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The NF Energy (NFEC) Grand Slam: XSEL and TPI Non Events

NF Energy (NFEC), Xinhua Sports and Media (XSEL), and Tianyin Pharma (TPI) were all out with Q3 numbers since Thursday, and the OTC Journal is 1 for 3 on blockbuster results.

In short, the earnings releases out of XSEL and TPI were not market moving. They were both good, and suggest both of these stocks are a perfectly good addition a China growth portfolio.

NF Energy was the shining star of the three, and in the early going the market has demonstrated it loves the numbers. Below is a review of all three events. 

First thing next week we are going to have CEU, UTA, and CREG - CGYV will have to come in here somewhere in the next few days. I believe UTA, CREG and CEU could all have market moving releases. CEU is the one I have been buying for my own account out in front of the news. CREG and CEU have been trading as if the market is looking for great numbers. 

Today, I'll start with the best one, and go from there.
 

NF Energy (OTC BB: NFEC) Brings It On

Apparently, energy savings technologies, especially when you're doing a lot of work for the massive government infrastructure build out, is great work if you can get it, and NF Energy can get it.

Friday NFEC filed its 10Q for Q3, and like the mailman, the company really delivered. $5.6 million was the early forecast for the top line. Delivered: a whopping $7.57 million - just 35% ahead of the early forecast from the company. Has everyone already forgotten the $44 million contract for hospital energy management the company inked back in early September?

The top line exceeded last year's Q3 number by 65%- that's all. The bottom line- that's really sweet. NFEC came in with $2.18 million net, which equates to $.16 in EPS. Balance sheet- strong- 3 to 1 current assets to current liabilities.

Have you considered the following? If you multiply 4x$.16- you get $.64. That's right co investors- based on NFEC's Q3 numbers, the company is on an annual revenue run rate of $.64 in Earnings Per Share with a 65% annual growth rate!!! This is killer.

Let's make this real simple for all of us. Companies generating $.64 in EPS with 65% annual growth rates don't trade at $4. They trade at $10. It's that simple.

So, why is the stock only about $4? Because it's just starting to get a following, and it's still on the Bulletin Board. Let's not spend a lot of time on this- NF Energy (NFEC); knock out numbers, worth $10, trading at $4. Pile in up to $6. Q4 is even going to be better than Q3, so the company will continue to march even onwards and upwards until the market gets this one right.

Friday's numbers got the stock working higher for the first time in a while on the best volume we've seen since the September reverse split. The publicly traded supply is very low since the reverse split, and the stock could move easily higher on lighter volumes.

Once their new plant is completed, they have nearly unlimited business already lined up for wind components. There's your big growth in 2010.

Here's the irony- I'm covering 3 companies in this edition- 1 on AMEX, 1 on NASDAQ, and 1 on the Bulletin Board. The BB stock has by far the best short term story, and is clearly the must own of today's ideas.
 

Xinhua Sports and Media (NASDAQ: XSEL) The First Steps in a Long Journey

It's going to be a journey to becoming the premier sports content delivery company in China. ESPN wasn't an overnight success, but XSEL has one major advantage- XSEL is already a profitable company, but has the potential to become a lot more profitable as time goes by. There will be ups and downs along the road.

For Q3, XSEL delivered just under $40 million in revenues. That's an annual revenue run rate of $160 million, so this is no struggling, start up situation. This company delivers some real numbers, and in my view, the market cap is still absurdly low.

Here's the confusing part- XSEL's profits. In plain English, XSEL makes money. Then, you have to take into account the language that's not plain English- the FASB accounting rules, which are in an entirely different language, and skew the results many companies are able to deliver to their shareholders.

In the case of XSEL, there's a convertible security outstanding that screws up the real numbers. Their income statement gets penalized if the stock goes up in price. To me, this is insane- if it were common stock, the income statement does not get penalized. 

So, XSEL had to take a charge of $7.6 million because their stock went up. Absurd, but there you have it. This is new accounting rule EITF 07-5. Here's your bottom line- XSEL made a real profit of $3.4 million in the quarter from their ongoing operations. All the non cash charges aren't meaningful to their operations.

I don't have the exact number of I&O shares today as they haven't filed their financial results with the SEC yet. I believe it will be about 80 million, which means the company is earning about $.04 per share per quarter. $.16 annualized.

The recent financing priced at $1.32 with underwriter Rodman Renshaw remains a black cloud on the pricing here. The stock closed at $1.15 on Friday, making XSEL my only China loser post '08 crash. 

This is a great edition to a China small cap portfolio. The company is profitable and will remain so. As their content grows and their distribution, they will start making some real money. 

I like the stock at this price, but not the barn burner on the growth side of some of my other followings. Stay tuned to this game- we're no where near the 4th quarter.
 

Tianyin Pharma (NYSE AMEX: TPI): Earnings Not A Market Mover

TPI, my small cap China pharma idea delivered its Q3 numbers on Thursday. My immediate reaction- nice, but not eye opening by China standards. TPI delivered 40% top line growth- great stuff year over year. Here's why the market yawned- the company only delivered 23% increase in net profits- the top line is growing faster than the bottom line, and analysts do not love that scenario.

$13.4 million was the top line- over $50 million in annual revenues. The company now has the infrastructure in place to go to $100 million, but it's only been there since September. 

The net profit was lower mainly due to costs associated with opening their new manufacturing facility, and higher R&D costs. 

As a result, EPS only improved from $.07 to $.08. SG&A was disproportionately higher. It's still $.32 in EPS annually - only about 11x annualized earnings with the potential to double in size over the next year.

Growth not as strong as some of my other ideas, but the $.10 cash dividend per share makes it a great edition to your China growth portfolio, but not the growth or earnings power of some of my other ideas. 

It will take some other event to get the stock moving here. Stand by. The CEO of this company took his last pharma deal to $1 billion and then pedaled it off for a huge premium.

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