Review: Sino-Env

Sino-Env recently released their FY06 results, showing an astonishing FY06 results. EPS for FY06 grew 37.2% over FY05 on the back of a 70+% of FY06 profits. Dispite the large difference between EPS and Profits, I'm still not worried as a 37.2% EPS annual growth is already a very healthy growth.

Sino-Env's revenue increased 76.2% in FY 06, and in line with that, Gross profit was up 72.5%. Though gross profit margin was down from 61% to 59% due to lower "gross profit margins on the industrial water treatment contracts secured by Fuda Desai", a 2% drop in profit margin is not a worrying trend on the back of the healthy profit growth.

Asset/liability ratio in FY05 was 18.7 vs FY 06 of 24.8. The asset liability ratio is in fact improved dispite the quick expansion in operations into industrial waste water treatment.

On top of that, the average contract value increased by RMB0.9 Million with an increase in contracts. Not only does this be a proof of Sino-Env's ability to secure more contracts, it shows that the status of Sino-Env over its competitors has improved.

Looking forward, I favour Sino-Env's prospects. The Chinese Government has stated its intention to improve its enviromental efforts, although they did mention they are unwilling to convert coal powerplants to oil powerplants due to cost. This could lead to more contracts for Sino-Env for desulphurization in China's dirty coal powerplants. On top of that, in 3Q2007, we are looking at a 309% increase in capacity for its industrial waste water treatment business. I look favourably to the management to fill up that extra capacity in a short time.

With the recent global sell off, Sino-Env's shares are below the $3 level. In addition, there has been increased in volume in recent times, probably a sign of increased investor interest in Sino-Env once again. Its time for investors to accumulate in their holdings in Sino-Env.

Maintain BUY, with a target price of $4.00, with 70% certainty target to be reached in 6 months.

Review: China Hong Xing

China Hong Xing saw a 59% growth in revenue, with a increase in 85.5% for its gross profit. EPS increased 31.7% for FY06.

China Hong Xing has attributed the increase in sales to its advertising and promotion campaign for major sporting events in China. The company has recently launched its new "Ground Shock-damping System" in April 2006, and according to the management, has received positive feedback from the market.

In addition, the company is successfully increased the number of Erke specialty stores by 550, from 2100. This 550 stores far exceeds the target of the management of 364 stores (1 a day). In addition, the actual profit for FY06 exceeded the target of 180Million RMB by 30.4%.

The management has proven itself as a over performer, ie delivers more than what they promise. In the stock market sense, this is good for share prices as they constantly exceed market expectation. The company has set a $300Million profit target in FY07. I look favourably for the company to exceed that expectation.

China Hong Xing has constantly found itself as sponsors for sporting events, and is looking enthusiastic about getting a foothold in Beijing before the Olympics in 2008 with a flagship store near the Olympics location.

China Hong Xing looks to expand its capacity to be completed in 2Q2007. With a inventory turnover time of 37 days (increase in 6 days over 06), China Hong Xing must keep a watchful eye on this trend of increased turnover time for its inventory as it increases its capacity.

Dispite this, China Hong Xing shows good potential with good growth and ambitious marketing campaign. Like Sino-Env, with the large global sell-off, its perhaps a good time for investors to accumulate more China Hong Xing stocks.

Maintain BUY, with a target of $3.80

End Of Week Review

This week saw the much anticipated correction become a reality. Many fundamental investors (like me) saw their portfolio wipped out. Many are probably seeing a red in their portfolio, but for me, I still see an overall green, other than the red for Swiber.

Realised my Put Warrant at $0.31, a 63% gain over $0.19. Decided to realise the warrant as the market was showing signs of "slowing drop", probably on its way to a recovery or out of this bull run. That will really help me in any more falls where I may see my margin ratio fall out of acceptable range (which is unlikely as my purchase prices of the shares was low).

But really, nothing seems to be any where close to predictable. Just when the market thought the worst was over, to my horror, we saw the US market open 200pts lower on Thursday, only to see the market quickly recover back to a 20-30 point drop.

This is a period where good financial results have no effect. China Hong Xing released their results and showed a 100++% gain in sales and profit. I'll be doing a review on it soon. Sino-Env, Swiber performed extremely well as well.

The reason why I did not sell Swiber was firstly cause I was late in seeing the price low (ie saw the closing price only), and the other reason was cause the closing price was about -6% consistantly for 2 days already. In this Bear run, I'm reluctant to let go of Swiber until the price actually closes at -7 to -8%.

With the weekend ahead, all we can look forward to is for the market to take a quick breather, and start next week stronger than ever.