) -- The Rodman & Renshaw conference comes to Beijing next week and I'm eagerly awaiting the opportunity to meet with some of the small-cap China companies I follow. Many of the stocks have come off by 30% to 40% or more since mid-January so it's a great time to check in with management teams to get an idea if there are any good buying opportunities.
The conference lineup is impressive with more than 100 companies listed on the
I'm eager to see
( CAGC) which uplisted last September at a $6 (adjusted for a 2-for-1 stock split) and now trades at more than $25.
Every time I want to get into the stock I hesitate , it then rockets up again, and I end up kicking myself for not getting in. So now is a good time to see if $25 is still a good entry point or if it's too late. Chine Agritech is scheduled to make a presentation at the conference on Tuesday.
While China Agritech is up 80% year to date, its direct competitor
China Green Agriculture
is basically flat for the year. China Green Agriculture boasts net margins of more than 30% and had more than $60 million of cash at year end with no long-term debt.
China Green Agriculture presents on Monday, so the real question I might be asking is "why buy Agritech" if I'm too late to the party and when CGA still looks very cheap at $15.
My biggest focus will be on
( DYP). The company priced its initial public offering on the
New York Stock Exchange
last year at $8, the low end of the range, and has traded up about 20% to 30% since then. But it still looks very cheap.
The company is run by Chairman Wenhua Guo, who is also chairman of NYSE-listed
Duoyuan Global Water
( DGW). Both companies have gross margins of around 50% and net margins of 25% to 30%, but DYP trades at a massive discount to DGW.
Because the companies have the same management, a similar financial profile and double-digit growth rates, I think DYP is a bargain which has about 50% upside to it. Piper Jaffray just reiterated its outperform rating on DYP with a $13 target vs. a current price just over $9.
Hong Kong High Power Technology
also is presenting at the conference and I'm sure it's looking forward to it. Rodman & Renshaw initiated coverage on HPJ last year, just before the company attended a Rodman conference in New York.
At the time of initiation, the stock price was $1.17 with a Rodman target of $5. The stock ran as high as $9.82 in subsequent months - a return of more than 700% -- and now trades at around $6. So again the question is does the pullback create a buying opportunity or was the stock overpriced at near $10?
New Energy Systems
also will be making a presenting this year. As far as I know, it is the company's first major investor conference. The story looks very positive but it has become a bit complicated to follow. The company completed two acquisitions in 2009 which I expect will have a significant impact on revenue. However, New Energy also issued quite a large amount of stock, effectively doubling shares outstanding, so it is still important to get a good handle on how the marginal income will be offset by the additional dilution.
The company appointed a new CEO in January and attended the CES exhibition in Vegas. In terms of investor outreach, the company had its investor relations firm release a detailed company presentation in January and is now attending the Rodman conference, both of which I view as strong positives.
Sino Clean Energy
no longer appears on the Rodman Web site and I confirmed with its IR firm that it won't be attending the conference this time.
--Written by Rick Pearson in Beijing.
Rick Pearson holds positions in Duoyuan Printing and Sino Clean Energy.
Pearson is a Beijing-based private investor focusing on U.S.-listed China small-cap stocks. Until 2005, Pearson was a director at Deutsche Bank, spending nine years in equity capital markets in New York, Hong Kong and London. Previously, he spent time working in venture capital in Beijing. Mr. Pearson graduated magna cum laude with a degree in finance from the University of Southern California and studied Mandarin for six years. He has frequently lived, worked and traveled in China since 1992.