China Energy - CGYV - Chugging Back Up The Hill
June 12, 2009 @ 4:35 pm
I was in Europe for 2 weeks and fell a bit behind on my correspondence and blogging. When I returned I spent some time plowing through emails and BLOG comments, and was both surprised and entertained by the reaction of some investors to CGYV’s recent pull back to the low print of $1.50. Pretty funny stuff. This formerly hot China stock has cooled off considerably.
For those who are interested, you might want to check out this Bloomberg interview with the investment banker who financed the company. Click here to view the video. It was a pre Asian market open on Thursday, the 11th.
I don’t know why the stock pulled back like it did. I suspect it had a lot to do with a delayed reaction to Q1 numbers, which were admittedly abysmal.
One might easily believe the company, after three consecutive years of double digit growth, had fallen on hard times after looking at the Q1 numbers. After all, the company only delivered $1.5 million in revs in Q1- not much relative to expectations of more than $30 million this year.
This is of little or no concern for those who understand this company’s business model. It’s not the kind of company that delivers consistent daily sales. It’s a large project oriented company, that does a lot of work in house before delivering. Then, they get to book about 90% of the revenues. The rest comes over time.
The company delivered on a rather large project the first week of April which they had hoped and planned to deliver on in late March, so a big swack of revs won’t book until Q2, which should be a good quarter.
In the interim, I find it interesting that none of the whiners about this stock are making much of the $5 million financing the company closed. This was a convertible security, with a 9% coupon, that converts at a non adjustable conversion price of $1.80.
Consider what this means. This is a Hong Kong based fund. Their analysts went directly to the company and performed extensive due diligence. They came away with the impression they could make a significant return on their investment from $1.80 per share in CGYV. True, they get 9% while they wait, but if you wanted to put up $5 million, you might be able to get the same.
That’s the first thing. Second, and perhaps far more intriguing- what are they going to do with the money they raised? After all, if you look at the Q1 balance sheet, you don’t see any need for the cash- at the end of March they had $4 million in cash, $4.75 million in receivables, and $9 million in inventories against $2.9 million in payables- that’s pretty strong.
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Now below $1.00. What’s going on?
Editor: Tax Sellling
Comment by Jason — 10/14/2009 @ 11:14 am
So whats going on here is everything okay or should i take my money out?
Editor: I wrote an edition that covered this issue.
Comment by Verland H — 10/10/2009 @ 4:00 pm
What will give this Stock a shot in the arm ? Even the news of another healthy contract did nothing to inject any enthusiasm …Is there any updates coming up from the company and I haven,t heard any information on earning guidelines for the 3rd Quarter . Do you think 3rd Quarter earnings will be disappointing and are already priced into the stock ?
Editor: They have to deliver growth, and they are not getting it done.
Comment by Andy — 9/24/2009 @ 7:48 am
What is your opinion on the 8-K filed on Monday 24 th of August , In particular the foreign investment enterprise . Is the finding of this funding ,or not ,going to make or break this company .
Editor: I don’t think it does a lot in 2009, but in 2010 it’s huge. It will make them one of the most competitive recycled energy companies in the world, and make late 2010 and into 2011 huge.
Comment by Andy — 8/25/2009 @ 6:48 am
Just wanted to confirm that second quarter filings should be coming out around 8/14….Also noticing a lot more volume the last couple of days…thanks for the info
Editor: If you’re not up to date on what’s happening, email me at editor@otcjournal.com.
Comment by Bob — 8/7/2009 @ 2:04 pm
Any updates on this stock?
Editor: Working on something.
Comment by Airjoe — 7/14/2009 @ 1:14 pm
Unfortunately , I think this stock may have run it,s course in price appreciation as there seems to be no buyers ! I have quite a decent number of shares of this one and I did buy for the long term , but although we have a good story here I,m not sure if there will ever be enough interest from investors to keep it going . I believe they have done a few investor conferences to gain attention to the stock but that apparently did not work . You mentioned that there should be some promising news on this one , was the latest news announcement on the 1.2 million contract delivered the news you were talking about or is there some bigger news to be expected .
Editor: Just waiting for Q2 numbers before casting any judgements. If Q1 was an abberation, this is an opportunity. If Q1 was the beginning of a trend, we have a problem.
Comment by Andy — 7/8/2009 @ 8:11 am
I am still waiting on the “Breakout above $2.00″! 0701/2009
Editor: Any day now- perhaps not quite, but let’s see what Q2 numbers tell us. Someone is accumulating this stock rather aggressively.
Comment by TheHague — 7/1/2009 @ 2:09 pm
It looks like they won,t make there projected gross income target for Q2 of over $ 5.8 million , at least based on there news releases . I get about $ 4.5 million tops unless they come up with another contract completed by the end of June . This could be a possible reason that the stock is losing steam because of not meeting its goals . Do you think this Quarter will show another loss ?
Editor: No, I don’t believe they will show a loss in the quarter. The year will be very back end loaded, but Q2 will be a far better representation of what’s really going on. You are right- another large contract would solidify another great growth year, but Q1 set the stock back a bit.
Comment by Andy — 6/23/2009 @ 7:56 am
I’ll wait another while on it.
Editor: Seems prudent right now.
Comment by Barry — 6/14/2009 @ 7:06 am
What U.S. companies are in the same business as CGYV?
Editor: the only comp that is even close is ERII, which isn’t quite in the same business. They have a very narrow focus on delsalinization plants, and do most of their business internationally.
Comment by Bill Polansky — 6/13/2009 @ 2:39 pm