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Strategies & Market Trends : Greater China Junior Stocks

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From: Julius Wong	6/30/2007 9:13:05 AM
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online.barrons.com ... Talk about some of the companies. Take China 3C, a consumer-electronics retailer. Last year, sales rose five-fold. In the first quarter they did $85 million in revenues versus $13 million a year earlier. This is like a Best Buy in China? Yes, China 3C [ticker: CHCG] operates leased departments in places like Wal-Mart and Carrefour. It had 913 stores at the end of the first quarter. It turned its inventory 50 times 50 times in the first quarter. If a U.S. retailer turns its inventory five times, it's thrilled. The company should earn about 55 cents a share this year, probably 80 cents next year. The stock is at 6½. And it's the leading electronics retailer in China -- a market that is growing very fast. I don't know what you pay for that kind of growth, but it should be more than 11 times earnings. The market cap is around $300 million. What else do you like? China Security & Surveillance Technology [CSCT]. This company is the leading player in the surveillance business in China. It's rolling up the surveillance market. All of a sudden the government wants more surveillance in the country. There's a law that mandates surveillance at every nightclub, every Internet cafe and every bar. More important, there is a new law requiring every reasonably sized city to install surveillance equipment on every street. Sales and earnings have been doubling every year. The company should make $1.05 a share this year and $1.50 in 2008. The stock is about 14. Citadel [the big hedge-fund operator] has invested $110 million in the company. It's got superb management. You mention earnings estimates. Whose projections are you using? Mine. In some cases, there are no analysts covering these companies. Give us one more Chinese stock. How about General Steel [GSHO]? It has a great story. The company was founded by some farmers as the first privately owned steel company in China. It scavenged equipment that was being thrown away by a local government steel mill. Deng Xiaoping came and blessed it. It recently announced joint ventures with two big Chinese steel companies. General Steel should make about 40 cents a share this year, and next year as these joint ventures start to hit, it should make $1.50, with over $2 the year after. The stock is at 3.75. Eventually mainline analysts are going to pick up coverage of these companies because they're real businesses with exciting growth stories. ... online.barrons.com

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