ACNS went dead quiet
The company is called "American Construction" but the website says "General Steel Holdings"
generalsteelinc.com
I think there will probably be a name change as it sure is no
"American Construction".
October 23, 2004 The Vancouver Sun
CHINA: From Middle Kingdom to Middle Class to International Superpower -- “Last year China doubled its investment in new steel mills and its importation of iron ore rose by one-third. In the first quarter of this year, imports of iron ore jumped by a further 45 per cent”. “China is using a third of the world's steel production and an astonishing half of global cement production” “The Rio Tinto group recently spent $1.25 billion US upgrading its iron ore mines in western Australia and the associated port and rail facilities in an effort to meet Chinese demand. Last year the two Rio Tinto mines produced 118 million tons of ore, a 14-per-cent increase over 2002, but it was not enough for China"
Here'a copy of Andrew Carpenter's news on General Steel.
NEW INVESTMENT IDEA
I came home from Asia Sunday night with a new requirement for
China-based companies in which we'll want to invest over the course of the next few years...
That requirement is that the majority of time we want to invest in solid companies that produce something that is a benefit to China.
Companies that are actually helping China grow, face far less
governmental interference, have a better chance at securing local funding and, in a worst-case scenario, have a greater probability of having old liabilities forgiven.
These companies usually have stronger ties to the central government as well.
Of course, I may break my own new rule for a company I want to recommend in the December issue. Its strong ties to China's banking system and central government make it a nearly sure thing.
Anyway, on to today's investment idea.
MEN OF STEEL
It is, as in it's, an Asia Business and Investing recommendation for our most aggressive investors.
But, fret not if your feet are cooler. My guess is that in three or four months it will be a more moderate risk. And, in six to eight months it will be a low-risk play.
What makes it so risky today is not the company, but the fact that it just came public last week while I was in China.
In fact, I asked the company to present to our group while we were in Beijing, because it looked to be three or four months from coming public.
NEWLY REVERSED
We've all been down this road before with newly public companies. So, I know, some of you will get in low, and others caught in the exuberance of fresh meat will pay way too much for this company tomorrow morning.
IT IS BETTER TO DO NO DEAL THAN A BAD DEAL... repeat that 100 times before you put your limit order in tonight. Repeat it again before you trade tomorrow morning.
REMEMBER YOUR HISTORY
If you haven't learned your lesson by now, I have.
We are not going to play that stupid P/E times EPS valuation game and force some weak logic as to why this is a $7 stock, today.
In fact, I am so fervent about this that anyone who complains about not being able to get in at a reasonable price, or who paid too much, will be immediately deleted from this service. That's the power of doing it for free... for now.
Also remember, the AB&I subscriber list, for the next two or three weeks anyway, is much smaller than other Asia publications. So don't expect to pay too much early on and have others drive you higher as the day progresses.
In fact, this company has such nice long term potential that we should hope it trades in a nice tight range tomorrow. But, that could be up to you.
Also, the spread between bid and ask is currently a whopping $1(bid $1.25 ask $2.25). As you know that has more to do with the market makers than the fact that this stock has not traded much in the last week.
Because the spread is so stupid, I placed a small 50-share order at $1.75 before the market this morning to see what the market makers would do. It's just sitting there.
Don't read my bid as advocating trying to break this company's back with low, low bids. I like these guys. But, as all of you know, I am hacked off at the shenanigans on the bulletin board.
Think about it. Federal regulations prevent a non-accredited investor from getting in on private placements on solid companies such as GE, Microsoft or UPS, but any idiot in the world can buys shares on the OB where the game is pernicious.
Remember that when you place your bid. As in, love the company... hate the market markers.
Also, even though the majority of company shares are locked up, there will be a bunch of unrestricted shares out there, likely owned by some of the folks who helped get this company public. The float will likely be pretty tight too... though at around 2 million it's not too bad for a stock this small.
So, again, don't set yourself up to be a sucker. Nuff said. Can't say it any stronger.
ROLL UP LONG-TERM PROFITS
With all that cautionary stuff out of the way, I have to tell you, the company I am about to introduce you to looks destined to be a long-term winner.
It's in a great sector... one that benefits China in many ways.
I had the opportunity to have lunch with the management team while I was in Beijing, and they seem solid.
The company is called General Steel Investment Co. Ltd. It just
completed a reverse merger with American Construction Company and still trades under that symbol (OTCBB:ACNS). It will likely trade under that symbol for another month or so.
So yes, you can get in before anyone else knows about this, but before your heart quickens another beat, go back and read the section above again.
The reason to like General Steel Investment is because in June 2004 it acquired 70% of Tianjin Da Qiu Zuang Sheet Metal Co., Ltd., aka "DQ". DQ is a privately owned manufacturer of high quality hot rolled carbon and silicon steel sheets, which are mainly used in the production of tractors, agricultural vehicles and other specialty vehicles in China. The company sells its products through both retailers and wholesalers.
DQ's operations include six production lines producing 250,000 tons of 0.7-2.0mm hot-rolled carbon steel sheets annually. That makes it the largest hot-rolled producer in China with a 40% market share of all steel plates used in the production of domestic agricultural vehicles.
In 2003, the company reported sales revenues of $56 million. Its net income rose 139% to $1.6 million. Its total assets at the end of 2003 were approximately $37 million.
VARSITY-SIZED IDEA WITH A SOLID JV
General Steel also entered into an initial-stage joint venture agreement with Baotou Steel and Iron United Inc. Baotou Steel is listed on the Shanghai Stock Exchange.
Baotou Steel is known as a leading iron and steel producer in China. It is also an R&D center for basic materials.
The initial-stage joint venture will be called Baotou General Plate Company Limited. General Steel will own 51% of the JV through two of its subsidiaries. Baotou will own 49%. The total investment and the registered capital of this initial-stage JV is estimated at approximately $90 million.
I met General Steel Investment's company Director and President, Zuo Sheng Yu, and his team. They seem sharp and excited about the opportunity to raise money on the US equity markets.
Yu does not strike as a man who went public out of vanity or so he could brag to the boys at the country club.
He's a steel man who received a BA from Institute of Business Management for Officers and an MBA from the Graduate School of Tian Jin Party University. Since April 2003, he's also been a member of APEC (Asia Pacific Economic Co-Operation.)
EYE TO EYE
I looked this guy in the eye and I liked him.
At lunch, he sat me at the appropriate power place at the table. Though, because of my status, I was supposed to get the head or tail of the fish in one of the seafood courses, he told me he instructed the waiters as to my lofty status, but
told them to bring me a portion of fish that I would enjoy.
It's the little stuff in Asia that tells, and that told me a lot. This is a man who wants a relationship with you. Someone who understands our cultural divide and is willing to work within it.
As you all know, that's very important to me, as it should be to you.
Still, I implore you to take it easy. Take small bites and wait to see some real quarter-on-quarter GAAP audited financials.
Yu and his company look to be a long-term play.
Remember the ask, at $2.25, represents a $1 spread. Three hours later my $1.75 bid is still sitting unfilled. If you're aggressive and want to get in don't buy above $2.90 to $3.
Also, I will add this to the portfolio at the price the shares open at tomorrow as quoted by Quicken.com. That's the way we do things here at AB&I. Tonight's close doesn't mean a thing to you or me. BE SMART Look, we should be a team on this.
Start with lower limit orders and work your way up if you have to.
Don't be so anxious that you post a high limit to start with.
Don't think you need 10,000 shares or even 5,000 shares to be a player here. That's way too risky now.
You have a year to load up.
So buy (OTCBB:ACNS) tomorrow, but be smart.
Anything else will make Crown Financial Group, Hill Thompson Magid & Co., Knight Equity Markets and Puglisi & Co. - the market makers - the only winners tomorrow... and that ain't right.
You're in the markets for you, not for them.
That's it for today.
Any complaints should be sent to United Airlines. Its 747 service to Asia is the best... flight crews superb... even its food is good. But hey, I caught jet lag from UA, it's a carrier... somebody got to catch the blame... and UA's shoulders are broader than mine.
See you next week, when I've returned to sanity.
Andy Carpenter
SOTTO inc. and Asia Business & Investing
asianbi.com
About The Company
American Construction Company (OTCBB: ACNS - News) acquired General Steel and its 70% ownership in its subsidiary, Tianjin Da Qiu Zuang Sheet Metal Co., Ltd., ("DQ") a People's Republic of China limited liability corporation, which is a manufacturer of high quality hot-rolled steel sheets primarily for use in tractors, agricultural vehicles and other specialty vehicles. Since 1998, it has expanded its operations to six production lines producing 250,000 tons of 0.7-2.0mm hot-rolled carbon steel sheets per year, the largest producer in China, maintaining a 40% market share of all steel plates used in the production of agricultural vehicles in China. In 2003, its sales revenues were over $56 million and its total assets were worth more than $37 million. The Company recently announced an initial stage joint venture agreement with the China Inner Mongolia Baogang Steel Union ("Baotou Steel") which is anticipated will increase annual steel production from the current 250,000 tons to over 1,000,000 tons. For more information, visit generalsteelinc.com. |
