Actually I don't understand how come its PE can be listed as below 5 when its market cap at 28 cents is 540 million? If price/market cap is 540 million, and earnings are around 80, then P/E should be 540/80 = 6.75? Don't forget the dilution that came with the dual listing which increased the market cap (but of course not the earnings). Could someone clarify? At a P/E of below 5, I think GX would be a great buy.
OK, I have re-checked the numbers and the following shld be correct:
a> 9M earnings for 2010 was about S$60 million. Assume Q3 = Q4 in earnings, so full-year 2010 = S$80 million net profit. (The indication from the announcements is that the 4Q will be much better than Q3 because of sharp increase in capacity, but let's save this for part c below).
b> Based on S$80 m assumption for full year, the PE is 7.1X.
This is derived from market cap of $571 divided by $80 million = 7.1X.
c> if 4Q result is 50% higher than 3Q, ie profit of S$30 million, then the full year is S$90 m.
Then the historical PE is 6.3X.
d> What is more relevant is to look at 2011. If the profit can go up just 20% because they have full-year contribution of the capacity expansion made in 2010, then it would be $108 million, translating into a PE of 5.3X .
For a company making over S$100 m, and a growth rate of 20%, the stock is very cheap when trading at 5.3X current year earnings. Stock price now is 28 cents.
Gaoxian's full year was stable or flat, depending on how you want to look at it, at S$80 million net profit.
The stock is firming up ....now at 25 cents, with a market cap of about S$510 million, which means a PE of about 6.5X.
Those institutions that bought into Korean KdRs would be expecting strong growth this year - we will soon know when the 1Q results are out. Gaoxian has one last chance to deliver on its promise of growth. 4Q was crap with 13% fall in earnings.
SGX: We note that trade and other receivables have decreased significantly from RMB325 million as at 31 December 2009 to RMB48 million as at 31 December 2010. Please provide details on the proportion
of cash sales and the receivable turnover days for both FY2010 and FY2009 to explain this significant
decrease.
China Gaoxian: Cash sales comprised 1% and 19% of total sales in FY2009 and FY2010, respectively. Cash sales comprised 1% and 65% of total sales in 4Q2009 and 4Q2010, respectively.
Receivable turnover days decreased significantly from 56 days for FY2009 to 35 days for FY2010 due to:
(a) The robust rise in domestic consumptions/expenses in China, led to the exceptionally strong
demand for the Group’s products in the fourth quarter of FY2010, such that customers were
generally prepared to pay on cash terms in order to ensure price and supply of the Group’s
products; and
(b) the Group taking prudent steps to increase its cash position, through tightening its credit
terms, selling on cash delivery basis and collecting outstanding receivables whenever it could,
as the Group had originally envisaged significant cash payments to equipment suppliers for
equipment purchase in early FY2011 in connection with its upstream expansion into PET
chips production (which relevant approvals are pending).
