Saturday, December 26, 2009

BAGAKOAA Dec 26, 2009 If you NEWN what I Knewn


Dec 26, 2009 If you NEWN what I Knewn

In early December, I mentioned a speculative stock NEWN that was involved in the Lithium Battery Manufacturing industry. As part of my year end get rid of the garbage efforts, the numbers were run on this spec stock. This was originally bought in early December at the 6.48 range, and added mid Dec at the 6.70 price. (Several of the portfolios.)

Here is what the homework showed. With a PE of 5.8 and a Price to Book of 2.6, the equity is more than fair valued. Top line revenue over the last 5 years has been sporadic, but it is a start up. They have gone from 2.3 million to 19.7 million. A market capitalization of 38 million makes it a micro stock. (Scary Speculative). They have a very sexy six month chart with the current price double the 200 day average.

Their Return on Equity is a massive 47.8% which is exceptional. That ratio prompted me to do some homework on the management team. I’ll admit that it took about an hour to try and figure out who is who in the corporate ladder. Fushin Li is the CEO and Chairman and he apparently has ties to several other electronic companies in the PRC. It seems like a seasoned and experienced management team according to the last quarterly report. That report does disclose a preferred stock offering in 2008 and a 10 to 1 reverse split this last July of the common. I say this only to WARN you this looks like a good company but the facts seem to be a little squishy. They have no long term debt, but carry about 5 million is an equity deficit which may have been the reason for the preferred offering in 2008. The deficit has been cut in half in the last 12 months and if China continues to recover, (a good bet), the deficit should be gone in 2010.

The company throws no dividend so this is solely a value increase play. It currently sells for 7.00 a share. My guess is 8.20 by 3rd quarter 2010. There are no analysts covering the stock that I could find so it is lonely. There is positive community support in both Market Watch and Stockpickr. So if you want to bet the farm, please be sure it’s a farm you do not want to ever live in again or even go back to visit because you can loose it. IBD rates this a 92 and when I finished my 23 point analysis it got an 82.61. Not bad for a spec stock.

Salve Lucrum


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