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

Updates

China Hong Xing will be announcing their FY06 on the 26th Feb 2007.

Sino-Env will be announcing their results on the 28th Feb 2007.

Stay updated. I'm expecting results that meet, or exceed expectations.

Review: China Hong Xing & Sino Env

What a good day it has been with China Hong Xing. Congrats to those who has followed my recommendations, and made 13% in 2 days (at todays intraday high).

Take profit if you are on contra. There might be a small correction for the next few days. I'm staying vested. Looking for more gains for China Hong Xing, which in my opinion, has a huge potential.

Addition (1700H, 31 Jan 2007):

I do not recommend selling before a possible correction. What if it doesn't happen? I recommend investors who intend to stay invested, to stay that way, and not try to outsmart the market by selling today at a high (for both Sino Env and China Hong Xing), and hopefully bargin hunt tomorrow.

I'm talking about people who bought on contra, on my recommendation. Today is a good day to take profits. Don't hold contra gains for too long. (i don't recommend contra by the way).

For those who have missed the boat for both counters (Sino Env and China Hong Xing), it is my opinion that these 2 shares can still grow. But you must be patient and have the holding power. Generally, a large 1 day gain isn't healthy for a short term.

Buy: Ching Hong Xing

China Hong Xing deals with sporting equipment in China. They own two brands, namely China Hong Xing Sporting Equipment and Li Ning. They have recently won a sponsorship contract with the South Koreans for their Olympics campaign.

China Hong Xing's profit growth has been increasing steadily, and at an increasing rate over the last 2 years. Like many of my lost opportunities, China Hong Xing has been in my watchlist for the last year already, and I've seen it grown to its current level from a modest price.

The 3Q 2006 report showed a 3Q QoQ growth of 40% and likewise for the 9 month comparison. This impressive quarter is supported by several quarters in the past 1 1/2 years. They showed similiar increasing profit growth.

"A company with not only profit growth, but increasing growth is the perfect company to invest in."

China Hong Xing's annual growth has also shown growth over the last few years. Infact, China Hong Xing has a even larger room to grow. With an extremely large population, China Hong Xing is well positioned to tap the large consumer base. The projections show a steady increase in retail outlets to tap an increased pie of consumer spending.

Looking forward, to the next few years, with the Olympics in Beijing coming up, there will be more Chinese spending on sporting goods. Who knows, with them sponsoring the Korean team, they might just be the next big thing in sports like the way Nike is.

Buy, with a target of $3.00
Vested at $2.56 on 29 Jan 2007, 1415hrs