth small company.
If the goal was to simply be on the NASDAQ national Market, we would reverse split our stock. We know this is not necessary because of the growth we are experiencing and the foundation we have made. We need more time to evolve. Largo Vista's new Vice President of Market Development is a specialist in Pension investments. He has brought our storyÿ to the attention of Pension funds and fund managers, About 200 of these 550ÿ fund managers are now starting to look at micro cap stocks. Companies like Largo Vista are the only ones left with the potential for dramatic stock price increase. The right buy on a penny stock will balance their large billion dollar portfolios.
Looking Forward to 1998 and Beyond
It's easy for some to overlook what we have accomplished, and we believe that the public doesn't quite grasp the profound impact of these developments. We believe our achievements will soon be discovered by the American investor. Largo Vista Group will continue in pursuing potentially high return projects. We have the people and strategies in place to maximize the value of our future opportunities. and make additional progress in strengthening our companies structure.ÿÿ
Largo Vista has a brighter future than ever. |
