China Digital Trades at Discount
As a result ABAT has cash of $45 million and no debt. In terms of expansion on the battery side, ABAT has just announced that it in the process of acquiring "a leading battery production company in Shenzhen, China." ABAT put down a deposit of RMB10 million ($1.5 million), meaning that its target is likely a smaller battery producer. I find this to be an encouraging data point for my valuation of CMTP.
HPJ is a great comp for CMTP because it is also a Shenzhen-based battery manufacturer, which happens to be located just five minutes away from CMTP's headquarters and factory. HPJ is currently trading at less than two times cash, but is trading on a cash adjusted P/E of about seven times. This is more than triple the multiple of CMTP's current price.
|Battery production line|
It is worth noting that HPJ has enjoyed a jump in its stock price of nearly 30% following the company's attendance at the Rodman and Renshaw conference in New York where it presented its story and gave one-on-one meetings with institutional investors. I expect CMTP may enjoy an even greater boost in stock price once it gains any meaningful institutional following.
I like CMTP because it is very profitable, expanding, debt-free and cash rich. At the current price of $4, the company trades at a cash-adjusted P/E ratio of only two times TTM earnings (compared to 10 times for ABAT, and losses for CBAK).HPJ trades at a P/E of 13 times, or roughly seven times once its substantial cash balance is backed out. According to its recent 10-Q, China Digital had nearly $10 million of cash on its books at quarter-end. The company has completely changed from its low-margin business of manufacturing battery shells and caps for lithium ion batteries.
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